Chapter 5
Universal Declaration of Human Rights
A United Nations document that lays down the basic principles of human rights that should be adhered to
Business Ethics:
Accepted principles of right or wrong governing the conduct of businesspeople
Ethics:
Accepted principles of right or wrong that govern the conduct of a person
Focus on Managerial Implications: Organizational Culture and Leadership
Articulate values that emphasize ethical behavior, repeatedly emphasize their importance, provide incentives and rewards -Code of ethics
The Roots of Unethical Behavior: Leadership
Employees often take cues from business leaders Actions speak louder than words
The chapter made the following points : 4
Ethical dilemmas are situations in which none of the available alternatives seems ethically acceptable.
The chapter made the following points : 2
Ethical issues and dilemmas in international business are rooted in the variations among political systems, law, economic development, and culture from nation to nation.
The Roots of Unethical Behavior: Societal Culture
Ethical policies differ by country MNEs located in countries where individualism and uncertainty avoidance are strong are more likely to emphasize ethical behavior MNEs located in countries with high masculinity and high power distance are less likely to promote ethical behavior
Introduction
Ethics - accepted principles of right or wrong that govern the conduct of a person, the members of a profession, or the actions of an organization --Business ethics - accepted principles of right or wrong governing the conduct of business people --Ethical strategy - a strategy, or course of action, that does not violate these accepted principles
Summary: In this chapter we have
Explored the ethical issues faced by international businesses. Recognized what is an ethical dilemma. Identified the causes of unethical behavior by managers. Described the different philosophical approaches to ethics. Explained how managers can incorporate ethical considerations into their decision making.
Justice theories
Focus on the attainment of a just distribution (one that is considered fair and equitable) of economic goods and services John Rawls - all economic goods and services should be distributed equally except when an unequal distribution would work to everyone's advantage Impartiality is guaranteed by the veil of ignorance - everyone is imagined to be ignorant of all his or her particular characteristics Under Raul's veil of ignorance would be a system where people would agree that each person is permitted the maximum of basic liberty compatible with similar liberty for others Once equal liberty is assured, inequality in basic social goods are to be allowed only if they benefit everyone The difference principle suggests that inequalities are justified if they benefit the position of the least advantaged person
Rights theories
Human beings have fundamental rights and privileges that transcend national boundaries and culture Form the basis for the moral compass that managers should navigate by when making decisions that have an ethical component The idea that some fundamental rights transcend national borders and cultures was the underlying motivation for the UN's Universal Declaration of Human Rights
Decision-Making Processes
If a manager can answer "yes" to the following questions, the decision is ethically acceptable -Does my decision fall within the accepted values of standards that typically apply in the organizational environment? -Am I willing to see the decision communicated to all stakeholders affected by it? -Would the people with whom I have significant personal relationships approve of the decision? A five-step process can also help managers think through ethical issues How would a decision affect stakeholders? --Internal stakeholders - people who work for or who own the business such as employees, the board of directors, and stockholders --External stakeholders - the individuals or groups who have some claim on a firm such as customers, suppliers, and unions Determine if a proposed decision violates the fundamental rights of any stakeholders Establish moral intent Engage in ethical behavior Audit decisions - reviewing them to make sure that they were consistent with ethical principles
Kantian ethics
Immanuel Kant argued that people should be treated as ends and never purely as means to the end of others -People have dignity and need to be respected, they are not machines
Ethics and International Business: Corruption
Is it ethical to make payments to government officials to secure business? -Foreign Corrupt Practices Act -Convention on Combating Bribery of Foreign Public Officials in International Business Transactions **Facilitating payments/speed money excluded Some argue that paying bribes might be the price of doing a greater good -Where preexisting political structures distort or limit the workings of the market mechanism, corruption -marketeering, smuggling, and side payments to government bureaucrats to "speed up" approval for business investments - may actually enhance welfare Others argue that corruption reduces the returns on business investment and leads to low economic growth
The chapter made the following points : 9
Kantian ethics state that people should be treated as ends and never purely as means to the ends of others. People are not instruments, like a machine. People have dignity and to be respected as much.
Understand the ethical issues faced by international businesses.
LO 5-1
Recognize an ethical dilemma.
LO 5-2
Identify the causes of unethical behavior by managers.
LO 5-3
Describe the different philosophical approaches to ethics.
