1. International Management
Welcome
Ethical Challenges of
International Management
Dr. Satyendra Singh Professor, Marketing and International Business University of Winnipeg Canada

2. Why Study Ethical Issues?2
Why Study Ethical Issues?
MNCs are accused of a # of abuses relating to business activities:
Corruption
Child labor
Human rights, Environment, Safety
Dumping
Role of MNCs in society
Responsibility: MNCs vs. Government

4. Sued over misleading beef Later charges dropped – counter sue4
Sued over misleading beef
Later charges dropped – counter sue

5. 5

10. f The Basic Premise Corruption Child labor8
The Basic Premise
Corruption
Child labor
Symptom vs. problem
Right vs. wrong?
Right vs. right? f
(Poverty, Lack of education,
Fair trade,…)

11. Corruption… Pay to get work done Caused by usually poverty, greed…9
Corruption…
Pay to get work done
Caused by usually poverty, greed…
Salary lasts for 3 weeks only…?
Survival vs. meeting basic needs
Corrupt individual
Individual primary beneficiary at the cost of organization
Corrupt organization
Selection, and Socialization

12. Corruption… Arguments for being corrupt! Tax Commission Compensation10
Corruption…
Arguments for being corrupt!
Tax
Commission
Compensation
Job well done
Appreciation
In West, it is called tips, gifts, bonus

13. Corruption: from MNC’s Viewpoint…11
Corruption: from MNC’s Viewpoint…
Western MNCs pay $80b to get contracts or concession (Hawley 2000)
$80b can eradicate poverty (UN)
It ↓ GDP in poor countries
Because it undermines mkt. economy
Decisions  based on corruption
Not on  price, quality, service, innovation
Raises price for everyone  poor suffers

14. Corruption: from MNCs Viewpoint…12
Corruption: from MNCs Viewpoint…
Divert resources from public services  schools and hospitals
to dams… more scope for corruption
Poor does not get public services
Poor is further impacted
Corruption undermines democratic process and rules of law
Environment is also likely to suffer
Corrupt officer  Non-enforcement

15. Corruption: from MNC’s viewpoint…13
Corruption: from MNC’s viewpoint…
Risk of accusation of corruption
Whether proven or not
Can lead to loss of reputation
If pay bribe, more demands likely
It adds costs of doing business
UN convention against corruption
If you cheat, so will your competitor
Doing business more difficult
Employees/stakeholders lose trust

16. Corruption: from MNC’s viewpoint14
Corruption: from MNC’s viewpoint
Customers do not trust companies
Governments do not trust companies
↓ likely to give assistance
↑ likely to audit transactions
↑ expensive to do business
Stock markets react negatively
Compromise personal beliefs
Need justification
Moral philosophies

17. The Moral Philosophies…15
The Moral Philosophies…
Ethics  moral principles or values
Deontological philosophy
Rule (whatever) based–no matter what
We are the best
Teleological philosophy
Consequence based
Responsible for the consequence

18. The Moral Philosophies…16
The Moral Philosophies…
Utilitarian philosophy
Based on net expected benefits
No absolute, relative
But, what is benefit? debatable
Contractarian philosophy
Based on the law of the land, contracts
Anything else is unethical
But, may be difficult to enforce

19. The Moral Philosophies17
The Moral Philosophies
Pluralism philosophy
Based on “do the right thing”
No need for law or contracts
We’ve conscience! Right vs. wrong
Most of us like it
Yet we had 2 WW
Rawls’s Social Justice Theory
Fairness, peace and harmony
But, social contract is a bit ideal

20. Which moral philosophy is (un)applicable…18
Which moral philosophy is (un)applicable…

21. The Options… 1 Stay away No country is perfect18
The Options…
1 Stay away
No country is perfect
Not everybody is corrupt
You lost huge opportunity
You did not try to impact locals
Black-listing a country is easy
Find creative ways of doing business

22. The Options 2 Embrace local standards Impact local culture19
The Options
2 Embrace local standards
Impact local culture
Develop ways to combat corruption
Does context change your values?
3 Maintain high global standards
Global firms have global reputation
Transfer of people easy
Can exceptions be made?

23. At Macro Level Education – a national strategy needed20
At Macro Level
Education – a national strategy needed
E.g., India, China, USSR, Ghana, Kenya
Build capability
Governments enforce moral guidelines
Government policies for fair trade
E.g., GM Food, Subsidies, Coca price…

24. At Micro Level Strategic — MNCs have the power21
At Micro Level
Strategic — MNCs have the power
School and day care for children
UN Global Compact implementation
Contribution to country’s development
Mode of entry
IJV vs. Wholly-owned subsidiary
Ethics Officer
Pay fair taxes, reduce transfer pricing

25. At Personal Level Personal moral compass Organizational Culture22
At Personal Level
Personal moral compass
Organizational Culture
Whistle-blower legislation
(Un)realistic performance goals
Volunteer for social cause
E.g., Scotia Bank  Winnipeg Public Library Board
Win-win situation

26. Child Labor (Peru)

27. Child Labor (India)

28. Child Labor (India)

31. Child Labor (300m) Poverty—survival  urbanization26
Child Labor (300m)
Poverty—survival  urbanization
If outlaw (Harkin Bill)
↓ Family income  ↓labor supply
↑ Adult wage  children go to school
↑ skills  ↑ productive  ↑ wages
↑ family welfare if demand persists
But, ↑ wages  ↓ # of jobs
Effective only if children go to school

32. UN Global Compact -- 5 Abolition of child labor27
UN Global Compact -- 5
Abolition of child labor
ILO conventions  Minimum Age Convention No. 138
Minimum age for admission to employment or work
Developed countries Developing countries
Light Work 13 Years Light Work 12 Years
Regular Work 15 Years Regular Work 14 Years
Hazardous Work 18 Years Hazardous Work 18 Years
Children have distinct rights
Child labour is damaging to a child’s physical, social,
mental, psychological and spiritual development
Deprives them of childhood, dignity; separates from families

33. UN Global Compact -- 10 Work against all forms of corruption28
UN Global Compact
Work against all forms of corruption
Corruption
the abuse of entrusted power for private gain
Extortion
When asking or demand is accompanied by threats that endanger the personal integrity or the life of the person
Bribery, Transparency International
gift, loan, fee, reward… from a person to do something dishonest, illegal or a breach of trust
Steps to fight corruption
Internal: Anti-corruption policies within organizations
External: Report corruption in the annual Communication
Collective: Join forces with industry peers, stakeholders…

34. Trends Against Corruption and Child Labor29
Trends Against Corruption and Child Labor
Transparency International
Foreign Corrupt Practices Act (US)
Corruption of Foreign Public officials (Canada)
OECD Anti-bribery Initiatives
Harkin Bill – Trade Ban
ILO Convention on Minimum Age138
UN Global Compact (UNGC 2007)
HR(2), Labor (4), Environment (3), Anticorruption (1)