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ETHICAL ISSUES IN INTERNATIONAL BUSINESS

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Title: ETHICAL ISSUES IN INTERNATIONAL BUSINESS


1
CHAPTER 9
  • ETHICAL ISSUES IN INTERNATIONAL BUSINESS

2
Norman E. Bowie
  • Relativism and the Moral Obligations of
    Multinational Corporations
  • Bowie distinguishes between descriptive and
    normative ethical relativism and criticizes both
    sets of views.
  • He goes on to defend a basic morality necessary
    for market transactions.

3
Cultural Relativism
  • Cultural relativism is the descriptive claim that
    ethical practices differ among cultures.
  • Moral (ethical) relativism is the normative claim
    that what is really right or wrong is what a
    culture says is right or wrong.

4
Arguments against cultural relativism
  • Different practices do not necessarily imply
    different underlying moral principles.
  • There are universal principles accepted by all
    cultures, such as prohibitions against torture
    and genocide.
  • There are international treaties and conventions
    that codify basic moral norms.

5
Arguments against moral (ethical) relativism
  • The mere fact that a culture believes a practice
    is correct does not make it correct.
  • It is inconsistent with the concept of a moral
    reformer, someone who argues against the views of
    the majority based on ethical principles.
  • The strongest argument against ethical relativism
    would be to defend universal moral norms (see
    next essay by Arnold).
  • There is no clearly agreed upon understanding of
    cultural.
  • There seem to be basic moral norms that every
    society must adapt, such as dont kill or steal.

6
Morality the Market
  • There is an implicit morality of the marketplace
    that is often ignored.
  • There are Kantian foundations for moral
    prohibitions against lying and cheating.
  • Multinationals are obligated to follow these
    minimum ethical norms.

7
Denis G. Arnold
  • The Human Rights Obligations of Multinational
    Corporations
  • Arnold defends a Kantian view of human rights
    obligations of corporations and defends that view
    against criticism.
  • He also criticizes one recent effort by the
    United Nations to identify the human rights
    obligations of corporations.

8
Human Rights
  • Human rights are different from legal rights in
    that they do not depend upon state sanction for
    their legitimacy.

9
The United Nations human rights
  • The Universal Declaration of Human Rights (1948)
    is aimed at states, not corporations
  • Draft Norms on the Responsibilities of
    Corporations and Other Business Enterprises with
    Respect to Human Rights (2003)
  • is aimed at corporations.
  • They are too wide and imprecise
  • They fail to distinguish between basic
    obligations and those actions that are good to
    perform but not mandatory.

10
Basic Rights
  • Are inalienable
  • Are attributable to persons

11
A Kantian basis for rights
  • Always treat others as an end, and never as a
    means only.
  • Entails negative duties such as avoiding physical
    force or coercion
  • Entails positive obligations like ensuring
    positive well-being
  • Freedom Individuals should be free to as much
    freedom as is compatible with a like freedom for
    all.
  • Human capabilities necessary to function well
    life, physical health, freedom of thought and
    expression, and the ability to pursue ones
    conception of the good.
  • The right to physical security and freedom of
    movement.
  • The right to non-discrimination on the basis of
    arbitrary characteristics such as race, sex,
    religion, ethnicity, and sexual orientation.
  • The right to freedom of association and
    collective bargaining.
  • The right to fair treatment.
  • The right to subsistence
  • The right to develop basic human capabilities.

12
Are Human Rights Western?
  • Human rights are not merely a Western concept.
  • There are diverse Asian societies, many, like
    India, embrace human rights language and
    arguments.
  • Even if all Asian nations denied the validity of
    human rights arguments, this would not entail
    that they were correct.

13
Patricia H. Werhane
  • Exporting Mental Models Global Capitalism in
    the 21st Century
  • Werhane argues for caution in extending Western
    style capitalism abroad.
  • She provides several examples whereby the
    unreflective extension of Western style
    capitalism led to bad outcomes.

14
Not All Ideas can be Exported
  • The mental model of private property, minimal
    regulations, and free trade is being exported by
    the U.S. as if it will always be of benefit. But
    this is not so.
  • Example of Luzon rice farmers.
  • Example of Mexican farmers
  • Example of W.R. Graces development of Neemix
  • Example of Solar Electric Light Fund in China and
    South Africa
  • The lesson here is that American mental models of
    property and free enterprise cannot be uniformly
    and unreflectively exported without producing
    negative consequences.

