Business Ethics in a Global Economy University of Bahrain College of Business Administration MGT 437 Business Ethics Chapter 10 Business Ethics in a Global Economy Copyright © Houghton Mifflin Company. All rights reserved. MGT437

Ethical Perceptions and International Business When businesspeople travel abroad, they sometimes perceive different modes of operation. Research shows that American companies feel they are different from many foreign companies. “We” versus “them” is referred to as self-reference criterion— unconscious reference to one’s own culture values, experiences, and knowledge. Copyright © Houghton Mifflin Company. All rights reserved. MGT437

Ethical Perceptions and International Business Dumping—the practice of charging high prices for products sold in domestic markets while selling the same products in foreign markets at low prices, often below the costs of exporting them The United States has a number of anti-dumping laws. Copyright © Houghton Mifflin Company. All rights reserved. MGT437

Culture as a Factor in Business Culture is everything in our surroundings made by people—both tangible and intangible concepts and values. Each nation has a distinctive culture and beliefs about acceptable or unethical activities. Citizens of different cultures vary based on their religious beliefs, perceptions of time, and body language. The key question: Whose values and ethical standards take precedence internationally? Copyright © Houghton Mifflin Company. All rights reserved. MGT437

Copyright © Houghton Mifflin Company. All rights reserved. MGT437 Cultural Relativism The concept that morality varies from one culture to another and business practices are therefore differentially defined as right or wrong by particular cultures Ethical relativism—one culture defines ethical behavior for the whole globe, no exceptions Business relativist—there may be no ethical standards except for the one in the transaction culture Copyright © Houghton Mifflin Company. All rights reserved. MGT437

Copyright © Houghton Mifflin Company. All rights reserved. MGT437 Global Values A set of global or universal ethical standards, such as Michael Josephson’s: Trustworthiness – Responsibility Honesty – Fairness Integrity – Caring Promise keeping – Citizenship Loyalty Respect for others Copyright © Houghton Mifflin Company. All rights reserved. MGT437

Multinational Corporations Public companies operating on a global scale without significant ties to any one nation/region Perceived to be unfair for MNCs to transfer jobs abroad where wage rates are lower Have been accused of increasing the gap between the rich and poor nations Have been accused of exploiting natural and human resources Have been accused of engaging in unfair competition Copyright © Houghton Mifflin Company. All rights reserved. MGT437

Multinational Corporations Nike Cisco Systems Monsanto Shell Copyright © Houghton Mifflin Company. All rights reserved. MGT437

Copyright © Houghton Mifflin Company. All rights reserved. MGT437 Global Ethical Issues Sexual and racial discrimination Human rights Price discrimination Bribery Harmful products Pollution and the natural environment Telecommunications issues Copyright © Houghton Mifflin Company. All rights reserved. MGT437

Sexual and Racial Discrimination U.S. and European laws prohibit businesses from discriminating on the basis of sex, race, religion or disabilities in their hiring, firing and promotion decisions. Discrimination is sometimes justified on the basis of cultural norms and values. For example, businesswomen are rare in the Middle East. Discrimination remains one of the more prevalent concerns in international business. Copyright © Houghton Mifflin Company. All rights reserved. MGT437

How Companies Might Address Discrimination Issues Develop a company policy on discrimination Communicate the policy internally and externally Determine benchmarks for activities in which discrimination can arise Determine indicators of possible noncompliance Establish methods to identifying noncompliance Develop a plan and implement the plan Source: “Discrimination,” Business for Social Responsibility, www.bsr.org Copyright © Houghton Mifflin Company. All rights reserved. MGT437

Copyright © Houghton Mifflin Company. All rights reserved. MGT437 Human Rights Opportunistic use of child labor, payment of low wages, and abuses in foreign factories are a few of the concerns. Relationships with subcontractors have proven problematic for some firms. MNCs should view the law as a floor of acceptable behavior and strive for greater improvements in workers’ quality of life. Copyright © Houghton Mifflin Company. All rights reserved. MGT437

Advancing Human Rights Engage in an open dialog with workers and management. Be aware of human rights issues and concerns in each country in which the company engages in business. Adopt the prevailing legal standard, but seek to embrace a “best practices” approach and standard. Copyright © Houghton Mifflin Company. All rights reserved. MGT437

Copyright © Houghton Mifflin Company. All rights reserved. MGT437 Price Discrimination Occurs when a firm charges different prices to different groups of consumers Allowable if justified, based on costs Price gouging—a price increase exceeding the costs of additional expenses (taxes, etc.) Copyright © Houghton Mifflin Company. All rights reserved. MGT437

Bribery and the Foreign Corrupt Practices Act Bribes and facilitating payments are acceptable in many cultures. The U.S. Foreign Corrupt Practices Act prohibits American corporations from offering or providing payments to officials of foreign governments for the purpose of obtaining or retaining business abroad. This may place U.S. businesses at a disadvantage. This has been supported through global treaties. Copyright © Houghton Mifflin Company. All rights reserved. MGT437

Consumer Experience with Bribery by Country Copyright © Houghton Mifflin Company. All rights reserved. MGT437

Copyright © Houghton Mifflin Company. All rights reserved. MGT437 Harmful Products Products banned in many industrial nations, considered harmful, are sold in other countries where they are still legal. Dumping of hazardous waste materials in less developed countries is a related issue. Some products that are not harmful in some countries may be so in others because of issues related to literacy, unsanitary conditions, and cultural values. Copyright © Houghton Mifflin Company. All rights reserved. MGT437

Pollution and the Natural Environment Many countries are working together to create alliances and standards for environmental responsibility to minimize the negative effects of pollution. Some countries are taking legal action against polluting firms in an effort to defend air and water quality. Reasonable global emission standards must be established. Copyright © Houghton Mifflin Company. All rights reserved. MGT437

Telecommunications Issues Satellites, e-mail, and the Internet bring ease of information access with resulting ethical issues. A few of the ethical issues include: Counterfeiting Knockoffs Day trading Money laundering Copyright © Houghton Mifflin Company. All rights reserved. MGT437

Intellectual Property Protection Intellectual property refers to ideas and creative materials people develop to solve problems, carry out applications, educate, and entertain others. Patents Legal document issued to an inventor that grants the right to exclude others from using or selling the product for a period of time Copyrights Protection that covers published and unpublished literary, scientific and artistic works Copyright © Houghton Mifflin Company. All rights reserved. MGT437

World Trade Organization The WTO administers its own trade agreements, facilitates future trading negotiations, settles trade disputes and monitors the trade policies of member nations. Addresses economic and social issues involving agriculture, textiles, banking, telecommunications, government purchases, industrial standards, food sanitation regulations, services and intellectual property The WTO was established in 1995 and now includes over 133 member nations. Copyright © Houghton Mifflin Company. All rights reserved. MGT437