Ethical Issues in the Global Arena

1. Ethical Issues in the Global Arena 9 1

2. 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 2

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

4. Introduction to Chapter Nine The focus of the chapter is on: • Transnational economy • Internationalization • Global ethics

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.

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 World A backlash against globalism began.

7. Concepts of Global Business • Internationalization • Globalization

8. Pros and Cons of Globalization 9-8

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

10. MNCs and the Global Environment 9-10

11. Search the Web For student activists interested in sweatshop practices, visit http://www.usasnet.org/ Ethical Issues in Global Business • Questionable marketing and safety practices • Sweatshop and labor abuse • Corruption, bribery, and questionable payments

12. For 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 Arguments For and Against Bribery

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

14. Trends Against Bribery 9-14

15. Definitions 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. Examples 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. Bribes vs. Grease Payments

16. Host Country Stakeholder Pressures Home Country Stakeholder Pressures Improving Global Business Ethics The Dilemma of the Multinational Corporation The Multinational Corp.

17. International LawGlobal Codes of Conduct ETHICAL IMPERIALISM BroadMiddle Ground CULTURAL RELATIVISM Home Country Host Country Mix of Home and Host Country Standards • Cultural standards • Ethical/moral standards of home country • Cultural standards • Ethical/moral standards of host country Application of Ethical Principles(see notes) Improving Global Business Ethics Ethical Choices in Home vs. Host Country Situations

18. Improving Global Business Ethics Typology of Global Types • Foreign type • Empire type • Interconnection type • Global type

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

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

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

22. The right to physical movement The right to ownership of property The right to freedom from torture The right to a fair trial The right to nondiscriminatory treatment The right to physical security The right to freedom of speech and association The right to minimal education The right to political participation The right to subsistence Improving Global Business Ethics Fundamental International Rights

23. 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 Improving Global Business Ethics Seven Moral Guidelines for MNCs

24. 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 Selected Key Terms