International Business Chapter 5

stakeholders

A firm's stakeholders are individuals or groups that have an interest, claim, or stake in the company, in what it does, and in how well it performs.

A naive immoralist

A naive immoralist 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.

Decision-Making Processes

According to experts, a decision is acceptable on ethical grounds if a businessperson can answer yes to each of these questions: -Does my decision fall within the accepted values or standards that typically apply in the organizational environment (as articulated in a code of ethics or some other corporate statement)? -Am I willing to see the decision communicated to all stakeholders affected by it—for example, by having it reported in newspapers, on television, or via social media? -Would the people with whom I have a significant personal relationship, such as family members, friends, or even managers in other businesses, approve of the decision?

External stakeholders

External stakeholders are all the other individuals and groups that have some direct or indirect claim on the firm. Typically, this group comprises primary stakeholders such as customers, suppliers, governments, and local communities as well as secondary stakeholders such as special-interest groups, competitors, trade associations, mass media, and social media.

The Friedman Doctrine

Friedman's basic position is that "the social responsibility of business is to increase profits," so long as the company stays within the rules of law. He explicitly rejects the idea that businesses should undertake social expenditures beyond those mandated by the law and required for the efficient running of a business. -If the shareholders then wish to use the proceeds to make social investments, that is their right

International ethics

Here, we focus on seven actions that an international business and its managers can take to make sure ethical issues are considered in business decisions: (1) favor hiring and promoting people with a well-grounded sense of personal ethics; (2) build an organizational culture and exemplify leadership behaviors that place 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 ethics officers in the organization; (5) develop moral courage; (6) make corporate social responsibility a cornerstone of enterprise policy; and (7) pursue strategies that are sustainable.

Internal stakeholders

Internal stakeholders are individuals or groups who work for or own the business. They include primary stakeholders such as employees, the board of directors, and shareholders.

Kantian ethics

Kantian ethics is based on the philosophy of Immanuel Kant (1724-1804). Kantian ethics holds 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 need to be respected as such.

Leadership

Leaders help establish the culture of an organization, and they set the example, rules, and guidelines that others follow as well as the structure and processes for operating both strategically and in daily operations. Employees often operate and work within a defined structure with a mindset very much similar to the overall culture of the organization that employs them.

Moral courage

Moral courage enables managers to walk away from a decision that is profitable but unethical.

Societal culture

Societal culture may well have an impact on the propensity of people and organizations to behave in an unethical manner. -Using Hofstede's dimensions of social culture, the study found that enterprises headquartered in cultures where individualism and uncertainty avoidance are strong were more likely to emphasize the importance of behaving ethically than firms headquartered in cultures where masculinity and power distance are important cultural attributes.

Decision-Making Processes

five-step process to think through ethical problems (this is another example of an ethical algorithm). -In step 1, businesspeople should identify which stakeholders a decision would affect and in what ways. -Step 2 involves judging the ethics of the proposed strategic decision, given the information gained in step 1. Managers need to determine whether a proposed decision would violate the fundamental rights of any stakeholders. -Step 3 requires managers to establish moral intent. This means the business must resolve to place moral concerns ahead of other concerns in cases where either the fundamental rights of stakeholders or key moral principles have been violated. At this stage, input from top management might be particularly valuable. -Step 4 requires the company to engage in ethical behavior. -Step 5 requires the business to audit its decisions, reviewing them to make sure they were consistent with ethical principles, such as those stated in the company's code of ethics.

unrealistic performance goals

pressure from the parent company to meet unrealistic performance goals that can be attained only by cutting corners or acting in an unethical manner.

righteous moralist

righteous moralist claims that a multinational's home-country standards of ethics are the appropriate ones for companies to follow in foreign countries.

Rights theories

rights theories recognize that human beings have fundamental rights and privileges that transcend national boundaries and cultures. Rights establish a minimum level of morally acceptable behavior.

Ethical behavior

six determinants of ethical behavior: personal ethics, decision-making processes, organizational culture, unrealistic performance goals, leadership, and societal culture

Facilitating payments

-"facilitating payments." Sometimes known as speed money or grease payments , facilitating payments are not payments to secure contracts that would not otherwise be secured, nor are they payments to obtain exclusive preferential treatment. -facilitating payments, or speed money , are excluded from both the Foreign Corrupt Practices Act and the OECD

John Rawls

-According to Rawls, valid principles of justice are those with which all persons would agree if they could freely and impartially consider the situation. -The first principle is that each person be permitted the maximum amount of basic liberty compatible with a similar liberty for others. Rawls takes these to be political liberty (e.g., the right to vote), freedom of speech and assembly, liberty of conscience and freedom of thought, the freedom and right to hold personal property, and freedom from arbitrary arrest and seizure. -The second principle is that once equal basic liberty is ensured, inequality in basic social goods—such as income and wealth distribution, and opportunities—is to be allowed only if such inequalities benefit everyone. Rawls accepts that inequalities can be just if the system that produces inequalities is to the advantage of everyone.

