Chapter 10

IHRM Trends and Future

Challenges
Chapter Objectives
In this final chapter, we identify and analyze some
observed trends and future directions regarding:
●● International
Internationalbusiness
businessethics
ethicsand
andthe
therole
roleof
ofIHRM
IHRM
●● Mode
Modeof
ofoperation
operationand
andIHRM
IHRM
●● Ownership
Ownershipissues
issuesrelating
relatingto
toIHRM
IHRMrequirements
requirementsof
of
organizations
organizationsother
otherthan
thanlarge
largeMNEs,
MNEs,such
suchas
asSMEs
SMEsand
and
NGOs
NGOsincluding
includingnot-for-profit
not-for-profitorganizations)
organizations)
●● Safety,
Safety,security,
security,and
andterrorism
terrorismissues
issues
●● The
Theevolving
evolvingfield
fieldof
ofIHRM
IHRM
Introduction
● In this course, we have explored the IHRM issues in a
multinational context. To that end we have examined the HR
functions and practices in the process of business
internationalization and their implications.
● We now turn our attention to some issues that have not been
emphasized in the general IHRM literature but present
challenges to IHRM, such as
■ International business ethics
■ Safety, security, and dealing with terrorism
■ Contractual, off-shoring, and supply chain management
● These topics distinguish the role of HRM in MNEs and fall in
the framework of strategic HRM.
4

Figure A model of strategic HRM in

10.1
multinational enterprises
External Factors: International
Business Ethics and HRM
● When business is conducted across borders, the ethics program takes on
added layers of complexity
● Especially problematic when multinationals operate in the host countries
that have:
○ Different standards of business practice
○ Economically impoverished
○ Inadequate legal infrastructure
○ Government corruption
○ Human rights violations
● Ethical questions arise not only in the context of different home- and
host-country employment practices but also in the central operations and
policies of MNEs.
Three Main Responses to
Ethics Questions
● Ethical relativism
No universal or international rights and wrongs, it all depends on a
particular culture’s values and beliefs – “when in Rome, do as the
Romans do’’.
● Ethical absolutism
“When in Rome, one should do what one would do at home,
regardless of what the Romans do”. This view of ethics gives primacy
to one’s own cultural values.
● Ethical universalism
There are fundamental principles of right and wrong which transcend
cultural boundaries and multinationals must adhere to these
fundamental principles or global values.
Studies on Ethical Universalism

● Recognize there is a distinction between cultural difference

and morally wrong
● Core values are more agreeable
● But value priority varies in different societies, e.g.
Individual freedom as most important in the U.S.
Unity with family or community in Asia
Fairness in Europe
Universal Ethical Principles
● Universal ethical principles can be seen in the agreements
among nations who are signatories to:
○ The UN Declaration of Human Rights
○ The OECD Guidelines for Multinational Enterprises
○ The Caux Roundtable Principles of Business

● They indicate the emergence of a trans-cultural corporate ethic

and provide guidelines that have direct applicability to the
central operations and policies of MNEs including the HRM
activities of staffing, compensation, employee training, and
occupational health and safety.
● However, there are a wide range of situations where variations in
business practice are permissible.
The US Foreign Corrupt Practices
Act (FCPA)
● Enacted in 1977, the US FCPA
○ Prohibits US-based firms and US nationals from making bribery
payments to foreign government officials.
○ Payments to agents violate the Act if it is known that the agent will use
those payments to bribe a government official.
○ Amended in 1988, to permit ‘facilitating’ payments but mandates record-
keeping provisions to help ensure that illegal payments are not disguised
as entertainment or business expenses.
● The United States has lobbied other nation-states to enact uniform
domestic government regulations, and has achieved some success.
10

Global Developments on the

Criminalization of Bribery
● Bribery & corruption
○ Involving the payment of agents to do things that are inconsistent with the
purpose of their position or office so as to obtain an unfair advantage
○ Can be distinguished from so-called “gifts”, “facilitating” or “grease”
payments, as to motivate agents to complete a task they would routinely do
in the normal course of their duties
○ The British Bribery Act (2010)
○ The UN Declaration against Corruption and Bribery in International
Commercial Transactions (1996)
● OECD Convention on Combating Bribery of Foreign Public Officials
in International Business Transactions (1997), ratified by 38 nations as
of 2009
 OCED Members’ Tax Treatment of Bribes

Members Denying Tax Members Allowing Tax Members Repealed Tax

Deductibility Deductibility Deductibility
Canada Australia Austria, 1998
Czech Republic Luxembourg Belgium, 1999
Finland New Zealand Denmark, 1998
Greece Sweden France, 1997
Hungary Switzerland Germany, 1997
Ireland Iceland, 1998
Italy Netherlands, 1997
Japan Norway, 1996
South Korea Portugal, 1997
Mexico
Poland
Turkey
U.K.
U.S

Source: OECD
Is bribery a business necessity?

