1. IHRM Trends and Future Challenges
Chapter 10
IHRM Trends and Future Challenges
IHRM, Dr. N. Yang

2. Chapter Objectives
In this final chapter, we identify and analyze some observed trends and future directions regarding:
International business ethics and the role of IHRM
Mode of operation and IHRM
Ownership issues relating to IHRM requirements of organizations other than large MNEs, such as SMEs and NGOs including not-for-profit organizations)
Safety, security, and terrorism issues
The evolving field of IHRM
IHRM, Dr. N. Yang

3. Introduction
In this course, we have explored the IHRM issues in a multinational context. To that end we have examined the HR functions and practices in the process of business internationalization and their implications.
We now turn our attention to some issues that have not been emphasized in the general IHRM literature but present challenges to IHRM, such as
International business ethics
Safety, security, and dealing with terrorism
Contractual, off-shoring, and supply chain management
These topics distinguish the role of HRM in MNEs and fall in the framework of strategic HRM.
IHRM, Dr. N. Yang

4. A model of strategic HRM in multinational enterprises
Figure
10.1
IHRM, Dr. N. Yang

5. External Factors: International Business Ethics and HRM
When business is conducted across borders, the ethics program takes on added layers of complexity
Especially problematic when multinationals operate in the host countries that have:
Different standards of business practice
Economically impoverished
Inadequate legal infrastructure
Government corruption
Human rights violations
Ethical questions arise not only in the context of different home- and host-country employment practices but also in the central operations and policies of MNEs.
IHRM, Dr. N. Yang

6. Three Main Responses to Ethics Questions
Ethical relativism
No universal or international rights and wrongs, it all depends on a particular culture’s values and beliefs – “when in Rome, do as the Romans do’’.
Ethical absolutism
“When in Rome, one should do what one would do at home, regardless of what the Romans do”. This view of ethics gives primacy to one’s own cultural values.
Ethical universalism
There are fundamental principles of right and wrong which transcend cultural boundaries and multinationals must adhere to these fundamental principles or global values.
IHRM, Dr. N. Yang

7. Studies on Ethical Universalism
Recognize there is a distinction between cultural difference and morally wrong
Core values are more agreeable
But value priority varies in different societies, e.g.
Individual freedom as most important in the U.S.
Unity with family or community in Asia
Fairness in Europe
IHRM, Dr. N. Yang

8. Universal Ethical Principles
Universal ethical principles can be seen in the agreements among nations who are signatories to:
The UN Declaration of Human Rights
The OECD Guidelines for Multinational Enterprises
The Caux Roundtable Principles of Business
They indicate the emergence of a trans-cultural corporate ethic and provide guidelines that have direct applicability to the central operations and policies of MNEs including the HRM activities of staffing, compensation, employee training, and occupational health and safety.
However, there are a wide range of situations where variations in business practice are permissible.
IHRM, Dr. N. Yang

9. The US Foreign Corrupt Practices Act (FCPA)
Enacted in 1977, the US FCPA
Prohibits US-based firms and US nationals from making bribery payments to foreign government officials.
Payments to agents violate the Act if it is known that the agent will use those payments to bribe a government official.
Amended in 1988, to permit ‘facilitating’ payments but mandates record-keeping provisions to help ensure that illegal payments are not disguised as entertainment or business expenses.
The United States has lobbied other nation-states to enact uniform domestic government regulations, and has achieved some success.
IHRM, Dr. N. Yang

10. Global Developments on the Criminalization of Bribery
Bribery & corruption
Involving the payment of agents to do things that are inconsistent with the purpose of their position or office so as to obtain an unfair advantage
Can be distinguished from so-called “gifts”, “facilitating” or “grease” payments, as to motivate agents to complete a task they would routinely do in the normal course of their duties
The British Bribery Act (2010)
The UN Declaration against Corruption and Bribery in International Commercial Transactions (1996)
OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (1997), ratified by 38 nations as of 2009
IHRM, Dr. N. Yang

11. OCED Members’ Tax Treatment of Bribes
Members Denying Tax Deductibility
Members Allowing Tax Deductibility
Members Repealed Tax Deductibility
Canada
Czech Republic
Finland
Greece
Hungary
Ireland
Italy
Japan
South Korea
Mexico
Poland
Turkey
U.K.
U.S
Australia
Luxembourg
New Zealand
Sweden
Switzerland
Austria, 1998
Belgium, 1999
Denmark, 1998
France, 1997
Germany, 1997
Iceland, 1998
Netherlands, 1997
Norway, 1996
Portugal, 1997
Source: OECD
IHRM, Dr. N. Yang

12. Is bribery a business necessity?
It is now generally agreed that bribery undermines equity, efficiency and integrity in the public service, undercuts public confidence in markets and aid programs, adds to the cost of products and may affect the safety and economic well-being of the general public.
Bribery and corruption top the list of the most frequent ethical problems encountered by international managers.
The World Bank estimates that about $80 billion annually goes to corrupt government officials.
IHRM, Dr. N. Yang

