Desjardins5e ppt ch12

CHAPTER TWELVE: INTERNATIONAL BUSINESS AND GLOBALIZATION

Copyright © 2014 by McGraw-Hill Education. All rights reserved.

Introduce students to the range of ethical issues arising in a global business context

Examine the issue of ethical relativism in a global setting Describe the application of human rights to international

business Explain the ethical issues involved in globalization Examine business’ role and ethical responsibilities in an

increasingly global economy Introduce the ethical arguments concerning international

sweatshops

12-2Copyright © 2014 by McGraw-Hill Education. All rights reserved.

For more than 40 years, public attention has focused on ethical issues arising when businesses operate in foreign countries

The 1977 Foreign Corrupt Practices Act made illegal U.S. firms’ participation in any bribery payment to a foreign official to obtain or further business interests in a foreign land

In the 1990s and 2000s, attention shifted to include responsibility for the entire supply chain that produces and distributes a business’ products

As the economic reality of doing business in the 21st century takes hold, ethical issues in international business have become a normal state of doing business


Google learned soon after it began operating in China in the early 2000s that access to Google, and therefore to the wider Internet, was being hindered and eventually prohibited by Chinese censors

Such actions violated Google’s own corporate values

Still, Google continued doing business in China with the rationale that staying engaged in the country would provide a pragmatic approach to changing policies for the better

From 2006 until 2010, Google conformed to China’s censorship policies

When a 2009 cyber attach that breached security at Google and other firms was traced to China, Google withdrew its Chinese operations


Recently, issues surrounding working conditions at foreign supply plants for major U.S.-based corporations emerged at a Foxconn manufacturing plant in China

Foxconn is among the world’s largest manufacturers of electronics and among the largest private employers in China It has an estimated 1 million workers in China At its 13 Chinese plants, Foxconn manufactures such consumer

products as the I-Pad, I-Phone, Kindle tablet, and Xbox 360


In 2012, 150 Chinese workers at a Foxconn plant threatened to commit mass suicide by leaping from their factory roof This incident followed as many as 14 actual suicides

at Foxconn in 2010 Both the actual and threatened suicides were in

protest of working conditions at the Foxconn plants


The Fair Labor Association, an independent watchdog organization, conducted an investigation of working conditions at Foxconn Results were published investigation in 2012 The report documented excessive overtime, including 80-hour

workweeks, health and safety issues at work, inadequate overtime pay, squalid living conditions in overcrowded company dormitories, and aggressive security guards who kept workers in line


Apple and other companies quickly moved to address these issues working with Foxconn and the Fair Trade Association to improve and verify working conditions at these facilities

Foxconn committed to reduce the workweek to between 48-60 hours, increase pay, and improve working and living conditions

A fight among several employees at a Foxconn plant escalated into a riot

involving about 2,000 people when security forces responded to the fight by attaching the employees

A Foxconn spokesman said, “If there’s any truth to these allegations, we’ll take severe action against any security guards, even though we don’t hire them directly.”


What do you do when you are faced with different value systems far from your home?

How do you choose between the values of your home country and the values of the country you are visiting for business purposes?


Given that significant financial benefits can result from following local ethical practices, it is tempting for business to take the step from cultural relativism to ethical relativism.


Recall: the fact that cultures have different values does not by itself imply that there are no objective standards for deciding between conflicting values.


Example: In 1998, in Indonesia bribes, kickbacks and extortion were commonplace.

After the government was overthrown, Indonesians passed many anticorruption reforms, indicating they share many values with the West.


Given different circumstances, conduct that might be condemned or excused in one context might be excused or condemned in another.

Does this fact count in favor of ethical relativism?


Example: Doing business with a state-controlled phone company.

Excusing unethical behavior is not the same as justifying it.


Multinational corporations have many more choices available to them than are available to local businesses, not the least of which is to use their economic power to change unethical practices.


Example: Low wages and unhealthy working conditions in sweatshops; remember Nike?

Just because local population tolerate sweatshops does not mean that such conditions are ethically justified when doing business in a foreign land.


In terms of integrity: When doing business in a foreign land, a person should not abandon their identity and character.

To abandon oneself in the face of diversity is to undermine one’s integrity.


Example: Consider doing business in a culture that treats women as second-class citizens.

If you believe that women and men are equal, why would you abandon your values when dealing with people from this culture?


Integrity does suggest that sometimes we act out of principle, rather than just utilitarian, or economic grounds.


Finally, why are we so quick to judge the values of other cultures as unethical?

We assume that the ethical of the industrialized Western democracies are more ethical than other countries. But are they always?


When corporations seek to justify or excuse otherwise unethical behavior by appealing to local values and customs, such appeals should be treated as suspect: they may be excuses for not performing in an ethically responsible manner.


