Download Business & Society Archie B. Carroll Ann K. Buchholtz Ethics, Sustainability, and Stakeholder

Business & Society
Ethics, Sustainability, and Stakeholder
Management
Eighth Edition
Archie B. Carroll
Ann K. Buchholtz
© 2012 South-Western, a part of Cengage Learning
1
Chapter 10
Ethical Issues
in the Global
Arena
© 2012 South-Western, a part of Cengage Learning
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Learning Outcomes
1.
2.
3.
4.
5.
6.
7.
Differentiate between the concepts of internationalization and
globalization of business.
Summarize arguments for and against globalization.
Explain the ethical challenges of multinational corporations
(MNCs) in the global environment.
Summarize the key implications of the following ethical issues:
infant formula controversy, Bhopal tragedy, sweatshops and human
rights abuses, and the Alien Tort Claims Act.
Define corruption and differentiate between bribes and grease
payments. Outline the major features of the Foreign Corrupt
Practices Act.
Discuss the growing anticorruption movement and the key players
in this movement.
Identify and discuss strategies for improving global ethics.
© 2012 South-Western, a part of Cengage Learning
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Chapter Outline
• The New, New World of Global Business
• MNCs and the Global Business Environment
• Ethical Issues in the Global Business Environment
• Improving Global Business Ethics
• Summary
• Key Terms
© 2012 South-Western, a part of Cengage Learning
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The Rise of Global Business
• The rise of global business is one of the
most critical developments of the past half
century.
• Characterized by a rapid growth of foreign
direct investment in developing nations
like China, India, and Russia.
 There is a growing backlash against global
business.
•
•
•
Terrorism
Stock market instability
Global recession
© 2012 South-Western, a part of Cengage Learning
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Transnational Economy
Transnational economy
• A term for the new expanded marketplace.
• Trade in goods, a much smaller trade in
services, the international movement of
labor, and international flows of capital and
information.
 Business must strive to be a leader in all
developed markets.
© 2012 South-Western, a part of Cengage Learning
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Eras of Internationalization
1945-55
The Post-World War II Decade
1955-70
The Growth Years
1970-80
The Troubled Years
1980-now
The New International Order
1999-now
The New, New World of Global Business
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Friedman’s Eras of Globalization
Globalization 1.0
1492--1800
Globalization 2.0
1800--2000
Globalization 3.0
2000--
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Expanding Concepts of Global
Business
Internationalization
• 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.
Globalization/ Globalism
• The global economic integration of many
formerly national economies into one
global economy.
• Has spurred backlash.
© 2012 South-Western, a part of Cengage Learning
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Backlash Against Globalization
 Outsourcing/Offshoring of jobs to lessdeveloped nations
 Tenth anniversary of NAFTA in 2004
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Globalists and Antiglobalists
Pros
Open markets across
the globe
Investors, consumers,
employees, and
environmentalists are
better off
Beneficial to poor and
rich nations alike
© 2012 South-Western, a part of Cengage Learning
Cons
Expansion and greed
of corporate
enterprises
Globalization is
responsible for
destruction of
environments and
emerging economies,
abuses of human
rights, undermining of
local cultures, and the
sovereignty of nationstates
Power of international
bodies
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Pros and Cons of Globalization
Globalists
Antiglobalists
I
M Consumers
P
A Employees
C
T
Free trade promotes lower costs,
etc.
Faster economic growth
Higher wages
Improved working conditions
Benefits the wealth at the expense
of the poor
Places profits above people
O
N
Environment
Creates resources needed to
address environmental issues
Exploits and destroys ecosystems
More pollution
Developing
Nations
Promotes national economic
World financial institutions
development, higher standard of conspire to keep poor nations in
living, better working conditions, debt
cleaner environments.
Human Rights
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.
© 2012 South-Western, a part of Cengage Learning
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MNCs and the Global Business
Environment
Multinational Corporations (MNCs)
• Corporations operating with offices, factories,
and headquarters in more than one country.
