Ethical Issues in the Global Arena

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 Chapter Nine Objectives
• Identify the internationalization and globalization
of business
• Summarize arguments for and against
globalization
• Discuss multinationals in the global environment
• Identify ethical challenges at the global level
• Define ISCT, hypernorms and moral free space
• Outline strategies for improving global ethics
• Introduce seven moral guidelines for global
business

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Chapter Nine Outline
• The New, New World of
International Business
• Multinational Corporations (MNCs)
and the Global Environment
• Ethical Issues in the Global
Business Environment
• Improving Global Ethics
• Summary
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Introduction to Chapter Nine

The focus of the chapter is

on:
– Transnational economy
– Internationalization
– Global ethics

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 Eras of Internationalization
• 1945-55 The Post-World War II Decade
A period of reconstruction dominated by the United States.
• 1955-70 The Growth Years
Japanese and European firms recover and the first U.S.-
based international firms become multinational.
• 1970-80 The Troubled Years
A U.S. balance of payments deficit and worldwide oil crisis
have a negative impact.

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 Eras of Internationalization
• 1980-now The New International
Order
Though the U.S. role in the world economy is diminished,
it is pressured to be a world leader in the ethics arena.
• 1999-now The New, New World
A backlash against globalism began.

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Concepts of Global Business

• Internationalization
• Globalization

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 Pros and Cons of Globalization
I Globalists Antiglobalists
M Consumers Free trade promotes lower Benefits the wealth at the
costs, etc. expense of the poor
P Faster economic growth Places profits above people
Employees
A promotes
Higher wages, etc.
C
Environment Creates resources needed to Exploits and destroys
T address the issue ecosystems

Developing Promotes national economic World financial institutions

O Nations development, higher standard conspire to keep poor nations
of living, etc. in debt
N
Human Creates cultures that support Corporations pursing profits
Rights law and free expression ignore human rights violations

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 MNCs and the Global
Environment
• Change scope and nature of U.S.-based
multinationals
• Face challenges of operating in new world of
business
– Corporate legitimacy
– MNC and host country philosophy
– MNC and host country challenges
• Cultural differences
• Business and government differences

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MNCs and the Global Environment

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 Ethical Issues in Global Business
• Questionable marketing and safety practices
• Sweatshop and labor abuse
• Corruption, bribery, and questionable
payments

Search the Web

For student activists interested in sweatshop
practices, visit http://www.usasnet.org/

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Arguments For and Against Bribery
For Against
• Necessary to do • Wrong
business • Illegal
• Compromise personal beliefs
• Common practice
• Promotes government corruption
• Accepted practice
• Slippery slope
• Form of commission, • Prohibits taking a stand for
tax, or compensation honesty, etc.
• Benefits recipient only
• Creates dependence on corruption
• Deceives stockholders

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 Trends Against Bribery
• Foreign Corrupt Practices Act enacted
• Transparency International developed
• OCED Antibribery Initiatives
launched

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Trends Against Bribery

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 Bribes vs. Grease Payments
• Definitions • Examples
– Grease Payments—Relatively small
sums of money given for the purpose of
– Money given to minor officials
getting minor officials to: (clerks, attendants, customs
• Do what they are supposed to be inspectors) for the purpose of
doing expediting. This form of payment
• Do what they are supposed to be helps get goods or services through
doing faster or sooner. red tape or administrative
• Do what they are supposed to be bureaucracies.
doing better than they would
otherwise.

– Bribes—Relatively large amounts of – Money given, often to high-ranking

money given far the purpose of officials. Purpose is often to get
influencing officials to make decisions or these persons to purchase goods or
take actions that they otherwise might services from the bribing firm. May
not take. If the officials considered the
merits of the situation only, they might also be users to avoid taxes, forestall
take same other action. unfavorable government intervention,
secure favorable treatment, etc.

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Improving Global Business Ethics
The Dilemma
of the Multinational Corporation

Home Country The Host Country

Stakeholder Multinational Stakeholder
Pressures Corp. Pressures

EG: EG: DOING

WALMART,PEPS BUSINESS IN
I, COKE INDIA 9-16
Improving Global Business Ethics
Ethical Choices in Home vs. Host Country Situations
International Law
Global Codes of Conduct

ETHICAL CULTURAL
IMPERIALISM RELATIVISM
Broad
Home Country Middle Ground Host Country

• Cultural Mix of Home and Host • Cultural

standards Country Standards standards
• Ethical/moral • Ethical/moral
standards of standards of
home country Application of Ethical Principles host country
(see notes)

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Improving Global Business Ethics

Typology of Global Types

• Foreign type
• Empire type
• Interconnection type
• Global type

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 Improving Global Business Ethics
Integrative Social Contract Theory (ISCT)
• Hypernorms consist of transcultural values including
fundamental human rights
• Consistent norms consist of norms that are culturally
specific, but consistent with hypernorms
• Moral free space norms consist of strongly held
cultural beliefs in particular countries that are in tension
with hypernorms
• Illegitimate norms consist of norms that are
incompatible with hypernorms

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Improving Global Business Ethics
Four Actions for Improving International
Business Ethics
• Create global codes of conduct
– Global codes and standards set by corporations
– Global Codes and standards set by international
organizations
• Integrate ethics into a global strategy
• Suspend activities in host country
• Create ethical impact statements

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Improving Global Business Ethics
Global Codes and Standards Developed by
International Organizations
• Caux Principles
• Global Reporting Initiative
• Global Sullivan Principles
• OECD Guidelines for Multinational Enterprises
• Principles for Global Corporate Responsibility:
Benchmarks
• UN Global Compact

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 Improving Global Business Ethics
Fundamental International Rights
1. The right to physical 6. The right to physical
movement security
2. The right to ownership of 7. The right to freedom of
property speech and association
3. The right to freedom 8. The right to minimal
from torture education
4. The right to a fair trial 9. The right to political
5. The right to participation
nondiscriminatory 10. The right to subsistence
treatment
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Improving Global Business Ethics
Seven Moral Guidelines for MNCs
• Inflict no intentional • Pay their fair share of
or direct harm taxes
• Produce more good
• Respect local cultural
than bad for the host
country beliefs that do not
violate moral norms
• Contribute to host
country’s development • Cooperate with the
• Respect the human government to develop
rights of their and enforce
employees background institutions
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 Selected Key Terms
• Anticorruption movement • Illegitimate norms
• Bhopal tragedy • Infant formula
• Bribes • Internationalization
• • Less-developed countries
Consistent norms
(LDC)
• Ethical impact statements • Moral free space
• Globalization • Multinational corporation
• Grease payments (MNC)
• Hypernorms • Sweatshops
• Transnational economy

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