Ethical Issues in the Global Arena. Chapter 10 Outcomes. Chapter 10 Outline. Chapter 10

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1 Chapter 10 Prepared by Deborah Baker Texas Christian University Business and Society: Ethics and Stakeholder Management, 7e Carroll & Buchholtz Copyright 2009 by South-Western, a division of Cengage Learning. All rights reserved 1 Chapter 10 Outcomes 1. Identify the concepts of internationalization and globalization of business. 2. Summarize arguments for and against globalization. 3. Explain the evolving role and problems with multinational corporations in the global environment. 4. Recognize the major ethical challenges of operating in the multinational environment. 5. Define ISCT and the concepts of hypernorms and moral free space. 6. Discuss strategies for improving global ethics. 7. Enumerate international rights and moral guidelines for improving business operations in the global sphere. 2 Chapter 10 Outline The New, New World of International Business Multinational Corporations (MNCs) and the Global Environment Ethical Issues in the Global Business Environment Improving Global Business Ethics Summary Key Terms Discussion Questions 3 1

2 Introduction to Chapter 10 The focus of the chapter is on The transnational economy The globalization of business Global business ethics 4 Eras of Internationalization The Post-World War II Decade The Growth Years The Troubled Years 1980-now The New International Order 1999-now The New, New World 5 Friedman s Eras of Globalization Globalization Globalization Globalization

3 Concepts of Global Business Internationalization A process by which firms increase their awareness of the influence of international activities on their future and conduct transactions with firms from other countries Globalization The global economic integration of many formerly national economies into one global economy 7 Pros and Cons of Globalization I M P A C T O N Consumers Employees Environment Developing Nations Human Rights Figure 10-1 Globalists Free trade promotes lower costs, etc. Faster economic growth Higher wages Improved working conditions Creates resources needed to address environmental issues Promotes national economic development, higher standard of living, better working conditions, cleaner environments. Creates cultures that support law and free expression. Spreads economic / political freedom to far corners Antiglobalists Benefits the wealth at the expense of the poor Places profits above people Exploits and destroys ecosystems More pollution World financial institutions conspire to keep poor nations in debt Corporations pursing profits ignore human rights violations, abuse of workers, free speech, etc. 8 Backlash Against Globalization Outsourcing of jobs to less-developed nations Tenth anniversary of NAFTA 9 3

4 Globalists and Antiglobalists Pros Cons Open markets across globe Investors, consumers, employees, and environmentalists are better off Beneficial to poor and rich nations alike Expansion and greed of corporate enterprises Globalization is responsible for destruction of environments and emerging economies, abuses of human rights, undermining of local cultures, and the sovereignty of nation-states Power of international bodies 10 MNCs and the Global Environment Changed scope and nature of U.S.-based multinationals Underlying challenges of operating in new world of business Corporate legitimacy Differing philosophies between MNCs and host countries MNC and host country challenges 11 The Dilemma of the Multinational Corporation Home Country Stakeholder Pressures Standards Practices Ethics Laws Culture Customs System of Government Socioeconomic System The Multinational Corporation Host Country Stakeholder Pressures Standards Practices Ethics Laws Culture Customs System of Government Socioeconomic System Figure

5 Other MNC-Host Country Challenges Cultural differences Business / government differences Management and control of global operations Organizational structure Human resource management Exploration of global markets Modify or redesign products appropriate for the intended market Be sensitive to the impacts of products Be sensitive to politically-vulnerable products 13 Ethical Issues in Global Business Product safety Plant safety Advertising practices Human resource management Environmental problems Business practices 14 Social Accountability Child Labor 2. Forced Labor 3. Health and Safety 4. Freedom of Association and Right to Collective Bargaining 5. Discrimination 6. Discipline 7. Working Hours 8. Compensation 9. Management Systems 15 5

6 Arguments For and Against Bribery For Bribery Necessary for profits in order to do business Common practice Accepted practice Form of commission, tax, or compensation Against Bribery Wrong and illegal in most developed nations Compromise personal beliefs Managers should not deal with corrupt governments Once started, never stops One should take a stand for honesty, morality, ethics Benefits recipient only Creates dependence on corruption Deceives stockholders and costs customers 16 Initiatives Against Bribery Foreign Corrupt Practices Act Transparency International OECD Antibribery Initiatives UN Convention Against Corruption Individual Country Initiatives 17 Bribes versus Grease Payments Grease Payments Relatively 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 Do what they are supposed to be doing better Bribes Relatively large amounts of money given for 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 some other action. Figure

7 Other Global Ethics Issues Acts of terrorism Kidnappings, murder, and violence against businesspeople Rogue nations Develop worldwide codes of conduct 2. Factor ethics into global strategy Conducting Business in Foreign Environments 3. Suspend activities when faced with unbridgeable ethical gaps 4. Develop periodic ethical impact statements 20 Balancing and Reconciling Ethics Traditions The Challenge of the Multinational Corporation Home Country Ethical Standards OR Host Country Ethical Standards 21 7

8 Ethical Choices in Home Versus Host Country Situations International Law Global Codes of Conduct ETHICAL IMPERIALISM Home Country Cultural standards Ethical/moral standards of home country Figure 10-5 BROAD MIDDLE GROUND Mix of Home and Host Country Standards Application of Ethical Principles CULTURAL RELATIVISM Host Country Cultural standards Ethical/moral standards of host country 22 Ethical Choices in Home Versus Host Country Situations Questions to be Resolved by Management: Which ethical standards will be used? Which ethical standards will transcend national boundaries? Worker and product safety? Fair treatment? Health? Discrimination? Freedom? Minimum pay? Consumer rights? Environmental Protection? What constitutes moral minimums in each category? Figure Typology of Global Types Foreign type Empire type Interconnection type Global type 24 8

9 Integrative Social Contract Theory Hypernorms consist of transcultural values including fundamental human rights Consistent norms Moral free space norms Illegitimate norms consist of norms that are culturally specific, but consistent with hypernorms consist of strongly held cultural beliefs in particular countries that are in tension with hypernorms consist of norms that are incompatible with hypernorms 25 Principles and Codes for Socially Responsible Business Practices Caux Round Table: Principles for Business CERES Principles Universal Declaration of a Global Ethic The MacBride Principles The Maquiladoras Standards of Conduct Principles for Global Corporate 26 Strategies for Improving Global Business Ethics Create global codes of conduct Integrate ethics into a global strategy Suspend activities in host country Create ethical impact statements and audits 27 9

10 Companies Act Against Corruption 1. High-level commitment by top management 2. Detailed statements of policies and operating procedures 3. Training and discussion of policies and procedures 4. Hotlines and helplines for all organizational members 5. Investigative follow-up, reporting, and disclosure 28 Key Terms Transnational economy Internationalization Globalism or globalization Outsourcing Offshoring North American Free Trade Agreement (NAFTA) Alien Tort Claims Act Corruption Bribes Grease payments Anticorruption movement Transparency International Corruption Perception Index Globalists Antiglobalists Multinational corporations Less-developed countries Infant formula controversy Bhopal tragedy Sweatshops Bribe Payers Index Public Integrity Index Hypernorms Consistent norms Moral free space Illegitimate norms Ethical impact statements 29 10