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INTRODUCTIONINTRODUCTION
Multinational managers face Multinational managers face complex ethical issuescomplex ethical issues
With an understanding of key With an understanding of key ethical problems in multinational ethical problems in multinational management, managers can make management, managers can make more informed ethical judgmentsmore informed ethical judgments
BUSINESS ETHICSBUSINESS ETHICS
Ethics - the rules and values that Ethics - the rules and values that determine what goals and actions determine what goals and actions people follow when dealing with people follow when dealing with other human beings other human beings
Business ethics: all business Business ethics: all business decisions with ethical consequencesdecisions with ethical consequences
The unique ethical problems The unique ethical problems faced by managers conducting faced by managers conducting business operations across business operations across national boundaries national boundaries
INTERNATIONAL BUSINESS INTERNATIONAL BUSINESS ETHICSETHICS
SOCIAL RESPONSIBILITYSOCIAL RESPONSIBILITY
The responsibility businesses to The responsibility businesses to society beyond making profits society beyond making profits
Often reflect the ethical values and Often reflect the ethical values and decisions of the top management teamdecisions of the top management team
Ethics and social responsibility not Ethics and social responsibility not easily distinguished in practiceeasily distinguished in practice
Excepts from Exhibit 15.1 Excepts from Exhibit 15.1 show examples of show examples of
ethical/social responsibility ethical/social responsibility issues faced by MNCsissues faced by MNCs
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IIssssuuee
EExxaammppllee PPrroobblleemm FFoorr tthheeMMNNCC
CCuussttoommeerr PPrroodduucctt ssaaffeettyy
SShhoouulldd aann MMNNCC ddeelleettee ssaaffeettyyffeeaattuurreess ttoo mmaakkee aa pprroodduuccttmmoorree aaffffoorrddaabbllee ffoorr ppeeoopplleeiinn aa ppoooorreerr nnaattiioonn??
SSttoocckkhhoollddeerrssFFaaiirr rreettuurrnn oonniinnvveessttmmeenntt
IIff aa pprroodduucctt iiss bbaannnneeddbbeeccaauussee iitt iiss uunnssaaffee iinn oonneeccoouunnttrryy,, sshhoouulldd iitt bbee ssoolldd iinnccoouunnttrryy wwhheerree iitt iiss nnoottbbaannnneedd ttoo mmaaiinnttaaiinn pprrooffiittmmaarrggiinnss??
CChhiilldd LLaabboorrSShhoouulldd aann MMNNCC uussee cchhiillddllaabboorr iiff iitt iiss lleeggaall iinn tthheeccoouunnttrryy ooff tthheeiirr llooccaattiioonn??
EEmmppllooyyeeeess
SShhoouulldd aann MMNNCC ffoollllooww llooccaallllaawwss tthhaatt vviioollaattee hhoommeeccoouunnttrryy llaawwss aaggaaiinnssttddiissccrriimmiinnaattiioonn??
HHoosstt ccoouunnttrryyFFoolllloowwiinngg llooccaallllaawwss
SSoocciieettyy iinnGGeenneerraall
PPrrootteeccttiioonn oofftthheeEEnnvviirroonnmmeenntt
IIss aann MMNNCC oobblliiggaatteedd ttooccoonnttrrooll iittss hhaazzaarrddoouuss wwaasstteettoo aa ddeeggrreeee hhiigghheerr tthhaann llooccaallllaawwss rreeqquuiirree??
