Ethical Issues in the Global Arena

1. 0 Ethical Issues in the Global Arena Chapter10 Prepared by Deborah BakerTexas Christian University Business and Society: Ethics and Stakeholder Management, 7e • Carroll & BuchholtzCopyright ©2009 by South-Western, a division of Cengage Learning.  All rights reserved

2. 0 Chapter 10 Outline • Multinational Corporations (MNCs) and the Global Environment • Ethical Issues in the Global Business Environment • Improving Global Business Ethics

3. A process by which firms increasetheir awareness of the influence ofinternational activities on their futureand conduct transactions with firmsfrom other countries The global economic integration of manyformerly national economies into oneglobal economy Internationalization Globalization 0 Concepts of Global Business

4. 0 Backlash Against Globalization • Outsourcing of jobs to less-developed nations • Tenth anniversary of NAFTA

5. Pros Cons 0 Globalists and Antiglobalists • Open markets across globe • Investors, consumers, employees, and environmentalists are better off • Beneficial to poor and rich nations alike • 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

6. 0 Pros and Cons of Globalization Figure 10-1

7. 0 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

8. Home CountryStakeholder Pressures Host CountryStakeholder Pressures Standards Practices Ethics Laws Culture Customs System ofGovernment Socioeconomic System Standards Practices Ethics Laws Culture Customs System ofGovernment SocioeconomicSystem The Multinational Corporation 0 The Dilemma of the Multinational Corporation Figure 10-2

9. 0 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

10. Product safety Plant safety Advertising practices Human resource management Environmental problems Business practices 0 Ethical Issues in Global Business

11. Necessary for profits in order to do business Common practice Accepted practice Form of commission, tax, or compensation Wrong and illegal in most developed nations Compromise personal beliefs Managers should not deal with corrupt governments Once started, never stops One should take a stand for honesty, morality, ethics Benefits recipient only Creates dependence on corruption Deceives stockholders and costscustomers For Bribery Against Bribery 0 Arguments For and Against Bribery

12. Grease Payments Relatively small sums of money given for the purpose of getting minor officials to: • Do what they are supposed to be doing • Do what they are supposed to be doing faster • Do what they are supposed to be doing better Bribes Relatively large amounts of money given for the purpose of influencing officials to make decisions or take actions that they otherwise might nottake. If the officials considered the merits of the situation only, they might take some other action. 0 Bribes versus Grease Payments Figure 10-4

13. Foreign Corrupt Practices Act Transparency International OECD Antibribery Initiatives UN Convention Against Corruption Individual Country Initiatives 0 Initiatives Against Bribery

14. 0 Other Global Ethics Issues • Acts of terrorism • Kidnappings, murder, and violence against businesspeople • Rogue nations

15. 0 Balancing and Reconciling Ethics Traditions The Challenge of the Multinational Corporation Home CountryEthical Standards Host CountryEthical Standards OR

16. International LawGlobal Codes of Conduct ETHICAL IMPERIALISM CULTURAL RELATIVISM BROAD MIDDLE GROUND HomeCountry HostCountry • Cultural standards • Ethical/moral standards of home country • Cultural standards • Ethical/moral standards of host country Mix of Home and Host Country Standards Application of Ethical Principles 0 Ethical Choices in Home Versus Host Country Situations Figure 10-5

17. 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? 0 Ethical Choices in Home Versus Host Country Situations Figure 10-5

18. 0 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

19. 0 Companies Act Against Corruption • High-level commitment by top management • Detailed statements of policies and operating procedures • Training and discussion of policies and procedures • Hotlines and helplines for all organizational members • Investigative follow-up, reporting, and disclosure