Chapter 5 Ethics
Sullivan Principles (General Motors)
A 1977 code of conduct that required multinational corporations in South Africa to do business in a nondiscriminatory way -Leon Sullivan-GM's board of directors
Transparency International
A private organization that compiles statistics about corruption in countries around the world. -Global corruption barometer -Corruption perception index (CPI) -Bribe Payer Index (BPI)
International Business Ethics
Moral principles that define right and wrong behavior in conducting business in a global environment -individual decisions -code of conduct, doesn't ensure ethical behavior, but for law
Which Ethical Issues Are Most Relevant To International Firms?
Most common ethical issue in business involve: -employment -human rights -environmental regulations -moral obligation of multinational companies -corruption
Foreign Corrupt Practices Act
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 -argued act would put U.S firms at competitive disadvantage -bc of this ^ amended to follow for "facilitating payments" -such payments still unclear...
Right Theories
a twentieth-century theory that recognizes that human beings have fundamental rights and privileges that transcend national boundaries and cultures -mini. level of morally acceptable behavior United Nations- Universal Declaration of Human Rights (1948)- ratified by almost every country on the planet and lays down basic principles that should aways be adored to irrespective of the culture in which one is doing business Article 23- directly to employment 1. everyone has right to work, free choice of employment, to just and favorable conditions of work & to protection against unemployment 2. everyone, without any discrimination, has right to equal pay for equal work 3. everyone who works has right to just & favorable remuneration ensuring for himself & his family and existence worth of human dignity& supplemented, if necessary, by other means of social protection 4. Everyone has the right to form & to join trade unions for the protection of his interest Article 29- notion that ppl have obligations 1. Everyone has duties to the community in which alone the free & full development of his personality is possible
economic progress could generate pressure for democratization...
belief suggest its ethical for multinationals to do business in nations that lack democratic structures & human rights record of developed nations
Ethical dilemmas are:
problems about which more than one choice can be made and the choice made is influenced by the values and beliefs of the decision makers -depends on cultural perspective ex; execution of murderers situations in which none of the available alternatives seem ethically acceptable ex; 12 yr old girl working
Global Corruption Barometer
published by Transparency International is the largest survey in the world tracking public opinion on corruption
Bribe Payers Index (BPI)
ranks leading exporting countries in terms of degree to which international companies with their headquarters in those countries are likely to pay bribes to senior public officials in key emerging market economies; measures supply side of bribery in the countries where bribes are paid -21 leading export countries -most likely to offer bribes: Russia, China, Taiwan, South Korea
Social Responsibility
refers to the idea that managers should consider the social consequences of economic actions when making business decision -advocates argue that businesses need to recognize that honorable & behavior is the responsibility of successful companies *give something back to the societies that have made their success possible *(or not) Friedman Doctrine
tragedy for commons
some parts of the environment that are a public good that no one owns but anyone can spoil
Moral Agent
the individual who must make an ethical choice in an organization
Personal Ethics
your own will to behave or unbehave
GM operation in SA under 2 conditions
1. company should not obey apartheid laws in its own South African operation (passive resistance) 2. the company should do everything within its power to promote abolition
Most common ethical issues in international business
1. employment practices -not acceptable to tolerate poor working conditions in foreign operations/subcontractors ex; Nike & subcontractors policies were seen as unethical, although they were not breaking the law to avoid unethical practices... establish mini. acceptable standards that safeguard basic rights and dignity of employees, audit subsidiaries% subcontractors on regular basis 2. human rights -freedom in developed nations ex:freedom of association/speech/assembly/ movement/political repression etc., not universal ex; Apartheid system- denied rights to nonwhite ppl of SA, still exist while developed nations invest in SA 3. environmental regulations -developed nations have substantial regulations governing emission of pollutants, the dumping of toxic chemicals, the use of toxic materials in the workplace & so on- lack in developing nations (result of^ pollution than allowed @ home) *pollute to gain economic adv. or make sure foreign subsidiaries adhere to common standards regarding pollution control? (tragedy of the commons) -argument ab ^ in carbon dioxide 4. corruption -(black marketeering, smuggling, & side payments to gov. bureaucrats to "speed up" approval for investment) arguable that corruption could improve efficiency and help growth; & opposite -study found that firms that paid in bribes likely to spend more not less, raise costs of firms bc of time negotiating -moral obligation -multinational corporations
Philosophical Approaches to Ethics
-Straw men -utilitarian and kantian ethics rights theories -justice theories
firms should
-establish minimal acceptable standards that safeguard the basic rights and dignity of employees -audit foreign subsidiaries and subcontractors regularly to ensure they are meeting the standards -take corrective action as necessary *companies need to set up surprise visits
Suppose work conditions in a host nation are clearly inferior to those in the multinational's home nation. Which standards should apply?
-home country standards (righteous moralist) -host country standards (cultural relativism) -something in-between
What happens when environmental regulations in host nations are far inferior to those in the home nation?