13. Transparency International Corruption Perceptions Index 2010
Table
10.1
Rank
Country Territory
CPI Score 2010 1
Denmark
9.3 11
Iceland
8.5
New Zealand
Luxemburg
Singapore 13
Hong Kong
8.4 4
Finland
9.2 14
Ireland
8.0
Sweden 15
Austria
7.9 6
Canada
8.9
Germany 7
Netherlands
8.8 17
Barbados
7.8 8
Australia
8.7
Japan
Switzerland 19
Qatar
7.7 10
Norway
8.6 20
United Kingdom
7.6
The index measures the perceived levels of public sector corruption in 178 countries around the world.
10 = very clean; 0 = highly corrupt.
IHRM, Dr. N. Yang

14. Ethics-related Challenges to MNEs and the HR Functions
Business ethics stand out as both a domestic and an international issue of concern
More complex in the international arena and require MNEs’ self-regulation and ethical leadership
Off-shoring activities
Supply chain management
Contracting and sub-contracting
Joint ventures, strategic alliances
The relentless low-cost strategy for competitive advantage
A worldwide discussion of the economic, social, political, and environmental consequences of global business
IHRM, Dr. N. Yang

15. The Role of HR in Operationalizing Corporate Ethics and CSR Programs
HR is well positioned to make an important contribution to creating, implementing and sustaining ethical organizational behavior and CSR programs within a strategic HR paradigm.
HR has a special role to play in the formulation, communication, monitoring, and enforcing corporate codes of conduct both within and across borders.
Responsibility for ethical leadership should cut across all functions and managerial levels, including line and senior managers.
IHRM, Dr. N. Yang

16. Non-government Organizations (NGOs)
Globalization has increased the scale and importance of NGOs
Prominent examples of NGOs:
■ The Red Cross ■ Fred Hollows Foundation
■ The Red Crescent ■ World Vision ■ Oxfam ■ Care International ■ Transparency International ■ Médecins Sans Frontieres
■ The Wikimedia Foundation
The impact and influence of NGOs will continue to be of importance to the activities of MNEs
IHRM, Dr. N. Yang

17. NGOs and IHRM
NGOs are as active internationally as for-profit firms, yet receive less attention, e.g.
The Red Cross
Greenpeace International groups
BARC (Bangladesh Rural Advancement Committee)
These organizations are diverse and share similar management and HR concerns
Often operate in high risk areas of the globe
Anti-globalization rallies and protest
Global terrorism
Natural disasters and humanitarian crisis
Broadening our focus of IHRM is important.
IHRM, Dr. N. Yang

18. Challenges in an Uncertain World
Safety, security and counterterrorism
Legal compliance and training related to safety in the workplace
Natural disaster protocols
Emergency and disaster preparedness
Workplace violence policy
Industrial theft and sabotage protocols
In-house security
IHRM, Dr. N. Yang

19. Five Areas of Corporate Risk Assessment
In-facility emergency and disaster preparedness
In-facility security
Industrial espionage
Cyber-terrorism
Out-of-facility fire and travel risks
Human Costs Built Into an iPad
Source: The New York Times, January 25, 2012, An explosion at a Foxconn factory in Chengdu, China, killed four people and injured 18. It built iPads. Charles Duhigg and David Barboza,
IHRM, Dr. N. Yang

20. Terrorism and Risk Management
External Environment
Low Risk Firms
High Risk Firms
Low Risk
No need to invest as heavily in security system and protocols
Security strategies focusing on hardening individual sites
High Risk
Security strategies that disperse activities across the region and build redundant infrastructures, so that value chain activities in the high risk region can be provided by out of region units
Must invest much more in quite elaborate risk management strategies
IHRM, Dr. N. Yang

21. The Evolving Field of IHRM
HR has been identified as one of the five business functions that will have most influence on global business in the future.
Recruiting, developing, and competition for talented employees are often cited as a major concern by MNEs.
IHRM issues will remain high on the “problem list” of senior managers of MNEs.
IHRM philosophies, strategies, policies, practices and capabilities of an MNE, industry or nation remain as a rich area for future research.
IHRM, Dr. N. Yang

22. Summary and Concluding Remarks
International business ethics and the role of IHRM
Mode of operations, IHRM activities that are required such as training and monitoring for contractual, supply chain and project operations
NGOs and IHRM challenges that are specific to these organizations but have remained relatively under-identifies
Complex assessment and planning activities related to safety, security, and counter-terrorist efforts
Research issues in IHRM, and developments that are endeavoring to assist in understanding the intricacies and interrelationships between the IHRM function and IHRM activities, firm internationalization, strategic directions and goals.
The ongoing process of discovery, a mapping of the IHRM complexities, the challenges, and the difficult choices
IHRM, Dr. N. Yang

23. Vocabulary Ethics, workplace safety, child labor
external factors, organizational factors
ethical relativism, absolutism & universalism
bribery
‘gifts’, ‘facilitating’, & ‘grease’ payments
US Foreign Corrupt Practices Act
Transparency International, Corruption Perceptions Index
NGOs
disaster protocols, risk management, ‘critical incidents’
workplace violence, industrial theft
in-house security, in-facility security
industrial espionage, cyber- terrorism
terrorist threats: micro & macro levels
IHRM, Dr. N. Yang

24. Discussion Questions
What is your view of internationally criminalize foreign bribery?
Identify a number of HRM problems that typically rise with expatriate assignments. In what ways might the core ethical values and guidelines identified in this chapter apply to them?
Outline and discuss the strategic role of IHRM in managing risks and corporate social responsibility.
IHRM, Dr. N. Yang