• Most major U.S. corporations are MNCs.
• Underlying challenges of operating in the
new world of business
 Corporate legitimacy
 Differing philosophies between MNCs and
host countries
 MNC and host country challenges
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Underlying Challenges in a
Multinational Environment
Two major challenges
1. Achieving corporate legitimacy in an
unfamiliar society.
2. Differing philosophies between MNCs
and host countries.
© 2012 South-Western, a part of Cengage Learning
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The Dilemma of the Multinational
Corporation
Home Country
Stakeholder Pressures
Standards
Practices
Host Country
Stakeholder Pressures
The Multinational
Corporation
Standards
Practices
Ethics
Ethics
Laws
Laws
Culture
Culture
Customs
Customs
System of
Government
System of
Government
Socioeconomic
System
Socioeconomic
System
© 2012 South-Western, a part of Cengage Learning
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Other MNC-Host Country
Challenges
 Cultural differences
 Business and government differences
 Management and control of global
operations
• Organizational structure and design
• 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
© 2012 South-Western, a part of Cengage Learning
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Ethical Issues in the Global Business
Environment
Product safety
Plant safety
Advertising practices
Human resource management
Environmental problems
Business practices
© 2012 South-Western, a part of Cengage Learning
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The Infant Formula Controversy
•
Classic illustration of ethical questions that
arise when conducting business abroad.
Health risks from using formula:




No refrigeration
Unsanitary conditions
Unclean water
Using diluted concentration
•
Bottle feeding led to increases in
malnourished babies.
Nestlé marketed formula to mothers who did
not know how to use it properly.
Protestors caused Nestlé to change its
marketing practices.
•
•
© 2012 South-Western, a part of Cengage Learning
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Plant Safety and the Bhopal
Tragedy
•
A leak of methyl isocyanate gas at a Union
Carbide Plan in Bhopal, India killed over 2,000
and injured 200,000.
Raised many ethical questions:




Should MNCs have the same standards at home and
abroad?
Is it acceptable to locate a dangerous plant where the
workforce is unskilled and uneducated, and where the
populace is unaware of the risks?
How wise are laws that require plants to be staffed
entirely by local employees?
What is the responsibility of corporations and
governments in allowing the use of safe products that
become dangerous because of local conditions?
© 2012 South-Western, a part of Cengage Learning
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Sweatshops, Human Rights, and
Labor Abuses
•
•
MNC’s use of women and children to
cheaply staff factories.
Many major corporations and many
countries have been involved.
Sweatshops
• Characterized by child labor, low pay, poor
working conditions, worker exploitation,
and health and safety violations.
 Increased scrutiny of sweatshop practices
in recent years.
© 2012 South-Western, a part of Cengage Learning
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Social Accountability 8000
An effort to improve sweatshop conditions
created by Social Accountability
International (SAI)
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
© 2012 South-Western, a part of Cengage Learning
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Alien Tort Claims Act and Human
Rights Violations
Alien Tort Claims Act (ATCA)
•
Allows foreign individuals to sue U.S.
firms in U.S. courts for companies’ actions
abroad.
 May become a powerful tool to increase
corporate accountability abroad.
© 2012 South-Western, a part of Cengage Learning
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Corruption, Bribery, and
Questionable Payments
The most frequent and severe ethical
problems in global business are
 Corruption
 Bribes
 Questionable payments
© 2012 South-Western, a part of Cengage Learning
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Corruption
• Attempts to influence the outcomes of
decisions wherein the nature and extent of
the influence are not made public.
Instances of corruption
 Bribery of government officials
 Giving of questionable political contributions
 Misuse of company assets for political favors
 Kickbacks and protection money for police
 Free junkets for government officials
 Secret price-fixing agreements
 Insider dealing
© 2012 South-Western, a part of Cengage Learning
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Arguments For and Against Bribery
For Bribery
Necessary for profits
Common practice
Accepted practice
Form of commission,
tax, or compensation
© 2012 South-Western, a part of Cengage Learning
Against Bribery
Wrong and illegal in
most developed nations
Compromises personal
beliefs
Managers should not
deal with corrupt
governments
Once started, it never
stops
One should take a stand
for honesty, morality, and
ethics
Creates a dependence on
corruption
Deceives stockholders
and costs customers
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Bribes versus Grease Payments
Grease Payments
•
•
Money given to minor officials to expedite
processes.
