Ethical Issues in the Global Arena

1
Ethical Issues in the Global Arena
9
1
2
Chapter Nine Objectives

• Identify the internationalization and
  globalization of business
• Summarize arguments for and against globalization
• 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

2
3
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

4
Introduction to Chapter Nine

• The focus of the chapter is on
• Transnational economy
• Internationalization
• Global ethics

5
Eras of Internationalization

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

6
Eras of Internationalization

• 1980-now 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.

7
Concepts of Global Business

• Internationalization
• Globalization

8
Pros and Cons of Globalization
I M P A C T O N Globalists Antiglobalists
I M P A C T O N Consumers Free trade promotes lower costs, etc. Benefits the wealth at the expense of the poor
I M P A C T O N Employees Faster economic growth promotes Higher wages, etc. Places profits above people
I M P A C T O N Environment Creates resources needed to address the issue Exploits and destroys ecosystems
I M P A C T O N Developing Nations Promotes national economic development, higher standard of living, etc. World financial institutions conspire to keep poor nations in debt
I M P A C T O N Human Rights Creates cultures that support law and free expression Corporations pursing profits ignore human rights violations
9-8
9
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
• Cultural differences
• Business and government differences

10
MNCs and the Global Environment
9-10
11
Ethical Issues in Global Business

• Questionable marketing and safety practices
• Sweatshop and labor abuse
• Corruption, bribery, and questionable payments

12
Arguments For and Against Bribery

• For
• Necessary to do business
• Common practice
• Accepted practice
• Form of commission, tax, or compensation

• Against
• Wrong
• Illegal
• Compromise personal beliefs
• Promotes government corruption
• Slippery slope
• Prohibits taking a stand for honesty, etc.
• Benefits recipient only
• Creates dependence on corruption
• Deceives stockholders

13
Trends Against Bribery

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

14
Trends Against Bribery
9-14
15
Bribes vs. Grease Payments

• Definitions
• Grease PaymentsRelatively small sums of money
  given for the purpose of getting minor officials
  to
• Do what they are supposed to be doing
• Do what they are supposed to be doing faster or
  sooner.
• Do what they are supposed to be doing better than
  they would otherwise.
• BribesRelatively large amounts of money given
  far the purpose of influencing officials to make
  decisions or take actions that they otherwise
  might not take. If the officials considered the
  merits of the situation only, they might take
  same other action.

• Examples
• Money given to minor officials (clerks,
  attendants, customs inspectors) for the purpose
  of expediting. This form of payment helps get
  goods or services through red tape or
  administrative bureaucracies.
• Money given, often to high-ranking officials.
  Purpose is often to get these persons to purchase
  goods or services from the bribing firm. May also
  be users to avoid taxes, forestall unfavorable
  government intervention, secure favorable
  treatment, etc.

16
Improving Global Business Ethics

The Dilemma of the Multinational Corporation
The Multinational Corp.
17
Improving Global Business Ethics

Ethical Choices in Home vs. Host Country
Situations
18
Improving Global Business Ethics

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

19
Improving Global Business Ethics

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

20
Improving Global Business Ethics

• Four Actions for Improving International Business
  Ethics
• Create global codes of conduct
• Global codes and standards set by corporations
• Global Codes and standards set by international
  organizations
• Integrate ethics into a global strategy
• Suspend activities in host country
• Create ethical impact statements

21
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
  Benchmarks
• UN Global Compact

22
Improving Global Business Ethics

Fundamental International Rights

1. The right to physical movement
2. The right to ownership of property
3. The right to freedom from torture
4. The right to a fair trial
5. The right to nondiscriminatory treatment

• 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

23
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

24
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