1. Ethics and Globalization
Chapter 9
Ethics and Globalization

2. Learning Outcomes
Understand the ethical issues arising in global business
Explain the issue of ethical relativism in a global environment
Explain the challenges in developing a global code of ethics

3. Learning Outcomes (continued)
Analyze the ramifications of the UN Global Compact
Explain the OECD Guidelines for Multinational Enterprises

4. Ethics and Globalization
Business transactions in different countries in different languages and different cultures force companies to revisit ethical principles
Less-developed nation: Lacks the economic, social, and technological infrastructure of a developed nation

5. Ethics and Globalization (continued 1)
Developed nation: Enjoys a high standard of living as measured by economic, social, and technological criteria
Utilitarianism: Ethical choices that offer the greatest good for the greatest number of people

6. Ethics and Globalization (continued 2)
Globalization: Expansion of international trade to a point where national markets have been overtaken by regional trade blocs
Leads to a global marketplace
Multinational Corporation (MNC): Company that provides and sells products and services across multiple national borders
Pursues revenue on the basis of operating strategies that ignore national boundaries

7. Reasons Why MNCs Ignore Ethical Standards
If they didn’t pursue the business, somebody else would
They operate in full compliance with local laws and regulations, which are far less restrictive than those in their own country

8. Ethical Relativism
Gray area in which ethical principles are defined by:
Traditions of one’s society
Personal opinions
Circumstances of the present moment

9. Ethical Relativism (continued 1)
In less developed nations, the ideal black and white world of ethics must give way to a gray area of ethical relativism
Policies and procedures can be hard to follow when one's customers don’t have comparable policies in their own organizations

10. Ethical Relativism (continued 2)
Policies that have been outlawed in developed nations may be standard operating procedure in less-developed nations
Social and political chaos can generate a bureaucracy that bears no relation to a logical reality

11. Pursuit of Global Ethics
Advantages of globalization
Disadvantages of globalization
Bringing unprecedented improvements in the standards of living of citizens in developing nations
Access to resources enables lower production costs that equate to lower prices and higher income standards for businesses of economically developed countries
Developing countries are destroyed for their raw materials with no concern for the longer-term economic viability of their national economies
Workers are exploited
Corporations are free to take full advantage of less restrictive legal environments

12. Global Code of Conduct
General standard of business practice that can be applied equally to all countries over and above their local customs and social norms
Any organization that commits itself to establishing and sticking with a clearly defined code of ethics will face considerable challenges
Moving that ethical commitment to a global stage requires a great deal more planning than simply increasing the scale of the policies and procedures

13. Ethical Guidelines for Organizations
Do no intentional harm
Produce more good than harm for the host country
Contribute to the host country’s development
Respect the human rights of their employees
Respect the local culture
Pay their fair share of taxes
Cooperate with the local government to enforce just background institutions

14. Ethical Guidelines for Organizations (continued)
Majority control of a firm includes the ethical responsibility of attending to the actions and failures of the firm
Multinationals that build hazardous plants are obliged to ensure these plants are operated safely
Responsible for redesigning the transfer of hazardous technologies so that they can be safely administered in host countries

15. Challenges in Developing a Global Code of Ethics
In pursuit of profit and continued expansion, MNCs have been found guilty of:
Bribery
Pollution
False advertising
Questionable product quality
Abuse of human rights in the utilization of sweatshop production facilities

16. Enforcing Global Ethics
Enforcing a global ethical standard would require all parties involved to agree on:
Acceptable standards of behavior
Appropriate consequences for failing to abide by those standards

17. Enforcing Global Ethics (continued)
United Nations (UN) and the Organization for Economic Cooperation and Development (OECD) promote behavior guidelines that MNCs can publicly support and endorse
To give a strong message to their stakeholders that they are committed to ethical corporate conduct wherever they do business in the world

18. UN Global Compact
Voluntary corporate citizenship initiative endorsing 10 key principles that focus on:
Environment
Anticorruption
Welfare of workers around the world
Global human rights
Not a regulatory instrument
Does not police, enforce, or measure the behavior or actions of companies

19. UN Global Compact (continued)
Relies on public accountability, transparency, and enlightened self-interest of companies, labor, and civil society
To initiate and share substantive action in pursuing the principles on which the Global Compact is based

20. UN Global Compact - Human Rights
Businesses should support and respect the protection of internationally proclaimed human rights
Businesses should make sure they are not complicit in human rights abuses

21. UN Global Compact - Labor Standards
Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining
Businesses should uphold the elimination of all forms of forced and compulsory labor
Businesses should uphold the elimination of discrimination in employment and occupation
Businesses should uphold the effective abolition of child labor

22. UN Global Compact - Environment
Businesses should support a precautionary approach to environmental challenges
Businesses should undertake initiatives to promote greater environmental responsibility
Businesses should encourage the development and diffusion of environmentally friendly technologies

23. UN Global Compact - Anticorruption
Businesses should work against all forms of corruption, including extortion and bribery

24. OECD Guidelines for Multinational Enterprises
Promote principles and standards of behavior in human rights, information disclosure, anticorruption, taxation, labor relations, environment, competition, and consumer protection
Governmental initiative endorsed by 30 members of the Organization for Economic Cooperation and Development and nine nonmembers

25. OECD Guidelines Carry no criminal or civil enforcement
Offer the following principles and standards of behavior
Concepts and principles
General policies
Disclosure
Employment and industrial relations
Environment

26. OECD Guidelines (continued)
Combating bribery
Consumer interests
Science and technology
Competition
Taxation