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© 2015 Cengage Learning1
Chapter 10 Ethical Issues in the Global Arena © 2015 Cengage Learning2
Learning Outcomes 1.Differentiate between the concepts of internationalization and globalization of business. 2.Explain the ethical challenges of multinational corporations (MNCs) in the global environment. 3.Summarize the key implications of the following ethical issues: infant formula controversy, Bhopal tragedy, sweatshops and human rights abuses, and the Alien Tort Claims Act. 4.Define corruption, differentiate between bribes and grease payments, and outline the major features of the Foreign Corrupt Practices Act. 5.Describe the growing anticorruption movement and the key players in this movement. 6.Identify and discuss strategies for improving global ethics. © 2015 Cengage Learning 3
Chapter Outline Business Challenges in a Multinational Environment Business Challenges in a Multinational Environment Ethical Issues in the Global Business Environment Ethical Issues in the Global Business Environment Improving Global Business Ethics Improving Global Business Ethics Summary Summary Key Terms Key Terms © 2015 Cengage Learning 4
Ethical Issues in the Global Business Environment The growth of global business as a critical element in the world economy is one of the most important developments of the past half century. Characterized by a rapid growth of foreign direct investment in developing nations like China, India, and Russia. In less-developed countries (LDCs), because there are no government regulations, the temptation is to lower or reject standards. The expanded marketplace has been called the transnational economy. © 2015 Cengage Learning5
Business Challenges in a Multinational Environment A multinational corporation (MNC) or multinational enterprise (MNE) seeks to be accepted into an unfamiliar society. Two major challenges: 1.Achieving corporate legitimacy in an unfamiliar society. 2.Differing philosophies between MNCs and host countries. © 2015 Cengage Learning6
The Dilemma of the Multinational Corporation 7 Home Country Stakeholder Pressures Host Country Stakeholder Pressures Standards Practices Ethics Laws Culture Customs System of Government Socioeconomic System Standards Practices Ethics Laws Culture Customs System of Government Socioeconomic System Standards Practices Ethics Laws Culture Customs System of Government Socioeconomic System Standards Practices Ethics Laws Culture Customs System of Government Socioeconomic System The Multinational Corporation © 2015 Cengage Learning
Ethical Issues in the Global Business Environment 8© 2015 Cengage Learning
Questionable Marketing and Plant Safety Practices Infant Formula Controversy- Nestle mass-marketed infant formula to poor mothers in tropical LDCs, knowing the health risks. As a result, there was a dramatic increase in infant malnourishment and sickness. Bhopal plant crisis – Union Carbide’s plant safety practices led to the “worst industrial accident in history,” killing more than 2,000 people, and injuring 200,000 others. The lack of regulation in LDCs is a temptation to lower or reject standards used in the firm’s home country. © 2015 Cengage Learning9
Sweatshops, Human Rights, and Labor Abuses 1 of 2) MNCs’ use of women and children to cheaply staff factories. Many major corporations and many countries have been involved. Sweatshops - Characterized by child labor, low pay, poor working conditions, worker exploitation, and health and safety violations. Increased scrutiny of sweatshop practices in recent years. © 2015 Cengage Learning10
Sweatshops, Human Rights, and Labor Abuses (2 of 2) Social Accountability 8000 (SA8000) – An effort to improve sweatshop conditions created by Social Accountability International (SAI): 1.Child Labor 2.Forced Labor 3.Health and Safety 4.Freedom of Association & Collective Bargaining 5.Discrimination 6.Discipline 7.Working Hours 8.Compensation 9.Management Systems © 2015 Cengage Learning11
Alien Tort Claims Act and Human Rights Violations Alien Tort Claims Act (ATCA) - Efforts to sue transnational companies for violations of international law in countries outside the U.S. Efforts by foreign individuals to sue U.S. firms in U.S. courts for the actions of their companies abroad. In 2013, the U.S. Supreme Court held that the law cannot be applied to actions that take place overseas, but only to actions which take place in the United States. © 2015 Cengage Learning12
Corruption, Bribery, and Questionable Payments Corruption - attempts to influence the outcomes of decisions wherein the nature and extent of the influence are not made public. Bribery - the practice of offering something (usually money) in order to gain an illicit advantage. Questionable payments – those not easily categorized; they may be “grease” payments (allowed), or bribes (not permitted) © 2015 Cengage Learning13
Corruption Instances of corruption - Bribery of government officials Giving of questionable political contributions Misuse of company assets for political favors Kickbacks and protection money for police Free junkets for government officials Secret price-fixing agreements Insider dealing, and more © 2015 Cengage Learning14
Arguments For and Against Bribery © 2015 Cengage Learning15
Bribes or Grease Payments? Grease Payments - Relatively small sums of money given to minor officials for the purpose of getting them 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 Bribes - Relatively large amounts of money given for the purpose of influencing officials to make decisions or take actions that they otherwise might not. Money given, often to high-ranking officials, to get them to purchase goods or services. © 2015 Cengage Learning16
Initiatives Against Bribery 17© 2015 Cengage Learning
Improving Global Business Ethics Business ethics is much more complex at the global level than at the domestic level. Complexity arises from the fact that a wide variety of value systems, stakeholders, cultures, forms of government and socio- economic conditions and standards of ethical behavior exist throughout the world. Because the U.S. and European MNCs have played such a leadership role, these firms have a heavy responsibility. © 2015 Cengage Learning18
Balancing & Reconciling the Ethics Traditions of Home & Host Countries The Challenge of the Multinational Corporation Home Country Ethical Standards Host Country Ethical Standards OR © 2015 Cengage Learning19
Ethical Choices in Home vs. Host Country Situations 20 International Law Global Codes of Conduct BROAD MIDDLE GROUND Mix of Home and Host Country Standards CULTURAL RELATIVISM ETHICAL IMPERIALISM Cultural standards Ethical/moral standards of home country Home Country Host Country Cultural standards Ethical/moral standards of host country Application of Ethical Principles © 2015 Cengage Learning
Strategies for Improving Global Business Ethics Four major strategies that could help MNCs conduct global business while maintaining ethics: 1.Create global codes of conduct. 2.Link ethics with global strategy. 3.Suspension of business activities in certain countries. 4.Create ethical impact statements and audits. © 2015 Cengage Learning21
Corporate Action Against Corruption Five vital steps for an anticorruption program: 1.High-level commitment by top management 2.Detailed statements of policies and operating procedures 3.Training and discussion of policies and procedures 4.Hotlines and help lines for all organizational members 5.Investigative follow-up, reporting, and disclosure © 2015 Cengage Learning22
Alien Tort Claims Act (ATCA) Anticorruption movement Bhopal tragedy Bribe Payers’ Index (BPI) Bribery Caux Roundtable Principles Corruption Corruption Perception Index (CPI) Cultural relativism Ethical impact statements Ethical imperialism Fair Labor Association (FLA) Foreign Corrupt Practices Act (FCPA) GBS Codex Grease payments Hypernorms Infant formula controversy © 2015 Cengage Learning 23 Key Terms (1 of 2)
Internationalization Less-developed countries (LDCs) Multinational corporations (MNCs) offshoring Outsourcing Social Accountability International (SAI) Sweatshops Transparency International (TE) UN Convention Against Corruption (UNCAC) UN Global Compact © 2015 Cengage Learning 24 Key Terms (2 of 2)
Business & Society Business & Society Ethics, Sustainability, and Stakeholder Management Eighth Edition Archie B. Carroll Ann K. Buchholtz © 2012 South-Western,
Chapter 10 Ethical Issues in the Global Arena © 2012 South-Western, a part of Cengage Learning 1.
BA 385: What MNCs Owe Society Chapter Nine: ETHICAL ISSUES in the GLOBAL ARENA.
© 2005 by Nelson, a division of Thomson Canada Limited. 1 Ethical Issues in the Global Arena Search the Web An excellent listing of global principles.
9-11 Ethical Issues in the Global Arena 9-2 Eras of Internationalization The Post-World War II Decade A period of reconstruction dominated by.
Ethical Issues in Global Business Marketing and safety practices – Nestle: the Baby Killers; Union Carbide: Bhopal Sweatshop and labour abuse - Wal-Mart’s.
1 Ethical Issues in the Global Arena Business and Society: Ethics and Stakeholder Management, 7e Carroll & Buchholtz Copyright ©2009 by South-Western,
Ethical Issues in Global Business Marketing and safety practices - Nestle: Baby Killers; Union Carbide: Bhopal Sweatshop and labour abuse - Wal-Mart’s.
Ethical Issues in Global Business Marketing and safety practices Sweatshop and labour abuse Corruption and bribery Search the Web For student activists.
Business and Society: Ethics and Stakeholder Management, 5E Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All.
9-11 Ethical Issues in the Global Arena 9-22 Chapter Nine Objectives Identify the internationalization and globalization of business Summarize arguments.
Family Feud GROUP 3- Chapters Family Feud Rules Each Chapter is worth $100, This will help each individual retain the information given. If a team.
1 Ethical Issues in the Global Arena Professor Craig Diamond BA 385 October 28, 2009 Chapter 10.
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Chapter Copyright© 2004 Thomson Learning All rights reserved 15 Managing Ethical and Social Responsibility Challenges in Multinational Companies.
1 Ethics and Social Responsibility Chapter 3. Chapter Outline Theories and principles of ethics Moral languages Cultural theories of ethics International.
Chapter 8 Ethics in International Business. Introduction International business ethics attempts to deal with questions of : What to do in situations where.
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© 2014 Routledge, Inc., Taylor and Francis Group. All rights reserved. PowerPoint Presentation Design by Charlie Cook CHAPTER 11 Competing in the Global.
CHAPTER 4 MANAGING ETHICAL AND SOCIAL RESPONSIBILITY CHANGES IN MULTINATIONAL COMPANIES.
18. Sustainable Marketing in the Global Marketplace.
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Chapter Copyright© 2007 Thomson Learning All rights reserved 4 Managing Ethical and Social Responsibility Challenges in Multinational Companies.
Ethics and Social Responsibility chapter three McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.
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Chapter 3 Ethics in International Business. Introduction International business ethics attempts to deal with questions of what to do in situations where.
UNIT 2: CONTEXT. Chapter 3: Ethics & Social Responsibility.
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Copyright © 2011 Pearson Education Part Two Comparative Environmental Frameworks International Business Environments and Operations, 13/e Global Edition.
INTRODUCTION F Multinational managers face complex ethical issues F With an understanding of key ethical problems in multinational management, managers.
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MANAGEMENT RICHARD L. DAFT. Managing in a Global Environment CHAPTER 4.
Chapter 5 Legal Environment. Chapter Outline Multiplicity of Legal Environments Legal Systems Jurisdiction and Extraterritoriality Legal Form of Organization.
Next >>. 2 International business impacts daily life around the world and also affects ethical decisions in business.
McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter Twelve Multinational Corporations and Government Relationships Part.
Ethics in IB B&W or Grayscale World?. University of Texas at Austin Importance of Ethics Many ethical issues arise while doing business in LA Moral implications.
Chapter 4 Ethics in International Business McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
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Management Fundamentals - Chapter 31 Study Question 3: How can high ethical standards be maintained? Ethical role models: – Top managers serve as ethical.
4-1 Chapter 4 Ethics and Social Responsibility. 4-2 Organizational Stakeholders The individuals and groups that have an interest or claim in an organization.
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PRIVATE SECTOR APPROACHES TO FIGHTING CORRUPTION Ruslan Stefanov Coordinator of the Economic Program Center for the Study of Democracy, Sofia, Bulgaria.
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