Chapter 5 INTB

Several studies of unethical behavior in a business setting have concluded that businesspeople sometimes do not realize they are behaving unethically, primarily because they simply fail to ask,

"Is this decision or action ethical?

The act was subsequently amended to allow for

"facilitating payments"

The Nobel Prize-winning economist Milton Friedman wrote an article in The New York Times in 1970 that has since become a classic straw man example that business ethics scholars outline only to then tear down.24 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

These individuals—often referred to as ethics officers—are responsible for managing their organization's ethics and legal compliance programs. 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

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

A situation in which there is no ethically acceptable solution; situations in which none of the available alternatives seems ethically acceptable

Ethical Dilemma

drive what people decide to do

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

Ethics

-----, -----, and ---- are intertwined issues facing companies, industries, countries, and regional societies worldwide

Ethics corporate social responsibility sustainability

Individuals or groups that have some claim on a firm such as customers, suppliers, and unions

External stakeholders

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.22 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

What are the first two causes of unethical behavior in business

First, within an organization, there are very few individuals who have the freedom (e.g., power) to decide ethical issues independent of pressures that may exist in an organizational setting (e.g., should we make a facilitating payment or resort to bribery?). Second, while the process for making an ethical decision may largely be the same in many countries, the relative emphasis on certain issues is unlikely to be the same.

U.S. law regulating behavior regarding the conduct of international business in the taking of bribes and other unethical actions

Foreign Corrupt Practices Act (FCPA)

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

The belief that people should be treated as ends and never as means to the ends of others

Kantian ethics

----- 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

Leaders

The utilitarian philosophy does have some serious drawbacks as an approach to business ethics:

One problem is measuring the benefits, costs, and risks of a course of action The second problem with utilitarianism is that the philosophy omits the consideration of justice

drive what companies ultimately decide to do

Social corporate responsibility and sustainability

---- may well have an impact on the propensity of people and organizations to behave in an unethical manner

Societal culture

occurs when a resource held in common by all but owned by no one is overused by individuals, resulting in its degradation (ex: pollution)

The tragedy of the commons

A United Nations document that lays down the basic principles of human rights that should be adhered to

Universal Declaration of Human rights

This brings us to the third cause of unethical behavior in businesses:

an organizational culture that deemphasizes business ethics, reducing all decisions to the purely economic

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,Page 142 and local communities as well as secondary stakeholders such as special-interest groups, competitors, trade associations, mass media, and social media

external stakeholders

The convention excludes

facilitating payments made to expedite routine government action

From a practical standpoint, giving bribes might be the price that must be paid to do a ------ (assuming the investment creates jobs and assuming the practice is not illegal)

greater good

the study found that enterprises headquartered in cultures where ------ and ----- are strong were more likely to emphasize the importance of behaving ethically than firms headquartered in cultures where ---- and ----- are important cultural attributes

individualism uncertainty avoidance masculinity power distance

People who work for or own the business such as employees, directors, and stockholders

internal stakeholders

A distribution of goods and services that is considered fair and equitable

just distribution

The Hewlett-Packard example suggests a fifth root cause of unethical behavior:

leadership

The action that produces the greatest good for the greatest number of people may result in the unjustified treatment of a

minority

any person or institution that is capable of moral action such as a government or corporation

moral agent

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

moral courage

Rights establish a minimum level of

morally acceptable behavior

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.

naive immoralist

It is important to note that along with rights come

obligations

At its extreme, cultural relativism suggests that if a culture supports slavery, it is

okay to use slave labor in a country (clearly it is not!)

The values and norms shared among an organization's employees

organizational culture

To foster ethical behavior, businesses need to build an ------- that values ethical behavior

organizational culture

are the generally accepted principles of right and wrong governing the conduct of individuals

personal ethics

Many of the ethical issues in international business are rooted in differences in

political systems, laws, economic development, and culture across countries

A fourth cause of unethical behavior has already been hinted at:

