Ethical Issues in the Global Arena

Chapter 10
Prepared by Deborah Baker
Texas Christian University

1
Business and Society: Ethics and Stakeholder Management, 7e • Carroll & Buchholtz
Copyright ©2009 by South-Western, a division of Cengage Learning.  All rights reserved
 Chapter 10 Outcomes
1. Identify the concepts of internationalization and globalization
of business.
2. Summarize arguments for and against globalization.
3. Explain the evolving role and problems with multinational
corporations in the global environment.
4. Recognize the major ethical challenges of operating in the
multinational environment.
5. Define ISCT and the concepts of hypernorms and moral free
space.
6. Discuss strategies for improving global ethics.
7. Enumerate international rights and moral guidelines for
improving business operations in the global sphere.
2
 Chapter 10 Outline

 The New, New World of International Business

 Multinational Corporations (MNCs) and the Global
Environment
 Ethical Issues in the Global Business Environment
 Improving Global Business Ethics
 Summary
 Key Terms
 Discussion Questions

3
 Introduction to Chapter 10

The focus of the chapter is on…

 The transnational economy

 The globalization of business
 Global business ethics

4
 Eras of Internationalization

1945-55 The Post-World War II Decade

1955-70 The Growth Years

1970-80 The Troubled Years

1980-now The New International Order

1999-now The New, New World

5
 Friedman’s Eras of Globalization

Globalization 1.0 1492--1800

Globalization 2.0 1800--2000

Globalization 3.0 2000--

6
 Concepts of Global Business

A process by which firms increase

their awareness of the influence of
Internationalization international activities on their future
and conduct transactions with firms
from other countries

The global economic integration of many

Globalization formerly national economies into one
global economy

7
 Pros and Cons of Globalization
Globalists Antiglobalists
I Consumers Free trade promotes lower costs, Benefits the wealth at the expense
etc. of the poor
M
Faster economic growth Places profits above people
P Employees Higher wages
A Improved working conditions

C Environment Creates resources needed to Exploits and destroys ecosystems

address environmental issues More pollution
T
Developing Promotes national economic World financial institutions
development, higher standard of conspire to keep poor nations in
O Nations
living, better working conditions, debt
N cleaner environments.

Human Rights Creates cultures that support law
and free expression.
Spreads economic / political
freedom to far corners
Figure 10-1
Corporations pursing profits ignore
human rights violations, abuse of
workers, free speech, etc.
8
 Backlash Against Globalization

 Outsourcing of jobs to less-developed nations

 Tenth anniversary of NAFTA

 North American Free Trade Agreement. A 1994 agreement reached by the United States, Canada,
and Mexico that instituted a schedule for the phasing out of tariffs and eliminated a variety of fees
and other hindrances to encourage free trade between the three North American countries.

9
 Globalists and Antiglobalists
Pros
 Open markets across globe
 Investors, consumers,
employees, and
environmentalists are
better off
 Beneficial to poor and rich
nations alike
Cons
 Expansion and greed of
corporate enterprises
 Globalization is responsible
for destruction of
environments and emerging
economies, abuses of human
rights, undermining of local
cultures, and the sovereignty
of nation-states
 Power of international bodies
10
 MNCs and the Global Environment

 Changed scope and nature of U.S.-based

multinationals

 Underlying challenges of operating in new world

of business
• Corporate legitimacy
• Differing philosophies between MNCs and host
countries
• MNC and host country challenges

11
 The Dilemma of the
Multinational Corporation
Home Country Host Country
Stakeholder Pressures Stakeholder Pressures

Standards The Multinational Standards

Practices Corporation Practices
Ethics Ethics
Laws Laws
Culture Culture
Customs Customs
System of System of
Government Government
Socioeconomic Socioeconomic
System System

Figure 10-2 12
 Other MNC-Host Country Challenges

 Cultural differences

 Business / government differences

 Management and control of global operations
• Organizational structure
• Human resource management

 Exploration of global markets

• Modify or redesign products appropriate for the intended
market
• Be sensitive to the impacts of products
• Be sensitive to politically-vulnerable products
13
Ethical Issues in Global Business

Product safety

Plant safety

Advertising practices

Human resource management

Environmental problems

Business practices

14
 Social Accountability 8000

1. Child Labor
2. Forced Labor
3. Health and Safety
4. Freedom of Association and Right to Collective Bargaining
5. Discrimination
6. Discipline
7. Working Hours
8. Compensation
9. Management Systems