15
How to Handle Poverty
  • Everyone can agree that abolishing poverty is a
    good thing, but we need to be cautious regarding
    our assumptions about how to do so.
  • We need to keep in mind that what matters most to
    many people are social relationships, family,
    religious and community traditions, and local
    values regarding social goods.
  • Economic development schemes that fail to
    recognize this will often fail.
  • It is in the best interest of corporations to
    tread lightly, as developing countries represent
    80 of the worlds population.

16
Unilever
  • Unilever is an example of a company that has
    adapted its mental models to meet the diverse
    needs of communities throughout the developing
    world.

17
Ian Maitland
  • The Great Non-Debate Over International
    Sweatshops
  • Maitland defends the use of sweatshops arguing
    that, on the whole, they are better for the
    worlds poor than the available alternatives.

18
Sweatshop Problems
  • There has been widespread criticism of corporate
    labor practices, especially in the apparel and
    footwear industry.
  • Students lead protests on U.S. college campuses
  • Anti-sweat campaigns led by NGOs against well
    known companies
  • Maitland argues that these critics dont
    understand or ignore basic economics.
  • IF they did, they would see that sweatshops are
    good for third-world workers.

19
Markets should determine wages
  • Workers in the urban, formal sector of developing
    nations earn better wages than do workers in the
    rural, informal sector.
  • The imposition of wages or labor standards
    greater than that demanded by the market
    increases costs.
  • Increased costs result in layoffs and slow
    investment in the formal sector.
  • Formal sector layoffs result in a surplus supply
    of labor in the informal sector.
  • A surplus of informal sector workers depresses
    income in the informal sector.
  • Conclusion Higher wages or labor standards
    increase poverty and limit economic growth in
    developing nations.

20
Sweatshops are Good!
  • What are needed are more, not fewer sweatshops.
  • Therefore, MNEs should stop appeasing their
    critics and provide a serious defense of their
    global labor practices.

21
Denis G. Arnoldand Norman E. Bowie
  • Sweatshops and Respect for Persons
  • Arnold and Bowie criticize the use of sweatshops
    by corporations and argue that workers should be
    treated with basic respect.
  • They provide examples of corporations that do so
    and criticize Maitlands defense of sweatshops.

22
Kant on sweatshops
  • Kantian respect for persons requires that one
    always act so that you treat others as an end and
    never as a means only.
  • Entails both positive and negative freedom.
  • Both the United Nations and the World Bank holds
    that MNCs have an obligation to respect workers
    and treat them with dignity.

23
Respecting workers means
  • Adhering to local labor laws
  • MNE factories frequently permit violations of
    local labor laws.
  • Such violations of the law are permitted by local
    government authorities in order to prevent the
    MNE factory from shutting down and moving
    elsewhere.
  • The violation of host nation labor laws by MNEs
    should be condemned because it is hypocritical.
  • Respect for the autonomy of host nation
    governments, especially those that are freely
    elected, demands that MNEs not use economic
    coercion to undermine the rule of law.
  • Refraining from coercion

24
Respecting workers means
  • Providing decent working conditions
  • Sweatshop workers are frequently exposed to
    repetitive motion injuries, exposure to toxic
    chemicals, exposure to airborne pollutants such
    as fabric particles, exposure to excessive noise
    pollution, malfunctioning machinery, and
    work-place fires.
  • The cost of improving these conditions varies
    significantly depending upon such factors as the
    problem being addressed and the size of the
    factory. Some of these problems can be addressed
    with little cost.
  • Maitland ignores safety issues.

25
Respecting workers means
  • An obligation to ensure that employees do not
    live under conditions of overall poverty
  • by providing adequate wages for a 48-hour work
    week to satisfy both basic food needs and basic
    non-food needs.
  • In economies where the minimum wage for a 48-hour
    work week allows workers to avoid overall
    poverty, employers will have no obvious moral
    obligation to pay their lowest paid workers more
    than the minimum wage.

