250-759 Social Responsibility of Business

© Prentice Hall, 2001

250-759 Social Responsibility of Business

Prepared by W. L. Dougan

Lecture 6


Chapter NineEthical Issues in International Business

Ethical Theory and Business, 8th Edition

Tom L. Beauchamp & Norman E. Bowie

© Prentice Hall, 2001 3

Topics for Chapter 9 Ethical Principles for Multinationals Ethical Relativism


Alternative Standards of Conduct Norms of home country Norms of host country Profitable choice Morally appropriate choice


“Relativism and the Moral Obligations of Multinational Corporations”

Norman Bowie General multinational corporation

obligations Distinctive obligations Relativism Morality of the marketplace


When in Rome do as the Romans do? Norman Bowie Only guide is what is legal and

appropriate in that country Justification: In some instances, laws and

regulations may be stricter (e.g., Europe have stricter environmental laws)

If things are sufficiently different, then it is (maybe) necessary to apply different standards (e.g., US companies complied with Arab firms not to post women for fear of losing lucrative contracts)


Is the adage wholly justified? No – because a country permits

bribery, unsafe working conditions, and violation of human rights does not mean that these practices are acceptable

How can one justify the wages paid by multinationals to less developed countries when these wages are a fraction of what is paid at home


Are there some universal standards? Yes – most cultures value

Human dignity, economic well-being, truthfulness, sense of justice and fairness

A document on global ethics produced by two religious leaders cites two universal principles Every human being must be treated

humanely What you do not wish to be done to yourself,

do not do to others


DeGeorge – developed 7 principles

Multinationals (MNCs) should do no harm MNCs should produce more good than bad for the

host country MNCs should contribute by their activities to the

host country’s development MNCs should respect the right of their employees MNCs should pay their fair share of taxes To the extent that the local culture does not violate

moral norms, MNCs should respect these norms MNCs should cooperate with the local governments

in the development and enforcement of background institutions


Donaldson – Minimal duties of MNCs MNCs have an obligation to respect

fundamental international rights Negative harm principle – MNCs have

an obligation not to add to deprivation or suffering

Rational empathy test – put yourself in the shoes of the foreigner


International standards for behavior Agreement already exists Standards are necessary for

society and exchange Business activity presupposes

some moral standards anyway


Are international norms appropriate? Standards might destroy culture Moral free space is available for

difference


Denis Arnold “The Human Rights Obligations of

Multinational Corporations” Defends a Kantian view of the human

rights obligations of corporations Defends Kantian view against criticism Criticizes one recent effort by the

United Nations to identify the human rights obligations of corporations

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Human Rights Principle Human rights are different from

legal rights in that they do not depend upon state sanction for their legitimacy

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United Nations positions on 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.

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Basic rights Are inalienable Are attributable to persons

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Kantian basis for rights 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.

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Kantian basis for rights (cont.)

Human capabilities necessary to function well: life, physical health, freedom of thought and expression, and the ability to pursue one’s 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.

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Universality of rights concepts Human rights are not merely a Western

concept. There are diverse Asian societies which,

embrace human rights language and arguments. Ex. - India

Even if all Asian nations denied the validity of human rights arguments, this would not entail that they were correct.

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Patricia H. Werhane “Exporting Mental Models: Global

Capitalism in the Twenty-First Century” Argues for caution in extending Western

style capitalism abroad Provides several examples of where the

unreflective extension of Western style capitalism has led to bad outcomes


Mental Models Mental representations, cognitive

frames, or mental pictures that frame and organize human experience

Mechanisms whereby humans are able to generate descriptions of system purpose and form

Explanations of system functioning and observed system states

Predictions of future system states.

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Patricia H. Werhane Many possible ways to organize

economic activity Our assumption in the US is that

we have extraordinary success, and that others will be improved if we offer assistance in doing things our way


Patricia H. Werhane American models of free enterprise and

property cannot be transferred uniformly throughout the world without unforseen consequences.

Analogous to biological transfer from one context to another Euclyptus trees Dandelion

Doesn’t mean that it cannot be transferred at all


Patricia H. Werhane We must seek some moral

minimums to remove human suffering, abject

poverty, preventable disease, high mortality and violence

We must tread lightly and carefully when we act in alien cultures


David Hess & Thomas Dunfee “Taking Responsibility for Bribery:

The Multinational Corporation’s Role in Combating Corruption”

Describe the harm cause to local communities by corruption,

Discuss international treaties banning bribery

Highlight the efforts of Shell to abolish slavery

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OECD Convention on Combating Bribery of Foreign Public Officials

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

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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)

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C2 Principles Adapted by the Caux Roundtable Three themes:

Policies Procedures Publication

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Shell’s 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 bribes29


Supreme Court of Texas, Dow Chemical Company and Shell Oil Company v. Domingo Castro Alfaro et al.

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.

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United States Court of Appeals for the Ninth Circuit, Doe 1 vs. Unocal Concerns Unocal’s involvement

with forced labor and human rights abuses in Myanmar (Burma).

Court found that Unocal could be held liable for complicity with such practices in U.S. courts

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250-759 Social Responsibility of Business