EX EX 15.115.1
BALANCING THE NEEDS OF BALANCING THE NEEDS OF THE COMPANY WITH ETHICAL THE COMPANY WITH ETHICAL
CONSEQUENCESCONSEQUENCES
Managers must weigh and Managers must weigh and balance the economic, legal, and balance the economic, legal, and ethical consequences of their ethical consequences of their decisions decisions
EconomicEconomicLegalLegalEthicalEthical
FORMS OF ANALYSESFORMS OF ANALYSES
ETHICAL PHILOSOPHYETHICAL PHILOSOPHY
TRADITIONAL VIEWSTRADITIONAL VIEWS
Two basic systems of ethical Two basic systems of ethical reasoningreasoning
–DeontologicalDeontological
–TeleologicalTeleological
DEOLONTOLOGICAL DEOLONTOLOGICAL THEORIESTHEORIES
Actions have a good or bad Actions have a good or bad morality regardless of the morality regardless of the outcomes they produceoutcomes they produce
TELEOLOCIALTELEOLOCIAL
Morality from the consequences Morality from the consequences of an actof an act
UtilitarianismUtilitarianism
MORAL LANGUAGESMORAL LANGUAGES
A contemporary view A contemporary view Basic ways that people use to Basic ways that people use to
make ethical decisions and make ethical decisions and explain ethical choices explain ethical choices
Virtue and viceVirtue and viceSelf controlSelf controlMaximize human welfareMaximize human welfareAvoiding harmAvoiding harmRights/dutiesRights/dutiesSocial contract Social contract
SIX BASIC ETHICAL SIX BASIC ETHICAL LANGUAGESLANGUAGES
NATIONAL DIFFERENCESNATIONAL DIFFERENCES
National culture and social National culture and social institutions affect ethical institutions affect ethical behavior/social responsibility behavior/social responsibility
See Exhibits 15.2-15.5See Exhibits 15.2-15.5
MANAGEMENTPRACTICES TOMONITOR AND
CONTROL ETHICALBEHAVIOR IN
ORGANIZATIONS(e.g., codes of ethics)
KEY SOCIALINSTITUTIONS
ReligionLaws and Legal
System
IMPORTANT ETHICALISSUES FOR
BUSINESS(e.g., equal rights for
women)
CULTURALNORMS AND
VALUES(e.g., norms for gift
giving)
EXHIBIT 15.2 A MODEL OF INSTITUTIONAL AND CULTURALEFFECTS ON BUSINESS ETHICS ISSUES AND MANAGEMENT
EX 15.3 ETHICAL ISSUES EX 15.3 ETHICAL ISSUES IDENTIFIED BY SENIOR U.S. AND IDENTIFIED BY SENIOR U.S. AND
EUROPEAN MANAGERSEUROPEAN MANAGERS
-100 -50 0 50
Relative Frequency of Concern0 = mean
U.S.
U.K.
Ger
man
y/Aust
riaPolitical andLocalInvolvement
PersonnelIssues
Use ofInformation
EX 15.4 THE MANAGEMENT OF KEY ETHICAL ISSUES
-15 -10 -5 0 50 = MeanU.S
.
U.K.
Germ
any/
Austria
Ethical Issues Addressed in Training
Ethical Issues Addressed in Written Policies
EX 15.5 BELIEFS REGARDING ETHICAL CODES
0 1 2 3 4
5=Agree3=Neutral
1=Disagree
Raise Ethical Level
Aid to Refuse
Define Limits
Violate if not Detected
French German U.S.