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
 Do what they are supposed to be doing better
Bribes
•
•
Relatively large amounts of money given for the
purpose of influencing officials to make decisions
or take actions that they otherwise might not
take.
Money given, often to high-ranking officials, to
get them to purchase goods or services.
© 2012 South-Western, a part of Cengage Learning
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Initiatives Against Bribery
Foreign Corrupt Practices Act
Transparency International
OECD Antibribery Initiatives
UN Convention Against Corruption
Individual Country Initiatives
© 2012 South-Western, a part of Cengage Learning
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Improving Global Business Ethics
1. Develop worldwide codes of conduct.
2. Factor ethics into global strategy.
3. Suspend activities when faced with
unbridgeable ethical gaps.
4. Develop periodic ethical impact statements
that assess the underlying moral
justifications for corporate actions and their
results.
© 2012 South-Western, a part of Cengage Learning
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Balancing and Reconciling Ethics
Traditions
The Challenge of the Multinational
Corporation
Home Country
Ethical Standards
© 2012 South-Western, a part of Cengage Learning
OR
Host Country
Ethical Standards
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Ethical Choices in Home versus Host
Country Situations
International Law
Global Codes of Conduct
ETHICAL
IMPERIALISM
Home
Country
• Cultural standards
• Ethical/moral
standards of home
country
BROAD
MIDDLE
GROUND
Mix of Home and Host
Country Standards
CULTURAL
RELATIVISM
Host
Country
• Cultural standards
• Ethical/moral
standards of host
country
Application of
Ethical Principles
© 2012 South-Western, a part of Cengage Learning
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Ethical Choices in Home versus
Host Country Situations (continued)
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?
© 2012 South-Western, a part of Cengage Learning
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Principles and Codes for Socially
Responsible Business Practices
 Caux Round Table: Principles for Business
 CERES Principles
 Universal Declaration of a Global Ethic
 The MacBride Principles
 The Maquiladoras Standards of Conduct
 Principles for Global Corporate
Responsibility
© 2012 South-Western, a part of Cengage Learning
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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.
© 2012 South-Western, a part of Cengage Learning
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Taking Action Against Corruption
Five steps to a successful anticorruption
program:
1. High-level commitment by top
management
2. Detailed statements of policies and
operating procedures
3. Training and discussion of policies and
procedures
4. Hotlines and help lines for all
organizational members
5. Investigative follow-up, reporting, and
Disclosure
© 2012 South-Western, a part of Cengage Learning
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Key Terms
• Alien Tort Claims Act
(ATCA)
• Anticorruption
movement
• Antiglobalists
• Bhopal tragedy
• Bribe Payers’ Index
(BPI)
• Bribes
• Caux Roundtable
Principles
• Corruption
• Corruption Perception
Index (CPI)
• Council on Economic
Priorities (CEP)
• Cultural relativism
• Ethical impact
statements
• Ethical imperialism
• Fair Labor Association
(FLA)
• Foreign Corrupt
Practices Act (FCPA)
• GBS Codex
• Globalism,
globalization
• Globalists
• Grease payments
• Hypernorms
• Infant formula
controversy
© 2012 South-Western, a part of Cengage Learning
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Key Terms (continued)
• Internationalization
• Less-developed
countries (LDCs)
• Multinational
corporations (MNCs)
• North American Free
Trade Agreement
(NAFTA)
• Offshoring
• Outsourcing
• Public Integrity Index
• Social Accountability
International
• Sweatshops
• Transparency
International
• UN Convention
Against Corruption
(UNCAC)
• UN Global Compact
© 2012 South-Western, a part of Cengage Learning
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