1. Welcome Ethical Challenges of International Management  Dr. Satyendra Singh Director, Centre for Emerging Markets Professor, Marketing and International Business Editor, International Journal of Business and Emerging Markets www.winnipeg.ca/~ssingh5

2. Why Study Ethical Issues?  MNCs are accused of a # of abuses relating to business activities:  Corruption  Child labor  Human rights, Environment, Safety  Dumping  Role of MNCs in society  Responsibility: MNCs vs. Government 2

4. Sued over misleading beef Later charges dropped – counter sue 4

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9. The Basic Premise  Corruption  Child labor  Symptom vs. problem  Right vs. wrong?  Right vs. right? (Poverty, Lack of education, Fair trade,…) f 8

10. Corruption…  Pay to get work done  Caused by usually poverty, greed…  Salary lasts for 3 weeks only…?  Survival vs. meeting basic needs  Corrupt individual  Individual primary beneficiary at the cost of organization  Corrupt organization  Selection, and Socialization 9

11. Corruption…  Arguments for being corrupt!  Tax  Commission  Compensation  Job well done  Appreciation  In West, it is called tips, gifts, bonus 10

12. Corruption: from MNC’s Viewpoint…  Western MNCs pay $80b to get contracts or concession (Hawley 2000)  $80b can eradicate poverty (UN)  It ↓ GDP in poor countries  Because it undermines mkt. economy  Decisions  based on corruption  Not on  price, quality, service, innovation  Raises price for everyone  poor suffers 11

13. Corruption: from MNCs Viewpoint…  Divert resources from public services  schools and hospitals  to dams…  more scope for corruption  Poor does not get public services  Poor is further impacted  Corruption undermines democratic process and rules of law  Environment is also likely to suffer  Corrupt officer  Non-enforcement 12

14. Corruption: from MNC’s viewpoint…  Risk of accusation of corruption  Whether proven or not  Can lead to loss of reputation  If pay bribe, more demands likely  It adds costs of doing business  UN convention against corruption  If you cheat, so will your competitor  Doing business more difficult  Employees/stakeholders lose trust 13

15. Corruption: from MNC’s viewpoint  Customers do not trust companies  Governments do not trust companies  ↓ likely to give assistance  ↑ likely to audit transactions  ↑ expensive to do business  Stock markets react negatively  Compromise personal beliefs  Need justification  Moral philosophies 14

16. The Moral Philosophies…  Ethics  moral principles or values  Deontological philosophy  Rule (whatever) based–no matter what  We are the best  Teleological philosophy  Consequence based  Responsible for the consequence 15

17. The Moral Philosophies…  Utilitarian philosophy  Based on net expected benefits  No absolute, relative  But, what is benefit? debatable  Contractarian philosophy  Based on the law of the land, contracts  Anything else is unethical  But, may be difficult to enforce 16

18. The Moral Philosophies  Pluralism philosophy  Based on “do the right thing”  No need for law or contracts  We’ve conscience! Right vs. wrong  Most of us like it  Yet we had 2 WW  Rawls’s Social Justice Theory  Fairness, peace and harmony  But, social contract is a bit ideal 17

19. The Options…  1 Stay away  No country is perfect  Not everybody is corrupt  You lost huge opportunity  You did not try to impact locals  Black-listing a country is easy  Find creative ways of doing business 18

20. The Options  2 Embrace local standards  Impact local culture  Develop ways to combat corruption  Does context change your values?  3 Maintain high global standards  Global firms have global reputation  Transfer of people easy  Can exceptions be made? 19

21. At Macro Level  Education – a national strategy needed  E.g., India, China, USSR, Ghana, Kenya  Build capability  Governments enforce moral guidelines  Government policies for fair trade  E.g., GM Food, Subsidies, Coca price… 20

22. At Micro Level  Strategic — MNCs have the power  School and day care for children  UN Global Compact implementation  Contribution to country’s development  Mode of entry  IJV vs. Wholly-owned subsidiary  Ethics Officer  Pay fair taxes, reduce transfer pricing 21

23. At Personal Level  Personal moral compass  Organizational Culture  Whistle-blower legislation  (Un)realistic performance goals  Volunteer for social cause  E.g., Scotia Bank  Winnipeg Public Library Board  Win-win situation 22

24. Child Labor (300m)  Poverty—survival  urbanization  If outlaw (Harkin Bill)  ↓ Family income  ↓labor supply  ↑ Adult wage  children go to school  ↑ skills  ↑ productive  ↑ wages  ↑ family welfare if demand persists  But, ↑ wages  ↓ # of jobs  Effective only if children go to school 23

25. UN Global Compact -- 5 24 Abolition of child labor –ILO conventions  Minimum Age Convention No. 138 –Minimum age for admission to employment or work Developed countries Developing countries Light Work 13 Years Light Work 12 Years Regular Work 15 YearsRegular Work 14 Years Hazardous Work 18 YearsHazardous Work 18 Years –Children have distinct rights Child labour is damaging to a child’s physical, social, mental, psychological and spiritual development Deprives them of childhood, dignity; separates from families

26. UN Global Compact -- 10 25 Work against all forms of corruption –Corruption the abuse of entrusted power for private gain –Extortion When asking or demand is accompanied by threats that endanger the personal integrity or the life of the person –Bribery, Transparency International gift, loan, fee, reward… from a person to do something dishonest, illegal or a breach of trust –Steps to fight corruption Internal: Anti-corruption policies within organizations External: Report corruption in the annual Communication Collective: Join forces with industry peers, stakeholders…

27. Trends Against Corruption and Child Labor  Transparency International  Foreign Corrupt Practices Act (US)  Corruption of Foreign Public officials (Canada)  OECD Anti-bribery Initiatives  Harkin Bill – Trade Ban  ILO Convention on Minimum Age138  UN Global Compact (UNGC 2007)  HR(2), Labor (4), Environment (3), Anticorruption (1) 26