ETHICAL RELATIVISM VS ETHICAL RELATIVISM VS ETHICAL UNIVERSALISMETHICAL UNIVERSALISM
Ethical relativism - each society's Ethical relativism - each society's view of ethics considered view of ethics considered legitimate and ethical legitimate and ethical
Ethical universalism - basic Ethical universalism - basic moral principles transcend moral principles transcend cultural/national boundaries cultural/national boundaries
PRACTICAL PROBLEMS OF PRACTICAL PROBLEMS OF FOLLOWING EITHERFOLLOWING EITHER
Convenient relativism - Convenient relativism - companies use ethical relativism companies use ethical relativism to behave any way they pleaseto behave any way they please
Cultural imperialism with ethical Cultural imperialism with ethical universalismuniversalism
ETHICAL CONVERGENCEETHICAL CONVERGENCE
In spite of wide differences in In spite of wide differences in cultures and social institutions, cultures and social institutions, growing pressures for growing pressures for multinationals to follow same multinationals to follow same rulesrules
PRESSURES FOR ETHICAL PRESSURES FOR ETHICAL CONVERGENCECONVERGENCE
Growth of international tradeGrowth of international trade–Creates pressures for Creates pressures for
uniformityuniformity
Increased cross national imitationIncreased cross national imitationMixed cultural background Mixed cultural background
employeesemployees
FOREIGN CORRUPT FOREIGN CORRUPT PRACTICES ACTPRACTICES ACT
Forbids U.S. companies to make Forbids U.S. companies to make or offer payments or gifts to or offer payments or gifts to foreign government officials to foreign government officials to get or retain business get or retain business
““Reason to know" provisionReason to know" provisionSee Exhibit 15.6 See Exhibit 15.6
FCPA does not prohibit some FCPA does not prohibit some forms of payments that may forms of payments that may occur in international businessoccur in international business
–Payments made under duress Payments made under duress to avoid injury or violence are to avoid injury or violence are acceptableacceptable
EFFECTS OF THE “ETHICS EFFECTS OF THE “ETHICS GAP”GAP”
FCPA and proliferation of ethical FCPA and proliferation of ethical codes in US are creating and ethics codes in US are creating and ethics gapgap
FCPA blocked some gains in export FCPA blocked some gains in export market share and FDImarket share and FDI
Pressure on other countries to Pressure on other countries to follow US rulesfollow US rules
PRESCRIPTIVE ETHICS FOR PRESCRIPTIVE ETHICS FOR THE MULTINATIONALTHE MULTINATIONAL
Donaldson suggestsDonaldson suggests
–Guides based on the moral Guides based on the moral languages of avoiding harm, languages of avoiding harm, right/duties, and the social right/duties, and the social contract contract
–Specified in contracts and Specified in contracts and international lawsinternational laws
CODE OF CONDUCTCODE OF CONDUCT
For moral language to work, For moral language to work, there must be codes of conduct there must be codes of conduct
Current codes exist based on Current codes exist based on codes from international codes from international governing bodies (UN, ILO) and governing bodies (UN, ILO) and international agreementsinternational agreements
WHY MULTINATIONALS DO WHY MULTINATIONALS DO NOT ALWAYS FOLLOW NOT ALWAYS FOLLOW ETHICAL PRINCIPLES?ETHICAL PRINCIPLES?
Governments make agreementsGovernments make agreementsCompliance voluntaryCompliance voluntaryNot all governments subscribeNot all governments subscribeEach guide is an incomplete Each guide is an incomplete
moral guidemoral guide
HOW SHOULD THE MANAGER HOW SHOULD THE MANAGER DECIDE?DECIDE?
Consider whether the action Consider whether the action makes business sensemakes business sense
Conduct and ethical analysisConduct and ethical analysis
–See Exhibit 15.8 nextSee Exhibit 15.8 next
IS THE BEHAVIOR OR ITS CONSEQUENCE:
No
No
No
No
Yes
Yes
Yes
Yes
Yes
No
Do It!
LegalAnalysis
OrganizationalEthical
Analysis
Cultural SensitivityEthical Analysis
Personal Ethical Analysis
No
Violates Hostor HomeCountryLaws?
Violates MNC's Codeof Conduct?
InViolation of
the Company'sEthical Code?
Consistentwith Company
Culture?
Consistentwith Local
CulturalNorms?
Consistentwith PersonalMoral Beliefs?
STOP!
STOP!
STOP!
STOP!
STOP!
STOP!
Yes
CONCLUSIONSCONCLUSIONS
Multinational managers face Multinational managers face ethical challenges magnified by ethical challenges magnified by the international contextthe international context
Need to understand home ethical Need to understand home ethical codes and impact on ethics of codes and impact on ethics of foreign culture/social institutionsforeign culture/social institutions