Ethical Issues in Global Business Marketing and safety practices – Nestle: the Baby Killers; Union Carbide: Bhopal Sweatshop and labour abuse - Wal-Mart’s Kathy Lee collection (20 hrs/day @ $0.20hr) Corruption and bribery - Gulf Oil: political contributions to Korea ($4.2 million) – Lockheed: bribes to Middle East ($22 million) and Japan ($12.5 million)

Bribes vs. Grease Payments Definitions 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. Examples 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.

The Moral Philosophy Framework Cultural Relativism: Cultural theories Situational ethics “When in Rome…do as the Romans do.” Limitation: Which Romans?

Arguments For and Against Bribery 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

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

Using ISCT: The Case of Bribery Is bribery part of moral free space or is it an illegitimate norm? 1) violates agent / principal contract 2) against law in all countries 3) violates political participation hypernorm 4) violates economic efficiency hypernorm Conclusion: Bribery is an illegitimate norm

Trends Against Bribery Foreign Corrupt Practices Act enacted Transparency International developed OCED Antibribery Initiatives launched #10 on UN Global Compact

Improving Global Business Ethics Fundamental International Rights The right to physical movement The right to ownership of property The right to freedom from torture The right to a fair trial The right to nondiscrimination The right to physical security The right to freedom of speech and association The right to minimal education The right to political participation The right to subsistence

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

No-win situations for MNC’s Labour-saving technology vs. employment motives Take the money and run vs. spreading $$ to gain more power Local wage rates = exploitation vs. higher rates = creaming market

Improving Global Business Ethics Ethical Choices in Home vs. Host Country Situations Broad Middle Ground Mix of Home and Host Country Standards Home Country ETHICAL IMPERIALISM Host Country CULTURAL RELATIVISM Application of Ethical Principles International Law Global Codes of Conduct Cultural standards Ethical & moral standards of home country Ethical & moral standards of host country Questions to be resolved by Management: Which ethical standard will be used? Which ethical standard will transcend national boundaries? Worker and product safety? Fair treatment? Health? Discrimination? Freedom? Minimum pay? Consumer rights? Environmental protection? What constitutes moral minimum in each category?

Improving Global Business Ethics Typology of Global Types Foreign type Empire type Interconnection type Global type

Improving Global Business Ethics Seven Moral Guidelines for MNCs 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 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