International Business Chapter 5

Human Rights

•Basic human rights found in developed nations are not universally accepted worldwide •Freedom of association •Freedom of speech •Freedom of assembly •Freedom of movement Freedom from political repression •Apartheid system in South Africa •Mandated segregation and prohibited blacks from managing whites •Some businesses from developed countries questioned the ethics of doing business in the country •United Nation's Sustainable Development Goals 2030 •General Motors case •Sullivan principles •Many companies divested operations in South Africa Economic sanctions from the United States •Repressive regimes still exist in the world •Is it ethical for multinational corporations to do business with repressive regimes? •Does multinational investment bring change to these regimes and foster economic growth and raise living standards? •Are some regimes so repressive that investment cannot be justified on ethical grounds?

Ethics

•Accepted principles of right or wrong that govern •The conduct of a person •The members of a profession •The actions of an organization •Business ethics Ethical strategy

Decision-Making Processes

•Businesspeople may act unethically when they fail to ask "Is this decision or action ethical?" •Problems arise in processes that do not incorporate ethical considerations into business decision making •Need to better understand how individuals make decisions that are ethical or unethical in an organizational environment

Corruption

•Corruption has been a problem in almost every society in history and continues to be one today •U.S. Foreign Corrupt Practices Act (FCPA) •Amended to allow for "facilitating payments" •The Convention on Combating Bribery of Foreign Public Official in International Business Transactions •Ethical implications of corruption •Are bribes the price to pay to do a greater good? •Do bribes reduce businesses' incentive to invest? •Some multinationals adopting a zero-tolerance policy •BP Dow Corning

Organizational Culture

•Culture in some organizations does not encourage people to think through ethical consequences of decisions

Societal Culture

•Cultures that emphasize individualism and uncertainty avoidance are more likely to stress ethical behavior than cultures where masculinity and power distance are emphasized

The most common ethical issues in international business involve

•Employment practices •Human rights •Environmental regulations •Corruption •Moral obligations of multination corporations

Justice Theories

•Focus on the attainment of a just distribution of economic goods and services •John Rawls argued that all economic goods and services should be distributed equally except when an unequal distribution would work to everyone's advantage •Veil of ignorance Difference principle

Personal Ethics

•Formation of ethics is guided by our parents, our schools, our religion, and the media •Expatriate managers may face pressure to violate their personal ethics because they are away from their ordinary social context and culture •Parent company may pressure managers to meet unrealistic goals that can only be fulfilled by acting unethically

Leadership

•Helps to establish the culture of an organization and set the examples that others follow •Employees often take their cue from business leaders

Ethical obligations of multinational corporations are not always clear-cut

•How should corporations handle ethical dilemmas regarding employment, human rights, corruption, and environmental pollution? •Pressure from customers and stakeholders to be transparent in ethical decision making •No universal worldwide agreement about what constitutes accepted ethical principles This is the nature of ethical dilemmas

Straw Men

•Offer inappropriate guidelines for ethical decision making •The Friedman Doctrine - "the social responsibility of business is to increase profits," so long as the company stays within the rules of law •Cultural relativism - ethics are a reflection of culture When in Rome, do as the Romans •Righteous moralist―home-country standards of ethics should be followed in foreign countries •Typically associated with managers from developed nations •Naïve immoralist―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

Unrealistic Performance Goals

•Pressure from parent company to meet unrealistic performance goals by cutting corners or acting unethically

Environmental Pollution

•Problems when environmental regulations differ between host nations and home nation •Tragedy of the commons •Global tragedy of the commons •Is it ethical for a company to escape regulations by moving production to a nation with lax regulations?

Rights Theories

•Rights establish a minimum level of morally acceptable behavior •Moral theorists argue that fundamental human rights form the basis for a moral compass that managers can use in ethical decision making •Universal Declaration of Human Rights •Article 1 Article 23 •Along with rights come obligations •Article 29 of the Universal Declaration of Human Rights •Obligations fall on more than one class of moral agents - any person or institution that is capable of moral action •A government A corporation

Why do managers behave unethically?