LO 5-4
Explain how managers can incorporate ethical considerations into their decision making
LO 5-5
Focus on Managerial Implications
Making Ethical Decisions Internationally Actions managers can take to ensure ethics are considered 1) Favor hiring and promoting people with a well grounded sense of personal ethics 2) Build an organizational culture that places a high value on ethical behavior 3) Put decision making processes in place that require people to consider the ethical dimension of business decisions 4) Institute ethical officers in the organization 5) Develop moral courage 6) Make corporate social responsibility a cornerstone of the enterprise policy 7) Pursue strategies that are sustainable
Focus on Managerial Implications: Moral Courage
Managers must be able to walk away from decisions that are profitable but unethical
Ethical Dilemmas
Managers often face situations where the appropriate course of action is not clear Ethical dilemmas - situations in which none of the available alternatives seems ethically acceptable -Exist because real world decisions are complex, difficult to frame, and involve various consequences that are difficult to quantify
The chapter made the following points : 6
Moral philosophers contended that approaches to business ethics such as the Friedman doctrine, culture relativism, the righteous moralist, and the naive immoralist are unsatisfactory in important was.
The chapter made the following points : 13
Multinational corporations that are practicing business-focused sustainability integrate a focus on market orientation, addressing the needs of multiple stakeholders, and adhering to corporate social responsibility.
Righteous moralist
One who claims that a multinational's home-country standards of ethics are the appropriate ones for companies to follow in foreign countries
The Roots of Unethical Behavior: Managerial behavior is influenced by:
Personal ethics Decision making processes Organizational culture Unrealistic performance goals Leadership Societal culture
The Roots of Unethical Behavior: Unrealistic Performance Goals
Pressure from parent company to meet goals that are unrealistic and can only be attained by acting in an unethical manner
The chapter made the following points : 10
Rights theories recognize that human beings have fundamental rights and privileges that transcend national boundaries and cultures. These rights establish a minimum level of moral acceptable behavior.
Ethics and International Business: Environmental Pollution
Should a multinational feel free to pollute in a developing nation if doing so does not violate laws? -Tragedy of the commons
Philosophical Approaches to Ethics
Straw men -The Friedman doctrine -Cultural relativism -The righteous moralist -The naïve immoralist Utilitarian and Kantian Ethics Rights theories Justice Theories
Ethical dilemma
a situation in which there is no ethically acceptable solution
Business ethics
accepted principles of right or wrong governing the conduct of business people
Righteous Moralist
an MNE's home country standards of ethics are the appropriate ones for companies to follow in foreign countries -Approach is common among managers from developed countries
Convention on Combating Bribery of Foreign Public Officials in International Business Transactions
an OECD convention that establishes legally binding standards to criminalize bribery of foreign public officials in international business transactions and provides for a host of related measures that make this effective.
Naive immoralist
one who asserts that if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either
Cultural relativism
the belief that ethics are culturally determined and that firms should adopt the ethics of the cultures in which they operate
Kantian ethics
the belief that people should be treated as ends and never as means to the ends of others
Utilitarian approach
the moral worth of actions or practices is determined by their consequences -Actions have multiple consequences, some good, some not -Actions are desirable if they lead to the best possible balance of good consequences over bad consequences
Friedman doctrine
the only social responsibility of business is to increase profits, so long as the company stays within the rules of law -Companies should do only what is mandated by law and what is required to run a business efficiently
Organizational Culture
the values and norms shared among an organization's employees
Utilitarian approaches to ethics
these hold that the moral worth of actions or practices is determined by their consequences
Ethical Decision Making Process
1. Identify which stakeholders the decision would affect in which ways 2. Judge the ethics of the proposed strategic decision 3. Establish moral intent 4. Engage in ethical behavior 5. Audit the decision made to make sure it was consistent with ethical principles
Corporate Social Responsibility (CSR)
■The ideas that businesses should consider social consequences of economic actions when making business decisions ■Sustainable Strategies: strategies that help the firm be profitable without harming the environment
The Roots of Unethical Behavior: Personal Ethics
Business ethics reflect personal ethics Expatriates may face pressure to violate their personal ethics -They are away from their ordinary social context and supporting culture -They are psychologically and geographically distant from the parent company
The Roots of Unethical Behavior: Decision-Making Processes
Business people may behave unethically because they fail to ask the relevant questions Decisions made based on economic logic
Focus on Managerial Implications: Hiring and Promotion
Businesses should strive to identify and hire people with a strong sense of personal ethics Prospective employees should find out as much as they can about the ethical climate in an organization
Ethical Strategy:
Course of action that does not violate a company's business ethics
Focus on Managerial Implications: Sustainability
Sustainable strategies - strategies that not only help the MNC make good profits, but that also do so without harming the environment while simultaneously ensuring that the company operates in a socially responsible manner with regard to its stakeholders Sustainable strategies can be good for shareholders, the environment, local communities, employees, and customers
The chapter made the following points : 7
The Friedman doctrine states that only social responsibility of business is to increase profits, as long as the company stays within the rules. Cultural relativism contends that one should adopt the ethics of the culture in which one is doing business. The righteous moralist monolithically applies home-country ethics to a foreign situation, while the naive immoralist believes that if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either.
