Global Business Today 8th Edition Hill Solutions Manual Download

Chapter 05 - Ethics in International Business
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Ethics in International Business

Chapter Outline
OPENING CASE: Exporting Used Batteries to Mexico
INTRODUCTION
ETHICAL ISSUES IN INTERNATIONAL BUSINESS
Employment Practices
Management Focus: Making Apple’s iPod
Human Rights
Environmental Pollution
Management Focus: Unocal in Myanmar
Corruption
Moral Obligations
Management Focus: Corruption at Daimler
ETHICAL DILEMMAS
THE ROOTS OF UNETHICAL BEHAVIOR
Personal Ethics
Decision Making Processes
Organizational Culture
Unrealistic Performance Expectations
Leadership
Societal Culture
PHILOSOPHICAL APPROACHES TO ETHICS
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Straw Men
Utilitarian and Kantian Ethics
Rights Theories
Justice Theories
FOCUS ON MANAGERIAL IMPLICATIONS
Hiring and Promotion

Organization Culture and Leadership
Decision-Making Processes
Ethics Officers
Moral Courage
Summary of Decision-Making Steps
SUMMARY
CRITICAL THINKING AND DISCUSSION QUESTIONS
CLOSING CASE: Working Conditions in a Chinese Factory
Learning Objectives
1. Understand the ethical issues faced by international businesses.
2. Recognize an ethical dilemma.
3. Identify the causes of unethical behavior by managers.
4. Describe the different philosophical approaches to ethics.
5. Explain how managers can incorporate ethical considerations into their decision making.
Chapter Summary
This chapter focuses on how ethical issues can and should be incorporated into decision making in an
international business. The chapter starts by looking at the source and nature of ethical issues and
dilemmas in an international business. Then, the reasons for poor ethical decision making in international
business are reviewed. Next, there is a discussion of different philosophical approaches to business ethics.
Finally, the chapter concludes with a review of the different processes that managers can adopt to make
sure that ethical considerations are incorporated into decision making in an international business firm.
Opening Case: Exporting Used Batteries to Mexico

Summary
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The opening case explores the ethics of companies in the used battery recycling industry. Because
research has shown that the high levels of lead in batteries can be harmful to humans if the batteries are
not properly disposed of, developed nations including the United States have established strict regulations
regarding their disposal. In contrast, some developing countries including Mexico have much less
stringent policies that often go unenforced. Consequently, the cost of recycling is higher in the United
States prompting many companies to export used batteries to Mexico. Discussion of the case can revolve
around the following questions:
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Suggested Discussion Questions
QUESTION 1: Are U.S companies that export used batteries to Mexico and follow local regulations in
their recycling acting in a socially and ethically responsible way? Should the companies be held to the
higher standards the United States demands?
ANSWER 1: This question is likely to generate considerable discussion among students. Some will
agree that it is unethical for U.S. companies to knowingly pollute the environment and harm people in
order to save money. Students taking this perspective will probably agree that U.S. companies should
follow proper safety procedures regardless of whether they are mandated by law. Other students however
might argue that as long as companies are in compliance with local regulations they are acting in an
appropriate manner. Some students taking this view might note that if a company is held to a higher,
more costly standard, it could go out of business taking with it jobs that are vital to the local economy.
Students arguing this point may wonder which is the lesser of two evils – polluting the environment with
harmful levels of lead, or eliminating much needed jobs.
QUESTION 2: Some companies like Johnson Controls export their batteries to Mexico for recycling, but
voluntarily follow U.S. recycling standards, even though it puts them at a cost disadvantage. Would you
be willing to pay more for a new battery or to have your old battery recycled if Johnson Control passed
these additional costs on to the consumer?
ANSWER 2: Most students will probably recognize that consumers contribute to the poor situations like
the one described in the case. By continually putting pressure on companies to provide better products at
lower prices, consumers encourage companies to find ways to lower their costs. While many students
might initially agree that they would be happy to absorb the higher costs, it appears that many cases when
it actually comes down to it, what they might do in theory is not the same as what they do in practice.
Teaching Tip: Students can explore Johnson Controls’ global operations at

{http://www.johnsoncontrols.com/content/us/en.html}.
Lecture Note: Johnson Controls recently opened a new recycling facility in North Carolina. To learn
more go to {http://www.businessweek.com/ap/2012-09-18/johnson-controls-opens-battery-recycling-
facility}, and Exide Technologies, another U.S. battery recycling company, recently agreed to close a
plant in Texas ending years of disputes regarding the safety of the plant’s waste. Go to
{http://www.businessweek.com/ap/2012-05-31/battery-plant-closing-in-deal-with-dallas-suburb} to learn
more details.
Chapter Outline with Lecture Notes, Video Notes, and Teaching Tips
INTRODUCTION
A) This chapter focuses on the ethical issues that arise when companies do business in different nations.
Many of these ethical issues arise because of differences in economic development, politics, legal
systems, and culture.
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B) The terms ethics refers to accepted principles of right or wrong that govern the conduct of a person, the
members of a profession, or the actions of an organization. Business ethics are the accepted principles of
right or wrong governing the conduct of business people, and an ethical strategy is a strategy, or course
of action, that does not violate these accepted principles.
Teaching Tip: The Carnegie Council on Ethics and International Affairs’

