Ethics in International Business

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What would you do?

Would you buy a product if you knew it was made by a 10-year old girl in Africa who was only paid $0.27/day for her work? What if that girls parents were killed and she was the primary

bread winner for her younger siblings? Would it bother you that she dropped out of school after 5th

grade to help support her family? What if the product normally sold for $150, but you could

get it for $20 because of this? What if one of your parents worked in the US for this

company and was earning $100,000+ per year, but had nothing to do with this product, would you be OK with it?

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Introduction

Ethics Moral guidelines which govern good behavior Not the same thing as behaving lawfully

Business Ethics The principles and standards that determine acceptable conduct

in business organizations Accepted principles of right or wrong that govern

the conduct of a person, the members of a profession, or the actions of an organization

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Ethical Issues in International Business

Arise when a manager makes decisions consistent with differing national environments Political Systems Legal Systems Economic Development Levels Culture

What is ethical and “normal” in one environment many not be so in another Who’s guidelines do you follow?

Home Country Host Country

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Ethical Issues in International Business

The most common ethical issues in business involve Employment PracticesHuman RightsEnvironmental RegulationsCorruptionThe Moral Obligation Of Multinational Companies

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Employment Practices

Child Laborthe employment of children in any work that deprives them

of their childhoodinterferes with their ability to attend regular schoolmentally, physically, socially or morally dangerous and

harmful Before 1940, numerous children aged 5–14 worked in Europe, the

United States and various colonies of European powers In 2010, sub-Saharan Africa had the highest incidence rates of child

labor, with several African nations witnessing over 50 percent of children aged 5–14 working

Primary cause of child labor – poverty Income from working children may be 25% - 40% of household revenue

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2Incidence Rates for Child LaborAges 10-14

Yellow < 10%

Green 10% - 20%

Orange 20% - 30%

Red 30% - 40%

Black > 40%

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Employment Practices

Sweat ShopsTerm for any working environment considered to be

unacceptably difficult or dangerousWork long hours for very low pay

Between 1850 and 1900, sweatshops attracted the rural poor to rapidly-growing cities, and attracted immigrants to places such as London and New York City's garment district

Triangle Shirtwaist Factory FireLed to workplace safety and labor laws

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Human Rights

What are human rights?Universal Declaration of Human Rights

Created by United NationsEstablished in 194830 basic Human Rights

We are all free & equal We all have the same right to use the law

Innocent until proven guilty

Don’t discriminate We are all protected by the law

The right to privacy

The right to life Fair treatment by fair courts

Freedom to move

No slavery No unfair detainment The right to asylum

No torture The right to trial The right to a nationality

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Human Rights

Universal Declaration of Human Rights (continued)

Do human rights violations still exist?Amnesty International findings:

Torture or abuse in at least 81 countries Unfair trials in at least 54 countries Restricted freedom of expression in at least 77 countries

Marriage & family The right to democracy The right to education

Your own things The right to social security

Culture and copyright

Freedom of thought Workers’ rights A free and fair world

Free to say what you want

The right to play Our responsibilities

Meet where you like A bed and some food Nobody can take away these rights and freedoms from us

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Environmental Regulations

Environmental PollutionIllegal DumpingDeforestationStripping of Natural

Resources

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Toxic Waste

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Deforestation

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Corruption

International businesses can, and have, gained economic advantages by making payments to government officialsUS passed the Foreign Corrupt Practices ActOrganization for Economic Cooperation and

Development (OECD) adopted the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions

World’s most corrupt nations, 2014#1 Somalia, North Korea#3 Sudan#4 Afghanistan#5 South Sudan#6 Iraq

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Social Responsibility

Multinational firms have power, wealth from control over resources and ability to move production

Moral philosophers argue that with power comes the responsibility to give something back to the societies that enable them to prosper

Noblesse Oblige - benevolent behavior that is the responsibility of successful people and enterprises

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Social Responsibility

Examples of Social Responsibility• Using only fair trade ingredients/

materials• Establishing sustainability

programs• Donating to less developed

countries• Steps to reduce companies

carbon footprint

Most Admired Companies

Rank Company

1 GDF Suez

2 Marquard & Bahls

3 RWE

4 Altria Group

5 Starbucks

6 Walt Disney

7 United Natural Foods

8 Sealed Air

9 Chevron

9 Whole Foods Market

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Ethical Dilemmas

Question: What are ethical dilemmas?

