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InternationalBusiness

9eByCharlesW.L.HillMcGraw-Hill/IrwinCopyright?2013byTheMcGraw-HillCompanies,Inc.Allrightsreserved.Chapter5EthicsinInternationalBusinessWhatIsEthics?Ethics-acceptedprinciplesofrightorwrongthatgoverntheconductofapersonthemembersofaprofessiontheactionsofanorganizationBusinessethics-acceptedprinciplesofrightorwronggoverningtheconductofbusinesspeopleEthicalstrategy-astrategy,orcourseofaction,thatdoesnotviolatetheseacceptedprinciplesWhichEthicalIssuesAreMostRelevantToInternationalFirms?

ThemostcommonethicalissuesinbusinessinvolveemploymentpracticeshumanrightsenvironmentalregulationscorruptionthemoralobligationofmultinationalcompaniesHowAreEthicsRelevant

ToEmploymentPractices?Supposeworkconditionsinahostnationareclearlyinferiortothoseinthemultinational’shomenationWhichstandardsshouldapply?homecountrystandardshostcountrystandardssomethinginbetweenHowAreEthicsRelevant

ToEmploymentPractices?FirmsshouldestablishminimalacceptablestandardsthatsafeguardthebasicrightsanddignityofemployeesauditforeignsubsidiariesandsubcontractorsregularlytoensuretheyaremeetingthestandardstakecorrectiveactionasnecessaryHowAreEthicsRelevant

ToHumanRights?BasichumanrightsaretakenforgrantedindevelopedcountriesfreedomofassociationfreedomofspeechfreedomofassemblyfreedomofmovementQuestion:

Whataretheresponsibilitiesoffirmsincountrieswherebasichumanrightsarenotrespected?HowAreEthicsRelevant

ToHumanRights?Question:

Isitethicalforcompaniestodobusinesswithcountrieswithrepressiveregimes?MyanmarNigeriaQuestion:

Doesmultinationalinvestmentactuallyhelpbringchangetothesecountriesandultimatelyimprovetherightsofcitizens?ChinaHowAreEthicsRelevant

ToEnvironmentalRegulations?Somepartsoftheenvironmentareapublicgoodthatnooneowns,butanyonecandespoilWhathappenswhenenvironmentalregulationsinhostnationsarefarinferiortothoseinthehomenation?Isitpermissibleformultinationalstopolluteindevelopingcountriessimplybecausetherearenoregulationsagainstit?legalversusethicalbehaviorThetragedyofthecommonsoccurswhenaresourceheldincommonbyall,butownedbynoone,isoverusedbyindividuals,resultinginitsdegradationHowAreEthicsRelevant

ToCorruption?TheU.S.ForeignCorruptPracticesActoutlawedthepracticeofpayingbribestoforeigngovernmentofficialsinordertogainbusinessamendedtoallowforfacilitatingpaymentsTheConventiononCombatingBriberyofForeignPublicOfficialsinInternationalBusinessTransactionswasadoptedbytheOrganizationforEconomicCooperationandDevelopment(OECD)obligesmemberstatestomakethebriberyofforeignpublicofficialsacriminaloffenseHowAreEthicsRelevant

ToCorruption?But,isitpermissibleformultinationalstopaygovernmentofficialsfacilitatingpaymentsifdoingsocreateslocalincomeandjobs?isitoktodoalittleevilinordertodoagreatergood?doesgreasemoneyactuallyimproveefficiencyandhelpgrowth?HowAreEthicsRelevant

ToMoralObligations?SocialresponsibilityreferstotheideathatmanagersshouldconsiderthesocialconsequencesofeconomicactionswhenmakingbusinessdecisionsthereshouldbeapresumptioninfavorofdecisionsthathavebothgoodeconomicandgoodsocialconsequencesitistherightwayforabusinesstobehaveHowAreEthicsRelevant

ToMoralObligations?Advocatesarguethatbusinessesneedtorecognizetheirnoblesseoblige-honorableandbenevolentbehaviorthatistheresponsibilityofsuccessfulcompaniesgivesomethingbacktothesocietiesthathavemadetheirsuccesspossibleBut,aremultinationalsmorallyrequiredtousetheirpowertoenhancelocalwelfare?WhatAreEthicalDilemmas?Ethicaldilemmas-situationsinwhichnoneoftheavailablealternativesseemsethicallyacceptablereal-worlddecisionsarecomplex,difficulttoframe,andinvolveconsequencesthataredifficulttoquantifytheethicalobligationsofanMNEtowardemploymentconditions,humanrights,corruption,environmentalpollution,andtheuseofpowerarenotalwaysclearcuttherightcourseofactionisnotalwaysclearWhyDoManagers

BehaveUnethically?SeveralfactorscontributetounethicalbehaviorincludingPersonalethics

-thegenerallyacceptedprinciplesofrightandwronggoverningtheconductofindividualsexpatriatesmayfacepressuretoviolatetheirpersonalethicsbecausetheyareawayfromtheirordinarysocialcontextandsupportingculturemanagersfailtoquestionwhetheradecisionoractionisethical,andinsteadrelyoneconomicanalysiswhenmakingdecisionsWhyDoManagers

BehaveUnethically?Decision-makingprocesses

-thevaluesandnormsthataresharedamongemployeesofanorganizationorganizationculture

thatdoesnotemphasizebusinesscultureencouragesunethicalbehaviorOrganizationalculture

-organizationalculturecanlegitimizeunethicalbehaviororreinforcetheneedforethicalbehaviorUnrealisticperformanceexpectations

-encouragemanagerstocutcornersoractinanunethicalmannerWhyDoManagers

BehaveUnethically?Leadership

-helpsestablishthecultureofanorganization,andsettheexamplesthatothersfollowwhenleadersactunethically,subordinatesmayactunethically,tooSocietalculture

–firmsheadquarteredincultureswhereindividualismanduncertaintyavoidancearestrongaremorelikelytostressethicalbehaviorthanfirmsheadquarteredincultureswheremasculinityandpowerdistancerankhighWhyDoManagers

BehaveUnethically?DeterminantsofEthicalBehaviorWhatAreThePhilosophicalApproachesToEthics?ThereareseveraldifferentapproachestobusinessethicsStrawmenapproachesdenythevalueofbusinessethicsorapplytheconceptinanunsatisfactorywayOthersapproachesarefavoredbymoralphilosophersandarethebasisforcurrentmodelsofethicalbehaviorWhatAreTheStrawMenApproachesToBusinessEthics?