Justice Theory:
The attainment of a just (fair & equitable) distribution of economic goods & services
The chapter made the following points : 11
The concept of justice developed by John Rawls suggest that a decision is just and ethical if people would allow it when designing a social system under a veil of ignorance.
Ethics and International Business
The most common ethical issues in business involve -Employment practices -Human rights -Environmental pollution -Corruption
The chapter made the following points : 3
The most common ethical issues in international business involve employment practices, human rights, environmental regulations, corruption, and social responsibility of multinational corporations.
The chapter made the following points : 1
The term ethics refers to accepted principles of right or wrong that govern the conduct of a person, the members of a profession, or the actions of an organization. Business ethics are the accepted principles of right or wrong governing the conduct of businesspeople, and an ethical strategy is one that does not violate these accepted principles.
Rights Theory:
Theory that recognizes that human beings have fundamental rights and privileges that transcend national boundaries & cultures
Philosophical Approaches to Ethics
There are several approaches to business ethics including: Strawman -Friedman Doctrine -Cultural Relativism -Righteous Moralist -Naive Immoralist Utilitarian and Kantian Rights theories Justice Theories
Focus on Managerial Implications: Corporate social responsibility
There should be a presumption in favor of decisions that have both good economic and good social consequences
Just Distribution
a distribution of goods and services that is considered fair and equitable
Summary:
This chapter discussed the source and nature of ethical issues in international businesses, the different philosophical approaches to business ethics, and the steps managers can take to ensure that ethical issues are respected in international business decisions.
Focus on Managerial Implications: Ethics Officers
To encourage ethical behavior in a business, a number of firms now have ethics officers Ethics officers ensure -Employees are trained to be ethically aware -Ethical considerations enter decision-making -The company's code of ethics is followed
The chapter made the following points : 12
To make sure that ethical issues are considered in international business decisions, managers should (a) favor hiring and promoting people with a well-grounded sense of personal ethics; (b) build an organizational culture and exemplify leadership behaviors that place a high value on ethical behavior; (c) put decision-making processes in place that require people to consider the ethical dimension of business decisions (d) establish ethics officers in the organization with responsibility for ethical decision making; (e) be morally courageous and encourage others to do the same; (f) make corporate social responsibility a cornerstone of enterprise policy; and (g) pursue strategies that are sustainable.
Rights theories
Twentieth-century theories that recognize that human beings have fundamental rights and privileges that transcend national boundaries and cultures.
Foreign Corrupt Practices Act (FCPA)
U.S. law regulating behavior regarding the conduct of international business in the taking of bribes and other unethical actions.
The chapter made the following points : 5
Unethical behavior is rooted in poor personal ethics, societal culture, the psychological and geographic distances of a foreign subsidiary from the home office, a failure to incorporate ethical issues into strategic and operational decision making, a dysfunctional culture, and failure of leaders to act in an ethical manner.
The Roots of Unethical Behavior: Organizational Culture
Unethical behavior may exist in firms with an organizational culture that does not emphasize business ethics Values and norms shape the culture of a firm, and that culture influences decision making
The chapter made the following points : 8
Utilitarian approaches to ethics hold that the moral worth of actions or practices is determined by their consequences, and the best decisions are those that produce the greatest good for the greater number of people.
International Ethics
What is ok in one country is not ok in another Most common international issues:-■Employment practices - manufacturing-■Human rights - South Africa-■Environmental regulations - move to countries with lower standards ■Corruption - bribes vs "gifts"
Ethics and International Business: Human Rights
What is the responsibility of a foreign multinational when operating in a country where basic human rights are not respected? -South Africa and apartheid -The Sullivan principles adopted by GM
Ethics and International Business: Employment Practices
What practices should be used when work conditions are inferior in the host nation?
Ethical strategy
a course of action that does not violate a company's business ethics
Cultural relativism
ethics are culturally determined and firms should adopt the ethics of the cultures in which they operate -"When in Rome, do as the Romans do"
Naïve Immoralist
if a manager of an MNE sees that firms from other nations are not following ethical norms in a host nation, that manager should not either -Actions are ethically justified if everyone else is doing the same thing
Child Labor
is still common in many poor nations