Politics, Law, and Business Ethics 3 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

3 - 2 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Roles of History and Culture

3 - 3 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Political Ideologies Both private and public groups need to balance each other’s power Every aspect of people’s lives must be controlled to preserve order Only individuals and private groups can preserve personal libertiesTotalitarianismAnarchismPluralism

3 - 4 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall ImposedauthorityImposedauthority Lack of constitutionalguarantees constitutionalguaranteesRestrictedparticipationRestrictedparticipation Totalitarianism  Leaders govern without people’s support  Government controls much of people’s lives  Leaders do not tolerate opposing viewpoints

3 - 5 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Forms of Totalitarianism Theocratic totalitarianism (totalitarian religious leadership) Secular totalitarianism (military and bureaucratic leadership) Tribal totalitarianism Communist totalitarianism Right-wing totalitarianism

3 - 6 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Business in Totalitarian Nations Risk Factors Arbitrary nature of business can mean that laws are vague or do not exist Bureaucrats may interpret laws however they wish

3 - 7 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Democracy Freedom of expression Periodic elections Full civil, property rights Minority rights Nonpolitical bureaucracies

3 - 8 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Types of Political Risk Conflict and violence Policy changes Terrorism and kidnapping Local content requirements Property seizure

3 - 9 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Arises from:  People’s resentment toward government  Territorial disputes between nations  Ethnic, racial, or religious disputes Reduces ability to:  Obtain materials and equipment  Manufacture and distribute products  Protect employees’ lives and firm’s assets Conflict and Violence

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Fly nonstop when possible and avoid unsecured areas of airports During your stay, vary your routines and means of transportation Keep a low profile and refrain from loud, flashy behavior Give friendly but cautious answers to personal questions Know local emergency procedures before trouble strikes Security checklist for managers on business abroad: Terrorism and Kidnapping

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Property Seizure Confiscation Forced transfer of assets from a company to the government without compensation Expropriation Forced transfer of assets from a company to the government with compensation Nationalization Forced asset transfer to the government of an entire industry

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Policies and Laws Policy changes restrict: Local content requirements: Specify the portion of a good or service to be supplied by local firms  Foreign ownership  Investment levels  Business activities

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Managing Political Risk I Adaptation Incorporate risk into business strategies Adaptation Incorporate risk into business strategies Localization Development assistance Partnerships Insurance

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Managing Political Risk II Agencies specializing in political-risk services Current employees with relevant information Information gathering Information gathering Gather data to better predict and manage risk Information gathering Information gathering Gather data to better predict and manage risk

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Managing Political Risk III Corruption Foreign Corrupt Practices Act Lobbying Influencing local lawmakers Influence local politics Influence local politics Present firm’s views on political matters Influence local politics Influence local politics Present firm’s views on political matters

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Common Law Precedent Past cases before the courts Usage How laws are applied Tradition Nation’s legal history

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Civil Law Rules and statutes constitute a legal code Defines all obligations, responsibilities, and privileges Dates to Roman times in the fifth century B.C.

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Theocratic Law Legal tradition based on religious teachings Islamic law Jewish law Hindu law

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Global Legal Issues I Intellectual property - Result of intellectual talent and abilities - Piracy/counterfeits a serious problem  Patent Excludes all but the inventor from making, using, or selling the invention (WTO = 20 years)  Trademark Words or symbols that distinguish a product and its manufacturer ("Coca-Cola")  Copyright Freedom of creator to publish or dispose of original works as they choose ("Happy Birthday to You")

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Business Software Piracy Source: Based on the Seventh Annual BSA and IDC Global Software Piracy Study (Washington, D.C.; Business Software Alliance, May 2010), Table 3, pp. 14–15, (

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Global Legal Issues II  Standardization - Interpreting and applying laws uniformly  Product safety and liability - Responsibility for damage, injury, or death  Taxation - Income, sales, consumption, and VAT  Antitrust (antimonopoly) laws - Prevent market sharing, price fixing, and unfair advantage

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Friedman View Cultural Relativism Utilitarianism Righteous Moralism Ethics and Social Responsibility PHILOSOPHIES

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Fight to eliminate bribery and corruption Improve labor conditions and guard human rights Practice fair trade to help the disadvantaged Protect the environment and conserve resources Social Responsibility Issues Go beyond legal obligations to balance commitments to investors, customers, communities, and other companies

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall International Relations  Stable business environments  Improved business communications  Efficient distribution systems  Expanded opportunities  Diminished risk levels  Prompt and equitable dispute resolution Favorable international political relations foster: