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Ethics and the Conduct of Business

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1 Ethics and the Conduct of Business
Eighth edition Chapter 14 International Business Ethics Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

2 Modules Introduction: International Business Ethics
14.1: Different Standards 14.2: Guidelines for Multinationals 14.3: Wages and Working Conditions 14.4: Foreign Bribery 14.5: Human Rights Abuses Conclusion: International Business Ethics Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

3 Learning Objectives (1 of 2)
14.1: Categorize the various ethical problems that multinational companies may face in their foreign operations, especially while conducting business in less- developed countries 14.2: Explain how the moral concepts of rights, welfare, and justice offer guidelines for conducting international business and the role of global civil society in developing and enforcing these guidelines Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

4 Learning Objectives (2 of 2)
14.3: Describe the ethical issues in determining wages and standards for working conditions in international business, and factors that multinational corporations and foreign contractors should consider to improve on those set by market mechanisms 14.4: Evaluate the various forms of bribery and factors that foster them, the ethical problems with bribery, and the diverse means and strategies for combating bribery 14.5: Relate the challenges multinational companies face in dealing with repressive governments, and how a strategy of constructive engagement can be applied to operations in countries with a record of human rights abuses Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

5 Introduction: International Business Ethics
Global marketplace Diversity of business standards Repressive governments Corruption Affects host country development Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

6 14.1: Different Standards (1 of 2)
Objective: Categorize the various ethical problems that multinational companies may face in their foreign operations, especially while conducting business in less-developed countries 14.1.1: Relevant Differences Conditions in countries differ 14.1.2: Variety of Outlooks Overview Cultural differences 14.1.3: Right to Decide Right of the host country 14.1.1: Relevant Differences Point 1- Conditions in countries differ Practices may have different impacts under different conditions Level of economic development 14.1.2: Variety of Outlooks Point 1- Overview Cultural difference Historical, political, and economic differences Point 2- Cultural differences Differences in the meaning of act performed Influence basic values Influence moral thinking 14.1.3: Right to Decide Point 1- Right of the host country Setting standards rests on government and people of host country Ethical imperialism should be avoided Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

7 14.1: Different Standards (2 of 2)
Objective: Categorize the various ethical problems that multinational companies may face in their foreign operations, especially while conducting business in less-developed countries 14.1.4: Business Necessity Necessary practice for business 14.1.4: Business Necessity Point 1- Necessary practice for business Easiest way of doing business Morally permissible Alternative risks losing business Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

8 14.2: Guidelines for Multinationals (1 of 2)
Objective: Explain how the moral concepts of rights, welfare, and justice offer guidelines for conducting international business and the role of global civil society in developing and enforcing these guidelines 14.2.1: Rights Fundamental International rights Rights-based guidelines drawback 14.2.2: Welfare Richard DeGeorge guidelines 14.2.3: Justice Distribution of benefits Violation of market rules 14.2.1: Rights Point 1- Fundamental International rights Thomas Donaldson Basic human rights Specifying rights Rational empathy test Point 2- Rights-based guidelines drawback Little guidance Unclear 14.2.2: Welfare Point 1- Richard DeGeorge guidelines 7 basic guidelines regarding welfare Emphasis on avoiding harm and providing benefits Downside of the guidelines 14.2.3: Justice Point 1- Distribution of benefits Unfair distribution of benefits Contribute to host country development Globalization Point 2- Violation of market rules Unfair competition Transfer pricing Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

9 14.2: Guidelines for Multinationals (2 of 2)
Objective: Explain how the moral concepts of rights, welfare, and justice offer guidelines for conducting international business and the role of global civil society in developing and enforcing these guidelines 14.2.4: International Codes International codes 14.2.4: International Codes Point 1- International codes The Global Compact The Caux Roundtable Principles Four sources of moral authority Rise of global civil society Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

10 Figure 14.1: Moral Authority for Codes of International Business Ethics30
National sovereignty Equality Market integrity Human rights Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