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

Home-country managers working abroad in multinational firms (expatriate managers) may experience more than the usual degree of

pressure to violate their personal ethics

In contrast, other economists have argued that corruption

reduces the returns on business investment and leads to low economic growth

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

righteous moralist

Twentieth-century theories that recognize that human beings have fundamental rights and privileges that transcend national boundaries and cultures

rights theories

Within the framework of a theory of rights, certain people or institutions are obligated to provide benefits or services that

secure the rights of others

Sometimes known as ---------, facilitating payments are not payments to secure contracts that would not otherwise be secured, nor are they payments to obtain exclusive preferential treatment. Rather they are payments to ensure receiving the standard treatment that a business ought to receive from a foreign government but might not due to the obstruction of a foreign official

speed money or grease payments

The individuals or groups that have an interest, stake, or claim in the actions and overall performance of a company

stakeholders

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

straw men

which either deny the value of business ethics or apply the concept in a very unsatisfactory way

straw men

follows that the first step to establishing a strong sense of business ethics is for a society to emphasize

strong personal ethics

The core idea of ------ 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.56

sustainability

As managers in international businesses strive to translate ideas about corporate social responsibility into strategic actions, many are gravitating toward strategies that are viewed as

sustainable

Strategies that not only help the multinational firm make good profits but that do so without harming the environment, while simultaneously ensuring that the corporation acts in a socially responsible manner with regard to its multiple stakeholders.

sustainable strategies

Basically, all individuals adopt a process for making ethical (or unethical) decisions. This process is based on their personal philosophical approach to ethics—that is,

the underlying moral fabric of the individual

The combination of an organizational culture that legitimizes unethical behavior, or at least turns a blind eye to such behavior, and unrealistic performance goals may be particularly ----

toxic

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

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

The belief that ethics are culturally determined and that firms should adopt the ethics of the cultures in which they operate

Culture relativism

Others have recommended a five-step process to think through ethical problems:

1) businesspeople should identify which stakeholders a decision would affect and in what ways 2) judging the ethics of the proposed strategic decision, given the information gained in step 1 3) requires managers to establish moral intent 4) requires the company to engage in ethical behavior 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

Three things are particularly important in building an organizational culture that emphasizes ethical behavior:

1) the businesses must explicitly articulate values that emphasize ethical behavior 2) Having articulated values in a code of ethics or some other document, leaders in the business must give life and meaning to those words by repeatedly emphasizing their importance and then acting on them 3)Finally, building an organizational culture that places a high value on ethical behavior requires incentive and reward systems, including promotions that reward people who engage in ethical behavior and sanction those who do not

Article 23 of this declaration, which relates directly to employment, states:

1. Everyone has the right to work, to free choice of employment, to just and favorable conditions of work, and to protection against unemployment. 2. Everyone, without any discrimination, has the right to equal pay for equal work. 3. 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. 4. Everyone has the right to form and to join trade unions for the protection of his interests

Determinants of ethical behavior

1. personal ethics 2. decision-making processes 3. organizational culture 4. unrealistic performance goals 5. leadership 6. societal culture

In these cases, ---- may be viewed as a way to hit challenging performance goals

bribery

The accepted principles of right and wrong governing the conduct of businesspeople

business ethics

A business's formal statement of ethical priorities; which is a formal statement of the ethical priorities a business adheres to

code of ethics

For now, it is enough to note that ethical dilemmas exist because many real-world decisions are

complex; difficult to frame; and involve first-, second-, and third-order consequences that are hard to quantify

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

corporate social responsibility (CSR)

which is that inequalities are justified if they benefit the position of the least-advantaged person

difference principle

Several economists advocate this reasoning, suggesting that in the context of pervasive and cumbersome regulations in developing countries, corruption may improve

efficiency and help growth

Additionally, ---- in a business often take their cue from business leaders, and if those leaders do not behave in an ethical manner, the ---- might not either

employees employees

In the international business setting, the most common ethical issues involve

employment practices, human rights, environmental regulations, corruption, and the moral obligation of multinational corporations

A course of action that does not violate a company's business ethics

ethical strategy

What is considered normal practice in one nation may be considered

unethical in another

In contrast to the straw men just discussed, most moral philosophers see value in

utilitarian and Kantian approached to business ethics

These hold that the moral worth of actions or practices is determined by their consequences; An action is judged desirable if it leads to the best possible balance of good consequences over bad consequences; it focuses attention on the need to weigh carefully all the social benefits and costs of a business action and to pursue only those actions where the benefits outweigh the costs

utilitarian approaches to ethics

under the ------- everyone is imagined to be ignorant of all of his or her particular characteristics, for example, race, sex, intelligence, nationality, family background, and special talents

veil of ignorance

This approach is often summarized by the maxim

when in Rome, do as the Romans do

Consequently, many multinationals have adopted a --------. For example, the large oil multinational BP has a zero-tolerance approach toward facilitating payments

zero-tolerance policy