Ethical Issues in the Global Arena

Chapter

2
1

Chapter 2 Outline
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 2 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

Introduction to Chapter 2
The focus of the chapter is on

The transnational economy

The globalization of business
Global business ethics

Eras of Internationalization
1945-55
1945-55

The
ThePost-World
Post-WorldWar
WarIIIIDecade
Decade

1955-70
1955-70

The
TheGrowth
GrowthYears
Years

1970-80
1970-80

The
TheTroubled
TroubledYears
Years

1980-now
1980-now

The
TheNew
NewInternational
InternationalOrder
Order

1999-now
1999-now

The
TheNew,
New,New
NewWorld
World
5

Friedmans Eras of Globalization

Globalization
Globalization1.0
1.0

1492--1800
1492--1800

Globalization
Globalization2.0
2.0

1800--2000
1800--2000

Globalization
Globalization3.0
3.0

2000-2000--

Concepts of Global Business

Internationalization

Globalization

A process by which firms increase

their awareness of the influence of
international activities on their future
and conduct transactions with firms
from other countries
The global economic integration of many
formerly national economies into one
global economy

Pros and Cons of Globalization

Globalists

Antiglobalists

I Consumers
M
P Employees
A
C Environment
T

Free trade promotes lower costs,

etc.

Benefits the wealth at the expense

of the poor

Faster economic growth

Higher wages
Improved working conditions

Places profits above people

Creates resources needed to

address environmental issues

Exploits and destroys ecosystems

More pollution

Developing
O Nations

Promotes national economic

development, higher standard of
living, better working conditions,
cleaner environments.

World financial institutions

conspire to keep poor nations in
debt

Creates cultures that support law

and free expression.
Spreads economic / political
freedom to far corners

Corporations pursing profits ignore

human rights violations, abuse of
workers, free speech, etc.

N
Human Rights

Figure 10-1

Backlash Against Globalization

Outsourcing of jobs to less-developed nations
Tenth anniversary of NAFTA

Globalists and Antiglobalists

Pros
Open markets across globe

Cons
Expansion and greed of
corporate enterprises

Investors, consumers,
employees, and
environmentalists are
better off

Beneficial to poor and rich

nations alike

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

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
HomeCountry
Country
Stakeholder
StakeholderPressures
Pressures
Standards
Practices

Host
HostCountry
Country
Stakeholder
StakeholderPressures
Pressures
The Multinational
Corporation

Standards
Practices

Ethics

Ethics

Laws

Laws

Culture
Customs
System of
Government
Socioeconomic
System
Figure 10-2

Culture
Customs
System of
Government
Socioeconomic
System
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
Productsafety
safety
Plant
Plantsafety
safety
Advertising
Advertisingpractices
practices
Human
Humanresource
resourcemanagement
management
Environmental
Environmentalproblems
problems
Business
Businesspractices
practices
14

Social Accountability
1.
2.
3.
4.
5.
6.
7.
8.
9.

Child Labor
Forced Labor
Health and Safety
Freedom of Association and Right to Collective Bargaining
Discrimination
Discipline
Working Hours
Compensation
Management Systems

15

Arguments For and Against Bribery

For Bribery
Necessary for profits in

order to do business
Common practice
Accepted practice
Form of commission, tax,
or compensation

Against Bribery
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 costs
16
customers

Initiatives Against Bribery

Foreign
Foreign Corrupt
Corrupt Practices
Practices Act
Act
Transparency
Transparency International
International
OECD
OECD Antibribery
Antibribery Initiatives
Initiatives
UN
UN Convention
Convention Against
Against Corruption
Corruption
Individual
Individual Country
Country Initiatives
Initiatives

17

Bribes versus Grease Payments

Grease
Grease
Payments
Payments

Relatively
Relativelysmall
smallsums
sumsof
ofmoney
moneygiven
given
for
forthe
thepurpose
purposeof
ofgetting
gettingminor
minorofficials
officialsto:
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
Bribes

Relatively
Relativelylarge
largeamounts
amountsof
ofmoney
moneygiven
givenfor
forthe
the
purpose
purposeof
ofinfluencing
influencingofficials
officialsto
tomake
makedecisions
decisions
or
ortake
takeactions
actionsthat
thatthey
theyotherwise
otherwisemight
mightnot
not
take.
take. IfIfthe
theofficials
officialsconsidered
consideredthe
themerits
meritsof
ofthe
the
situation
situationonly,
only,they
theymight
mighttake
takesome
someother
otheraction.
action.

18

Other Global Ethics Issues

Acts of terrorism
Kidnappings, murder, and violence
against businesspeople

Rogue nations

19

Conducting Business Ethically in

Foreign Environments
1. Develop worldwide codes of conduct
2. Include 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
HomeCountry
Country
Ethical
EthicalStandards
Standards

OR

Host
HostCountry
Country
Ethical
EthicalStandards
Standards

21

Ethical Choices in Home Versus

Host Country Situations
International
InternationalLaw
Law
Global
GlobalCodes
Codesof
ofConduct
Conduct
ETHICAL
IMPERIALISM
Home
Home
Country
Country
Cultural standards
Ethical/moral
standards of home
country

BROAD
MIDDLE
GROUND
Mix of Home and Host
Country Standards

CULTURAL
RELATIVISM
Host
Host
Country
Country
Cultural standards
Ethical/moral
standards of host
country

Application of
Ethical Principles
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?

23

Integrative Social Contract Theory

Hypernorms
Hypernorms

consist
consist of
of transcultural
transcultural values
values including
including
fundamental
fundamental human
human rights
rights

Consistent
Consistent
norms
norms

consist
consist of
of norms
norms that
that are
are culturally
culturally
specific,
specific, but
but consistent
consistent with
with hypernorms
hypernorms

consist
consist of
of strongly
strongly held
held cultural
cultural beliefs
beliefs
Moral
free
Moral free
in
in particular
particular countries
countries that
that are
are in
in tension
tension
space
norms
space norms with
with hypernorms
hypernorms

Illegitimate
Illegitimate
norms
norms

consist
consist of
of norms
norms that
that are
are incompatible
incompatible
with
with hypernorms
hypernorms
24

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

25

Companies Act Against Corruption

1.
2.
3.
4.
5.

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

26

Key Terms

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

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
27