Ethical Issues in the Global Arena

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Ethical Issues in the Global Arena
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Chapter Nine Objectives

• Identify the internationalization and
  globalization of business
• Summarize globalization arguments
• Discuss multinationals in the global environment
• Identify ethical challenges at the global level
• Define ISCT, hypernorms, and moral free space
• Outline strategies for improving global ethics
• Introduce seven moral guidelines for global
  business

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Chapter Nine Outline

• The New, New World of International Business
• Multinational Corporations (MNCs) and the Global
  Environment
• Ethical Issues in the Global Business Environment
• Improving Global Ethics
• Summary

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Introduction to Chapter Nine

• The focus of the chapter
• The transnational economy
• Internationalization
• Global ethics

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Eras of Internationalization

• 1945-55 The Post-World War II
• A period of reconstruction dominated by the
  United States.
• 1955-70 The Growth YearsJapanese and European
  firms recover and U.S. international firms become
  multinational.
• 1970-80 The Troubled Years
• U.S. deficit and worldwide oil crisis have a
  negative impact.

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Eras of Internationalization

• 1980s-The New International OrderThough the U.S.
  role in the world economy is diminished, it is
  pressured to be a world leader in the ethics
  arena.
• 1999-now The New, New World
• A backlash against globalism began.

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Concepts of Global Business

• Internationalization
• Globalization

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Pros and Cons of Globalization
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MNCs and the Global Environment

• Change scope and nature of U.S.-based
  multinationals
• Face challenges of operating in new world of
  business
• Corporate legitimacy
• MNC and host country philosophy
• MNC and host country challenges

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Ethical Issues in Global Business

• Marketing and safety practices
• Sweatshop and labour abuse
• Corruption and bribery

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Arguments For and Against Bribery

• For
• A necessary tool
• Accepted practice
• Form of commission, tax, or compensation

• Against
• Wrong/illegal
• Compromise personal beliefs
• Promotes government corruption
• Benefits recipient only
• Creates dependence on corruption
• Deceives stockholders

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Trends Against Bribery

• Foreign Corrupt Practices Act enacted
• Transparency International developed
• OCED Antibribery Initiatives launched

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Bribes vs. Grease Payments

• Definitions
• Grease PaymentsMoney given for the purpose of
  getting minor officials to do what they are
  supposed to be doing.
• BribesRelatively large amounts of money given
  far the purpose of influencing officials to make
  decisions or take actions that they otherwise
  might not take.

• Examples
• Money given to minor officials (clerks,
  attendants, customs inspectors) for the purpose
  of expediting a project
• Money given, often to high-ranking officials.
  Purpose is often to get these persons to purchase
  goods or services from the bribing firm.

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Improving Global Business Ethics

The Dilemma of the Multinational Corporation
The Multinational Corp.
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Improving Global Business Ethics

Ethical Choices in Home vs. Host Country
Situations
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Improving Global Business Ethics

• Typology of Global Types
• Foreign type
• Empire type
• Interconnection type
• Global type

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Improving Global Business Ethics

• Integrative Social Contract Theory (ISCT)
• Hypernorms-- transcultural values including
  fundamental human rights
• Consistent norms-- norms that are culturally
  specific, but consistent with hypernorms
• Moral free space norms-- strongly held cultural
  beliefs in countries that are in tension with
  hypernorms
• Illegitimate norms those norms that are
  incompatible with hypernorms

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Improving Global Business Ethics

• Four Actions for Improving International Business
  Ethics
• Create global codes of conduct
• Integrate ethics into a global strategy
• Suspend activities in host country
• Create ethical impact statements

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Improving Global Business Ethics

• Global Codes and Standards Developed by
  International Organizations
• Caux Principles
• Global Reporting Initiative
• Global Sullivan Principles
• OECD Guidelines for Multinational Enterprises
• Principles for Global Corporate Responsibility
• UN Global Compact

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Improving Global Business Ethics

Fundamental International Rights

• The right to physical movement
• The right to ownership of property
• The right to freedom from torture
• The right to a fair trial
• The right to nondiscrimination

• The right to physical security
• The right to freedom of speech and association
• The right to minimal education
• The right to political participation
• The right to subsistence

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Improving Global Business Ethics
Seven Moral Guidelines for MNCs

• Inflict no intentional or direct harm
• Produce more good than bad for the host country
• Contribute to host countrys development
• Respect the human rights of their employees

• Pay their fair share of taxes
• Respect local cultural beliefs that do not
  violate moral norms
• Cooperate with the government to develop and
  enforce background institutions

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Selected Key Terms

• Anticorruption movement
• Bhopal tragedy
• Bribes
• Consistent norms
• Ethical impact statements
• Globalization
• Grease payments
• Hypernorms

• Illegitimate norms
• Infant formula
• Internationalization
• Less-developed countries (LDC)
• Moral free space
• Multinational corporation (MNC)
• Sweatshops
• Transnational economy