Business & Society Business & Society Ethics, Sustainability, and Stakeholder Management Eighth Edition Archie B. Carroll Ann K. Buchholtz © 2012 South-Western, a part of Cengage Learning 1

Chapter 10 Ethical Issues in the Global Arena © 2012 South-Western, a part of Cengage Learning 2

Learning Outcomes © 2012 South-Western, a part of Cengage Learning 1.Differentiate between the concepts of internationalization and globalization of business. 2.Summarize arguments for and against globalization. 3.Explain the ethical challenges of multinational corporations (MNCs) in the global environment. 4.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. 5.Define corruption and differentiate between bribes and grease payments. Outline the major features of the Foreign Corrupt Practices Act. 6.Discuss the growing anticorruption movement and the key players in this movement. 7.Identify and discuss strategies for improving global ethics. 3

Chapter Outline The New, New World of Global Business MNCs and the Global Business Environment Ethical Issues in the Global Business Environment Improving Global Business Ethics Summary Key Terms Discussion Questions 4 © 2012 South-Western, a part of Cengage Learning

Transnational Economy Transnational economy A term for the new expanded marketplace. Trade in goods, a much smaller trade in services, the international movement of labor, and international flows of capital and information.  Business must strive to be a leader in all developed markets. 5 © 2012 South-Western, a part of Cengage Learning

Eras of Internationalization © 2012 South-Western, a part of Cengage Learning 6

Expanding Concepts of Global Business Internationalization A process by which firms increase their awareness of the influence of international activities on their future and conduct transactions with firms from other countries. Globalization/ Globalism The global economic integration of many formerly national economies into one global economy. Has spurred backlash. 7 © 2012 South-Western, a part of Cengage Learning

MNCs and the Global Business Environment Multinational Corporations (MNCs) Corporations operating with offices, factories, and headquarters in more than one country. Most major U.S. corporations are MNCs. Underlying challenges of operating in the new world of business Corporate legitimacy Differing philosophies between MNCs and host countries MNC and host country challenges 8 © 2012 South-Western, a part of Cengage Learning

Underlying Challenges in a Multinational Environment Two major challenges 1.Achieving corporate legitimacy in an unfamiliar society. 2.Differing philosophies between MNCs and host countries. 9 © 2012 South-Western, a part of Cengage Learning

MNC-Host Country Challenges  Cultural differences  Business and government differences  Management and control of global operations Organizational structure and design Human resource management  Exploration of global markets Modify or redesign products appropriate for the intended market Be sensitive to the impacts of products Be sensitive to politically-vulnerable products 10 © 2012 South-Western, a part of Cengage Learning

Ethical Issues in the Global Business Environment 11 © 2012 South-Western, a part of Cengage Learning

Sweatshops, Human Rights, and Labor Abuses MNC’s 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. 12 © 2012 South-Western, a part of Cengage Learning

Social Accountability 8000 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 and Right to Collective Bargaining 5.Discrimination 6.Discipline 7.Working Hours 8.Compensation 9.Management Systems 13 © 2012 South-Western, a part of Cengage Learning

Alien Tort Claims Act and Human Rights Violations Alien Tort Claims Act (ATCA) Allows foreign individuals to sue U.S. firms in U.S. courts for companies’ actions abroad.  May become a powerful tool to increase corporate accountability abroad. 14 © 2012 South-Western, a part of Cengage Learning

Corruption Attempts to influence the outcomes of decisions wherein the nature and extent of the influence are not made public. 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 15 © 2012 South-Western, a part of Cengage Learning

Bribes versus Grease Payments Grease Payments Money given to minor officials to expedite processes. Relatively small sums of money given for the purpose of 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 Bribes Relatively large amounts of money given for the purpose of influencing officials to make decisions or take actions that they otherwise might not take. Money given, often to high-ranking officials, to get them to purchase goods or services. 16 © 2012 South-Western, a part of Cengage Learning

Initiatives Against Bribery 17 © 2012 South-Western, a part of Cengage Learning

Improving Global Business Ethics 1.Develop worldwide codes of conduct. 2.Factor ethics into global strategy. 3.Suspend activities when faced with unbridgeable ethical gaps. 4.Develop periodic ethical impact statements that assess the underlying moral justifications for corporate actions and their results. 18 © 2012 South-Western, a part of Cengage Learning

Balancing and Reconciling Ethics Traditions The Challenge of the Multinational Corporation 19 © 2012 South-Western, a part of Cengage Learning Home Country Ethical Standards Host Country Ethical Standards OR

Ethical Choices in Home versus Host Country Situations (continued) Questions to be resolved by management Which ethical standards will be used? Which ethical standards will transcend national boundaries? Worker and product safety? Fair treatment? Health? Discrimination? Freedom? Minimum pay? Consumer rights? Environmental Protection? What constitutes moral minimums in each category? 20 © 2012 South-Western, a part of Cengage Learning

Taking Action Against Corruption Five steps to a successful 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 21 © 2012 South-Western, a part of Cengage Learning

Key Terms Alien Tort Claims Act (ATCA) Anticorruption movement Antiglobalists Bhopal tragedy Bribe Payers’ Index (BPI) Bribes Caux Roundtable Principles Corruption Corruption Perception Index (CPI) Council on Economic Priorities (CEP) Cultural relativism Ethical impact statements Ethical imperialism Fair Labor Association (FLA) Foreign Corrupt Practices Act (FCPA) GBS Codex Globalism, globalization Globalists Grease payments Hypernorms Infant formula controversy © 2012 South-Western, a part of Cengage Learning 22

Key Terms (continued) Internationalization Less-developed countries (LDCs) Multinational corporations (MNCs) North American Free Trade Agreement (NAFTA) Offshoring Outsourcing Public Integrity Index Social Accountability International Sweatshops Transparency International UN Convention Against Corruption (UNCAC) UN Global Compact © 2012 South-Western, a part of Cengage Learning 23