2. © Prentice Hall, 2001 250-759 Social Responsibility of Business Prepared by W. L. Dougan Lecture 6

3. © Prentice Hall, 2001 Chapter Nine Ethical Issues in International Business Ethical Theory and Business, 8 th Edition Tom L. Beauchamp & Norman E. Bowie

4. © Prentice Hall, 2001 3 Topics for Chapter 9 Ethical Principles for Multinationals Ethical Relativism

5. © Prentice Hall, 2001 4 Alternative Standards of Conduct Norms of home country Norms of host country Profitable choice Morally appropriate choice

6. © Prentice Hall, 2001 5 “Relativism and the Moral Obligations of Multinational Corporations” Norman Bowie General multinational corporation obligations Distinctive obligations Relativism Morality of the marketplace

7. © Prentice Hall, 2001 6 When in Rome do as the Romans do? Norman Bowie Only guide is what is legal and appropriate in that country Justification: In some instances, laws and regulations may be stricter (e.g., Europe have stricter environmental laws) If things are sufficiently different, then it is (maybe) necessary to apply different standards (e.g., US companies complied with Arab firms not to post women for fear of losing lucrative contracts)

8. © Prentice Hall, 2001 7 Is the adage wholly justified? No – because a country permits bribery, unsafe working conditions, and violation of human rights does not mean that these practices are acceptable How can one justify the wages paid by multinationals to less developed countries when these wages are a fraction of what is paid at home

9. © Prentice Hall, 2001 8 Are there some universal standards? Yes – most cultures value Human dignity, economic well-being, truthfulness, sense of justice and fairness A document on global ethics produced by two religious leaders cites two universal principles Every human being must be treated humanely What you do not wish to be done to yourself, do not do to others

10. © Prentice Hall, 2001 9 DeGeorge – developed 7 principles Multinationals (MNCs) should do no harm MNCs should produce more good than bad for the host country MNCs should contribute by their activities to the host country’s development MNCs should respect the right of their employees MNCs should pay their fair share of taxes To the extent that the local culture does not violate moral norms, MNCs should respect these norms MNCs should cooperate with the local governments in the development and enforcement of background institutions

11. © Prentice Hall, 2001 10 Donaldson – Minimal duties of MNCs MNCs have an obligation to respect fundamental international rights Negative harm principle – MNCs have an obligation not to add to deprivation or suffering Rational empathy test – put yourself in the shoes of the foreigner

12. © Prentice Hall, 2001 11 International standards for behavior Agreement already exists Standards are necessary for society and exchange Business activity presupposes some moral standards anyway

13. © Prentice Hall, 2001 12 Are international norms appropriate? Standards might destroy culture Moral free space is available for difference

14. © Prentice Hall, 2001 Denis Arnold “The Human Rights Obligations of Multinational Corporations” Defends a Kantian view of the human rights obligations of corporations Defends Kantian view against criticism Criticizes one recent effort by the United Nations to identify the human rights obligations of corporations 13

15. © Prentice Hall, 2001 Human Rights Principle Human rights are different from legal rights in that they do not depend upon state sanction for their legitimacy 14

16. © Prentice Hall, 2001 United Nations positions on human rights The Universal Declaration of Human Rights (1948) is aimed at states, not corporations Draft Norms on the Responsibilities of Corporations and Other Business Enterprises with Respect to Human Rights (2003) is aimed at corporations. They are too wide and imprecise They fail to distinguish between basic obligations and those actions that are good to perform but not mandatory. 15

17. © Prentice Hall, 2001 Basic rights Are inalienable Are attributable to persons 16

18. © Prentice Hall, 2001 Kantian basis for rights Entails negative duties such as avoiding physical force or coercion Entails positive obligations like ensuring positive well-being Freedom: Individuals should be free to as much freedom as is compatible with a like freedom for all. 17

19. © Prentice Hall, 2001 Kantian basis for rights (cont.) Human capabilities necessary to function well: life, physical health, freedom of thought and expression, and the ability to pursue one’s conception of the good. The right to physical security and freedom of movement. The right to non-discrimination on the basis of arbitrary characteristics such as race, sex, religion, ethnicity, and sexual orientation. The right to freedom of association and collective bargaining. The right to fair treatment. The right to subsistence The right to develop basic human capabilities. 18

20. © Prentice Hall, 2001 Universality of rights concepts Human rights are not merely a Western concept. There are diverse Asian societies which, embrace human rights language and arguments. Ex. - India Even if all Asian nations denied the validity of human rights arguments, this would not entail that they were correct. 19

21. © Prentice Hall, 2001 20 Patricia H. Werhane “Exporting Mental Models: Global Capitalism in the Twenty-First Century” Argues for caution in extending Western style capitalism abroad Provides several examples of where the unreflective extension of Western style capitalism has led to bad outcomes

22. © Prentice Hall, 2001 Mental Models Mental representations, cognitive frames, or mental pictures that frame and organize human experience Mechanisms whereby humans are able to generate descriptions of system purpose and form Explanations of system functioning and observed system states Predictions of future system states. 21

23. © Prentice Hall, 2001 22 Patricia H. Werhane Many possible ways to organize economic activity Our assumption in the US is that we have extraordinary success, and that others will be improved if we offer assistance in doing things our way

24. © Prentice Hall, 2001 23 Patricia H. Werhane American models of free enterprise and property cannot be transferred uniformly throughout the world without unforseen consequences. Analogous to biological transfer from one context to another Euclyptus trees Dandelion Doesn’t mean that it cannot be transferred at all

25. © Prentice Hall, 2001 24 Patricia H. Werhane We must seek some moral minimums to remove human suffering, abject poverty, preventable disease, high mortality and violence We must tread lightly and carefully when we act in alien cultures

26. © Prentice Hall, 2001 David Hess & Thomas Dunfee “Taking Responsibility for Bribery: The Multinational Corporation’s Role in Combating Corruption” Describe the harm cause to local communities by corruption, Discuss international treaties banning bribery Highlight the efforts of Shell to abolish slavery 25

27. © Prentice Hall, 2001 OECD Convention on Combating Bribery of Foreign Public Officials Ratified by 34 countries Makes it illegal to bribe abroad Transparency International Reports that only 19% of executives knew about the convention Just 27% reported reduced corruption after the convention 26

28. © Prentice Hall, 2001 Foreign Corrupt Practices Act U.S. law that went into effect in the U.S. in 1977 Currently U.S. corporations are the 9th most likely to bribe foreign officials (out of 21) 27

29. © Prentice Hall, 2001 C 2 Principles Adapted by the Caux Roundtable Three themes: Policies Procedures Publication 28

30. © Prentice Hall, 2001 Shell’s Anti-Corruption Policies Studied best practices at 15 companies Put in place a no-bribes policy Promulgates and educates within the organization Defines bribery Terminates and prosecutes employees that pay bribes 29

31. © Prentice Hall, 2001 Supreme Court of Texas, Dow Chemical Company and Shell Oil Company v. Domingo Castro Alfaro et al. Concerns the question of whether or not a Texas based corporation can be held accountable in Texas courts for harmful actions conducted abroad, or whether this is inconvenient for such corporations and thus should not be allowed The majority of the court found that corporations should be held accountable for overseas activities in Texas courts. 30

32. © Prentice Hall, 2001 United States Court of Appeals for the Ninth Circuit, Doe 1 vs. Unocal Concerns Unocal’s involvement with forced labor and human rights abuses in Myanmar (Burma). Court found that Unocal could be held liable for complicity with such practices in U.S. courts 31