Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003

Doing Business Globally

Major Ethical Problems:Foreign values, culture,

practices, laws, briberyNegative impactsFundamental Rights &

Guidelines

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003

Doing Business Globally

Major Ethical Problems: Foreign values, culture and practices differ

from parent, consumer and capital marketplaces: Bribery, facilitating payments Treatment of workers, environment

Foreign laws ... different, weaker, non-existent

Autonomy of distant operations may weaken understanding or observance of company policies

Impact of multinational on local markets

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003

Jail & The German Sub-contractor

Responsibility for actions of sub-contractor - for incorrect wage calculations

Lessons learned……. Oversight of suppliers Responsibility to staff

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003

Italian Tax Mores Case

Practice is to understate profit “Invitation to discuss” Commercialista…bustarella US Bank sub files American-style return Mgr. refuses to discuss…pays tax on return Disallowance of all interest paid to

depositors …thought it would get your attention...shall

we now begin our negotiations?

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003

Global or Local?

What/who should determine practices?

Management … parent or local Local laws or domestic (parent) Shareholders or primary

stakeholders Laws or stakeholder interests Fundamental rights

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003

Market economy…or moral economy?

Success = f(Trust +Respect/Reputation)Trustworthiness & Reputation come from culture, religion, values & political economy

… a sort of Moral Economy

Management effectiveness depends on understanding local values (culture)

In foreign culturesT + Re = ƒ(Mgt. of Conflicts of interest &

Risk)

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003

CULTURAL DIFFERENCES…

Sphere Basis of Value-systemN. America Rights-based: rights, justice, utility

Sino-Confucian Duty-based: obligation to familyJapan Duty-based: obligation to companyMiddle East Duty-based: obligation to saviourEurope Personal rightsS. America & other

Impact On….Dealing with people…hiring, gender; bribery; motivation for doing business; short- or long-term time horizons; importance of quality-of-life issues

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003

Multinationals Can Influence

Labour rates, supply and practices Rate busting Treatment of women, children,

minorities Input markets Finance markets Product markets Political decisions

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003

Conflicts of Interest/Bribery

Foreign Corrupt Practices Act (US) History, fines, disclosure Transparency International

Corruption perception index-country rating Website: www.transparency.de

OECD initiative - April 1998 Corp. statements of policy…moral imagination

Bribes, Facilitating payments, Kickbacks Conflict of Interest

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003

Product Decisions

Should a product/input ruled/known to be harmful at home be sold/used abroad? (Corn in chips)

Should a product be recalled overseas, but not at home? (Firestone tires on Ford Explorers)

Should a product harmful to a culture be sold? (Nestle)

Should a product be made which involves questionable practices with animals? (Pate)

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003

Pricing Decisions

Predatory pricing Dumping Gouging Set to minimize/avoid tax

Transfer Pricing

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003

Questions To Be Considered

Does a business owe any loyalty to: Foreign workers during a downsizing? Host locales?

Should codes of conduct be tailored to each country of operations?

Should procedures for evaluation ethical behaviour vary by country?

Are there general operating guidelines that can be followed by multinationals?

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003

Donaldson…Fundamental International Rights

Freedom of physical movement

Ownership of property Freedom from torture Nondiscriminatory

treatment Freedom of speech &

association

Tom Donaldson, The Ethics of International Business, Oxford University Press, 1989,81

Fair trial Physical security Minimal education Political participation Subsistence

Minimal Behaviour

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003

De George...Guidelines For Multinationals

Do no intentional direct harm Produce more good than harm for host country Help the host country’s development Respect human rights of their employees Provided local culture does not violate ethical

norms, respect & work with ethical culture Pay their fair share of taxes Cooperate with local government in developing

& enforcing just background institutions

Richard T. De George, Competing with Integrity in International Business, Oxford University Press, 1993, 45-56.

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003

Ethical Tests For International Activities…Brooks , Donaldson & DeGeorge

Does the practice violate: company code, guidelines for multinationals? a fundamental international right? Principles: Sullivan; Caux; Int’l. Code for Can. Bus. international agreements, laws or codes?

Can business be conducted in the host country without the practice?

Is it permissible: at home? in consumer markets? in capital markets?Thomas Donaldson, HBR, September-October, 1996, 48-62.

Prof. Len Brooks, Rotman School of Management, University of Toronto, 2003

Global Business Ethics Value Chain

GO

CAUTION

STOP

CORPORATION

ACTIONS

BEHAVIOUR

STAKEHOLDERSCREEN

INFLUENCES

Primary

Other

ACHEIVEMENT OFSTRATEGIC OBJECTIVES

GovernanceMechanism

Formulation of StrategicObjectives

CustomersEmployeesCapital MarketsCurrent: Shareholders LendersEnvironmentalistsHost CommunitiesGovernmentsNGOs

DETERMINANTS OF VALUE…DETERMINANTS OF VALUE…Success = f(Trust + Respect)

CORPORATE CULTURE ETHICS PROGRAM &CODE TOP MANAGEMENT SUPPORT STAKEHOLDER SYNERGIESCHARACTERGLOBAL MEDIA

PERCEPTION OF: TRUST RESPECTRELATIVE IMPACTRELATIVE SALIENCELOCAL CULTURE