Are there any values that can be applied across culture?

Tom Donaldson argues that fundamental human rights can provide a basis for a list of international responsibilities for business.


1. The right to freedom of physical movement2. The right to ownership of property3. The right to freedom from torture4. The right to a fair trial5. The right to nondiscriminatory treatment6. The right to physical security7. The right to freedom of speech and association8. The right to minimal education9. The right to political participation10. The right to subsistence


Donaldson admits there is room for dispute concerning the details of application or the range of such rights.

But such rights create duties for others.


One of the major challenges to the minimalist approach is that it does not seem to explain why the responsibilities correlated with these rights should fall on the shoulders of multinational businesses.

The minimalist approach does not seem to give much help when cross cultural values conflict.


Richard DeGeorge has offered 10 ethical guidelines that can be applied cross culturally. Multinational corporations should:1. do no intentional direct harm2. produce more good than harm for the host country3. contribute by their activity to the host country’s development


4. respect the human rights of their employees5. respect the local culture and work with and not against it6. pay their fair share of taxes7. cooperate with the local government in developing and enforcing just background institutions


8. recognize that majority control of a firm carries with it the ethical responsibility for the actions and failures of the firm9. make sure that hazardous plants are safe and run safely10. when transferring hazardous technology, make sure it can be safely administered in the host country


One could argue that such a list amounts simply to the application of more general minimalist duties…

…another interpretation suggests that these responsibilities are derived from an implicit social contract between multinationals and host countries


What is globalization?

Globalization refers to a process of international economic integration.- GATT- NAFTA- European Union


Globalization is the process of extending free and open competition beyond national borders…- this flow of trade is thought to be the best way to improve the well being of most impoverished people- economic integration is a major impediment to conflict


A free, competitive, and open international market will result in a more efficient and optimal distribution of economic goods and services.

Is this a sound argument?


The answer to this question is both empirical and conceptual. The empirical answer is ambiguous and is actually a

utilitarian argument about whether such benefits outweigh the harms of free and open competition.

Critics charge that exported jobs pay bar subsistence wages and create sweatshop conditions.


Market theory tells us that these newly employed workers are better off because they have chosen to take these jobs.

Critics respond that the choice to work under such conditions is little more than extortion and exploitation by business.


What are the ethical responsibilities of international business to their employees in host countries?

In general, we should conclude that they are the same responsibilities as their responsibilities to employees at home.


People are not just factors of production- Living wage- Fair wages

In practice, many international businesses do not directly employ workers in the host countries.


A reasonable principle is that if an international business wants to benefit from less-costly local labor, they should take full and direct responsibility for how those workers are treated.


But are local national economies in host countries harmed or benefited from the arrival of international business?


Even if it is true that freer trade and greater international economic integration can improve the economic well being of any nation that adopts free trade, it does not follow that these policies can improve the economic well being of all countries.


A second set of challenges to global economic activity: Freer trade and economic integration creates

incentives to weaken or do away with environmental, labor, health, and safety regulations.

There may be a “race to the bottom” in an attempt to get international business to locate in many countries.


Consider OSHA-type laws The presence of these laws in the U.S. is an incentive

for companies to move out of the country to countries where these laws do not exist.

The result is pressure to eliminate these laws so that industries in this country can compete more effectively under rules of free trade.


Consider environmental regulations 1992: Congress passed a law protecting Dolphins

from certain Tuna harvesting practices 1999: WTO prohibited the U.S. from enforcing this

law


Regulation on economic activity for any ethical reason is likely to be judged a barrier to free trade.

But think on this:No economic market exists in a vacuum.

- the Montreal Protocol- the Kyoto Agreement


If social regulation is to set the minimally acceptable conditions on market transactions, and if these regulations are accurately to reflect the ethical consensus of citizens, business ought to refrain from trying to influence such policies.


Critics of increase global economic integration charge that institutions such as the WTO, World Bank, and IMF are themselves undemocratic bureaucracies that threaten the political values of democracy and self-determination in both poor and industrialized countries.


Critics of the World Bank and the IMF often raise the challenge that their economic policies undermine self-determination in poorer countries seeking international financial help.- the Golden Straitjack


Critics also charge that the World Bank and the IMF are secretive and undemocratic.


Referring to the Golden Straitjack, defenders of the World Bank argue that the policies of the World Bank and the IMF are simply rational requirements if a nation chooses prosperity over poverty.


Defenders offer two responses to the charge that globalization undermines democracy within industrialized countries:- the empirical evidence is ambiguous- these institutions exist because nations have freely agreed to give them authority


Finally, defenders of the World Bank and the IMF argue that the proper model for these institutions is judiciary not legislative.


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Desjardins5e ppt ch12