BA 385: What MNCs Owe Society

BA 385: What MNCs Owe Society Chapter Nine: ETHICAL ISSUES in the GLOBAL ARENA

Internationalization Globalization Concepts of Global Business

1945-55 1955-70 1970-80 The Post-World War II Decade The Growth Years The Troubled Years A period of reconstruction dominated by the United States Japanese and European firms recover and the first U.S.-based international firms become multinational A U.S. balance of payments deficit and worldwide oil crisis have a negative impact Eras of Internationalization

1980-2001 1999-now The New International Order The New, New World Though the U.S. role in the world economy is diminished, it is pressured to be a world leader in the ethics arena A backlash against globalism began. In the early 2000’s the US lost the leadership role in ethics due to war against Iraq and scandalous business behavior. Eras of Internationalization

Pros and Cons of Globalization

MNC’s and the Global Environment • Changed scope and nature of U.S.-based multinationals • Underlying challenges of operating in new world of business • Corporate legitimacy • MNC and host country philosophy • MNC and host country challenges • Cultural differences • Business and government differences • Management and control of global operations • Exploration of global markets

Home CountryStakeholder Pressures Host CountryStakeholder Pressures Standards Practices Ethics Laws Culture Customs System ofGovernment Socioeconomic System Standards Practices Ethics Laws Culture Customs System ofGovernment SocioeconomicSystem The Multinational Corporation The Dilemma of the Multinational Corporation

Product safety Plant safety Advertising practices Human resource management Environmental problems Ethical Issues in Global Business http://www.studentsagainstsweatshops.org http://www.sweatshopwatch.org

Social Accountability 8000 Child labor Forced labor Health and safety Freedom of association and Right to Collective Bargaining Discrimination Discipline Working Hours Compensation Management Systems

Necessary to do business Common practice Accepted practice Form of commission, tax, or compensation Wrong Illegal Compromise personal beliefs Promotes government corruption Once started, never stops Prohibits taking a stand for honesty, morality, ethics Benefits recipient only Creates dependence on corruption Deceives stockholders Arguments For and Against Bribery Against Bribery For Bribery

Foreign Corrupt Practices Act Transparency International OECD Antibribery Initiatives Individual Country Initiatives Trends Against Bribery

Grease Payments Relatively small sums of money given for the purpose of getting minor officials to: • Do what they are supposed to be doing • Do what they are supposed to be doing faster • Do what they are supposed to be doing better Bribes Relatively large amounts of money given far the purpose of influencing officials to make decisions or take actions that they otherwise might nottake. If the officials considered the merits of the situation only, they might take same other action. Bribes versus Grease Payments

The Multinational Corporation Home CountryStakeholder Pressures Host CountryStakeholder Pressures Improving Global Business Ethics The Dilemma of the Multinational Corporation

International LawGlobal Codes of Conduct ETHICAL IMPERIALISM CULTURAL RELATIVISM BROAD MIDDLE GROUND HomeCountry HostCountry • Cultural standards • Ethical/moral standards of home country • Cultural standards • Ethical/moral standards of host country Mix of Home and Host Country Standards Application of Ethical Principles Ethical Choices in Home versus Host Country Situations

Ethical Choices in Home versus Host Country Situations Questions to be Resolved by Management: Which ethical standards will be used? Which ethical standards will transcend national boundaries? Worker and product safety? Fair treatment? Health? Discrimination? Freedom? Minimum pay? Consumer rights? Environmental Protection? What constitutes moral minimums in each category?

Actions for Improving International Business Ethics • Create global codes of conduct • Corporate global codes and standards • International organization global codes and standards • Integrate ethics into a global strategy • Suspend activities in host country • Create ethical impact statements

Caux Principles Global Reporting Initiative Global Sullivan Principles OECD Guidelines for Multinational Enterprises Principles for Global Corporate Responsibility: Benchmarks UN Global Compact Global Standards from International Organizations(see p. 324 in text)

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 nondiscriminatory treatment 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 Fundamental International Rights

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 Seven Moral Guidelines for MNCs

BA 385: What MNCs Owe Society