11 14.3: Wages and Working Conditions
Objective: Describe the ethical issues in determining wages and standards for working conditions in international business, and factors that multinational corporations and foreign contractors should consider to improve on those set by market mechanisms 14.3.1: Setting Wages Obstacles Argument for market wages Arguments against market wages 14.3.2: Working Conditions Overview 14.3.1: Setting Wages Point 1- Obstacles Need for minimum standard Living wage Poor market condition Lack of free market Lax labor protection law Oppressive government Point 2- Argument for market wages MNCs pay above minimum wages Raising pay scale has adverse effects Low labor cost has competitive advantage Point 3- Argument against market wages Possibility of exploitation Pay less than living wage is unjust 14.3.2: Working Conditions Point 1- Overview Cost is a concern High standard can reduce welfare Developing a code is vital Industry-wide approach is required Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

12 14.4: Foreign Bribery (1 of 2) 14.4.1: What Is Bribery?
Objective: Evaluate the various forms of bribery and factors that foster them, the ethical problems with bribery, and the diverse means and strategies for combating bribery 14.4.1: What Is Bribery? What is bribery 14.4.2: What's Wrong with Bribery? Economic effects Noneconomic consequences 14.4.1: What Is Bribery? Point 1- What is bribery Payment made to violate duty Occurs when offered payment is accepted Forms of payment Purpose of bribe 14.4.2: What's Wrong with Bribery? Point 1- Economic effects  Causes capital flight Shortchanging Alters local priorities Wastage of resources Encourages over-regulation Point 2- Noneconomic consequences  Results in inequality Loss of confidence in government Political instability Unhealthy social order Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

13 14.4: Foreign Bribery (2 of 2) 14.4.3: Combating Bribery Problems
Objective: Evaluate the various forms of bribery and factors that foster them, the ethical problems with bribery, and the diverse means and strategies for combating bribery 14.4.3: Combating Bribery Problems Solution Anti-bribery strategies Foreign Corrupt Practices Act 14.4.3: Combating Bribery Point 1- Problems Secretive nature Deep penetration Occurs out of public eye Involves network of people Point 2- Solution Action should affect everyone Address the root cause Point 3- Anti-bribery strategies  Altering the role of government in economy Civil service reforms Careful selection of government projects Anti-bribery laws Point 4- Foreign Corrupt Practices Act  Applies to Americans and foreign entities in United States Legally-permitted payments Penalty for violation Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

14 Table 14.1: World’s 10 Industry Sectors Most Likely to Involve Bribery
Score (0–10) Public works contracts and construction 5.3 Real estate, property, legal and business services 6.1 Utilities Oil and gas 6.2 Mining 6.3 Power generation and transmission 6.4 Pharmaceutical and healthcare Heavy manufacturing 6.5 Arms, defence and military 6.6 Fisheries List of industries ranked from most corrupt to least corrupt Ranked on scale 0–10 0 represents most corrupt 10 represents least corrupt Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

15 Table 14.2: Strategies for Combating Bribery
Anti-Bribery Tactics and Goals Score (0–10) Limit government involvement and promote free markets and healthy competition Design and enforce proper regulations to clarify and simplify processes Alter the government’s role in the economy Pay civil servants more to remove the need for extra income Make civil service jobs so attractive that the risk of losing them will deter bribery Reduce the temptation to demand or accept bribes Carefully select projects to eliminate those most vulnerable to bribery Closely monitor approved projects Have funding agencies and loaning investment banks perform checks Eliminate bribery in government projects Create special law enforcement units to uncover and prosecute instances of bribery Promote international standards against corruption to combat bribery Use international cooperation to recover plundered assets Focus on enforcing laws to prevent and criminalize bribery Anti-bribery tactics and goals Strategies Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

16 14.5: Human Rights Abuses 14.5.1: Constructive Engagement
Objective: Relate the challenges multinational companies face in dealing with repressive governments, and how a strategy of constructive engagement can be applied to operations in countries with a record of human rights abuses 14.5.1: Constructive Engagement Constructive engagement strategy 14.5.2: Liability for Abuses MNCs indirectly accountable for abuses 14.5.1: Constructive Engagement Point 1- Constructive engagement strategy Receptiveness of a government to change Effectiveness of a company with regard to a change 14.5.2: Liability for Abuses Point 1- MNCs indirectly accountable for abuses  MNCs indirectly accountable for abuses Have knowledge of events Provide resources for government actions Right of victims to seek remedy Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

17 Conclusion: International Business Ethics
MNCs have social responsibility Diverse political and legal systems Diverse standards Guidelines for international business International codes of ethics Copyright © 2017, 2012, 2009 Pearson Education, Inc. All Rights Reserved

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