● It is now generally agreed that bribery undermines equity,

efficiency and integrity in the public service, undercuts
public confidence in markets and aid programs, adds to the
cost of products and may affect the safety and economic
well-being of the general public.
● Bribery and corruption top the list of the most frequent
ethical problems encountered by international managers.
● The World Bank estimates that about $80 billion annually
goes to corrupt government officials.
13

Table Transparency International Corruption

10.1 Perceptions Index 2010
Rank Country CPI Score Rank Country CPI Score
Territory 2010 Territory 2010
1 Denmark 9.3 11 Iceland 8.5
New Zealand 9.3 Luxemburg 8.5
Singapore 9.3 13 Hong Kong 8.4
4 Finland 9.2 14 Ireland 8.0
Sweden 9.2 15 Austria 7.9
6 Canada 8.9 Germany 7.9
7 Netherlands 8.8 17 Barbados 7.8
8 Australia 8.7 Japan 7.8
Switzerland 8.7 19 Qatar 7.7
10 Norway 8.6 20 United Kingdom 7.6

The index measures the perceived levels of public sector corruption in 178 countries around the world.
10 = very clean; 0 = highly corrupt.
14

Ethics-related Challenges to MNEs

and the HR Functions
● Business ethics stand out as both a domestic and an international issue
of concern
● More complex in the international arena and require MNEs’ self-
regulation and ethical leadership
○ Off-shoring activities
○ Supply chain management
○ Contracting and sub-contracting
○ Joint ventures, strategic alliances
○ The relentless low-cost strategy for competitive advantage
○ A worldwide discussion of the economic, social, political, and
environmental consequences of global business
The Role of HR in Operationalizing
Corporate Ethics and CSR Programs
● HR is well positioned to make an important contribution to
creating, implementing and sustaining ethical
organizational behavior and CSR programs within a
strategic HR paradigm.
● HR has a special role to play in the formulation,
communication, monitoring, and enforcing corporate codes
of conduct both within and across borders.
● Responsibility for ethical leadership should cut across all
functions and managerial levels, including line and senior
managers.
Non-government Organizations
(NGOs)
● Globalization has increased the scale and importance of
NGOs
● Prominent examples of NGOs:
■
The Red Cross ■
Fred Hollows Foundation
■
The Red Crescent ■
World Vision
■
Oxfam ■
Care International
■
Transparency International ■ Médecins Sans Frontieres
■
The Wikimedia Foundation
● The impact and influence of NGOs will continue to be of
importance to the activities of MNEs
17

NGOs and IHRM

● NGOs are as active internationally as for-profit firms,
yet receive less attention, e.g.
○ The Red Cross
○ Greenpeace International groups
○ BARC (Bangladesh Rural Advancement Committee)

● These organizations are diverse and share similar

management and HR concerns
● Often operate in high risk areas of the globe
○ Anti-globalization rallies and protest
○ Global terrorism
○ Natural disasters and humanitarian crisis

● Broadening our focus of IHRM is important.

Challenges in an Uncertain World

● Safety, security and counterterrorism

Legal compliance and training related to safety in
the workplace
Natural disaster protocols
Emergency and disaster preparedness
Workplace violence policy
Industrial theft and sabotage protocols
In-house security
Five Areas of Corporate Risk Assessment
● In-facility emergency and
disaster preparedness Human Costs Built Into an iPad

● In-facility security
● Industrial espionage
● Cyber-terrorism
● Out-of-facility fire and travel
risks Source: The New York Times, January 25, 2012,
An explosion at a Foxconn factory in Chengdu,
China, killed four people and injured 18. It built
iPads. Charles Duhigg and David Barboza,
20

Terrorism and Risk Management

External
Low Risk Firms High Risk Firms
Environment
Low Risk No need to invest as heavily in
security system and protocols
Security strategies focusing
on hardening individual
sites

High Risk Security strategies that disperse Must invest much more in
activities across the region and quite elaborate risk
build redundant infrastructures, management strategies
so that value chain activities in
the high risk region can be
provided by out of region units
The Evolving Field of IHRM
● HR has been identified as one of the five business functions
that will have most influence on global business in the
future.
● Recruiting, developing, and competition for talented
employees are often cited as a major concern by MNEs.
● IHRM issues will remain high on the “problem list” of senior
managers of MNEs.
● IHRM philosophies, strategies, policies, practices and
capabilities of an MNE, industry or nation remain as a rich
area for future research.
22

Summary and Concluding Remarks

● International business ethics and the role of IHRM
● Mode of operations, IHRM activities that are required such as training and
monitoring for contractual, supply chain and project operations
● NGOs and IHRM challenges that are specific to these organizations but have
remained relatively under-identifies
● Complex assessment and planning activities related to safety, security, and
counter-terrorist efforts
● Research issues in IHRM, and developments that are endeavoring to assist in
understanding the intricacies and interrelationships between the IHRM function
and IHRM activities, firm internationalization, strategic directions and goals.
● The ongoing process of discovery, a mapping of the IHRM complexities, the
challenges, and the difficult choices
Group IV
● Reizza Marie Reyes
● Riza Joy Betis
● Mary Grace Juelar
● Giselle Alicaway
● Erica Lagrisola
● Tzarisse Estilo
● Micah Salo
● Jenalyn Lacson
● Renah Joy Magana
● Angelica Franchette De Jesus
● Abigail Villaluna