15
 Arguments For and Against Bribery
For Bribery Against Bribery

 Necessary for profits in  Wrong and illegal in most

order to do business developed nations
 Common practice  Compromise personal beliefs
 Accepted practice  Managers should not deal with
corrupt governments
 Form of commission, tax,
or compensation  Once started, never stops
 One should take a stand for
honesty, morality, ethics
 Benefits recipient only
 Creates dependence on
corruption
 Deceives stockholders and costs
customers 16
 Initiatives Against Bribery

Foreign Corrupt Practices Act

Transparency International

OECD Antibribery Initiatives

UN Convention Against Corruption

Individual Country Initiatives

17
 Bribes versus Grease Payments

Relatively small sums of money given

Grease for the purpose of getting minor officials to:
• Do what they are supposed to be doing
Payments • Do what they are supposed to be doing faster
• Do what they are supposed to be doing better

Relatively large amounts of money given for the

purpose of influencing officials to make decisions
Bribes or take actions that they otherwise might not
take. If the officials considered the merits of the
situation only, they might take some other action.

Figure 10-4 18
 Other Global Ethics Issues

 Acts of terrorism

 Kidnappings, murder, and violence

against businesspeople

 Rogue nations

19
 Conducting Business in
Foreign Environments
1. Develop worldwide codes of conduct

2. Factor ethics into global strategy

3. Suspend activities when faced with unbridgeable

ethical gaps

4. Develop periodic “ethical impact statements”

20
 Balancing and Reconciling
Ethics Traditions

The Challenge
of the Multinational Corporation

Home Country Host Country

OR
Ethical Standards Ethical Standards

21
 Ethical Choices in Home Versus
Host Country Situations
International Law
Global Codes of Conduct

ETHICAL CULTURAL
IMPERIALISM RELATIVISM
BROAD
Home MIDDLE Host
Country GROUND Country

• Cultural standards • Cultural standards

Mix of Home and Host
• Ethical/moral Country Standards • Ethical/moral
standards of home standards of host
country country

Application of
Ethical Principles
Figure 10-5 22
 Ethical Choices in Home Versus
Host Country Situations

Questions to be Resolved by Management:

Which ethical standards will be used?

Which ethical standards will transcend national boundaries?
Worker and product safety? Fair treatment?
Health? Discrimination? Freedom? Minimum pay?
Consumer rights? Environmental Protection?

What constitutes moral minimums in each category?

Figure 10-5 23
 Typology of Global Types

Foreign type

Empire type

Interconnection type

Global type

24
 Integrative Social Contract Theory

consist of transcultural values including

Hypernorms fundamental human rights

Consistent consist of norms that are culturally

norms specific, but consistent with hypernorms

consist of strongly held cultural beliefs

Moral free in particular countries that are in tension
space norms with hypernorms

Illegitimate consist of norms that are incompatible

norms with hypernorms
25
 Principles and Codes for
Socially Responsible Business Practices

 Caux Round Table: Principles for Business

 CERES Principles
 Universal Declaration of a Global Ethic
 The MacBride Principles
 The Maquiladoras Standards of Conduct
 Principles for Global Corporate Responsibility

https://crt-japan.jp/files2020/HP/CRT%20Principles%20for%20Business.pdf

https://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?article=1614&context=yjil
@
26
http://www.goodmoney.com/directry_codes.htm
 Strategies for Improving
Global Business Ethics

 Create global codes of conduct

 Integrate ethics into a global strategy
 Suspend activities in host country
 Create ethical impact statements and audits

27
 Companies Act Against Corruption

1. High-level commitment by top management

2. Detailed statements of policies and operating procedures
3. Training and discussion of policies and procedures
4. Hotlines and helplines for all organizational members
5. Investigative follow-up, reporting, and disclosure

28

 Transnational economy
 Internationalization
 Globalism or globalization
 Outsourcing
 Offshoring
 North American Free Trade
Agreement (NAFTA)
 Alien Tort Claims Act
 Corruption
 Bribes
 Grease payments
 Anticorruption movement
 Transparency International
 Corruption Perception Index
Key Terms
 Globalists
 Antiglobalists
 Multinational corporations
 Less-developed countries
 Infant formula controversy
 Bhopal tragedy
 Sweatshops
 Bribe Payers’ Index
 Public Integrity Index
 Hypernorms
 Consistent norms
 Moral free space
 Illegitimate norms
 Ethical impact statements
29