International Business Ethics

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International Business Ethics

• MGMT 491
• Management Ethics in a Global Environment
• Jeffery D. Smith

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Ethics of International Business

• Inevitable trend
• Fewer institutions for enforcement
• National and cultural differences

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Multinational Corporations (MNCs)
technology, information, and organization
financial and political strength
multidomestic multinational
(decentralized)
global multinational (centralized)
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• Ethical Relativism Revisited
• Ethical principles, values, decisions, or
  judgments are ultimately dependent upon, and
  relative to, ones culture, society, or personal
  feelings.
• X is rightX is practiced by culture C
• X is rightX is practiced by society S
• International business is conducted in places
  with social and cultural practices distinct from
  the United States

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• Corrupt Payments
• Foreign Corrupt Practices Act (1977, 1988, 1998)
• Bribes vs. Facilitating Payments
• A corporation pays a bribe when it offers a
  special payment or service to another individual,
  organization, or government agency in order to
  influence the latters behavior or judgment so as
  to obtain or retain a business arrangement.
• A corporation makes a facilitating payment
  (grease payment) when it makes a payment at the
  request of a foreign official in order to
  expedite routine government action a
  facilitating payment is not made to establish or
  renew a business arrangement but to speed up the
  process of implementing or carrying out a
  previously established business arrangement

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• Corrupt Payments, contd
• 1977 FCPA Facilitating Payments only to
  clerical and ministerial officials for the
  purpose of expediting routine government action
• 1988 and 1998 FCPA Facilitating Payments to
  anyone so long as the payment is intended to
  expedite routine government action 
• 1998 FCPA Facilitating Payments permissible if
  the payment is lawful under the written laws of
  the foreign country

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• Are Standards of Corrupt Payments Relative?
• What is a corrupt payment?
• Are there some payments that are contrary to the
  very existence of free markets?
• What standards of corruption should US businesses
  abide by, given the new flexibility of the FCPA?

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Thomas DonaldsonBusiness Values Away From Home

• Balancing Ethical Relativism and Absolutism
• respect for core human values
• respect for local traditions
• context matters in ethical decision making

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Managing Ethical Conflicts in International
Business
conflict of relative development
conflict of cultural tradition
WOULD THE PRACTICE BE ACCEPTABLE AT HOME IF MY
COUNTRY WERE AT A SIMILAR LEVEL OF DEVELOPMENT?
IS THE PRACTICE ESSENTIAL TO CONDUCT BUSINESS IN
THE FOREIGN COUNTRY?
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What is Fair Labor Practice? Human resource,
supply chain and information management practices
adopted by Multinational Enterprises (MNEs) that
show respect for, and support of, the freedom
and well-being of employees. Wages, compensation
and benefits Occupational health and
safety Freedom of thought, expression and
association Absence of coercion and
repression Non-discrimination Appropriate
treatment of children
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• Problems Thus Far
• Growth of Outsourcing and Imports in Key
  Industries
• Specialization
• Reduced Production Costs
• Cycle Time
• Flexibility and Experimentation
• Race to the Bottom and Sweatshops
• Information Gaps
• Corruption and Legal Infrastructures

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Arnold, D. and Hartman, L. (2006). Worker Rights
and Low Wage Industrialization How to Avoid
Sweatshops. Human Rights Quarterly 28  676700.
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Cooperation with Non-Governmental
Organizations Social Accountability
International (SAI) Ethical Trading Initiative
(ETI) Fair Labor Association
(FLA) Consistency Breadth Verification
Mechanisms Programmatic Change
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Developments MNE Responses When I first began
to study management, during and immediately
after World War II, a manager was defined as
someone who is responsible for the work of
subordinates. A manager in other words was a
boss and management was rank and power. This
is probably still the definition a good many
people have in mind when they speak of managers
and management. But by the early 1950s, the
definition of manager had already changed to one
who is responsible for the performance of
people. Today, we know that is also too narrow
a definition. The right definition of a manager
is one who is responsible for the application and
performance of knowledge. Peter Drucker,
Post-Capitalist Society (1993), p. 44
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• Nike
• 1998, Just Did It
• Minimum age requirements
• OSHA-style requirements
• Employee education programs
• Microenterprise loan programs
• Audit and Compliance Division
• SHAPE Program (Safety, Health, Attitude, People
  and Environment)
• Cooperation with Ministries, NGOs and Auditors

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Two hand button pushing
Arnold, D and Hartman, L. (2004). Rising Above
Sweatshops Innovative Approaches to Global Labor
Challenges. London Praeger.
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adidas-Salomon SoE Management
General Counsel adidas-Salomon AG
Global Director Social and Environmental Affairs
Social and Environmental Affairs Head of Asia
Social and Environmental Affairs Head of Americas
Social and Environmental Affairs Head of Europe
Regional Team HSE/Labor Monitors Based In
Regional Team HSE/Labor Monitors Based In
USA
CHINA
Regional Team HSE/Labor Monitors Based In
INDONESIA
SOUTH AMERICA
TURKEY
THAILAND
GERMANY
VIETNAM
SINGAPORE
TAIWAN
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Prospects Multi-stakeholder Dialogue/Management
Incremental but Systemic Change Market-based
Objections to Fair Labor Practice are Anecdotally
False Ian Maitland, The Great Non-Debate Over
International Sweatshops (2001) National
Center for Policy Analysis, Sweatshops Offer
Ways to Survive (1997) David Henderson,
Misguided Virtue False Notions of CSR (2001)

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Alternative Supply Chain System Chart Denis
Arnold and Laura Hartman, Moral Imagination and
the Future of Sweatshops Business and Society
Review 1084 (2003), p. 434
Global Monitoring Organizations External
Auditors
Global Consumer Groups American Consumers
MNE
Shareholders
Global Labor Advocates In Country Labor Reps In
Country Labor Advocates
In Country Brand Professional Staff
FLA WRC Global Trade Unions
Contractor
ILO UN Global Compact
Contractor Workers
Host Nations