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Ethical Issues in the Global Arena

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Title: Ethical Issues in the Global Arena


1
Ethical Issues in the Global Arena
0
Chapter 10
Professor Craig Diamond BA 385 October 28, 2009
2
Outline of Topics

0
  • The New World of International Business -
    Globalization
  • Multinational Corporations (MNCs) and the Global
    Environment
  • Ethical Issues in the Global Environment
  • Marketing practices
  • Plant safety
  • Sweatshops, labor and human rights
  • Corruption and bribery
  • Improving Global Business Ethics

3
Eras of Internationalization

0
4
Concepts of Global Business
0
5
Backlash Against Globalization
0
  • Protests at WTO, G8
  • Outsourcing of jobs to less-developed nations
  • Manufacturing
  • White collar jobs (e.g., IT and high tech jobs)
  • Tenth anniversary of NAFTA in 2004
  • Public opinion in developed countries holds
    negative view of globalization

6
Pros and Cons of Globalization
0
Figure 10-1
From Center for the Study of American Business,
2001.
7
MNCs and the Global Environment
0
  • Changed scope and nature of U.S.-based
    multinationals
  • 1962 60 of largest MNCs were U.S.-based
  • 2007 less than 40 U.S.-based
  • Underlying challenges of operating in new world
    of business
  • Corporate legitimacy
  • Differing philosophies between MNCs and host
    countries
  • MNC and host country challenges

8
Other MNC-Host Country Challenges
0
  • Cultural differences
  • Business / government differences
  • Management and control of global operations
  • Organizational structure
  • Human resource management
  • Exploration of global markets
  • Modify or redesign products appropriate for the
    intended market
  • Be sensitive to the impacts of products
  • Be sensitive to politically-vulnerable products

9
The Dilemma of the Multinational Corporation
0
Figure 10-2
10
Ethical Issues in Global Business
  • Ethical issues tend to be worse in less developed
    countries (LDCs)
  • Legal/ethical structure less developed
  • Temptation to apply lower standards
  • Will now focus on
  • Marketing practices
  • Plant safety
  • Sweatshops and human rights
  • Corruption and bribery

11
Marketing Practices
  • Infant Formula Controversy
  • Companies actively marketing baby formula to
    mothers in LDCs (milk nurses in maternity
    wards)
  • It was well known that breast feeding much safer
    and more nutritious.
  • Nestle focus of criticism
  • Boycott in U.S. 1977-1984
  • 1991 Nestle finally stopped providing formula
    inappropriately
  • Current controversy formula marketed to
    low-income Hispanic immigrants

12
Plant Safety
  • Bhopal Tragedy (1984)
  • Poisonous gas leak at Union Carbide plant killed
    at least 2,000 people and injured about 200,000
  • Up to 150,000 people still suffering mental
    /physical problems
  • Main issue low standards in host country and
    Union Carbide did not enforce appropriate
    standards
  • 460 M settlement, but payments slow due to
    corruption
  • Note this led to Responsible Care program in
    the chemical industry

13
Sweatshops
  • Wide-spread criticism of unfair/unsafe labor
    practices
  • Focus on textiles (e.g., Nike, Wal-Mart, Gap,
    Reebok)
  • Nike case
  • More than 530,000 people employed in factories
    that make Nike products
  • In 1996, Michael Jordon under 20 M endorsement
    contract
  • Questions on Nike case
  • Why should Nike be held responsible for what
    happens in factories that it does not own?
  • Does Nike have a responsibility to ensure workers
    receive a living wage?
  • Are contracts with MJ (and others such as Tiger
    Woods) unethical?

14
Social Accountability 8000 Standard
0
  • Child Labor (min age 14 or 15)
  • Forced Labor
  • Health and Safety
  • Freedom of Association and Right to Collective
    Bargaining
  • Discrimination
  • Discipline (no physical/mental abuse)
  • Working Hours (48 hr/wk, min one day off)
  • Compensation
  • Management Systems

As of 2007 1,315 facilities certified to 8000
standard world-wide
15
Bribery and Corruption
  • Corruption
  • Involves behavior on the part of officials, in
    the public and private sectors, in which they
    improperly and unlawfully enrich themselves
    and/or those close to them.
  • Bribery
  • Offering something (usually ) in exchange for
    gaining an illicit advantage
  • Example Lockheed Martin bribe to Japanese firm
    led to resignation of Japanese Prime-Minister.

16
Arguments For and Against Bribery
0
  • Wrong and illegal in most developed nations
  • Managers should not deal with corrupt governments
  • Benefits recipient only
  • Creates dependence on corruption
  • Deceives stockholders and costs customers
  • Economic harm to host country
  • Necessary for profits in order to do business
  • Common practice
  • Accepted practice
  • Form of commission, tax, or compensation

17
Bribes vs. Grease Payments

0
Figure 10-4
18
Initiatives Against Bribery
0
Growing anticorruption movement...
19
Alien Tort Claims Act
  • Obscure law passed in 1789
  • Allows foreign individuals to sue U.S. firms
    operating abroad.
  • Applies to cases in which companies are accused
    of human rights abuses or abetting corrupt
    governments.
  • Companies that have been sued (examples)
  • Occidental Petroleum
  • Del Monte
  • Chevron

20
Other Global Ethics Issues

0
  • Acts of terrorism
  • Kidnappings, murder, and violence against
    businesspeople
  • Rogue nations (e.g., Iran, Syria, Libya)

21
Balancing and Reconciling Ethics Traditions

0
The Challenge of the Multinational Corporation
Home Country Ethical Standards
Host Country Ethical Standards
OR
Ethics in the international environment is more
complex than national. Firms have great power in
LDCs, and thus great responsibility.
22
Ethical Choices in Home Versus Host Country
Situations

0
Figure 10-5
23
Ethical Choices in Home Versus Host Country
Situations

0
Figure 10-5
24
Integrative Social Contract Theory
0
25
Strategies for Improving Global Business Ethics
0
  • Create corporate global codes of conduct
  • Integrate ethics into a global strategy
  • Suspend activities in host country
  • Create ethical impact statements and audits

26
Principles and Codes for Socially Responsible
Business Practices
0
  • Caux Round Table Principles for Business
  • CERES Principles
  • Universal Declaration of a Global Ethic
  • The MacBride Principles
  • The Maquiladoras Standards of Conduct
  • Principles for Global Corporate Responsibility
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