26
Problems with Maitlands position
  • He contradicts himself
  • He argues against improving market outcomes by
    paying above market wages because it will benefit
    more workers
  • He argues in favor of improving market outcomes
    by fighting consumer pressure to improve wages
    because it will benefit workers
  • He assumes that productivity is independent of
    wages, but this assumption is dubious.
  • Critics are not calling for an increase in
    minimum wages, but for voluntary increases in
    expenditures by MNCs.
  • Many companies such as Adidas, Nike, and Gap are
    working to eliminate abusive working conditions.

27
David Hess and Thomas Dunfee
  • Taking Responsibility for Bribery The
    Multinational Corporations Role in Combating
    Corruption
  • Hess and Dunfee describe the harm cause to local
    communities by corruption
  • Discuss international treaties banning bribery
  • And they highlight the efforts of Shell to
    abolish slavery.

28
Corruption
  • Corruption inhibits economic development and
    undermines human rights
  • OECD Convention on Combating Bribery of Foreign
    Public Officials 1997 (1999)
  • Ratified by 34 countries
  • Makes it illegal to bribe abroad
  • Transparency International Reports that only 19
    of executives knew about the convention
  • Just 27 reported reduced corruption after the
    convention

29
Corruption
  • Foreign Corrupt Practices Act
  • U.S. law that went into effect in the U.S. in
    1977
  • Currently U.S. corporations are the 9th most
    likely to bribe foreign officials (out of 21)
  • C2 Principles
  • Adapted by the Caux Roundtable
  • Three themes
  • Policies
  • Procedures
  • Pulication

30
Shells Anti-Corruption Policies
  • Studied best practices at 15 companies
  • Put in place a no bribes policy
  • Promulgates and educates within the organization
  • Defines bribery
  • Terminates and prosecutes employees that pay
    bribes

31
Legal Perspectives
  • Supreme Court of Texas, Dow Chemical Company and
    Shell Oil Company v. Domingo Castro Alfaro et al.
  • This case concerns the question of whether or not
    a Texas based corporation can be held accountable
    in Texas courts for harmful actions conducted
    abroad, or whether this is inconvenient for such
    corporations and thus should not be allowed. The
    majority of the court found that corporations
    should be held accountable for overseas
    activities in Texas courts.
  • United States Court of Appeals for the Ninth
    Circuit,Doe 1 vs. Unocal
  • This case concerns Unocals involvement with
    forced labor and human rights abuses in Myanmar
    (Burma). The court found that Unocal could be
    held liable for complicity with such practices in
    U.S. courts.

32
Legal Perspectives
  • United Nations Draft Norms on the
    Responsibilities of Transnational Corporations
    and Other Business Enterprises with Regard to
    Human Rights (2003)
  • The United Nations Global Compact
  • This is a non-binding compact regarding ethical
    conduct in the global economy that corporations
    may endorse. The Global Compact is not a part
    of the Draft Norms on the Responsibilities of
    Transnational Corporations, as its heading in the
    textbook implies. This will be corrected in
    future printings.
  • This is a non-binding draft document attempting
    to articulate the human rights obligations of
    businesses in the global economy.

33
Cases
  • Foreign Assignment
  • This case describes possible sexual
    discrimination against a young women employee of
    a U.S. bank operating in Mexico. It is useful for
    discussions of relativism and human rights.
  • Facilitation or Bribery Cultural and Ethical
    Disparities
  • This case considers whether facilitation payments
    constitute bribery.
  • Chrysler and Gao Feng Corporate Responsibility
    for Religious and Political Freedom in China
  • An employee of a Chrysler joint venture in China,
    who is also a devout Christian, is arrested by
    the Chinese government for illegal religious
    practices. Chryslers partner in the joint
    venture pressures Chrysler to fire him. What
    should Chrysler do?

34
Cases
  • Should Wal-Mart Do More? A Case Study in Global
    Supply Chain Ethics
  • Wal-Mart inspects its factories for compliance
    with labor standards. A major news magazine
    reports that Wal-Marts Chinese supplier
    factories routinely submit false information to
    satisfy these reports. Factory managers report
    that Wal-Marts efforts to maintain costs and
    improve quality make it impossible for them to
    comply with labor standards.
  • adidas Application of Standards of Engagement to
    Child Labor Dilemma
  • Adidass proactive solution to child labor is
    described.
  • Tackling HIV/AIDS Unilever Tea Kenya
  • Unilevers proactive efforts to help reduce the
    HIV infection in Africa are discussed.
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