•Six determinants of ethical behavior •Personal ethics •Decision-making processes •Organizational culture •Unrealistic performance goals •Leadership Societal culture

Employment Practices

•Suppose work conditions in a host nation are inferior to those in a multinational's home nation •Which standards should apply? •Home or host nation or something between? •Nike case •Nike did not break the law, but the case raised questions regarding the ethics of using sweatshop labor •To guard against ethical abuses, firms should •Establish minimal acceptable standards that safeguard the basic rights and dignity of employees •Audit foreign subsidies and contractors regularly to ensure standards are being met •Take corrective action as necessary

Utilitarian and Kantian Ethics

•Utilitarian approaches to ethics •Philosophers David Hume, Jeremy Bentham, and John Stuart Mill •Actions are desirable if they lead to the best possible balance of good consequences over bad consequences •Best decisions are those that produce the greatest good for the greatest number of people •Drawbacks •Difficult to measure benefits, costs, and risks of an action It fails to consider justice •Based on the philosophy of Immanuel Kant •People should be treated as ends and never as purely means to the ends of others •People have dignity and need to be respected •Contemporary moral philosophers view Kantian ethics as incomplete •System has no place for moral sentiments such as sympathy or caring

How can managers make ethical decisions?

1.Hire and promote people with a well-grounded sense of personal ethics •Refrain from promoting individuals who have acted unethically •Try to hire only people with strong ethics •Prospective employees should find out as much as they can about the ethical climate in an organization prior to taking a position 2.Build an organizational culture that places a high value on ethical behavior •Articulate values that place a strong emphasis on ethical behavior •Emphasize the importance of a code of ethics •Implement a system of incentives and rewards that recognize people who engage in ethical behavior and sanction those who do not 3.Put decision-making processes in place that require people to consider the ethical dimension of business decisions •Does the decision fall within the accepted values of standards that typically apply in the organizational environment? •Is there a willingness to see the decision communicated to all stakeholders affected by it? •Would people close to me (family members, friends, colleagues) approve of the decision? •Managers can also use a five-step process to think through ethical problems •Step 1: Identify which stakeholders a decision would affect and in what ways. •Internal stakeholders •External stakeholders •Stakeholder analysis involves moral imagination - standing in the shoes of the stakeholder and asking how a proposed decision might impact that stakeholder •Managers can also use a five-step process to think through ethical problems continued •Step 2: Determine whether a proposed decision would violate the fundamental rights of any stakeholders •Step 3: Establish moral intent - place moral concerns ahead of other concerns in cases where either the fundamental rights of stakeholders or key moral principles have been violated •Step 4: Engage in ethical behavior •Step 5: Audit decisions to make sure they are consistent with ethical principles 4.Institute ethical officers to •Assess the needs and risks that an ethics program must address •Develop and distribute a code of ethics •Conduct training programs for employees •Establish and maintain confidentiality of employees •Comply with government laws and regulations •Monitor and audit ethical conduct •Take action, where appropriate •Periodically reviewing and updating the code of ethics 5.Develop moral courage •Enables managers to walk away from a decision that is profitable but unethical •Gives an employee the strength to say no to a superior who instructs employee to pursue actions that are unethical •Gives employees the integrity to go public to the media and blow the whistle on persistent unethical behavior in a company 6.Make corporate social responsibility a cornerstone enterprise policy •Advocates argue that businesses need to recognize their noblesse oblige and give something back to the societies that have made their success possible. •Power can be used in a positive way to increase social welfare, which is ethical, or used in a manner that is ethically and morally suspect. 7.Pursue sustainable strategies •Core idea is that an organization's actions do not exert a negative impact on the ability of future generations to meet their own economic needs •Actions impart long-run economic and social benefits on stakeholders