Ethical Issues in Global Business

1. Ethical Issues in Global Business • Marketing and safety practices – Nestle: the Baby Killers; Union Carbide: Bhopal • Sweatshop and labour abuse - Wal-Mart’s Kathy Lee collection (20 hrs/day @ $0.20hr) • Corruption and bribery - Gulf Oil: political contributions to Korea ($4.2 million) – Lockheed: bribes to Middle East ($22 million) and Japan ($12.5 million)

2. Definitions Grease Payments—Money given for the purpose of getting minor officials to do what they are supposed to be doing. Bribes—Relatively large amounts of money given far the purpose of influencing officials to make decisions or take actions that they otherwise might not take. Examples Money given to minor officials (clerks, attendants, customs inspectors) for the purpose of expediting a project Money given, often to high-ranking officials. Purpose is often to get these persons to purchase goods or services from the bribing firm. Bribes vs. Grease Payments

3. The Moral Philosophy Framework • Cultural Relativism: • Cultural theories • Situational ethics • “When in Rome…do as the Romans do.” • Limitation: • Which Romans?

4. For A necessary tool Accepted practice Form of commission, tax, or compensation Against Wrong/illegal Compromise personal beliefs Promotes government corruption Benefits recipient only Creates dependence on corruption Deceives stockholders Arguments For and Against Bribery

5. Improving Global Business Ethics Integrative Social Contract Theory (ISCT) • Hypernorms-- transcultural values including fundamental human rights • Consistent norms-- norms that are culturally specific, but consistent with hypernorms • Moral free space norms-- strongly held cultural beliefs in countries that are in tension with hypernorms • Illegitimate norms– those norms that are incompatible with hypernorms

6. Using ISCT: The Case of Bribery • Is bribery part of moral free space or is it an illegitimate norm? • 1) violates agent / principal contract • 2) against law in all countries • 3) violates political participation hypernorm • 4) violates economic efficiency hypernorm • Conclusion: Bribery is an illegitimate norm

7. Trends Against Bribery • Foreign Corrupt Practices Act enacted • Transparency International developed • OCED Antibribery Initiatives launched • #10 on UN Global Compact

8. The right to physical movement The right to ownership of property The right to freedom from torture The right to a fair trial The right to nondiscrimination The right to physical security The right to freedom of speech and association The right to minimal education The right to political participation The right to subsistence Improving Global Business Ethics Fundamental International Rights

9. Host Country Stakeholder Pressures Home Country Stakeholder Pressures Improving Global Business Ethics The Dilemma of the Multinational Corporation The Multinational Corp.

10. No-win situations for MNC’s • Labour-saving technology vs. employment motives • Take the money and run vs. spreading $$ to gain more power • Local wage rates = exploitation vs. higher rates = creaming market

11. International LawGlobal Codes of Conduct ETHICAL IMPERIALISM BroadMiddle Ground CULTURAL RELATIVISM Home Country Host Country Mix of Home and Host Country Standards • Cultural standards • Ethical & moral standards of home country • Cultural standards • Ethical & moral standards of host country Application of Ethical Principles Improving Global Business Ethics Ethical Choices in Home vs. Host Country Situations

12. Improving Global Business Ethics Typology of Global Types • Foreign type • Empire type • Interconnection type • Global type

13. Inflict no intentional or direct harm Produce more good than bad for the host country Contribute to host country’s development Respect the human rights of their employees Pay their fair share of taxes Respect local cultural beliefs that do not violate moral norms Cooperate with the government to develop and enforce background institutions Improving Global Business Ethics Seven Moral Guidelines for MNCs