1. Chapter 4 Ethics in International Business

2. 4 - 2 McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Ethical Issues in International Business Arise when a manager makes decisions consistent with differing national environments -Political systems -Legal systems -Economic development levels -Culture What is ethical and “normal” in one environment may not be so in another

3. 4 - 3 McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Ethical Issues in International Business Arise most often in the context of: -Employment practices -Human rights -Environmental policy -Corruption -An MNC’s perceived moral obligations to society

4. 4 - 4 McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Employment Practices What standards should be applied? -Home nation’s -Host nation’s -Other Should the MNC adapt its policies? Standardize? Hiring practices, labor relations, diversity issues, employment conditions are some specific issues that require careful thought

5. 4 - 5 McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Human Rights A manager can assume as universal her/his views on freedom of: -Association -Speech -Assembly -Movement -Political repression What is the responsibility of an MNC to uphold different standards of human rights?

6. 4 - 6 McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Repressive Regimes Is it ethical for MNCs to operate in countries with repressive regimes? -Is inward investment an agent for change? -What is the limit beyond which inward investment would not be justified under all circumstances? -What if competitors from other nations invest and you don’t?

7. 4 - 7 McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Environmental Policies Locally mandated environmental standards may be inferior to those an MNC knows it can achieve Tragedy of the commons: a resource held in common by all, but owned by no one, is overused by some, resulting in degradation. If a decision is legal but unethical, should it be taken?

8. 4 - 8 McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Corruption Government officials may ask for bribes for an MNC to “get things done” -Is an MNC’s manager who agrees a corrupt manager? -Should an MNC ever accede to bribery demands? Foreign corrupt practices act (USA) Convention on Combating Bribery of Foreign Officials in International Business Transactions (OECD)

9. 4 - 9 McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. MNC Power and Moral Decisions MNCs have power over a host country -They can move production away -Along with power arise obligations (?) Power is morally neutral -How it is used is what matters -Perceptions of how it should be used and of its impact vary Company view Host country view

10. 4 - 10 McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. MNC and Social Responsibility Social responsibility: business decisions should be made after consideration of social consequences of economic actions -Noblesse oblige: honorable and benevolent behavior is the responsibility of those in power -Benevolent behavior responsibility of only successful business?

11. 4 - 11 McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Determinants of Ethical Behavior Organization culture Personal ethics Decision making processes Leadership Unrealistic / realistic performance goals

12. 4 - 12 McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Philosophical Approaches to Ethics Straw men: often adopted, offer inappropriate guidelines for MNC behavior -Friedman doctrine -Righteous moralist -Naïve immoralist Utilitarian and Kantian Ethics Rights theories Justice theories

13. 4 - 13 McGraw-Hill/Irwin Global Business Today, 4/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Ethical Decision Making Hiring and promotion Organization culture and leadership Decision-making processes -Stakeholder perspectives Ethics officers -Codes of ethics Moral courage: walk away from profitable and unethical decision