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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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