-is it permissible for multinationals to pollute in developing countries simply bc there are no regulations against it? -legal vs ethical behavior
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
6 determinants of ethical behavior
1. personal ethics derive from parents, schools, religion & media; exerts profound influence on the way we behave as business people *working abroad puts more pressure in violating personal ethics bc away from culture & distant from parent company 2. decision making processes businesspeople fail to ask or realize behavior is ethical -improve ethical decision: making need to better understand how individuals make decisions that can be considered ethical/unethical in org. environment -two problematic assumptions: 1. ppl assume ind. in workplace make ethical decisions same way from @home> pressure & freedom 2.ppl from diff cultures make ethical decisions>unlikely the same 3. organizational culture values(abstract ideas)& norms(social rules) shared among employees of an org. 4. unrealistic performance goals pressure from parent company to meet unrealistic performance goals that are only attained by cutting corner or acting in an unethical manner 5. leadership helps establish the culture of an organization & sets examples, rules, and guidelines that others follow as well as the structure with a mindset very much similar to the overall culture of the organization that employs them 6. societal culture impacts propensity of ppl& org. to behave in an unethical manner -study: Hofstede's dimensions of social culture, study found enterprises headquartered in culture where individualism & uncertainty avoidance are strong were more likely to emphasize importance of behaving ethically than with masculinity & power distance(behavior more unethical)
how are ethics relevant to human rights?
Basic human rights are taken for granted in developed countries -freedom of association -freedom of speech -freedom of assembly -freedom of movement
Tradegy of the Commons
The idea that where there is no clear ownership of rights to a natural resource, the users of the resource are likely to overexploit it. This becomes an argument either for strong government intervention or for privatization of rights to the resource -named by Garrett Hardin 16th century
Ethics related to corruption
US Foreign Corruption Act outlawed the practice of paying bribers to foreign gov. officials in order to gain business - also pertains the foreign nationals that work for a US firm * amended to allow for facilitating payments * 2 parts of the law -make bribes directly -bribes paid by intermediaries -------------------------------------------challenging for business operating in countries where bribes are a way of doing business
Ethical strategy
a course of action that does not violate a company's business ethics
Straw Men Approaches
business ethics raised by business ethics scholars primarily to demonstrate they offer inappropriate guidelines for ethical decision making in multinational enterprises Approaches characterized as: Friedman Doctorine(1970): "the social responsibility of business is to increase profits so long as the company stays within the rules of law", more rewarding, shareholders can make the house to use proceeds to make social investment -rejects the idea that businesses should undertake social expenditures beyond those mandated by law &required for efficient running of business Cultural Relativism: belief that ethics are nothing more than reflection of a culture-all ethics are culturally determined) The Righteous Moralist: claims multinational's home-country standards of ethics are the appropriate ones for companies to follow in foreign countries -associate w managers from developed nations -criticism> go too far ex; American Banker The 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(Drug lord problem) -objection twofold: 1. action is ethically justified if everyone is doing it is not sufficient 2. multinational must recognize it does have the ability to change the prevailing practice in a country, can use power for +moral purpose ex; BP adopting zero-tolerance policy w regard to facilitating payments
Decision making process
businesses need to have something in place to whistleblow or to make good decisions *there are things an IBUS firms should do and shouldn't *not all ethical dilemmas have a clear obvious solution -firms must rely on the decision making ability of its managers
cause-related marketing
buy a product, proceeds go to company or charity ex; Toms
unethical behavior
comes from: unrealistic perf goals- having #'s; sales organization culture **leadership needs to start from top
Utilitarian and Kantian Ethics Approach
developed in 18th& 19th centuries, philosophers David Hume (1711-76), Jeremy Bentham (1748-1832), John Stuart Mill (1806-1873) -the moral worth of actions or practices is determined by their consequences. -action judged desirable if it leads to best possible balance of good consequences over bad. -committed to max. good/ social benefits, and mini. harm/ costs of business action & pursue only actions where benefits outweigh the costs -cost-benefit analysis & risk assessment Drawbacks(unethical): -measuring benefits, costs, & risks of a course of action -philosophy omits the consideration of justice Kantian Ethics/philosophy of immanuel Kant (1724-1804) - holds that people should treated as ends and never purely as means to the ends of others. People are not instruments, like a machine. People have dignity & need to be respected as such. -critic: no place for moral emotions or sentiments (incomplete)
Justice Theories
focus on the attainment of a just distribution of economic goods and services John Rawls- argues all economic goods & services should be distributed equally except when an unequal distribution would work for everyone's advantage Veil of Ignorance: everyone is imagined to be ignorant of all of his or her particular characteristics for ex; race, sex, intelligence, nationality, family background, and special talents -what system ppl would design under a veil of ignorance... -follows that it is unjust& by extension unethical for companies to pursue actions that contribute toward extensive degradation of the commons -conceptual tool that contributes to moral compass that managers can use to help them navigate through difficult dilemmas -under condition agree on 2 fundamental principles of justice- 1. each person permitted the max amount of basic liberty compatible w/ a similar liberty for others (political liberty, right to vote, freedom of speech/ assembly/conscience& thought/ right to hold personal property/arbitrary arrest&seizure) 2. once equal basic liberty is ensured inequality is basic social goods- (income & wealth distribution& opportunities)- it to be allowed only if such inequalities benefit everyone Difference in principle: inequalities justified if they become the position f the least-advantaged person ex; free trade& market-based economy Just distribution: is one that is considered fair & equitable -no one theory of justice/ several conflict w each other
Societal Culture
involves shared values, norms, identities, and interpretations that result from common experiences of members of collectives that are transmitted over time ethics & unethics become norms
Corruption Perception Index (CPI)
measurement of the level of corruption in a country according to interviews and polls taken
global tragedy of the commons
moving production to locations where they are free to pump pollutants into the atmosphere or dump them in oceans or rivers, thereby harming these valuable global commons
Friedman Doctrine says...
not responsible of company to give back, responsibility to max. share holders profits-> let shareholders decide where to use $
Convention on Combating Bribery of Foreign Public Officials in International Business Transactions
obliges member states & other signatories to make the bribery of foreign public officials a crime offense