1 Ethical Issues in the Global Arena Business and Society: Ethics and Stakeholder Management, 7e Carroll & Buchholtz Copyright ©2009 by South-Western, a division of Cengage Learning. All rights reserved Prepared by Deborah Baker Texas Christian University Chapter 10

2 Rolls Royce…

3 Quote of the Day  If a working class Englishman saw a bloke drive past in a Rolls-Royce, he'd say to himself "Come the social revolution and we'll take that away from you, mate".  Whereas if his American counterpart saw a bloke drive past in a Cadillac he'd say "One day I'm going to own one of those". To my way of thinking the first attitude is wrong. The latter is right. Kerry Packer (Australia's richest man and Media Magnate) (Larry, Mona – hope)

4 Eras of Internationalization The Post-World War II Decade The Growth Years The Troubled Years 1980-now The New International Order 1999-now The New, New World

5 Friedman’s Eras of Globalization Globalization Globalization Globalization

6 Seattle, 1999

7 Concepts of Global Business Internationalization A process by which firms increasetheir awareness of the influence ofinternational activities on their futureand conduct transactions with firmsfrom other countries Globalization The global economic integration of manyformerly national economies into oneglobal economy

8 IMPACTONIMPACTON GlobalistsAntiglobalists Consumers Free trade promotes lower costs, etc. Benefits the wealth at the expense of the poor Employees Faster economic growth Higher wages Improved working conditions Places profits above people Environment Creates resources needed to address environmental issues Exploits and destroys ecosystems More pollution Developing Nations Promotes national economic development, higher standard of living, better working conditions, cleaner environments. World financial institutions conspire to keep poor nations in debt Human Rights Creates cultures that support law and free expression. Spreads economic / political freedom to far corners Corporations pursing profits ignore human rights violations, abuse of workers, free speech, etc. Pros and Cons of Globalization Figure 10-1

9 Globalists and Antiglobalists ProsCons  Open markets across globe  Investors, consumers, employees, and environmentalists are better off  Beneficial to poor and rich nations alike  Expansion and greed of corporate enterprises  Globalization is responsible for destruction of environments and emerging economies, abuses of human rights, undermining of local cultures, and the sovereignty of nation-states  Power of international bodies

10 MNCs and the Global Environment  Changed scope and nature of U.S.-based multinationals  Underlying challenges of operating in new world of business Corporate legitimacy Differing philosophies between MNCs and host countries MNC and host country challenges

11 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 Figure 10-2

12 Other MNC-Host Country Challenges  Cultural differences  Business / government differences  Management and control of global operations Organizational structure Human resource management  Exploration of global markets Modify or redesign products appropriate for the intended market Be sensitive to the impacts of products Be sensitive to politically-vulnerable products

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

14 Social Accountability Child Labor 2. Forced Labor 3. Health and Safety 4. Freedom of Association and Right to Collective Bargaining 5. Discrimination 6. Discipline 7. Working Hours 8. Compensation 9. Management Systems

15 When in Rome?!?!?

16 Arguments For and Against Bribery For BriberyAgainst Bribery  Necessary for profits in order to do business  Common practice  Accepted practice  Form of commission, tax, or compensation  Wrong and illegal in most developed nations  Compromise personal beliefs  Managers should not deal with corrupt governments  Once started, never stops  One should take a stand for honesty, morality, ethics  Benefits recipient only  Creates dependence on corruption  Deceives stockholders and costs customers

17 How do you KNOW!?!?

18 Foreign Corrupt Practice Act  One of the first initiatives: 1977  “it is a criminal offense for a representative of an American corporation to offer or give payments to the officials of other governments for the purpose of getting or maintaining business.”  Why???? (pg. 419)

19 Initiatives Against Bribery Foreign Corrupt Practices Act OECD Antibribery Initiatives Transparency International UN Convention Against Corruption Individual Country Initiatives

20 Bribes versus Grease Payments Bribes Relatively large amounts of money given for 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 some 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 Figure 10-4

21 Other Global Ethics Issues  Acts of terrorism  Kidnappings, murder, and violence against businesspeople  Rogue nations

22 Conducting Business in Foreign Environments 1. Develop worldwide codes of conduct 2. Factor ethics into global strategy 3. Suspend activities when faced with unbridgeable ethical gaps 4. Develop periodic “ethical impact statements”

23 The Challenge of the Multinational Corporation Balancing and Reconciling Ethics Traditions Home Country Ethical Standards Host Country Ethical Standards OR

24 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 Figure 10-5

25 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? Figure 10-5

26 Typology of Global Types  Foreign: Conforms to LOCAL ethical requirements  Empire: Conforms to HOME country requirements and identity  Interconnection: EU/NAFTA – not promoting national identity. Conforms to both, but still sees separation of domestic from host  Global: Home or host not “relevant”, all global (same)

27 Principles and Codes for Socially Responsible Business Practices  Caux Round Table: Principles for Business  CERES Principles  Universal Declaration of a Global Ethic  The MacBride Principles  The Maquiladoras Standards of Conduct  Principles for Global Corporate Responsibility

28  Create global codes of conduct  Integrate ethics into a global strategy  Suspend activities in host country  Create ethical impact statements and audits Strategies for Improving Global Business Ethics

29 1. High-level commitment by top management 2. Detailed statements of policies and operating procedures 3. Training and discussion of policies and procedures 4. Hotlines and helplines for all organizational members 5. Investigative follow-up, reporting, and disclosure Companies Act Against Corruption