© 2005 by Nelson, a division of Thomson Canada Limited. 1 Ethical Issues in the Global Arena Search the Web An excellent listing of global principles and codes for ethics may be found at:

© 2005 by Nelson, a division of Thomson Canada Limited. 2 Chapter Nine Objectives Identify the internationalization and globalization of business Summarize globalization arguments 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

© 2005 by Nelson, a division of Thomson Canada Limited. 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

© 2005 by Nelson, a division of Thomson Canada Limited. 4 Introduction to Chapter Nine The focus of the chapter: –The transnational economy –Internationalization –Global ethics

© 2005 by Nelson, a division of Thomson Canada Limited. 5 Eras of Internationalization The Post-World War II A period of reconstruction dominated by the United States The Growth Years Japanese and European firms recover and U.S. international firms become multinational The Troubled Years U.S. deficit and worldwide oil crisis have a negative impact.

© 2005 by Nelson, a division of Thomson Canada Limited. 6 Eras of Internationalization 1980s-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.

© 2005 by Nelson, a division of Thomson Canada Limited. 7 Concepts of Global Business Internationalization Globalization

© 2005 by Nelson, a division of Thomson Canada Limited. 8 Pros and Cons of Globalization IMPACTONIMPACTON GlobalistsAntiglobalists Consumers Free trade promotes lower costs, etc. Benefits the wealthy 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 and standards 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

© 2005 by Nelson, a division of Thomson Canada Limited. 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

© 2005 by Nelson, a division of Thomson Canada Limited. 10 Ethical Issues in Global Business Marketing and safety practices Sweatshop and labour abuse Corruption and bribery Search the Web For student activists interested in sweatshop practices, visit

© 2005 by Nelson, a division of Thomson Canada Limited. 11 Arguments For and Against Bribery For A necessary tool Accepted practice Form of commission, tax, or compensation Against Wrong/illegal Compromise personal beliefs Promotes government corruption Benefits recipient only Creates dependence on corruption Deceives stockholders

© 2005 by Nelson, a division of Thomson Canada Limited. 12 Trends Against Bribery Foreign Corrupt Practices Act enacted Transparency International developed OCED Antibribery Initiatives launched

© 2005 by Nelson, a division of Thomson Canada Limited. 13 Bribes vs. Grease Payments DefinitionsDefinitions –Grease Payments— Money given for the purpose of getting minor officials to do what they are supposed to be doing. –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. ExamplesExamples –Money given to minor officials (clerks, attendants, customs inspectors) for the purpose of expediting a project –Money given, often to high-ranking officials. Purpose is often to get these persons to purchase goods or services from the bribing firm.

© 2005 by Nelson, a division of Thomson Canada Limited. 14 Improving Global Business Ethics The Multinational Corp. Home Country Stakeholder Pressures Host Country Stakeholder Pressures The Dilemma of the Multinational Corporation

© 2005 by Nelson, a division of Thomson Canada Limited. 15 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/mor al standards of home country Cultural standards Ethical/mor al standards of host country Ethical Choices in Home vs. Host Country Situations

© 2005 by Nelson, a division of Thomson Canada Limited. 16 Improving Global Business Ethics Typology of Global Types Foreign type Empire type Interconnection type Global type

© 2005 by Nelson, a division of Thomson Canada Limited. 17 Improving Global Business Ethics Integrative Social Contract Theory (ISCT) Hypernorms-- transcultural values including fundamental human rights Consistent norms-- norms that are culturally specific, but consistent with hypernorms Moral free space norms-- strongly held cultural beliefs in countries that are in tension with hypernorms Illegitimate norms– those norms that are incompatible with hypernorms

© 2005 by Nelson, a division of Thomson Canada Limited. 18 Improving Global Business Ethics Four Actions for Improving International Business Ethics Create global codes of conduct Integrate ethics into a global strategy Suspend activities in host country Create ethical impact statements

© 2005 by Nelson, a division of Thomson Canada Limited. 19 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 UN Global Compact

© 2005 by Nelson, a division of Thomson Canada Limited. 20 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 nondiscrimination 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

© 2005 by Nelson, a division of Thomson Canada Limited. 21 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

© 2005 by Nelson, a division of Thomson Canada Limited. 22 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