{http://www.cceia.org/}publications reflect on many ethical issues in international business.
ETHICAL ISSUES IN INTERNATIONAL BUSINESS
A) In the international business setting, the most common ethical issues involve employment practices,
human rights, environmental regulations, corruption, and the moral obligation of multinational companies.
Employment Practices
B) A critical ethical issue facing companies doing business in a foreign country involves employment
practices. When work conditions in a host nation are clearly inferior to those in a multinational’s home
nation, what standards should be applied, those of the home nation, those of the host nation, or something
in between? When human rights activists complained about the sweatshop conditions at Nike’s
subcontractors’ operations, Nike, even though it had not broken any laws, was forced to institute a code of
conduct for its subcontractors. More recently, Apple faced similar challenges.
Management Focus: Making Apple’s iPOD
Summary
This feature explores Apple’s experiences with employment practices at the Chinese factory that produces
its iPOD. In 2006, two Chinese journalists reported that the working conditions at Hongfujin Precision
Industries, which is owned by Taiwanese conglomerate Foxconn, where Apple’s iPODs are produced
were substandard. According to the report, not only were workers at the plant poorly paid, but they were
also forced to work overtime. Apple immediately responded to the allegations and audited the factory in
question. However, managers at the factory filed a defamation lawsuit against the two journalists.
Despite the fact that Apple’s audit did indeed show substandard working conditions at the factory,
Hongfujin did not withdraw the lawsuit. Eventually the Reporters Without Borders group took up the
case for the two reporters and the lawsuit was dropped.
1. Should Apple be responsible for ensuring that its suppliers are safeguarding the basic rights and dignity
of their employees? How can Apple be sure that its suppliers do not employ sweatshop labor?
Discussion Points: Many students will probably agree that Apple should be responsible at least to some
degree for ensuring that the factories where it sources its products are safe. Some students may suggest
that to knowingly buy products from a company with substandard working conditions is a violation of
basic human ethics. Other students however, may argue that Apple cannot force suppliers to adopt
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specific practices and policies toward labor. Students taking this perspective might further suggest that
pushing American practices on Chinese companies is ethnocentric, and that for many Chinese the prospect
of having a job, even in poor working conditions, is better than having no job at all. Many students may
be surprised that Apple did not already have an audit policy in place prior to the accusations by the
Chinese reporters, but will probably agree that the company handled the situation appropriately.
2. The allegations against Hongfujin Precision Industries were made by two Chinese reporters. Discuss
the implications of this for other Chinese companies.
Discussion Points: Most students will probably agree that the fact that the allegations against Hongfujin
Precision Industries were made by Chinese reporters who work for China Business News, a state run
newspaper, could have interesting implications for other companies. Some students will probably suggest
that it should serve as a signal to other companies that poor working conditions are unacceptable, and that
while in the past, it may have been possible to hide them, it is no longer the case. Other students may
suggest that the allegations may force companies to rethink their production and look for new ways to
increase productivity. Some students may note that the very fact that the report was published is startling
in some regards, and that companies should anticipate further scrutiny.
Lecture Note: Apple maintains that it requires its suppliers to practice responsible manufacturing. To learn
more about Apple’s policies go to {http://www.apple.com/about/}.
Lecture Note: To extend this case, consider exploring Apple’s recent troubles with allegations of
sweatshop conditions in supplier factories that have prompted worker suicide. Go to
{http://www.businessweek.com/technology/no-company-follows-apples-expanded-china-factory-audits-
02272012.html}, {http://www.businessweek.com/magazine/content/11_20/b4228039775369.htm}, and
{http://www.businessweek.com/videos/2012-02-13/foxconn-opens-doors-to-investigators} for more
details.
Human Rights
C) There are still many nations in the world where basic human rights are not respected. Rights taken for
granted in the developed world such as freedom of association, freedom of speech, freedom of assembly,
freedom of movement, and so on, are by no means universally accepted. The text illustrates this point
with examples of South Africa, China, and Myanmar.
Environmental Pollution
D) Ethical issues arise when environmental regulations in host nations are inferior to those in the home
nation. The tragedy of the commons occurs when a resource held in common by all, but owned by no
one, is overused by individuals resulting in its degradation. Corporations can contribute to the global
tragedy of the commons by moving production to locations where they are free to pump out pollutants
into the environment, thereby harming these valuable global commons. The question here is whether the
decision to do so, while perhaps legal, is ethical.
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Teaching Tip: Consumers International {http://www.consumersinternational.org/} is dedicated to

