9-11 Ethical Issues in the Global Arena

9-22 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

9-3 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

9-4 Introduction to Chapter Nine The focus of the chapter is on: –Transnational economy –Internationalization –Global ethics

9-5 Eras of Internationalization The Post-World War II Decade A period of reconstruction dominated by the United States The Growth Years Japanese and European firms recover and the first U.S.- based international firms become multinational The Troubled Years A U.S. balance of payments deficit and worldwide oil crisis have a negative impact.

9-6 Eras of Internationalization 1980-now The New International Order Though the U.S. role in the world economy is diminished, it is pressured to be a world leader in the ethics arena now The New, New World A backlash against globalism began.

9-7 Concepts of Global Business Internationalization Globalization

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

9-9 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

9-10 MNCs and the Global Environment 9-10

9-11 Ethical Issues in Global Business Questionable marketing and safety practices Sweatshop and labor abuse Corruption, bribery, and questionable payments Search the Web For student activists interested in sweatshop practices, visit

9-12 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

9-13 Trends Against Bribery Foreign Corrupt Practices Act enacted Transparency International developed OCED Antibribery Initiatives launched

9-14 Trends Against Bribery 9-14

9-15 Bribes vs. Grease Payments DefinitionsDefinitions –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 or sooner. Do what they are supposed to be doing better than they would otherwise. –Bribes—Relatively 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. ExamplesExamples –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.

9-16 Improving Global Business Ethics The Multinational Corp. Home Country Stakeholder Pressures Host Country Stakeholder Pressures The Dilemma of the Multinational Corporation

9-17 Improving Global Business Ethics Broad Middle Ground Mix of Home and Host Country Standards Home Country ETHICAL IMPERIALISM Host Country CULTURAL RELATIVISM Application of Ethical Principles (see notes) International Law Global Codes of Conduct Cultural standards Ethical/moral standards of home country Cultural standards Ethical/moral standards of host country Ethical Choices in Home vs. Host Country Situations

9-18 Improving Global Business Ethics Typology of Global Types Foreign type Empire type Interconnection type Global type

9-19 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

9-20 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

9-21 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

9-22 Improving Global Business Ethics 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 6.The right to physical security 7.The right to freedom of speech and association 8.The right to minimal education 9.The right to political participation 10.The right to subsistence Fundamental International Rights

9-23 Improving Global Business Ethics Inflict no intentional or direct harm Produce more good than bad for the host country Contribute to host country’s 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 Seven Moral Guidelines for MNCs

9-24 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