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 1. Identify the concepts of internationalization and globalization of business. 2. Summarize arguments for and against globalization. 3. Explain the evolving role and problems with multinational corporations in the global environment. 4. Recognize the major ethical challenges of operating in the multinational environment. 5. Define ISCT and the concepts of hypernorms and moral free space. 6. Discuss strategies for improving global ethics. 7. Enumerate international rights and moral guidelines for improving business operations in the global sphere. Chapter 10 Outcomes

3 Chapter 10 Outline  The New, New World of International Business  Multinational Corporations (MNCs) and the Global Environment  Ethical Issues in the Global Business Environment  Improving Global Business Ethics  Summary  Key Terms  Discussion Questions

4 Introduction to Chapter 10 The focus of the chapter is on…  The transnational economy  The globalization of business  Global business ethics

5 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

6 Friedman’s Eras of Globalization Globalization Globalization Globalization

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 Backlash Against Globalization  Outsourcing of jobs to less-developed nations  Tenth anniversary of NAFTA

10 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

11 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

12 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

13 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

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

15 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

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

18 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

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

20 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”

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

22 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

23 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

24 Typology of Global Types Foreign type Interconnection type Empire type Global type

25 Integrative Social Contract Theory Hypernorms consist of transcultural values including fundamental human rights Consistent norms consist of norms that are culturally specific, but consistent with hypernorms Moral free space norms consist of strongly held cultural beliefs in particular countries that are in tension with hypernorms Illegitimate norms consist of norms that are incompatible with hypernorms

26 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

27  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

28 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

29 Key Terms  Transnational economy  Internationalization  Globalism or globalization  Outsourcing  Offshoring  North American Free Trade Agreement (NAFTA)  Alien Tort Claims Act  Corruption  Bribes  Grease payments  Anticorruption movement  Transparency International  Corruption Perception Index  Globalists  Antiglobalists  Multinational corporations  Less-developed countries  Infant formula controversy  Bhopal tragedy  Sweatshops  Bribe Payers’ Index  Public Integrity Index  Hypernorms  Consistent norms  Moral free space  Illegitimate norms  Ethical impact statements