1. Globalization of Ethical Decision Making
C H A P T E R 10
Globalization of Ethical Decision Making

2. Capitalism, Economics and Business Ethics
The first decade of the 21st century was a turbulent one
Ethical misconduct and excessive risk-taking seemed rampant
Many stakeholders lost confidence in businesses
Lack of fairness, trust and honesty made stakeholders question the stability of major institutions, as well as the intentions of executives
Even the competence of governmental regulatory institutions was called into question 2

3. Risk Compartmentalization
Occurs when profit centers within an organization are unaware of the consequences of their decisions on the organization as a whole
No single person can be blamed for negative outcomes that occur because of systemic problems
Source: Flying Colours Ltd.

4. Key Figures in Modern Economics
Adam Smith
Laissez-faire capitalism
John Maynard Keynes
Government can stimulate the private sector
Milton Friedman
Return to self-regulating free market system

5. Keynes and Friedman Agreed That:
People have rational preferences among outcomes that can be identified and associated with value
Individuals seek to maximize utility and firms seek to maximize profits
People act independently on the basis of full and relevant information

6. Capitalism, Economics and Business Ethics
Socialism: Advocates that wealth and power be shared equally across society based on the amount of work expended in production
Karl Marx was the most famous advocate
Social democracy formed in the 1940s as an offshoot of socialism
Private ownership of property, but large government
Current global economic system has created bimodal wealth distribution: The middle class shrinks so that there are many poor and a few very wealthy

7. Two Schools of Economic Thought
Rational economics: Assumes that people are rational and base their decisions on maximizing their utility based on the amount of resources available to them
Behavioral economics: Assumes that humans do not always act rationally
Also believes that how information is presented can affect people’s choices, which is called the framing effect

8. The Economic Capitalism Country Differential

9. Common Values, Goals, and Business Practices
Global common values: Shared across most cultures
Country cultural values: Specific to certain groups that express actions, behavior and intent
Culture: Everything in our surroundings that is made by people
Each nation has a distinctive culture beliefs about what business activities are acceptable
Subcultures can also be found within many nations

10. Cultural Differences
Can become liabilities when firms transfer personnel
One significant area of cultural differences is language
Cultural differences in body language can also lead to misunderstandings
Perceptions of time may differ
Source: Corbis, Pacific Rim

11. Global Business Practices
The Self-reference criterion (SRC): An implied perspective of ethical superiority is common
SRC is an unconscious reference to one’s own cultural values, experiences, and knowledge
We react on the basis of knowledge, which is accumulated over a lifetime and grounded in the culture of origin

12. Perceptions of Countries as Least/Most Corrupt

13. Global Business
Dumping: The practice of charging high prices for products sold in domestic markets while selling the same products in foreign markets at low prices, often below the costs of exporting them
The U.S. has multiple anti-dumping laws
Source: Jack Star/PhotoLink

14. Cultural Relativism
The concept that morality varies from one culture to another
There is a continuum of cultural relativism
Some believe that only one culture defines ethical behavior for the whole globe
For the business relativist, there may be no ethical standards except for the one in the transaction culture, or none at all. These people may be in conflict with their own individual moral standards.

15. Matrix for Global Relativists When Making Cross-Cultural Decisions

16. Consumerism
The belief that consumers, not the interests of corporations, should dictate the economic structure of society
Belief that consumption of goods relates to increased well being
Made-to-break (planned obsolescence) encourages consumers to regularly buy more items
Consumerism meeting with backlash because of increased sustainability concerns

17. Human Rights
Defined as an inherent dignity that should be afforded all people with equal and inalienable rights as the foundation of freedom, justice and peace in the world
Have been codified in the United Nations Human Rights Declaration
Source: Nancy Ney

18. Health Care Is a major global human rights issue
The issue of healthcare availability and affordability for workers in all nations is becoming a major source of concern
Question remains of whether access to healthcare is a right or a privilege

19. Labor More people than ever work in nations other than their homeland
Doing business in many different countries, firms today have many ethical concerns involving labor issues
A corporation must always know where the labor comes from in its entire supply chain so as to avoid controversy
Corporations that do not take labor issues seriously will find themselves in legal and ethical trouble

20. Sustainable Development
Is a systematic approach to achieving development in such a way that the earth’s resources are preserved for future generations
Will be a serious issue for most firms in the future
Some companies conduct their own sustainability performance reports

21. The Millennium Ecosystem Assessment

22. The International Monetary Fund
The IMF emerged from the Bretton Woods agreement of 1944
The IMF assumed a major role in the 1980s in the management of the less developed countries (LDC) debt crisis
An ethical issue surrounding the IMF has to do with the increased inequality in LDCs
Some contend that foreign corporations offload their debt via IMF bailouts

23. The World Trade Organization
The WTO was established in 1995 and now includes 133 member nations and 33 others with observer status
Administers its own trade agreements, facilitates future trading negotiations, settles trade disputes and monitors the trade policies of member nations
Addresses economic and social issues in a broad range of industries

24. The Multinational Corporation
Are public companies that operate on a global scale without significant ties to any one nation or region
Represent highest level of international business commitment
MNCs are subject to ethical criticism over their impact on the countries in which they do business
Because of increased scrutiny and pressure to be socially responsible, many corporations belong to Business for Social Responsibility

25. World’s Largest Countries and Corporations (Based on GDP and Revenues)
Notice that Walmart’s revenues is roughly equal to the GDP of Taiwan, which is the 26th largest economy in the world.