protecting the rights of consumers worldwide and promoting ethical behavior on the part of companies.
Video Note: The iGlobe India's Car Demands Eclipse Environmental Concerns explores the implications
of the global auto industry’s push to sell more cars in India on the country’s environment.
Management Focus: Unocal in Myanmar
Summary
This feature explores Unocal’s actions in Myanmar. Unocal, an American oil and gas enterprise, formed a
joint venture with a French company to build a pipeline from Myanmar to Thailand. Unocal made that
investment at a time when many other American companies were exiting the country in protest of the
local government’s policy of brutally suppressing internal dissent.
1. Why did Unocal’s investment become so controversial? Did Unocal behave in an ethical manner?
Discussion Points: Unocal made its investment in Myanmar just as many other companies were leaving
the country in protest of the nation’s brutal military dictatorship. The company had formed an agreement
with the government that involved clearing a path for a new pipeline. The investment became
controversial when, in order to fulfill the agreement, Myanmar’s army forcibly moved villagers and then
forced them to work under slave-like conditions. Unocal claims it had no knowledge of what was
occurring, but this claim was rejected by a judge who heard the case that was filed against Unocal on
behalf of Myanmar villagers. Students will probably agree that the company failed to act in an ethical
manner, and that while it may not have directly participated in the brutality, Unocal did have a
responsibility to oversee what was going on and ensure that people were treated fairly.
2. A 1996 law suit against Unocal was dismissed on the grounds that the Unocal could not be held liable
for the actions of a foreign government against its own people, although the judge noted that the company
was aware of what was going on in the country. Discuss the difference between acting in an ethical
manner and acting according to the law.
Discussion Points: Students will probably be familiar with the notion that even if something is not
explicitly forbidden, it does not mean it is right. This concept would certainly seem to apply in this case.
Ethical responsibility goes beyond the letter of the law to encompass the idea of behaving in a certain way
simply because it is the right thing to do. It is worth noting that an appeal by the plaintiffs resulted in an
out-of-court settlement in 2005, which would imply that Unocal was guilty at least to some extent.
Teaching Tip: Unocal is now part of Chevron. The company’s web page is {http://www.chevron.com/}.
Corruption
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E) In the United States, the Foreign Corrupt Practices Act outlawed the practice of paying bribes to
foreign government officials in order to gain business (see Chapter 2). The Organization for Economic
Cooperation and Development (OECD) adopted a Convention on Combating Bribery of Foreign
Public Officials in International Business Transactions in 1999. The convention obliges member
states to make the bribery of foreign public officials a criminal offense.
F) Some economists suggest that the practice of giving bribes might be the price that must be paid to do a
greater good. These economists believe that in a country where preexisting political structures distort or
limit the workings of the market mechanism, corruption in the form of black-marketeering, smuggling,
and side payments to government bureaucrats to “speed up” approval for business investments may
actually enhance welfare.
G) In contrast, other economists have argued that corruption reduces the returns on business investment
and leads to low economic growth.
Lecture Note: Recently, the United States has been making a bigger effort to enforce the Foreign Corrupt
Practices Act. To learn more, go to
{http://www.businessweek.com/managing/content/dec2009/ca20091216_871901.htm}.
Moral Obligations
H) The concept of social responsibility refers to the idea that business people should take the social
consequences of economic actions into account when making business decisions, and that there should be
a presumption in favor of decisions that have both good economic and good social consequences.
I) In its purest form, social responsibility can be supported for its own sake simply because it is the right
way for a business to behave. Advocates of this approach argue that businesses need to recognize their
noblesse oblige (honorable and benevolent behavior that is the responsibility of successful companies) and
give something back to the societies that have made their success possible.
Management Focus: Corruption at Daimler
Summary
This feature explores corruption at Daimler. After Chrysler merged with Daimler in 1998, it was
discovered that for years, Daimler had been paying bribes to government officials in various countries in
exchange for preferential treatment. In fact, the Securities and Exchange Commission (SEC) described
the payments by Daimler as “standard operating procedure” at the company.
1. Consider the corrupt culture at Daimler. Why do you think that the practice of making routine bribes
persisted for so many years? Why do you think no one blew the whistle on the practice?
Discussion Points: Many students will probably suggest that the bribes were so widespread and had been
made for so many years for a variety of reasons that they had become a legitimate part of doing business
for the company. Seemingly, no one questioned why the bribes were being made, nor whether they were
ethical. Instead, the typical checks and balances between departments failed to put a stop to the process
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and allowed the practice to continue. Some students may suggest that the bribes may have been more
acceptable under German law, but when the company was acquired by Chrysler, the practice was found to
violate U.S. law.
2. Why did Daimler feel the need to make bribe payments? What advantages did the practice give the
company? Did Daimler act in an ethical manner?
Discussion Points: Bribes are typically paid in order to achieve something that would otherwise not be
forthcoming. Most students will probably recognize that the money paid out by Daimler to government
officials in some 22 countries helped the company sell some $1.9 billion of vehicles, a seemingly good
return on the investment. Without the bribes, those sales may have been significantly smaller. Most
students will agree that managers at Daimler knew exactly what they were up to and that furthermore it
was inappropriate behavior. Students taking this perspective will probably point to the fact that the
payments were carefully disguised on the books, indicating unethical behavior.
Teaching Tip: Daimler is no long part of Chrysler. To learn more go to