Ethical dilemmas are situations in which none of the available alternatives seems ethically acceptablethey exist because real world decisions are complex,

difficult to frame, and involve various consequences that are difficult to quantify

Managers often face situations where the appropriate course of action is not clear

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The Roots of Unethical Behavior

Question: Why do managers behave in an unethical manner?

Managerial behavior is influenced byPersonal ethicsDecision making processesOrganizational cultureUnrealistic performance expectationsLeadership

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Philosophical Approaches to Ethics There are several approaches to business ethics

includingStraw Men

Friedman Doctrine Cultural Relativism Righteous Moralist Naïve Immoralist

Utilitarian and Kantian Rights theoriesJustice Theories

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What’s a Straw Man?

Wrong ways to approach ethics For combat training, people used to create dummies out

of straw and then practice attacking them Today when a thinker seeks to develop good ideas, they

try to increase understanding by proposing weak ideas and showing why they’re weak

Scholars raise straw-man approaches to ethics to demonstrate that they offer inappropriate guidelines for decision-making in a multinational firm

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Friedman Doctrine

States that the only social responsibility of business is to increase profits, staying within the law

May be defensible in developed countriesWhat if you’re in systems that let you destroy a

country’s environment or keep people poor?

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Cultural Relativism

Suggests that ethics are nothing more than the reflection of a culture When in Rome, do as the RomansIf a culture supports slavery, is it OK to use

slaves?

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Philosophical Straw Men

Righteous Moralistclaims that his or her own standards of ethics are the

appropriate ones in all countries

Naïve Immoralist asserts that if a manager sees that firms from other

nations are not following ethical norms in a host country then they should not either

If everybody is making payments to a local drug lord, do you do it too?

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A Few Defensible Philosophical Approaches

UtilitarianKantianRights PrinciplesJustice Theory

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UtilitarianMoral worth of actions or practices is determined

by their consequencesAn action is judged to be desirable if it leads to the

best possible balance of good consequences over bad consequences

One problem with utilitarianism is in measuring the benefits, costs, and risks of an action

The second problem related to utilitarianism is that it does not explicitly consider justice, so the minority will always be at a disadvantage

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KantianThe philosopher Immanuel Kant (1724-1804)

introduced the principle that people should be treated as ends and never purely as means to the ends of othersPeople are not instruments like a machinePeople have dignity and need to be respected

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Rights Principles

Rights theories recognize that human beings have fundamental rights and privileges, which transcend national boundaries and cultures

Rights establish a minimum level of morally acceptable behavior

Moral theorists argue that fundamental human rights form the basis for the moral compass that managers should navigate by when making decisions which have an ethical componentUnited Nations Universal Declaration of Human Rights

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Justice Theories

Justice theories focus on the attainment of a just distribution of economic goods and servicesA just distribution is one that is considered fair and

equitableThere is no one theory of justiceSeveral theories of justice conflict with each other in

important waysValid principles of justice are those with which all

persons would agree if they could freely and impartially consider the situation

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Why so many Ethical Approaches?

Accountants and medical doctors have organizations that try to establish agreement in the professionAnd still there are major disagreements

No one tries to establish agreement among general managers, marketersThe situations a general manager faces are so

diverse, no central organization could create agreement

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The world has many different ethical systems derived from different religions rooted in differences in political systems, law,

economic development, and culture

Different systems can lead to different opinions about what is ethical

Why so many Ethical Approaches?

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Ethical Decision Making

Five things that an international business and its managers can do to make sure ethical issues are considered 1. Favor hiring and promoting people with a well-grounded sense

of personal ethics2. Build an organizational culture that places a high value on

ethical behavior3. Make sure that leaders within the business not only articulate

the rhetoric of ethical behavior, but also act in a manner that is consistent with that rhetoric

4. Implement decision-making processes that require people to consider the ethical dimension of business decisions

5. Develop moral courage

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Moral Courage

Moral courage enables managers to walk away from a decision that is profitable, but unethical

Moral courage gives an employee the strength to say no to a superior who instructs her to pursue actions that are unethical

Moral courage does not come easy and employees have lost their jobs when acting on this courage

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Decision-Making Process

According to experts, a decision is acceptable on ethical grounds if a businessperson can answer yes to each of these questions: Does my decision fall within the accepted values or standards

that typically apply in the organizational environment (as articulated in a code of ethics or some other corporate statement)?

Am I willing to see the decision communicated to all stakeholders affected by it — for example, by having it reported in newspapers or on television?

Would the people with whom I have a significant personal relationship, such as family members, friends, or even managers in other businesses, approve of the decision?

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Ethics in International Business

What is seen as unethical in one country may be seen differently in another