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Ethical Issues in the Global Arena
Chapter
10
Prepared by Deborah Baker
Texas Christian University
Business and Society: Ethics and Stakeholder Management, 7e • Carroll & Buchholtz
Copyright ©2009 by South-Western, a division of Cengage Learning. All rights reserved
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Chapter 10 Outcomes
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.
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Chapter 10 Outline
 The New, New World of International Business
 Multinational Corporations (MNCs) and the Global
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Environment
Ethical Issues in the Global Business Environment
Improving Global Business Ethics
Summary
Key Terms
Discussion Questions
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Introduction to Chapter 10
The focus of the chapter is on…
 The transnational economy
 The globalization of business
 Global business ethics
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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
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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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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
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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
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Backlash Against Globalization
 Outsourcing of jobs to less-developed nations
 Tenth anniversary of NAFTA
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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
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MNCs and the Global Environment
 Changed scope and nature of U.S.-based
multinationals
 Underlying challenges of operating in new world
of business
• Corporate legitimacy
• Differing philosophies between MNCs and host
countries
• MNC and host country challenges
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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
Customs
System of
Government
Socioeconomic
System
Figure 10-2
Culture
Customs
System of
Government
Socioeconomic
System
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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
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Ethical Issues in Global Business
Product safety
Plant safety
Advertising practices
Human resource management
Environmental problems
Business practices
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Social Accountability 8000
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
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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
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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
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customers
Initiatives Against Bribery
Foreign Corrupt Practices Act
Transparency International
OECD Antibribery Initiatives
UN Convention Against Corruption
Individual Country Initiatives
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Bribes versus Grease Payments
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
• 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. If the officials considered the merits of the
situation only, they might take some other action.
Figure 10-4
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Other Global Ethics Issues
 Acts of terrorism
 Kidnappings, murder, and violence
against businesspeople
 Rogue nations
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Conducting Business in
Foreign Environments
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”
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Balancing and Reconciling
Ethics Traditions
The Challenge
of the Multinational Corporation
Home Country
Ethical Standards
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
Figure 10-5
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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?
Figure 10-5
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Typology of Global Types
Foreign type
Empire type
Interconnection type
Global type
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Integrative Social Contract Theory
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
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Principles and Codes for
Socially Responsible Business Practices
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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
@
http://www.goodmoney.com/directry_codes.htm
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Strategies for Improving
Global Business Ethics
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Create global codes of conduct
Integrate ethics into a global strategy
Suspend activities in host country
Create ethical impact statements and audits
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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
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Key Terms
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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
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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
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