{http://www.daimler.com/company}.
ETHICAL DILEMMAS
A) From an international business perspective, some argue that what is ethical depends upon one’s
cultural perspective. Ethical dilemmas are situations in which none of the available alternatives seems
ethically acceptable.
THE ROOTS OF UNETHICAL BEHAVIOR
A) The determinants of ethical behavior include personal ethics, decision making processes, leadership,
unrealistic performance expectations, and organizational culture.
Personal Ethics
B) Business ethics reflect personal ethics (the generally accepted principles of right and wrong governing
the conduct of individuals). The personal ethical code that guides our behavior comes from a number of
sources, including our parents, our schools, our religion, and the media.
C) Home country managers working abroad in multinational firms may experience more than the usual
degree of pressure to violate their personal ethics because they are away from their ordinary social context
and supporting culture, and they are psychologically and geographically distant from the parent company.
D) Many studies of unethical behavior in a business setting have come to the conclusion that business
people sometimes do not realize that they are behaving unethically simply because they fail to ask the
relevant question—is this decision or action ethical?
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Organization Culture
E) The third cause of unethical behavior in business is an organizational culture that de-emphasizes
business ethics, reducing all decisions to the purely economic. The term organization culture refers to
the values and norms that are shared among employees of an organization.
Unrealistic Performance Expectations
F) The fourth cause of unethical behavior is pressure from the parent company to meet performance goals
that are unrealistic, and can only be attained by cutting corners or acting in an unethical manner.
Leadership
G) The fifth root cause of unethical behavior is leadership. Leaders are vital in helping a firm establish its
organization culture, and setting examples. If leaders are not acting ethically, other employees may not
act ethically.
Societal Culture
H) Companies headquartered in countries where individualism and uncertainty avoidance are dominant
are more likely to emphasize ethical behavior than companies that are located in countries where
masculinity and power distance are important.
PHILOSOPHICAL APPROACHES TO ETHICS
A) There are several different philosophical approaches to ethics. Some deny the value of business ethics
entirely, or apply it in an unsatisfactory way. Others form the basis for business ethics that is used by
many companies today.
Straw Men
B) Straw men approaches to business ethics are approaches that are raised by business ethics scholars
primarily for the purpose of demonstrating that they offer inappropriate guidelines for ethical decision
making in a multinational enterprise. Four such approaches are the Friedman doctrine, cultural relativism,
the righteous moralist, and the naïve immoralist.
The Friedman Doctrine
C) Nobel Prize winning economist’s Milton Friedman’s classic position on business ethics is that the only
social responsibility of business is to increase profits, so long as the company stays within the rules of law.
He rejects the idea that businesses should undertake social expenditures beyond those mandated by the
law and required for the efficient running of a business.
Cultural Relativism
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D) Cultural relativism is the belief that ethics are culturally determined and that firms should adopt the
ethics of the cultures in which they operate, or in other words, “when in Rome, do as the Romans do.”
The Righteous Moralist
E) The righteous moralist approach to business ethics claims that a multinational’s home country standards
of ethics are the appropriate ones for companies to follow in foreign countries. The main criticism of the
righteous moralist approach is that its proponents go too far.
The Naïve Immoralist
F) The naïve immoralist asserts that if a manager of a multinational sees that firms from other nations are
not following ethical norms in a host nation, that manager should not either.
Utilitarian and Kantian Ethics
G) In contrast to the straw men, most moral philosophers see value in utilitarian and Kantian approaches
to business ethics. The utilitarian approach to business ethics dates back to philosophers such as David
Hume, Jeremy Bentham, and John Stuart Mill. Utilitarian approaches to ethics hold that the moral
worth of actions or practices is determined by their consequences. An action is judged to be desirable if it
leads to the best possible balance of good consequences over bad consequences.
H) One problem with the utilitarian approach is measuring the benefits, costs, and risks of a course of
action. A second problem is that the philosophy fails to consider justice.
I) Kantian ethics are based on the philosophy of Immanuel Kant who argued that people should be
treated as ends and never purely as means to the ends of others.
Rights Theories
J) Rights theories recognize that human beings have fundamental rights and privileges that transcend
national boundaries and culture. Moral theorists argue that fundamental human rights form the basis for
the moral compass that managers should navigate by when making decisions that have an ethical
component.
K) The notion that there are fundamental rights that transcend national borders and cultures was the
underlying motivation for the United Nations’ Universal Declaration of Human Rights which specifies
the basic principles that should always be adhered to irrespective of the culture in which one is doing
business.
Justice Theories
L) Justice theories focus on the attainment of a just distribution of economic goods and services. A just
distribution is one that is considered fair and equitable. There is no one theory of justice, and several
theories of justice conflict with each other in important ways. One important and influential theory of
justice was set forth by John Rawls who argued that all economic goods and services should be distributed
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equally except when an unequal distribution would work to everyone’s advantage.
M) Impartiality under Rawls’ theory is guaranteed by the veil of ignorance (everyone is imagined to be
ignorant of all his or her particular characteristics). Rawls suggests that under these conditions, people
would unanimously agree on two fundamental principles of justice. First, that each person is permitted
the maximum amount of basic liberty compatible with a similar liberty for others, and second, that once
equal basic liberty is assured, inequality in basic social goods is to be allowed only if it benefits everyone.
N) Rawls formulates what he calls the difference principle, which is that inequalities are justified if they
benefit the position of the least advantaged person. The text provides examples of how Rawls’ theory can
be used as the moral compass that managers can use to help them navigate through difficult ethical
dilemmas.
FOCUS ON MANAGERIAL IMPLICATIONS
A) Five things an international business can do to make sure that ethical issues are considered in a
business decision are (1) favor hiring and promoting people with a well grounded sense of personal
ethics; (2) build an organizational culture that places a high value on ethical behavior; (3) make sure that
leaders within the business not only articulate the rhetoric of ethical behavior, but also act in manner that
is consistent with that rhetoric; (4) put decision making processes in place that require people to consider
the ethical dimension of business decisions; (5) develop moral courage.
Hiring and Promotion
B) Not only should businesses strive to identify and hire people with a strong sense of personal ethics, but
it is also in the interests of prospective employees to find out as much as they can about the ethical climate
in an organization. Table 5.1 in the text provides a list of questions that job seekers might want to ask a
prospective employer.
Organization Culture and Leadership
C) To foster ethical behavior, businesses need to build an organization culture that places a high value on
ethical behavior. Three things are particularly important. First, the business must explicitly articulate
values that place a strong emphasis on ethical behavior, perhaps using a code of ethics (a formal statement
of the ethical priorities a business adheres to). Second, leaders in the business should give life and
meaning to the code of ethics by repeatedly emphasizing its importance, and then acting on it. Third, the
business should put in place a system of incentives and rewards that recognize people who engage in
ethical behavior and sanction those who do not.
D) Business people need a moral compass to help determine whether a decision is ethical. According to
experts if a business person can answer “yes” to the following questions, the decision is ethically
acceptable. First, does my decision fall within the accepted values of standards that typically apply in the
organizational environment? Second, am I willing to see the decision communicated to all stakeholders
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affected by it? Third, would the people with whom I have significant personal relationships approve of the
decision?
Video Note: Coca Cola has been criticized for its actions in India where it has been accused of failing to
act in a socially responsible way. To learn more, consider the iGlobe Indian Farmers, Coca-Cola Vie for
Scarce Water Supply.
E) Others have recommended a five step process to think through ethical problems. In Step 1, business
people should identify which stakeholders (the individuals or groups who have an interest, stake, or claim
in the actions and overall performance of a company) a decision would affect and in what ways. Internal
stakeholders include those who work for or who own the business such as employees, the board of
directors, and stockholders. External stakeholders are the individuals or groups who have some claim
on a firm such as customers, suppliers, and unions.
F) Step 2 involves judging the ethics of the proposed strategic decision given the information gained in
Step 1. Managers need to determine whether a proposed decision would violate the fundamental rights of
any stakeholders.
G) Step 3 requires managers to establish moral intent (the business must resolve to place moral concerns
ahead of other concerns in cases where either the fundamental rights of stakeholders or key moral
principles have been violated).
H) Step 4 requires the company to engage in ethical behavior. Step 5 requires the business to audit its
decisions, reviewing them to make sure that they are consistent with ethical principles.
Ethics Officers
I) To encourage ethical behavior in a business, a number of firms now have ethics officers who are
responsible for making sure all employees are trained to be ethically aware, that ethical considerations
enter the business decision-making process, and that the company’s code of ethics is followed.
Moral Courage
J) It is important to recognize that employees in an international business may need significant moral
courage.
Summary of Decision-Making Steps
K) In the end, there are clearly things that an international business should do, and there are things that an
international business should not do, but there are also actions that present managers with true dilemmas.
Critical Thinking and Discussion Questions

