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Chapter 5 BA:361- Ethics in International Business

accepted principles of right and wrong that govern the
-conduct of a person
-members of a profession
-the actions of an organization
Business ethics
accepted principles of right or wrong governing the conduct of business people
ethical strategy
a strategy that does not violate these accepted priciples
Most common ethical issues in business
-employment practices
-human rights
-the environment
-moral obligations of multinational companies
Firms should do what things in terms of ethics?
-establish minimal acceptable standards that safeguard the basic rights of employees
-confirm these standards in airtight contracts
-audit foreign subsidiaries and subcontractors regularly to ensure they are meeting the standards
-take corrective action as necessary
Tragedy of the commons
occurs when a resource held in common by all, but owned by no one, is overused by individuals, resulting in its degradation. For example, a company moves manufacturing to a country with lax environmental laws which aren’t broken, but is it ethical?
2 types of bribery
Facilitating payments and speed money
facilitating payments
often called grease payments, they are for smaller needs
speed money
includes more serious bribes to influence a result
U.S. foreign corrupt practices act
outlaws the practice of paying bribes to foreign government officials in order to gain business
-provides for so called “safe harbor”
-American companies can pay facilitating payments
-exp. pay to get a container out of a port where port and customs authorities demand a bribe
The convention on combating bribery of foreign public officials in international business transactions
adopted by the organization for economic cooperation and development (OECD)
-obliges member states to make the bribery of foreign public officials a criminal offense
social responsibility
often called corporate social responsibility or CSR refers to the idea that managers should consider the social consequences of economic actions when making business decisions
noblesse oblige
honorable and benevolent behavior that is the responsibility of successful companies
-give something back to the societies that have made their success possible
ethical dilemmas
situations in which non of the available alternatives seem ethically acceptable
-the right course of action is not always clear
factors contributing to unethical behavior
1. personal ethics
2. decision-making processes
3. organization culture
4. unrealistic performance expectations
5. leadership
6. societal culture
personal ethics
the generally accepted principles of right and wrong governing the conduct of individuals
-may face pressure to violate their personal ethics because they are away from their ordinary social context
-managers fail to question where an action is ethical and instead rely on economic analysis
decision-making processes
the values and norms that are shared among employees of an organization
-organization culture that does not emphasize business culture encourages unethical behavior
organization culture
can legitimize unethical behavior or reinforce the need for ethical behavior
unrealistic performance expectations
encourage managers to cut corners or act in an unethical manner
-pressure to make the numbers
helps establish the culture of an organization, sets the example that other follow
societal culture
firms headquartered in cultures where individualism and uncertainty avoidance are strong and more likely to stress ethical behavior than firms headquartered in cultures where masculinity and power distance rank high.
Straw men approaches to ethics
deny the value of business ethics or apply the concept in an unsatisfactory way

-inappropriate guidelines for ethical decision making

4 straw man approaches to ethics
1. Friedman doctrine
2. cultural relativism
3. righteous moralist
4. naive immoralist
Friedman doctrine
only social responsibility of business is to increase profits, so long as the company stays within the rules of law
cultural relativism
ethics are culturally determined and firms should adopt the ethics of the cultures in which they operate
righteous moralist
a multinational’s home country standards of ethics should be followed in foreign countries
naive immoralist
if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either
How can managers make ethical decisions?
1. hire and promote people with good personal ethics
2. build an organizational culture that places a high value on ethics
3. Make sure that leaders withing the business articluate the rhetoric of ethical behavior and act in a manner that is consistent with that rhetoric
4. Put decision making processes in place that require people to consider the ethical dimensions of business decisions
5. develop moral courage
5 step process to think through ethical problems
1. ID which stakeholders a decision would affect and in what ways
2. determine whether a proposed decision would violate the fundamental rights of any stakeholders
3. establish moral intent
4. engage in ethical behavior
5. audit decisions and review them to make sure that they are consistent with ethical principles (often overlooked)
moral intent
place moral concerns ahead of other concerns in cases where either the fundamental rights of stakeholders or key moral principles have been violated
ethics officers
ensure all employees are trained in ethics
-that ethics are considered in the decision making process
-that the company’s code of conduct is followed
most important trait you must carry in your life
your integrity
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