Ethics and Globalization Chapter 9 Ethics and Globalization

Learning Outcomes Understand the ethical issues arising in global business Explain the issue of ethical relativism in a global environment Explain the challenges in developing a global code of ethics

Learning Outcomes (continued) Analyze the ramifications of the UN Global Compact Explain the OECD Guidelines for Multinational Enterprises

Ethics and Globalization Business transactions in different countries in different languages and different cultures force companies to revisit ethical principles Less-developed nation: Lacks the economic, social, and technological infrastructure of a developed nation

Ethics and Globalization (continued 1) Developed nation: Enjoys a high standard of living as measured by economic, social, and technological criteria Utilitarianism: Ethical choices that offer the greatest good for the greatest number of people

Ethics and Globalization (continued 2) Globalization: Expansion of international trade to a point where national markets have been overtaken by regional trade blocs Leads to a global marketplace Multinational Corporation (MNC): Company that provides and sells products and services across multiple national borders Pursues revenue on the basis of operating strategies that ignore national boundaries

Reasons Why MNCs Ignore Ethical Standards If they didn’t pursue the business, somebody else would They operate in full compliance with local laws and regulations, which are far less restrictive than those in their own country

Ethical Relativism Gray area in which ethical principles are defined by: Traditions of one’s society Personal opinions Circumstances of the present moment

Ethical Relativism (continued 1) In less developed nations, the ideal black and white world of ethics must give way to a gray area of ethical relativism Policies and procedures can be hard to follow when one's customers don’t have comparable policies in their own organizations

Ethical Relativism (continued 2) Policies that have been outlawed in developed nations may be standard operating procedure in less-developed nations Social and political chaos can generate a bureaucracy that bears no relation to a logical reality

Pursuit of Global Ethics Advantages of globalization Disadvantages of globalization Bringing unprecedented improvements in the standards of living of citizens in developing nations Access to resources enables lower production costs that equate to lower prices and higher income standards for businesses of economically developed countries Developing countries are destroyed for their raw materials with no concern for the longer-term economic viability of their national economies Workers are exploited Corporations are free to take full advantage of less restrictive legal environments

Global Code of Conduct General standard of business practice that can be applied equally to all countries over and above their local customs and social norms Any organization that commits itself to establishing and sticking with a clearly defined code of ethics will face considerable challenges Moving that ethical commitment to a global stage requires a great deal more planning than simply increasing the scale of the policies and procedures

Ethical Guidelines for Organizations Do no intentional harm Produce more good than harm for the host country Contribute to the host country’s development Respect the human rights of their employees Respect the local culture Pay their fair share of taxes Cooperate with the local government to enforce just background institutions

Ethical Guidelines for Organizations (continued) Majority control of a firm includes the ethical responsibility of attending to the actions and failures of the firm Multinationals that build hazardous plants are obliged to ensure these plants are operated safely Responsible for redesigning the transfer of hazardous technologies so that they can be safely administered in host countries

Challenges in Developing a Global Code of Ethics In pursuit of profit and continued expansion, MNCs have been found guilty of: Bribery Pollution False advertising Questionable product quality Abuse of human rights in the utilization of sweatshop production facilities

Enforcing Global Ethics Enforcing a global ethical standard would require all parties involved to agree on: Acceptable standards of behavior Appropriate consequences for failing to abide by those standards

Enforcing Global Ethics (continued) United Nations (UN) and the Organization for Economic Cooperation and Development (OECD) promote behavior guidelines that MNCs can publicly support and endorse To give a strong message to their stakeholders that they are committed to ethical corporate conduct wherever they do business in the world

UN Global Compact Voluntary corporate citizenship initiative endorsing 10 key principles that focus on: Environment Anticorruption Welfare of workers around the world Global human rights Not a regulatory instrument Does not police, enforce, or measure the behavior or actions of companies

UN Global Compact (continued) Relies on public accountability, transparency, and enlightened self-interest of companies, labor, and civil society To initiate and share substantive action in pursuing the principles on which the Global Compact is based

UN Global Compact - Human Rights Businesses should support and respect the protection of internationally proclaimed human rights Businesses should make sure they are not complicit in human rights abuses

UN Global Compact - Labor Standards Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining Businesses should uphold the elimination of all forms of forced and compulsory labor Businesses should uphold the elimination of discrimination in employment and occupation Businesses should uphold the effective abolition of child labor

UN Global Compact - Environment Businesses should support a precautionary approach to environmental challenges Businesses should undertake initiatives to promote greater environmental responsibility Businesses should encourage the development and diffusion of environmentally friendly technologies

UN Global Compact - Anticorruption Businesses should work against all forms of corruption, including extortion and bribery

OECD Guidelines for Multinational Enterprises Promote principles and standards of behavior in human rights, information disclosure, anticorruption, taxation, labor relations, environment, competition, and consumer protection Governmental initiative endorsed by 30 members of the Organization for Economic Cooperation and Development and nine nonmembers

OECD Guidelines Carry no criminal or civil enforcement Offer the following principles and standards of behavior Concepts and principles General policies Disclosure Employment and industrial relations Environment

OECD Guidelines (continued) Combating bribery Consumer interests Science and technology Competition Taxation