1. A visiting American executive finds that a foreign subsidiary in a poor nation has hired a 12-year old
girl to work on a factory floor, in violation of the company’s prohibition on child labor. He tells the local
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manager to replace the child and tell her to go back to school. The local manager tells the American
executive that the child is an orphan with no other means of support, and she will probably become a
street child if she is denied work. What should the American executive do?
Answer: This question, illustrating a potentially very real ethical dilemma facing managers working in
subsidiaries located in developing countries, is designed to stimulate class discussion. Students should
recognize that neither alternative—violating the company’s position on child labor, nor putting the child
out on the streets—seems acceptable. In the end, many students may agree that allowing the child to
continue to work in the factory is the lesser of the two evils.
2. Drawing upon John Rawls’ concept, the veil of ignorance, develop an ethical code that will
(a) guide the decisions of a large oil multinational towards environmental protection, and
(b) influence the policies of a clothing company to outsource its manufacturing process.
Answer: According to John Rawls, a decision is just and ethical if people would allow for it when
designing a social system under a veil of ignorance. Rawls’ veil of ignorance is a conceptual tool that can
contribute towards the moral compass that managers can use to help them navigate through difficult
ethical dilemmas. This question can produce some interesting responses particularly in a class with a
diverse group of nationalities.
3. Under what conditions is it ethically defensible to outsource production to the developing world where
labor costs are lower when such actions also involve laying off long-term employees in the firm’s home
country?
Answer: This question is likely to stimulate some lively discussion, particularly if students have
personally felt the impact of this practice. Many American companies are outsourcing not only blue collar
work, but also white collar positions to the developing world. Students are facing a tenuous job market
where positions that they may have sought when they began their college degrees are being “shipped
abroad.” Some students will argue that companies have to do what is best for all stakeholders, and if that
means taking advantage of cheaper labor costs elsewhere, then that is the appropriate strategy. Others
however, will probably argue that companies owe a social debt to their home countries, and that loyalty
from long-term employees should be rewarded.
4. Are facilitating payments ethical?
Answer: Students will probably be divided on this question, and a lively debate should ensue. Certainly,
the notion of when in Rome, do as the Romans do could be argued. However, those taking this
perspective should recognize that it may be difficult to draw the line on exactly what is acceptable under
this guise, and when bribery goes too far.
5. A manager from a developing country is overseeing a multinational’s operations in a country where

