9-11

Ethical Issues in the Ethical Issues in the Global ArenaGlobal Arena

9-22

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

9-3

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

9-4

Introduction to Chapter Nine

The focus of the chapter is on:– Transnational economy– Internationalization – Global ethics

9-5

Eras of Internationalization

•1945-55 The Post-World War II DecadeA period of reconstruction dominated by the United States.

•1955-70 The Growth YearsJapanese and European firms recover and the first U.S.-based international firms become multinational.

•1970-80 The Troubled YearsA U.S. balance of payments deficit and worldwide oil crisis have a negative impact.

9-6

Eras of Internationalization

• 1980-now The New International OrderThough 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 WorldA backlash against globalism began.

9-7

Concepts of Global Business

• Internationalization

• Globalization

9-8

Pros and Cons of Globalization

I

M

P

A

C

T

O

N

Globalists Antiglobalists Consumers Free trade promotes lower

costs, etc.Benefits the wealth at the expense of the poor

Employees Faster economic growth promotes

Higher wages, etc.

Places profits above people

Environment Creates resources needed to address the issue

Exploits and destroys ecosystems

Developing

Nations

Promotes national economic development, higher standard of living, etc.

World financial institutions conspire to keep poor nations in debt

Human Rights

Creates cultures that support law and free expression

Corporations pursing profits ignore human rights violations

9-8

9-9

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

9-10

MNCs and the Global Environment

9-10

9-11

Ethical Issues in Global Business

• Questionable marketing and safety practices

• Sweatshop and labor abuse• Corruption, bribery, and

questionable paymentsSearch the WebFor student activists interested in sweatshop practices, visit http://www.usasnet.org/

9-12

Arguments For and Against BriberyFor

• Necessary to do business

• Common practice• Accepted practice• Form of

commission, tax, or compensation

Against• Wrong• Illegal• Compromise personal beliefs• Promotes government

corruption• Slippery slope• Prohibits taking a stand for

honesty, etc.• Benefits recipient only• Creates dependence on

corruption• Deceives stockholders

9-13

Trends Against Bribery

• Foreign Corrupt Practices Act enacted

• Transparency International developed

• OCED Antibribery Initiatives launched

9-14

Trends Against Bribery

9-14

9-15

Bribes vs. Grease Payments

• DefinitionsDefinitions– 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 or sooner.

• Do what they are supposed to be doing better than they would otherwise.

– Bribes—Relatively large amounts of money given far the purpose of influencing officials to make decisions or take actions that they otherwise might not take. If the officials considered the merits of the situation only, they might take same other action.

• ExamplesExamples– Money given to minor officials

(clerks, attendants, customs inspectors) for the purpose of expediting. This form of payment helps get goods or services through red tape or administrative bureaucracies.

– Money given, often to high-ranking officials. Purpose is often to get these persons to purchase goods or services from the bribing firm. May also be users to avoid taxes, forestall unfavorable government intervention, secure favorable treatment, etc.

9-16

Improving Global Business Ethics

The Multinational

Corp.

Home Country Stakeholder Pressures

Host Country Stakeholder Pressures

The Dilemma of the Multinational Corporation

9-17

Improving Global Business Ethics

BroadMiddle Ground

Mix of Home and Host Country Standards

Home Country

ETHICAL IMPERIALISM

Host Country

CULTURAL RELATIVISM

Application of Ethical Principles(see notes)

International LawGlobal Codes of Conduct

• Cultural standards

• Ethical/moral standards of home country

• Cultural standards

• Ethical/moral standards of host country

Ethical Choices in Home vs. Host Country Situations

9-18

Improving Global Business Ethics

Typology of Global Types• Foreign type• Empire type• Interconnection type• Global type

9-19

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

9-20

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

9-21

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

9-22

Improving Global Business Ethics

1. The right to physical movement

2. The right to ownership of property

3. The right to freedom from torture

4. The right to a fair trial5. The right to

nondiscriminatory treatment

6. The right to physical security

7. The right to freedom of speech and association

8. The right to minimal education

9. The right to political participation

10.The right to subsistence

Fundamental International Rights

9-23

Improving Global Business Ethics

• Inflict no intentional or direct harm

• Produce more good than bad for the host country

• Contribute to host country’s development

• Respect the human rights of their employees

• Pay their fair share of taxes

• Respect local cultural beliefs that do not violate moral norms

• Cooperate with the government to develop and enforce background institutions

Seven Moral Guidelines for MNCs

9-24

Selected Key Terms

• Anticorruption movement

• Bhopal tragedy• Bribes• Consistent norms• Ethical impact

statements• Globalization• Grease payments• Hypernorms

• Illegitimate norms• Infant formula• Internationalization• Less-developed

countries (LDC)• Moral free space• Multinational

corporation (MNC)• Sweatshops• Transnational

economy