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Chapter 10 Ethical Issues in the Global Arena © 2012 South-Western, a part of Cengage Learning 1 Backlash Against Globalization Outsourcing/Offshoring of jobs to lessdeveloped nations Tenth anniversary of NAFTA in 2004 © 2012 South-Western, a part of Cengage Learning 2 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 3 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 4 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 5 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 6 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 7 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 8 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 9 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 10 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 11 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 12 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 13 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 14 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 15