drug trafficking and lawlessness are rife. One day, a representative of a local “big man” approaches the
manager and asks for a “donation” to help the “big man” provide housing for the poor. The representative
tells the manager that in return for the donation, the “big man” will make sure that the manager has a
productive stay in his country. No threats are made, but the manager is well aware that the “big man”
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heads a criminal organization that is engaged in drug trafficking. He also knows that the big man does
indeed help the poor in the run down neighborhood of the city where he was born. What should the
manager do?
Answer: Many students will probably suggest that the manager should not accept the assistance of the
“big man”, nor make the recommended “donation”. Students taking this perspective are likely to suggest
that doing so would be unethical, and that if the manager really wants to help poor people it can give a
more legitimate donation. Other students however may point out that the “big man” could make life very
difficult for the manager, or he could really help the manager. Some students may argue that, in order to
satisfy stakeholders, the managers should meet the demands of the ‘big man”. Still other students will
probably point out that if conditions in the country are so poor, the company should simply take its
investments elsewhere.
Lecture Note: Mexico’s drug trafficking problem is currently prompting many foreign companies to
rethink their investments in the country. To learn more, go to {http://www.businessweek.com/ap/2012-
09-13/mexico-purported-gulf-drug-cartel-leader-caught} and
{http://www.businessweek.com/technology/content/feb2009/tc2009022_069976.htm}.
6. Reread the Management focus feature on Unocal and answer the following questions:
a) Was it ethical for Unocal to enter into a partnership with a brutal military dictatorship for financial
gain?
b) What actions could Unocal have taken, short of not investing at all, to safeguard the human rights of
people impacted by the gas pipeline project?
Answer: Many students will probably agree that it was unethical for Unocal to partner with Myanmar’s
military dictatorship. Students taking this perspective will probably point out that at the time of the
investment many American companies were actually leaving the country in protest of the political
situation there. Other students however may note that the partnership offered Unocal the opportunity to
generate significant returns, and that the company had an obligation to its shareholders to make profits.
Students taking this point of view may also indicate that in addition to the profits that the project
generated for shareholders, it also helped Myanmar’s economic situation, and therefore the country’s 43
million people. Some students may suggest that if Unocal decided to form the partnership, it should have
done so only with a clear policy in place to protect the human rights of the Myanmar people. Students
may suggest for example, that the partnership should only have gone ahead if plans were in place to help
the villagers who lost their homes, and that certainly the villagers should not have been used as slave
labor. Most students will probably agree that Unocal’s claims of ignorance of the situation are weak at
best. Students will probably suggest that in a country where other companies are leaving because of the
brutal political situation, Unocal had an even greater obligation to be aware of how its presence might
affect the population.
Closing Case: Working Conditions in a Chinese Factory

