Chapter 4

Ethics in International Business

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Ethics in International Business

• Objectives- Source of ethical challenges in IB- Effect of ethical challenges on decisions in IB- Causes of poor ethical decisions in IB- Different conceptual underpinnings for ethical

decisions in IB- What managers can do to• Promote an awareness of ethical issues

throughout the organization • Ensure that ethical considerations enter into

decision making

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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 may not be so in another

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Ethical Issues in International Business

• Arise most often in the context of: - Employment practices- Human rights- Environmental policy - Corruption- An MNC’s perceived moral obligations to

society

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Employment Practices

• What standards should be applied?- Home nation’s- Host nation’s- Other

• Should the MNC adapt its policies? Standardize?• Hiring practices, labor relations, diversity issues,

employment conditions are some specific issues that require careful thought

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Human Rights

• A manager can assume as universal her/his views on freedom of:- Association- Speech- Assembly- Movement- Political repression

• What is the responsibility of an MNC to uphold different standards of human rights?

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Repressive Regimes

• Is it ethical for MNCs to operate in countries with repressive regimes?

- Is inward investment an agent for change?

- What is the limit beyond which inward investment would not be justified under all circumstances?

- What if competitors from other nations invest and you don’t?

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Environmental Policies

• Locally mandated environmental standards may

be inferior to those an MNC knows it can achieve

• Tragedy of the commons: a resource held in

common by all, but owned by no one, is overused

by some, resulting in degradation.

• If a decision is legal but unethical, should it be

taken?

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Corruption

• Government officials may ask for bribes for an MNC to “get

things done”

- Is an MNC’s manager who agrees a corrupt manager?

- Should an MNC ever accede to bribery demands?

• Foreign corrupt practices act (USA)

• Convention on Combating Bribery of Foreign Officials in

International Business Transactions (OECD)

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MNC Power and Moral Decisions

• MNCs have power over a host country- They can move production away- Along with power arise obligations (?)

• Power is morally neutral- How it is used is what matters- Perceptions of how it should be used and of its impact

vary• Company view• Host country view

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MNC and Social Responsibility

• Social responsibility: business decisions should be made after consideration of social consequences of economic actions- Noblesse oblige: honorable and

benevolent behavior is the responsibility of those in power- Benevolent behavior responsibility of

only successful business?

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Determinants of Ethical Behavior

• Organization culture

• Personal ethics

• Decision making processes

• Leadership

• Unrealistic / realistic performance goals

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Philosophical Approaches to Ethics

• Straw men: often adopted, offer inappropriate guidelines for MNC behavior- Friedman doctrine- Righteous moralist- Naïve immoralist

•Utilitarian and Kantian Ethics•Rights theories• Justice theories

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Ethical Decision Making

• Hiring and promotion• Organization culture and leadership• Decision-making processes- Stakeholder perspectives

• Ethics officers- Codes of ethics

• Moral courage: walk away from profitable and unethical decision