TherearefourcommonstrawmenapproachesFriedmandoctrine

-theonlysocialresponsibilityofbusinessistoincreaseprofits,solongasthecompanystayswithintherulesoflawCulturalrelativism

-ethicsareculturallydeterminedandfirmsshouldadopttheethicsoftheculturesinwhichtheyoperate“wheninRome,doastheRomansdo”WhatAreTheStrawMenApproachesToBusinessEthics?

Righteousmoralist-amultinational’shomecountrystandardsofethicsshouldbefollowedinforeigncountriesNa?veimmoralist-ifamanagerofamultinationalseesthatfirmsfromothernationsarenotfollowingethicalnormsinahostnation,thatmanagershouldnoteitherAllapproachesofferinappropriateguidelinesforethicaldecisionmakingWhatAreUtilitarianAnd

KantianApproachesToEthics?Utilitarianethics-(DavidHume,JeremyBentham,JohnStuartMills)-themoralworthofactionsorpracticesisdeterminedbytheirconsequencesactionsaredesirableiftheyleadtothebestpossiblebalanceofgoodconsequencesoverbadconsequencesbut,itisdifficulttomeasurethebenefits,costs,andrisksofanactiontheapproachfailstoconsiderjusticeWhatAreUtilitarianAnd

KantianApproachesToEthics?Kantianethics-(ImmanuelKant)-peopleshouldbetreatedasendsandneverpurelyasmeanstotheendsofotherspeoplehavedignityandneedtoberespectedpeoplearenotmachinesWhatAreRightsTheories?Rightstheories

-humanbeingshavefundamentalrightsandprivilegeswhichtranscendnationalboundariesandculturesestablishaminimumlevelofmorallyacceptablebehaviorthe

UniversalDeclarationofHumanRights

-basicprinciplesthatshouldalwaysbeadheredtoirrespectiveofthecultureinwhichoneisdoingbusinessMoraltheoristsarguethatfundamentalhumanrightsformthebasisforthemoralcompassthatmanagersshouldnavigatebywhenmakingdecisionswhichhaveanethicalcomponentWhatAreJusticeTheories?Justicetheoriesfocusontheattainmentofajustdistributionofeconomicgoodsandservicesajustdistribution

isonethatisconsideredfairandequitableJohnRawlsarguedthatalleconomicgoodsandservicesshouldbedistributedequallyexceptwhenanunequaldistributionwouldworktoeveryone’sadvantage

impartialityisguaranteedbytheveilofignorance-everyoneisimaginedtobeignorantofallhisorherparticularcharacteristicsHowCanManagers

MakeEthicalDecisions?HireandpromotepeoplewithawellgroundedsenseofpersonalethicsrefrainfrompromotingindividualswhohaveactedunethicallytrytohireonlypeoplewithstrongethicsprospectiveemployeesshouldfindoutasmuchastheycanabouttheethicalclimateinanorganizationpriortotakingapositionHowCanManagers

MakeEthicalDecisions?Buildanorganizationalculturethatplacesahighvalueonethicalbehaviorarticulatevaluesthatplaceastrongemphasisonethicalbehavioremphasizetheimportanceofa

codeofethics-formalstatementoftheethicalprioritiesabusinessadherestoimplementasystemofincentivesandrewardsthatrecognizepeoplewhoengageinethicalbehaviorandsanctionthosewhodonotHowCanManagers

MakeEthicalDecisions?MakesurethatleaderswithinthebusinessarticulatetherhetoricofethicalbehaviorandactinamannerthatisconsistentwiththatrhetoricgivelifeandmeaningtowordsmakesurethatleadersemphasizetheimportanceofethicsverballyandthroughtheiractionsHowCanManagers

MakeEthicalDecisions?PutdecisionmakingprocessesinplacethatrequirepeopletoconsidertheethicaldimensionsofbusinessdecisionsAskwhetherdecisionsfallwithintheacceptedvaluesofstandardsthattypicallyapplyintheorganizationalenvironmentdecisionscanbecommunicatedtoallstakeholdersaffectedbyitifcolleagueswouldapproveofdecisionsHowCanManagers

MakeEthicalDecisions?Managerscanalsouseafivestepprocesstothinkthroughethicalproblems:Step1:Identifywhichstakeholders(theindividuals orgroupswhohaveaninterest,stake,or claimintheactionsandoverall performanceofacompany)adecision wouldaffectandinwhatwaysinternalstakeholdersarepeoplewhoworkfororwhoownthebusinesssuchasemployees,theboardofdirectors,andstockholdersexternalstakeholdersaretheindividualsorgroupswhohavesomeclaimonafirmsuchascustomers,suppliers,andunionsHowCanManagers

MakeEthicalDecisions?Step2:DeterminewhetheraproposeddecisionwouldviolatethefundamentalrightsofanystakeholdersStep3:Establishmoralintent-placemoralconcernsaheadofotherconcernsincaseswhereeitherthefundamentalrightsofstakeholdersorkeymoralprincipleshavebeenviolated

HowC

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