Summary
5-15
The closing case describes the deplorable working conditions at the Metai factory in China that supplies
computer parts directly to U.S. computer maker Dell, and indirectly to Hewlett Packard and Lenovo.
Workers at the factory work long hours doing monotonous tasks and have just two days off per month.
Wages are very low, and employees are forbidden to converse, listen to music, or even take bathroom breaks
while on the job. When alerted to the conditions at the factory, all three companies expressed dismay and
promised prompt investigations and appropriate action. Discussion of the case can revolve around the
following questions.
QUESTION 1: What enables the owners of the Metai factory profiled in this case to get away with such
awful working conditions?
ANSWER 1: Students will probably suggest that many factors contribute to the appalling conditions at the
Metai factory. They may note for example, that because the factory is an indirect supplier for some of its
major customers, there is no direct oversight of factory conditions. If the Metai factory directly supplied
Lenovo or Hewlett Packard, it might not be able to get away with some of its unethical practices.
Students may also suggest that workers in the factory have limited means of communicating the
conditions or working to get them changed, again enabling the status quo to continue. Some students may
also note that the factory may not be in violation of local regulations, again a situation that would make it
easier for the factory to continue to force employees to work in substandard conditions.
QUESTION 2: Should U.S. companies like Microsoft, Dell, and Hewlett-Packard be held responsible for
working conditions in foreign factories that they do not own, but where subcontractors make products for
them?
ANSWER 2: Many students will be shocked by the poor working conditions at the Metai factory and
suggest that Dell should certainly demand that its supplier make changes. Students taking this perspective
may argue that Dell has an ethical responsibility to ensure that the products it sells are not harmful to
anyone. Other students however, may disagree and claim that Dell has no right to impose its own ethical
values on another company particularly when it is located in another country. Students taking this point of
view may point out that Dell can switch suppliers if it is not comfortable with its existing one.
QUESTION 3: What labor standards regarding safety, working conditions, overtime, and the like, should
U.S. companies hold foreign factories to: those prevailing in that country or those prevailing in the United
States?
ANSWER 3: This is a difficult question. On one hand, students will probably argue that companies
should be held to whichever standards are higher. On the other hand, students may note that demanding
that a company meet higher, more expensive standards when other companies are not doing so could put
the company at a competitive disadvantage.
QUESTION 4: Do you think the U.S. companies mentioned in this case need to make any changes to their
current policies? If so, what? Should they make changes even if they hinder their ability to compete in
the marketplace?
5-16
ANSWER 4: Most students will agree that companies like Hewlett Packard, Microsoft, and Dell should be
held responsible for ensuring their suppliers, even those who are indirect, should act in an ethically
responsible manner. That being said, students will probably also agree that it could be very difficult, and
perhaps impossible, to inspect every company that supplies parts. Most students will agree though, that at
minimum the companies should demand that direct suppliers act ethically, and perhaps agree to a clearly
defined ethical policy, and also require direct suppliers to ensure that their suppliers are also acting in an
ethical manner.
Lecture Note: Apple has found itself in trouble recently as reports of substandard working conditions at its
supplier Foxconn surfaced. To learn more, consider {http://www.businessweek.com/ap/2012-09-25/apple-
suppliers-factory-back-up-after-china-brawl} and {http://www.businessweek.com/ap/2012-10-06/chinese-
iphone-workers-strike-over-quality-demands}.
Video Note: The iGlobe Growing Internet Use in China Reflects Changing Society examines freedom of the
press in China and Google’s decision to enter the Chinese market despite the filtering system required by
the Chinese government.
Continuous Case Concept
The auto industry, as Continuous Case Concept in Chapter 1 demonstrated, is a global one.
Manufacturing takes place across the globe, and auto companies rely on suppliers around the world to
produce quality parts at a reasonable cost.
 Ask students whether the auto companies should run their foreign operations according to the
ethical standards in the host country or according to home country standards. Honda recently
agreed to raise its compensation rate in China after striking employees threaten to disrupt the
company’s production process, yet wage rates in China are still substantially below those in other
markets.
 Then, ask students to consider how companies like Ford and BMW can reconcile how their
suppliers run their operations with their own ethics policies. Do Ford and BMW have any
responsibility to ensure that suppliers make ethical decisions?
 Finally, reflect on the notion of social responsibility especially towards the environment and how it
is forcing changes in the auto industry. Brazil, the seventh largest auto-producing nation in the
world, recently announced that all new vehicles must meet new safety standards. The country also
said that automakers that exceed these standards and/or produce more fuel efficient cars will be
entitled to new tax breaks.
This exercise is useful for expanding the discussion of Ethical Issues in International Business, especially
with regard to Employment Practices, Human Rights, and Environmental Pollution. The exercise also
works well with the discussion of the role of leaders in ethical decision making, and with the material on
ethics officers.
5-17
globalEDGE Exercises
Use the globalEDGE Resource Desk {http://globalEDGE.msu.edu/ResourceDesk/} to complete the

