BA 385: What MNCs Owe Society Chapter Nine: ETHICAL ISSUES in the GLOBAL ARENA

Concepts of Global Business Internationalization Globalization

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

Eras of Internationalization 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 1999-now The New, New World A backlash against globalism began. In the early 2000’s the US lost the leadership role in ethics due to war against Iraq and scandalous business behavior. A backlash against globalism began. In the early 2000’s the US lost the leadership role in ethics due to war against Iraq and scandalous business behavior.

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 Pros and Cons of Globalization

MNC’s and the Global Environment Changed scope and nature of U.S.-based multinationals Underlying 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 Management and control of global operations Exploration of global markets

The Dilemma of the Multinational Corporation Home Country Stakeholder Pressures Host Country Stakeholder Pressures Standards Practices Ethics Laws Culture Customs System of Government Socioeconomic System Standards Practices Ethics Laws Culture Customs System of Government Socioeconomic System The Multinational Corporation

Ethical Issues in Global Business Product safety Plant safety Advertising practices Human resource management Environmental problems

Social Accountability 8000 Child labor Forced labor Health and safety Freedom of association and Right to Collective Bargaining Discrimination Discipline Working Hours Compensation Management Systems

Arguments For and Against Bribery For Bribery Against Bribery Necessary to do business Common practice Accepted practice Form of commission, tax, or compensation Wrong Illegal Compromise personal beliefs Promotes government corruption Once started, never stops Prohibits taking a stand for honesty, morality, ethics Benefits recipient only Creates dependence on corruption Deceives stockholders

Trends Against Bribery Foreign Corrupt Practices Act OECD Antibribery Initiatives Transparency International Individual Country Initiatives

Bribes versus Grease Payments 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. 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 Do what they are supposed to be doing better

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

Ethical Choices in Home versus Host Country Situations International Law Global Codes of Conduct BROAD MIDDLE GROUND Mix of Home and Host Country Standards CULTURAL RELATIVISM ETHICAL IMPERIALISM Cultural standards Ethical/moral standards of home country Home Country Host Country Cultural standards Ethical/moral standards of host country Application of Ethical Principles

Ethical Choices in Home versus Host Country Situations Questions to be Resolved by Management: Which ethical standards will be used? Which ethical standards will transcend national boundaries? Worker and product safety? Fair treatment? Health? Discrimination? Freedom? Minimum pay? Consumer rights? Environmental Protection? What constitutes moral minimums in each category?

Create global codes of conduct Corporate global codes and standards International organization global codes and standards Integrate ethics into a global strategy Suspend activities in host country Create ethical impact statements Actions for Improving International Business Ethics

Global Standards from International Organizations (see p. 324 in text) Caux Principles Global Reporting Initiative Global Sullivan Principles OECD Guidelines for Multinational Enterprises Principles for Global Corporate Responsibility: Benchmarks UN Global Compact

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 nondiscriminatory treatment 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 Fundamental International Rights

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