Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-1 International Business Environments & Operations 14e Daniels ● Radebaugh ● Sullivan

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-2 Chapter 5 Globalization and Society

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-3 Learning Objectives  To examine the broad foundation of ethical behavior  To demonstrate the cultural and legal foundations of ethical behavior  To discuss the importance of social responsibility when operating internationally, especially in the areas of sustainability  To discuss some key issues in the social activities and consequences of globalized business  To examine corporate responses to globalization in the form of codes of conduct, among other things

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-4 Introduction  Companies must satisfy stakeholders Shareholders Employees Customers Society

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-5 Foundations of Ethical Behavior Learning Objective 1: To examine the broad foundation of ethical behavior.

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-6 Foundations of Ethical Behavior  Three levels of moral development 1. Preconventional 2. Conventional 3. Postconventional, autonomous, principled

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-7 Foundations of Ethical Behavior  Teleological approach decisions are based on the consequences of the action  Utilitarianism an action is right if it produces the greatest amount of good  Deontological approach moral judgments are made and moral reasoning occurs independently of consequences

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-8 Why Do Companies Care?  Ethical behavior can help a company develop a competitive advantage avoid being perceived as irresponsible

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-9 The Cultural and Legal Foundations of Ethical Behavior Learning Objective 2: To demonstrate the cultural and legal foundations of ethical behavior

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-10 Relativism versus Normativism  Relativism ethical truths depend on the groups holding them  Normativism there are universal standards of behavior that all cultures should follow

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-11 Legal Justification: Pro and Con  The law is inadequate because Some things that are unethical are not illegal Laws are slow to develop in emerging areas of concern Laws may be based on imprecisely defined moral concepts The law often needs to undergo scrutiny by the courts The law is not very efficient

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-12 Legal Justification: Pro and Con  Legal justification is appropriate because The law embodies many of a country’s moral principles The law provides a clearly defined set of rules The law contains enforceable rules that apply to everyone The law reflects careful and wide-ranging discussions

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-13 Extraterritoriality  Extraterritoriality imposing domestic legal and ethical practices on the foreign subsidiaries of companies headquartered in their jurisdictions

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-14 Ethics and Corporate Bribery  Regardless of the reasons for not using the law as a starting point for ethical behavior, it remains a good starting point  Countries looking for solutions to common problems take similar legal steps Consider  activities that affect the well-being of people  activities that affect the environment

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-15 Corruption and Bribery  Corruption the misuse of entrusted power for private gain  Bribes payments or promises to pay cash or anything of value Occurs  to obtain government contracts  to get public officials to do what they should be doing anyway

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-16 Corruption and Bribery Where Bribes Are Business As Usual

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-17 Corruption and Bribery  International accords to stop bribery OECD Anti-Bribery Convention ICC code of rules UN Convention against Corruption  Regional initiatives include EU efforts U.S. Foreign Corrupt Practices Act and Sarbanes-Oxley legislation  Industry initiatives include 2005 World Economic Forum zero tolerance pact

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-18 Ethics and the Environment Learning Objective 3: To discuss the importance of social responsibility when operating internationally, especially in the areas of sustainability

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-19 Ethics and the Environment  Companies compromise the environment contamination of air, soil, or water during manufacturing producing products that emit fossil-fuel contaminants  Effect of natural resource extraction renewable versus non-renewable

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-20 What is Sustainability?  Sustainability meeting the needs of the present without compromising the ability of future generations to meet their own needs  Is sustainability good business practice? yes

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-21 Global Warming, Kyoto Protocol  Kyoto Protocol (1997) signed to require countries to cut greenhouse gas emissions to 5.2% below 1990 levels between 2008 and 2012  Some countries have adopted stricter requirements others have not ratified the agreement including  the U.S., China, India

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-22 Ethical Dilemmas and Other Business Practices Learning Objective 4: To discuss some key issues in the social activities and consequences of globalized business

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-23 Ethical Dilemmas in the Pharmaceutical Industry  Tiered pricing and other price-related issues reverse engineering  WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) generic drugs  R&D and the Bottom Line India

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-24 Ethical Dimensions of Labor Conditions  Labor issues include Wages Child labor Working conditions Working hours Freedom of association

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-25 Ethical Dimensions of Labor Conditions Sources of Worker-Related Pressures in the Global Supply Chain

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-26 Ethical Dimensions of Labor Conditions  Child labor – ILO estimates 250 million children aged 5–17 years work  Some companies avoid operating in countries where child labor is common or establish responsible policies in those countries - IKEA  Some companies refuse to hire individuals who want to work long hours concerned about exploitation

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-27 Corporate Codes of Ethics Learning Objective 5: To examine corporate responses to globalization in the form of codes of conduct, among other things

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-28 Corporate Codes of Ethics  How should companies behave?  The UN Global Compact establishes guidelines for appropriate behavior in human rights labor the environment anti-corruption

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-29 Motivations for Corporate Responsibility  Unethical and irresponsible behavior could result in legal sanctions result in consumer boycotts lower employee morale cost sales because of bad publicity  A code of conduct sets global policy that must be complied with communicates the code to employees, suppliers, and subcontractors ensures that policies are carried out reports results to external stakeholders

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-30 Corporate Ethics in The Future  Two trends: There will be greater convergence of proper ethical conduct Individuals will develop skills to address ethical issues  Impact of social media  Impact of future business and government leaders

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 5-31 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.