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Ethical Challenges of International Management

Explore the ethical issues faced by multinational companies in their international operations, including corruption, child labor, and human rights. Discover strategies to address these challenges and promote responsible business practices.

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Ethical Challenges of International Management

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  1. Welcome Ethical Challenges of International Management Dr. Satyendra SinghProfessor, Marketing and International BusinessUniversity of WinnipegCanadas.singh@uwinnipeg.cahttps://abem.uwinnipeg.cahttps://www.abem.ca/conference

  2. 2 Why Study Ethical Issues? • MNCs are accused of a # of abuses relating to business activities: • Corruption • Child labor • Human rights, Environment, Safety • Dumping • Role of MNCs in society • Responsibility: MNCs vs. Government

  3. 4 Sued over misleading beef Later charges dropped – counter sue

  4. 5

  5. 8 The Basic Premise • Corruption • Child labor • Symptom vs. problem • Right vs. wrong? • Right vs. right? f (Poverty, Lack of education, Fair trade,…)

  6. 9 Corruption… • Pay to get work done • Caused by usually poverty, greed… • Salary lasts for 3 weeks only…? • Survival vs. meeting basic needs • Corrupt individual • Individual primary beneficiary at the cost of organization • Corrupt organization • Selection, and Socialization

  7. 10 Corruption… • Arguments for being corrupt! • Tax • Commission • Compensation • Job well done • Appreciation • In West, it is called tips, gifts, bonus

  8. 11 Corruption: from MNC’s Viewpoint… • Western MNCs pay $80b to get contracts or concession (Hawley 2000) • $80b can eradicate poverty (UN) • It ↓ GDP in poor countries • Because it undermines mkt. economy • Decisions  based on corruption • Not on price, quality, service, innovation • Raises price for everyone  poor suffers

  9. 12 Corruption: from MNCs Viewpoint… • Divert resources from public services schools and hospitals • to dams… more scope for corruption • Poor does not get public services • Poor is further impacted • Corruption undermines democratic process and rules of law • Environment is also likely to suffer • Corrupt officer Non-enforcement

  10. 13 Corruption: from MNC’s viewpoint… • Risk of accusation of corruption • Whether proven or not • Can lead to loss of reputation • If pay bribe, more demands likely • It adds costs of doing business • UN convention against corruption • If you cheat, so will your competitor • Doing business more difficult • Employees/stakeholders lose trust

  11. 14 Corruption: from MNC’s viewpoint • Customers do not trust companies • Governments do not trust companies • ↓ likely to give assistance • ↑ likely to audit transactions • ↑ expensive to do business • Stock markets react negatively • Compromise personal beliefs • Need justification • Moral philosophies

  12. 15 The Moral Philosophies… • Ethics  moral principles or values • Deontological philosophy • Rule (whatever) based–no matter what • We are the best • Teleological philosophy • Consequence based • Responsible for the consequence

  13. 16 The Moral Philosophies… • Utilitarian philosophy • Based on net expected benefits • No absolute, relative • But, what is benefit? debatable • Contractarian philosophy • Based on the law of the land, contracts • Anything else is unethical • But, may be difficult to enforce

  14. 17 The Moral Philosophies • Pluralism philosophy • Based on “do the right thing” • No need for law or contracts • We’ve conscience! Right vs. wrong • Most of us like it • Yet we had 2 WW • Rawls’s Social Justice Theory • Fairness, peace and harmony • But, social contract is a bit ideal

  15. 18 Which moral philosophy is (un)applicable…

  16. 18 The Options… • 1 Stay away • No country is perfect • Not everybody is corrupt • You lost huge opportunity • You did not try to impact locals • Black-listing a country is easy • Find creative ways of doing business

  17. 19 The Options • 2 Embrace local standards • Impact local culture • Develop ways to combat corruption • Does context change your values? • 3 Maintain high global standards • Global firms have global reputation • Transfer of people easy • Can exceptions be made?

  18. 20 At Macro Level • Education – a national strategy needed • E.g., India, China, USSR, Ghana, Kenya • Build capability • Governments enforce moral guidelines • Government policies for fair trade • E.g., GM Food, Subsidies, Coca price…

  19. 21 At Micro Level • Strategic — MNCs have the power • School and day care for children • UN Global Compact implementation • Contribution to country’s development • Mode of entry • IJV vs. Wholly-owned subsidiary • Ethics Officer • Pay fair taxes, reduce transfer pricing

  20. 22 At Personal Level • Personal moral compass • Organizational Culture • Whistle-blower legislation • (Un)realistic performance goals • Volunteer for social cause • E.g., Scotia Bank Winnipeg Public Library Board • Win-win situation

  21. Child Labor (Peru)

  22. Child Labor (India)

  23. Child Labor (India)

  24. 26 Child Labor (300m) • Poverty—survival  urbanization • If outlaw (Harkin Bill) • ↓ Family income ↓labor supply • ↑ Adult wage  children go to school • ↑ skills ↑ productive ↑ wages • ↑ family welfare if demand persists • But, ↑ wages ↓ # of jobs • Effective only if children go to school

  25. 27 UN Global Compact -- 5 • Abolition of child labor • ILO conventions Minimum Age Convention No. 138 • Minimum age for admission to employment or work • Developed countries Developing countries • Light Work 13 Years Light Work 12 Years • Regular Work 15 Years Regular Work 14 Years • Hazardous Work 18 Years Hazardous Work 18 Years • Children have distinct rights • Child labour is damaging to a child’s physical, social, • mental, psychological and spiritual development • Deprives them of childhood, dignity; separates from families

  26. 28 UN Global Compact -- 10 • Work against all forms of corruption • Corruption • the abuse of entrusted power for private gain • Extortion • When asking or demand is accompanied by threats that endanger the personal integrity or the life of the person • Bribery, Transparency International • gift, loan, fee, reward… from a person to do something dishonest, illegal or a breach of trust • Steps to fight corruption • Internal: Anti-corruption policies within organizations • External: Report corruption in the annual Communication • Collective: Join forces with industry peers, stakeholders…

  27. 29 Trends Against Corruption and Child Labor • Transparency International • Foreign Corrupt Practices Act (US) • Corruption of Foreign Public officials (Canada) • OECD Anti-bribery Initiatives • Harkin Bill – Trade Ban • ILO Convention on Minimum Age138 • UN Global Compact (UNGC 2007) • HR(2), Labor (4), Environment (3), Anticorruption (1)

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