Ethics in International Business

1
Ethics in International Business

• Dr. Balbir B. Bhasin

2
Eras in International Business

• Post WW2 (1945-1955) US dominant, Japan under
  reconstruction
• Growth Years (1955-1970) Europe Japan rising,
  US tied down in Vietnam, US Balance of Payment
  deficit, Rise in MNCs, Rise in global production,
  US dominating the world with Europe and Japan

3
Eras in IB (continued)

• Troubled Years (1970-1980) US dropped fixed
  exchange rate, US declined significantly, Rise
  of German Mark and Japanese Yen, Oil crisis with
  OPEC
• New International Order (1980-2000) Public
  concerned about issues environment, pollution,
  natural resource allocation, consumer protection,
  exploitation of labor, EU, NAFTA, ASEAN etc.

4
Corporate Response to Public Concerns

• Corporate Social Responsibility obligation of a
  business towards society
• Business Ethics comprises principles and
  standards that guide behavior in the world of
  business
• Alternative A to survive, a business must make
  profits
• Alternative B need to balance desire for
  profits with needs of society

5
Principal Causes of Ethical Compromise (1997
Survey)

• Meeting overly aggressive business objectives
• Meeting schedule pressure
• Helping the organization survive
• Rationalizing that others do it
• Resisting competitive threats
• Saving jobs

6
Influences on Ethical Behavior

• Personal values
• Attitude/behavior of Supervisor
• Attitude/behavior of Senior Management
• Internal drive to succeed
• Performance pressure
• No threat of punishment
• Friends and co-workers

7
What are the Ethical Issues?

• Bribes to get business (major problem)
• Compromising safety and quality to lower costs
  (Bhopal tragedy)
• Misrepresenting product features and attributes
  (Nestle in Africa)
• Promising delivery when unable to meet deadline
• Overworking employees without additional
  compensation (Sweatshops, Nike? Carpets, Pak?)
• Insufficient training of employees

8
For and Against Bribery

• Necessary to do business
• Everybody does it anyway
• Accepted practice, norm?
• Form of commission or tax

• Morally wrong
• Illegal Foreign Corrupt Practices Act 1977
• Once started, no end it it
• Bribes encourage more bribes

9
What is bribery?

• Grease payment small amount for expediting
  process
• Corruption large amounts for
• Purchases (kickbacks)
• Avoid taxes
• Prevent government intervention

10
The Response

• Transparency, Governance and Code of Ethics
• Case Study
• Values and Morals (Universal)
• International Code of Ethics
• Video Presentation