IB Chapter 5

Sullivan Principles

A twofold approach to doing business in apartheid South Africa, comprising passive resistance to apartheid laws and attempts to influence the abolition of apartheid laws. Wasn't enough. State pension funds refused to hold stock from South Africa

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

Ethical implications of corruption

Are bribes the price to pay to do a greater good? Do bribes reduce firms incentive to invest?

Justice Theory

Attainment of a just distribution of economic goods and services All economic goods and services should be distributed equally except when an unequal distribution would work to everyone's advantage

Develop moral courage

Enable managers to walk away from a decision that is profitable but unethical Give an employee the strength to say no to a superior if asked to do something unethical Give employees the integrity to go public or blow the whistle on unethical behavior

facilitating payments

Ensure receiving the standard treatment that a business ought to receive from a foreign government Speed money or grease payments

Leadership

Establish the culture of the organization, set an example, rules and guidelines that others follow Employees operate within company's overall culture

Moral obligations of multinational corporations

Ethical obligations not always clear No worldwide agreement about ethical principles Pressure from customers and stakeholders to be transparent in ethical decision making

Approach2: cultural relativism

Ethics are a reflection of culture When in Rome, do as romans

human rights

Freedom of association Speech Assembly Movement From political repression

Approach 3: righteous moralist

Home country standard of ethics is the appropriate ones for companies to follow in foreign countries

Approach 4: naive immoralist

Manager sees firm from other nations are not following ethical norms in a host nation then that manager should not either

Sustainable Strategies

Organizations actions do not exert a negative impact on the ability of future generations to meet their own economic needs

Kantian Ethics

People have dignity and need to be respected Contemporary philosophers think it's incomplete because his system has no place for moral sentiments such as sympathy or caring

Six determinants of ethical behavior

Personal ethics Decision-making processes Organizational culture Unrealistic performance goals Leadership Social culture

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 Bribery

Decision Making Process

Processes that do not incorporate ethical considerations into business decision making Better understand how individuals make decisions that are ethical or unethical in an organizational environment

global tragedy of the commons

Resource held in common by all, but owned by no one, is overused by individuals or firms resulting in degradation

Approach 1: Friedman Doctrine

Social responsibility of business is to increase profits as within rules of law

Foreign Corrupt Practices Act (FCPA)

a law that prohibits U.S. corporations from making illegal payments to public officials of foreign governments to obtain business rights or to enhance their business dealings in those countries

ethical dilemma

a situation in which more than one side of an issue can be supported with valid arguments. None seem ethically acceptable

Ethical Strategy

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

Business Ethics

accepted principles of right and wrong governing the conduct of business people

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 4 approaches

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

obliges member states to make the bribery of foreign public officials a criminal offense OECD Allows facilitating or expediting payments

Environmental pollution

the degradation of the environment through the emission of toxic waste material in low environmental regulation nations

organizational culture

the values and norms shared among an organization's employees Paying bribes

Institute ethical officers to

- access the needs and risks that ethics programs must address - develop and distribute code of ethics - conduct training programs - 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

The most common ethical issues in business involve:

1. employment practices 2. human rights 3. environmental pollution 4. corruption 5. moral obligations of multinational companies

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

How can managers make ethical decisions?

1) Hire and promote people with a well grounded sense of personal ethics 2) Build an organizational culture that places a high value on ethical behavior 3) Make sure that leaders within the business articulate the rhetoric of ethical behavior and act in a manner that is consistent with that rhetoric 4) Put decision making processes in place that require people to consider the ethical dimensions of business decisions 5) Develop moral courage

Managers five-step process to think through ethical problems

1) identify which stakeholders a decision would affect and in what ways 2) determine whether a proposed decision would violate the fundamental rights of any stakeholder 3) establish moral intent to place moral concerns ahead of other concerns in cases where either the fundamental rights of stakeholders or key moral principles have beeen violated 4) engage in ethical behavior 5) audit decisions to make sure they are consistent with ethical principles

How is the apartheid system in South Africa violate human rights

1) segregation between white and nonwhites 2) reserved certain occupations exclusively for whites 3) prohibit blacks from being placed in positions where they manage whites

Multinationals with zero tolerance in facilitating or expediting payments

Bp plc of the UK DOW CORNING CORP US

Corporate Social Responsibility (CSR)

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

Societal Culture

Culture may have an impact on the propensity of people and organizations to a have in an unethical way Hofstedes dimensions of social culture show that firms are more likely to emphasize the importance of behaving ethically in developed countries rather than non developed countries

Employment Practices

The manners and methods by which employers deal with their employees Whose standards should apply? Home nation, host nation, something between

corruption

dishonest or fraudulent conduct by those in power, typically involving bribery.

Veil of Ignorance

everyone is imagined to be ignorant of all his or her particular characteristics Race sex and so on

Personal Ethics

formed from upbringing, acculturation, life experiences, personal choices, and education Parents, schools, religion, the media Expatriate managers may face pressure to violate these ethics because they are away from ordinary social context and supporting culture

Utilitarian Approaches to Ethics

hold that the moral worth of actions or practices is determined by their consequences Drawbacks: difficult to measure benefits, costs, and risks of an action Fails to consider justice

Rights Theories

human beings have fundamental rights and privileges which transcend national boundaries and cultures Minimum level of moral accepted behavior Form the basis for the moral compass that managers can use 1948 universal declaration of human rights

Difference Principle

inequalities are justified if they benefit the position of the least advantaged person