Ethics & International Management Chapter 4 Ethics & International Management

Ethics & International Management Study of decision making within a framework of a system of moral standards. Study of morality and standards of conduct.

Managerial Ethics-Issues Can there be one fixed moral framework that can provide standards to guide managers every time they face ethical decisions? If a single set of standard is to guide managerial behavior, which is the right set among the conflicting definitions of good and bad behavior?

Ethical Issues Ethical Dilemmas Ethical Dilemmas (ED) Ethical Lapses (EL) Managers facing ethical issues fall into two broad categories-ED and EL. The issue has two conflicting but arguably valid sides. Ethical Dilemmas

Ethical Dilemma Not Allowing to advertise Permitting or not tobacco companies to advertise. Not Allowing to advertise Restricts their freedom of speech Obstructs their ability to do business

Ethical Lapse Occurs when a manager makes an unethical decision Unresolved interpretations of ethical issues lead to-ethical dilemmas. Ethical lapse is associated with cases of unethical behavior. Desire of a tobacco company to advertise is an ethical dilemma. Decision of a top manager to earn profit from inside information is an act of ethical lapse. Example

Approaches to Ethical Management Ethical management practices Must be a proactive stance Must be pursued with diligence Must be pursued with persistence > For achieving the aim, the need is to recognize various ethical pressures on managers lead to ethical dilemmas

Ethical Pressure on Managers Organizational Goals Ethical Pressure Personal Goals Fear Competition

Organization. Goals. Target sale Pressure. Adopting less ethical Organization Goals Target sale Pressure Adopting less ethical course of action Benefit Better short-term performance

Ethical organization recognize Managers should ask ethical questions while taking decisions. Decision making should consider factors beyond immediate goals.

Personal Goals Compensation & Promotion Pressure Unethical behavior (overstate a products benefit to increase the sales volume) Pressure (Other employees work as his own) Pressure (Other employees to lower their performance)

To beat the competitors Competition Market Success Pressure Unethical Practices (To announce product well before they exist) Benefit To beat the competitors Danger Mislead customers Cause financial damages to firms Late or no arrival of products

Fear To loose job Pressure Unethical decisions (Using of sub-standard material on the instruction of boss) Cheating Customers

Ethical issues: Country differences give rise to some interesting ethical issues One major ethical dilemma facing firms from the Western democracies (U.S) whether they should do business in totalitarian countries that violates the human rights of their citizens (e.g.: China)

One ethical concern regards whether firms should invest in countries where the government represses its citizens in political and/or economic freedom A second ethical concern regards whether an international firm should adopt consistent and high levels of product safety, worker safety, and environmental protection worldwide, or whether they should focus only on meeting local regulations.

Another ethical concern regards whether firms should pay bribes to governmental officials or business partners in exchange for business access.

Four Actions for Improving International Business Ethics Create global codes of conduct Global codes and standards set by corporations Global Codes and standards set by international organizations Integrate ethics into a global strategy Suspend activities in host country Create ethical impact statements

Global Codes and Standards Developed by International Organizations Caux Principles Global Reporting Initiative Global Sullivan Principles OECD Guidelines for Multinational Enterprises Principles for Global Corporate Responsibility: Benchmarks UN Global Compact

Code of Ethics Need to respect laws & regulations of the host countries Do nothing to compromise with the health & safety of consumers Should not exploit the weakness in legislation in host countries Be proactive & assist the government in preventing marketing of unsafe products Should not misuse the close relationship developed by firm & government.

MNCs Marketing Practices –Issues of Ethical Nature Selling products in LDC, less in demand in Home countries- (Tobacco) Selling prohibited products in LDC markets-(DDT) Selling products likely to be misused-(Milk Power) Dumping Counterfeiting-violating patent & copyright Grey marketing

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 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

Seven Moral Guidelines for MNCs 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