Chapter 5–Ethics in International Business
-moral obligation of multinational corporations
-Nike (women who worked with toxic materials 6 days a week for only 20 cents an hour @ a Vietnamese subcontractor)
—> Nike code of conduct for subcontractors and instituted annual monitoring by independent auditors
–>Levis terminating partnership with Tan Brothers
1. GM –> Sullivan Principles in S. Africa in 1980s (company would not obey apartheid laws & company should do everything in its power to promote abolition of apartheid laws)
2. Eventual divestments within S.Africa. (after 10 ish years) [Exxon, GM, Kodak, IBM, Xerox]
3. Led to the introduction of democratic elections in 1994 within S. Africa
~~Thus adopting an ethical stance was argued to have helped improve human rights in South Africa~~
–Argued that: inward investment from MNEs can be a force for economic, political, and social progress that ultimately improves the rights of people in repressive regimes.
–Myanmar has a small economy and that divestment carries no great economic penalty for Western firms, unlike, for example, divestment from China.
–Polluting even if not regulated hurts all –>Tragedy of the Commons
–>outsourcing can lead to the contribution to the global tragedy of the commons
–Created by Garrett Hardin
-Lockheed case was an impetus for the 1977 passing for the Foreign Corrupt Practices Act
–ethical implications of paying speed money are unclear (not covered in treaty or by OECD)
Several economist advocate–suggesting that in the context of pervasive and cumbersome regulations in developing countries, corruption may improve efficiency and help growth (130)
**Look up the 70 percent stat on page 130 middle of page
BP has a 0 tolerance policy approach toward facilitating payments.
Subsequently amended to allow for “facilitating payments.” Sometimes known as speed money or grease payments to secure contracts that would not otherwise be secured nor are they payments to obtain exclusive preferential treatment.
An OECD convention that establishes legally binding standards to criminalize bribery of foreign public officials in international business transactions and provides for a host of related measures that make this effective.
**convention excludes facilitating payments made to expedite routine government action from the convention.
with power comes social responsibility to give something back to the societies that enable them to prosper and grow
Example: British East India Company– grew to dominatethe entire indian subcontinent in the 19th century
Power itself is morally neutral; how power is used is what matters
BP —-> undertake “social investments” in the countries where it does business.
there should be a presumption in favor of decisions that have both good economic and social consequences
–12 year old hired to work on the floor at a subsidiary; someone from the US comes in and sees that is “not ethical” and makes the subsidiary replace her. She is the bread winner for her family and 6 year old brother; she cannot find another job so she turns to prostitution and then dies 2 years later from AIDS.
–if the US man had understood the gravity of her situation would he still have made her be replaced?
WEB DIAGRAM (PAGE 133)
-Unrealistic Performance Goals
Societal business ethics are not divorced from personal ethics
Home-country managers working abroad in multinational firms (expatriate managers) may experience more than the usual degree of pressure to violate their personal ethics
The fault lies in the processes that do not incorporate ethical considerations into business decision making
Nikes decision to subcontract:
Those decisions were probably made based on good economic logic. Subcontractors were probably chosen based on business variables such as cost, delivery, and product quality, but the key managers simply failed to ask “how does this subcontractor treat its workforce?”
values–abstract ideas about what a group believes to be good , right
norms–are the social rules and guidelines that prescribe appropriate behavior in particular situations
“The HP Way” — values, which shape the way business is conducted both within and by the corporation, have an important ethical component
Companies HQ’ed in cultures where individualism and uncertainty avoidance are strong were more likely to emphasize the importance of behaving ethically than firms headquartered in cultures where masculinity and power distance are important cultural attributes.
Freidman’s basic position is that the only social responsibility of business is to increase profits, so long as the company stays within the rules of law.
“There is only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say that it engages in open and free competition with out deception or fraud.”
Critics argue that his arguements break down under examination
especially in international biz where the rules of the game differ from country to country and are often not well established
Which is the belief that ethics are nothing more than the reflection of a culture–all ethics are culturally determined–and that accordingly, a firm should adopt the ethics of the culture in which its operating
“when in rome, do as the romans do”
BP’s experiences suggest that companies should not use cultural relativism as an argument for justifying behavior that is clearly based upon suspect ethical grounds,even if that behavior is both legal and routinely accepted in the country where the company is doing business
*typically associated with managers from developed countries
italy tax example–the right thing to do is to follow the prevailing cultural norms, because there is a big penalty for not doing so
While there are some universal moral principles that should not be violated, it does not always follow that the appropriate thing to do is adopt home-country standards–EX strict us wages laws, should they also follow these wages in countries with lower wage rates?
–>Probably not because doing so might nullify the reason for investing in that country in the first place
paying off druglord to not be bombed is ethical because everyone is doing it.
1. to say that an action is ethically justified if everyone is doing it is not sufficient
2. the multinational must recognize that it does have the ability to change the prevailing practice in country.
An action is judged desirable if it leads to the best possible balance of good consequences over bad consequences
as a philosophy for business ethics, it focuses on attention on the need to weigh carefully all of the social benefits and costs of a business action and to pursue only those actions where the benefits outweigh the costs.
–Cost Benefit Analysis
PROBLEM ONE–measuring the benefits, costs, and risks of a course of action. In the case of considering drilling for oil in Alaska, how does one measure the potential harm done to the region’s ecosystem?
PROBLEM TWO–philosophy omits the consideration of justice. the action that produces the greatest good for the greatest number of people may result in the unjustified treatment of a minority. such action cannot be ethical, precisely because it is unjust.
The belief that people should be treated as ends and never as means to the ends of others
People are not instruments, like a machine. People have dignity and need to be respected as such employing people in sweatshops, making them work for long hours for low pay in poor work conditions, is a violation of ethics, according to Kantian philosophy
which has been ratified by almost every country on the planet and lays down the basic principles that should always be adhered to irrespective of the culture in which one is doing business”
article 23 implies that it is unethical to employ child labor in sweatshop settings and pay less than subsistence wages, even if that happens to be a common practice in some countries
Under the veil of ignorance, everyone is imagined to be ignorant of all of his or her particular characteristics, for example, race, sex, intelligence, naionality, family backgrouund, and special talents. Rawls then asks what people would unanimously agree on two fundamental principles of justice.
1. each person be permitted the maximum amount of basic liberty compatible with a similar liberty for others.
2. once equal basic liberty is assured, inequality in basic social goods–such as income and wealth distribution, and opportunities–is to be allowed only if such inequalities benefit everyone
inequalities are justified if they benefit the position of the least-advantaged person.
(read more on this — page 140)
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