1. 1 CBEB3101 Business Ethics Lecture 12 Semester 1, 2011/2012 Prepared by Zulkufly Ramly

2. 2 Topic 12: Globalization and Ethical Issues

3. 3/12/20163  Defining globalization  Factors accelerating globalization  Benefits and costs of globalization  Ethical issues  Global codes of corporate conduct Contents of Topic 12

4. 3/12/20164 1.Define globalization 2.List the forces facilitating globalization process 3.Summarize the arguments for and against globalization 4.Explain the ethical issues involved in international business Topic 12 - Learning Outcomes

5. 3/12/20165 Introduction to Globalization  Refers to the increasing movement of goods, services, and capital across national borders  The global economic integration of many formerly national economies into one global economy  Is considered a process — an ongoing series of interrelated events  International trade and financial flows integrate the world economy, leading to the spread of technology, culture, and politics

6. 3/12/20166 “Globalization involves the integration of technology, markets, politics, cultures, labor, production, and commerce. Globalization is both the process and the result of this integration”

7. 3/12/20167 Globalization change factors  Technological innovation  Improved transportation systems  The growth of major transnational corporations  Social and political reforms  Free trading and trading agreements  Rise of international financial and trade institutions that stabilize currencies

8. 3/12/20168 IMPACTONIMPACTON Globalists ConsumersFree trade promotes lower costs EmployeesFaster economic growth promotes higher wages. EnvironmentCreates resources needed to address the issue Developing Nations  Promotes econ. development.  Higher standard of living.  Promotes transfer of technology. Human RightsCreates cultures that support law and free expression Positive Impacts

9. 3/12/20169 IMPACTONIMPACTON Anti-globalists ConsumersBenefits the wealth at the expense of the poor Employees Places profits above people EnvironmentExploits and destroys ecosystems Developing Nations  Keeps poor nations in debt.  Erodes nations sovereignty.  Westernization of other cultures. Human Rights Corporations pursing profits ignore human rights violations Negative Impacts

10. 3/12/201610 Examples of MNCs wrongdoing  Not forthright about known defects (Ford/Firestone)  Questionable safety standards and controls (Union Carbide)  Lack of proper product instructions that are understandable (Nestle)  Support of questionable governmental practices or policies (Apartheid in South Africa)  Damaging the physical environment (Exxon-Valdez)  Committing corporate crimes (bribery, kickbacks, etc) (Lockheed)

11. 3/12/201611 Ethical Issues in Global Business Product safety Price discrimination Intellectual property protection Human rights Environmental problems Corruption & bribery

12. 3/12/201612 Product safety  Not forthright about known defects (Ford/Firestone)  Harmful products sold – defective or contained genetically modified ingredients  Products that are not harmful in some countries become harmful in others because of the illiteracy, unsanitary conditions or cultural values  Export of tobacco products to less developed countries

13. 3/12/201613 Price discrimination  A company charges different prices to different groups of customers.  Price gouging - when prices increases beyond the costs of additional expenses such as the costs of transportation, taxes, tariffs, and other expenses.  Price dumping - when a global company charges low prices that allow it to enter a market quickly and capture large market share.

14. 3/12/201614 Intellectual property protection  Intellectual property refers to the ideas and creative materials developed to solve problems, carry out applications, educate and entertain others  E.g. Patents - pharmaceuticals products –  Fraudulent use of their trademarks - through counterfeiting or ambiguous misrepresentation of a product

15. 3/12/201615 Human rights  Opportunistic use of child labour (Nike Inc.)  Payment of low wages (Soccer balls made in Pakistan)  Employee abuses in foreign factories (Walmart)  Questionable safety standards and controls (Union Carbide & Ford/Firestone)

16. 3/12/201616 Environmental problems  Failure to ensure that their operations or products do not cause harm to the environment  Harmful effect - polluting air and water or releasing hazardous gas into the environment

17. 3/12/201617 Examples  1984 – Dow Chemical Company - Bhopal Tragedy in India  1986 – Soviet Union: Chernobyl nuclear power plant meltdown causing deaths of thousands of people. Many were injured for life  1989 – Exxon Valdez: 11-million gallon oil spilt on the shore of Alaska polluted the sea and killed marine life  2010 – British Petroleum oil leakage destroying marine life in the Gulf of Mexico and the coastal line of southern states.

18. 3/12/201618 Bhopal Tragedy

19. 3/12/201619 Chernobyl Nuclear Disaster

20. 3/12/201620 Corruption and Bribery  In many cultures, giving bribes, also known as facilitating payments, is an acceptable business practices.  Global companies should be aware that bribes are an ethical issue and that the practice is more prevalent on some countries than in others.  Bribes requests are frequently associated with large construction project, turnkey capital projects, large commodity or large equipment projects.  e.g. the purchase of Lockheed’s aircrafts by ANA in which Lockheed’s CEO had to pay bribes to Japanese parties in order to secure the deal.  Other corrupt practices include misuse of company assets for political favours, kickbacks, protection money for police, secret price-fixing agreements, and insider dealing.

21. 3/12/201621 Grease PaymentBribe Relatively small sums of money given for getting minor officials to:  Do what they are supposed to be doing  Do what they are supposed to be doing faster  Do what they are supposed to be doing better Relatively large amounts of money given for:  influencing officials to make decisions  take actions that they otherwise might not take

22. 3/12/201622 Arguments For and Against Bribery For BriberyAgainst Bribery  Necessary to do business  Common practice  Accepted practice  Form of commission, tax, or compensation  Wrong  Illegal  Compromise personal beliefs  Promotes government corruption  Once started, never stops  Prohibits taking a stand for honesty, morality, ethics  Benefits recipient only  Creates dependence on corruption  Deceives stockholders

23. 3/12/201623 Other Global Ethics Issues  Acts of terrorism  Rogue nations

24. 3/12/201624 Global Codes of Corporate Conduct (1)  The United Nations Global Compact  Initiated by Kofi Annan in 2000  A values-based platform designed to promote institutional learning  Corporations are invited to voluntarily endorse core principles covering labor, human rights, and environmental standards  As of 2006, over 2000 companies had endorsed the principles

25. 3/12/201625 Global Codes of Corporate Conduct (2)  The OECD Guidelines for Multinational Enterprises  Code of conduct for corporations developed by member nations of the OECD  The guidelines are voluntary, address employment relations, information disclosure, environmental stewardship, consumer interests, and the management of technology

26. 3/12/201626 MNE Moral Guidelines  Do no intentional harm  Produce more good than harm for the host country  Contribute to the host country’s development  Respect human rights, local culture  Pay fair share of taxes  Cooperate with local government as partners  Attend to actions, consequences, and failures of the firm  Maintain high safety standards and controls  Protect the natural environment