Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003 Doing Business Globally Major Ethical Problems: Foreign values, culture, practices, laws, bribery Negative impacts Fundamental Rights & Guidelines

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003 Doing Business Globally Major Ethical Problems:  Foreign values, culture and practices differ from parent, consumer and capital marketplaces: Bribery, facilitating payments Treatment of workers, environment  Foreign laws... different, weaker, non- existent  Autonomy of distant operations may weaken understanding or observance of company policies  Impact of multinational on local markets

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003 Jail & The German Sub-contractor Responsibility for actions of sub- contractor - for incorrect wage calculations Lessons learned……. Oversight of suppliers Responsibility to staff

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003 Italian Tax Mores Case  Practice is to understate profit  “Invitation to discuss”  Commercialista…bustarella  US Bank sub files American-style return  Mgr. refuses to discuss…pays tax on return  Disallowance of all interest paid to depositors  …thought it would get your attention...shall we now begin our negotiations?

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003 Global or Local? What/who should determine practices?  Management … parent or local  Local laws or domestic (parent)  Shareholders or primary stakeholders  Laws or stakeholder interests  Fundamental rights

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003 Market economy…or moral economy? Success = f(Trust +Respect/Reputation) Trustworthiness & Reputation come from culture, religion, values & political economy … a sort of Moral Economy Management effectiveness depends on understanding local values (culture) In foreign cultures T + Re = ƒ(Mgt. of Conflicts of interest & Risk)

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003 CULTURAL DIFFERENCES … Sphere Basis of Value-system N. America Rights-based: rights, justice, utility Sino-Confucian Duty-based: obligation to family Japan Duty-based: obligation to company Middle East Duty-based: obligation to saviour Europe Personal rights S. America & other Impact On ….Dealing with people…hiring, gender; bribery; motivation for doing business; short- or long- term time horizons; importance of quality-of-life issues

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003 Multinationals Can Influence  Labour rates, supply and practices Rate busting Treatment of women, children, minorities  Input markets  Finance markets  Product markets  Political decisions

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003 Conflicts of Interest/Bribery  Foreign Corrupt Practices Act (US) History, fines, disclosure Transparency International  Corruption perception index-country rating  Website: OECD initiative - April 1998  Corp. statements of policy…moral imagination  Bribes, Facilitating payments, Kickbacks  Conflict of Interest

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003 Product Decisions  Should a product/input ruled/known to be harmful at home be sold/used abroad? (Corn in chips)  Should a product be recalled overseas, but not at home? (Firestone tires on Ford Explorers)  Should a product harmful to a culture be sold? (Nestle)  Should a product be made which involves questionable practices with animals? (Pate)

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003 Pricing Decisions  Predatory pricing  Dumping  Gouging  Set to minimize/avoid tax Transfer Pricing

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003 Questions To Be Considered  Does a business owe any loyalty to: Foreign workers during a downsizing? Host locales?  Should codes of conduct be tailored to each country of operations?  Should procedures for evaluation ethical behaviour vary by country?  Are there general operating guidelines that can be followed by multinationals?

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003 Donaldson…Fundamental International Rights  Freedom of physical movement  Ownership of property  Freedom from torture  Nondiscriminatory treatment  Freedom of speech & association Tom Donaldson, The Ethics of International Business, Oxford University Press, 1989,81  Fair trial  Physical security  Minimal education  Political participation  Subsistence Minimal Behaviour

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003 De George...Guidelines For Multinationals  Do no intentional direct harm  Produce more good than harm for host country  Help the host country’s development  Respect human rights of their employees  Provided local culture does not violate ethical norms, respect & work with ethical culture  Pay their fair share of taxes  Cooperate with local government in developing & enforcing just background institutions Richard T. De George, Competing with Integrity in International Business, Oxford University Press, 1993,

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003 Ethical Tests For International Activities … Brooks, Donaldson & DeGeorge  Does the practice violate: company code, guidelines for multinationals? a fundamental international right? Principles: Sullivan; Caux; Int’l. Code for Can. Bus. international agreements, laws or codes?  Can business be conducted in the host country without the practice?  Is it permissible: at home? in consumer markets? in capital markets? Thomas Donaldson, HBR, September-October, 1996,

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003 Global Business Ethics Value Chain GO CAUTION STOP CORPORATION ACTIONS BEHAVIOUR STAKEHOLDER SCREEN INFLUENCES Primary Other ACHEIVEMENT OF STRATEGIC OBJECTIVES Governance Mechanism Formulation of Strategic Objectives Customers Employees Capital Markets Current: Shareholders Lenders Environmentalists Host Communities Governments NGOs DETERMINANTS OF VALUE… DETERMINANTS OF VALUE… Success = f(Trust + Respect) CORPORATE CULTURE ETHICS PROGRAM &CODE TOP MANAGEMENT SUPPORT STAKEHOLDER SYNERGIES CHARACTER GLOBAL MEDIA PERCEPTION OF: TRUST RESPECT RELATIVE IMPACT RELATIVE SALIENCE LOCAL CULTURE