Ethical dilemma

-Ethical dilemmas situations in which none of the available alternatives seems ethically acceptable. -From an international business perspective, some argue that what is ethical depends on one's cultural perspective.

Universal Declaration of Human Rights

-Everyone has the right to work, to free choice of employment to just and favorable conditions of work, and to protection against unemployment. -Everyone, without any discrimination, has the right to equal pay for equal work. -Everyone who works has the right to just and favorable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection. -Everyone has the right to form and to join trade unions for the protection of his interests.

Justice theories

-Justice theories focus on the attainment of a just distribution of economic goods and services. A just distribution is one that is considered fair and equitable. -John Rawls argues that all economic goods and services should be distributed equally except when an unequal distribution would work to everyone's advantage.

Ethical issues

-Many of the ethical issues in international business are rooted in differences in political systems, laws, economic development, and culture across countries. -the most common ethical issues involve employment practices, human rights, environmental regulations, corruption, and the moral obligation of multinational corporations.

Personal ethics

-generally accepted principles of right and wrong governing the conduct of individuals. -comes from a number of sources, including our parents, our schools, our religion, and the media. -the first step to establishing a strong sense of business ethics is for a society to emphasize strong personal ethics.

Convention on Combating Bribery of Foreign Public Officials in International Business Transactions

10 The convention, which went into force in 1999, obliges member states and other signatories to make the bribery of foreign public officials a criminal offense.

Business ethics

Business ethics are the accepted principles of right and wrong governing the conduct of businesspeople

sustainable strategies

By sustainable strategies , we refer to strategies that not only help the multinational firm make good profits, but that also do so without harming the environment while simultaneously ensuring that the corporation acts in a socially responsible manner with regard to its stakeholders. The core idea of sustainability is that the organization—through its actions—does not exert a negative impact on the ability of future generations to meet their own economic needs and that its actions impart long-run economic and social benefits on stakeholders.

Straw men

Straw men approaches to business ethics are raised by business ethics scholars primarily to demonstrate that they offer inappropriate guidelines for ethical decision making in a multinational enterprise. Four such approaches to business ethics are commonly discussed in the literature. These approaches can be characterized as the Friedman doctrine, cultural relativism, the righteous moralist, and the naive immoralist. All these approaches have some inherent value, but all are unsatisfactory in important ways. Nevertheless, sometimes companies adopt these approaches.

Foreign Corrupt Practices Act (FCPA)

The Lockheed case (Carl Kotchian bribed 12.6 million) was the impetus for the Foreign Corrupt Practices Act (FCPA) in the United States, discussed in Chapter 2 . The act outlawed paying of bribes to foreign government officials to gain business, and this was the case even if other countries' companies could do it.

Universal Declaration of Human Rights

The notion that there are fundamental rights that transcend national borders and cultures was the underlying motivation for the United Nations Universal Declaration of Human Rights , adopted in 1948, which has been ratified by almost every country on the planet and lays down basic principles that should always be adhered to irrespective of the culture in which one is doing business.

organizational culture

The term organizational culture refers to the values and norms that are shared among employees of an organization.

Human rights

These are often hindered: freedom of association, freedom of speech, freedom of assembly, freedom of movement, and freedom from political repression

Ethics officers

They are typically responsible for (1) assessing the needs and risks that an ethics program must address; (2) developing and distributing a code of ethics; (3) conducting training programs for employees; (4) establishing and maintaining a confidential service to address employees' questions about issues that may be ethical or unethical; (5) making sure that the organization is in compliance with government laws and regulations; (6) monitoring and auditing ethical conduct; (7) taking action, as appropriate, on possible violations; and (8) reviewing and updating the code of ethics periodically.

To improve ethical decision

To improve ethical decision making in a multinational firm, the best starting point is to better understand how individuals make decisions that can be considered ethical or unethical in an organizational environment. -Two assumptions must be taken into account. First, too often it is assumed that individuals in the workplace make ethical decisions in the same way as they would if they were home. Second, too often it is assumed that people from different cultures make ethical decisions following a similar process

Utilitarian approaches to ethics

Utilitarian approaches to ethics hold that the moral worth of actions or practices is determined by their consequences. 30 An action is judged desirable if it leads to the best possible balance of good consequences over bad consequences. Utilitarianism is committed to the maximization of good and the minimization of harm. -dates to philosophers such as David Hume (1711-1776), Jeremy Bentham (1748-1832), and John Stuart Mill (1806-1873)

code of ethics

code of ethics is a formal statement of the ethical priorities a business adheres to.

corporate social responsibility (CSR)

corporate social responsibility (CSR) refers to the idea that businesspeople should consider the social consequences of economic actions when making business decisions and that there should be a presumption in favor of decisions that have both good economic and social consequences.

cultural relativism

cultural relativism is the belief that ethics are nothing more than the reflection of a culture—all ethics are culturally determined—and that accordingly, a firm should adopt the ethics of the culture in which it is operating. -when in Rome, do as the Romans do

ethical strategy

ethical strategy is a strategy, or course of action, that does not violate these accepted principles.