following exercises.
Exercise 1
The report can be accessed by searching for the term "Guidelines for Multinational Enterprises" at
http://globaledge.msu.edu/Reference-Desk. The "Organization for Economic Cooperation and
Development (OECD) - Guidelines for Multinational Enterprises" is the only source in this search and can
also be found under the globalEDGE categories "Global" and "Corporate Governance". Once on the
OECD website, follow the "Text of the Guidelines" link on the right column to find and download the full
text to complete the exercise.
Search Phrase: "Guidelines for Multinational Enterprises"

Resource Name: Organization for Economic Cooperation and Development (OECD) -Guidelines for
Multinational Enterprises
Resource Link: http://globaledge.msu.edu/global-resources/resource/1337
globalEDGE Categories: "Global" and "Corporate Governance"
Exercise 2
The report can be accessed by searching for the term "integrity performance" at
http://globaledge.msu.edu/Reference-Desk. The Global Integrity Report is a study published by Global
Integroty. This resource is found under the globalEDGE categories "Global" and "Corporate Governance".
Search Phrase: "integrity performance"

Resource Name: Global Integrity
Resource Link: http://globaledge.msu.edu/global-resources/resource/1334
globalEDGE Categories: "Global" and "Corporate Governance"
Additional Readings and Sources of Information
The U.S. Goes After Bribery on a Budget

http://www.businessweek.com/magazine/the-us-goes-after-bribery-on-a-budget-01192012.html
Judge in No Hurry to Hear Wal-Mart Bribery Lawsuit

http://www.businessweek.com/ap/2012-07-16/judge-in-no-rush-to-hear-wal-mart-bribery-lawsuit
News Summary: Pfizer Settles Bribery Allegations

http://www.businessweek.com/ap/2012-08-07/news-summary-pfizer-settles-bribery-allegations
5-18
Will Foxconn Findings Change Apple’s Supply Chain

http://www.businessweek.com/videos/2012-03-29/will-foxconn-findings-change-apples-supply-chain
No Company Follows Apple's Expanded China Factory Audits

http://www.businessweek.com/technology/no-company-follows-apples-expanded-china-factory-audits-
02272012.html
The Higher Costs of Bribery in China

http://www.businessweek.com/magazine/content/10_29/b4187011931530.htm
5-19

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Chapter 05 - Ethics in International Business

Solution Manual for Global Business Today 8th Edition by Hill

Solution manual: https://testbankpack.com/p/solution-manual-for-global-business-today-

Ethics in International Business

ETHICAL ISSUES IN INTERNATIONAL BUSINESS

THE ROOTS OF UNETHICAL BEHAVIOR

PHILOSOPHICAL APPROACHES TO ETHICS

FOCUS ON MANAGERIAL IMPLICATIONS

Hiring and Promotion

CRITICAL THINKING AND DISCUSSION QUESTIONS

CLOSING CASE: Working Conditions in a Chinese Factory

2. Recognize an ethical dilemma.

3. Identify the causes of unethical behavior by managers.

4. Describe the different philosophical approaches to ethics.

Opening Case: Exporting Used Batteries to Mexico

Suggested Discussion Questions

Teaching Tip: Students can explore Johnson Controls’ global operations at

Teaching Tip: The Carnegie Council on Ethics and International Affairs’

ETHICAL ISSUES IN INTERNATIONAL BUSINESS

Management Focus: Making Apple’s iPOD

Suggested Discussion Questions

Teaching Tip: Consumers International {http://www.consumersinternational.org/} is dedicated to

Management Focus: Unocal in Myanmar

Suggested Discussion Questions

Teaching Tip: Daimler is no long part of Chrysler. To learn more go to

THE ROOTS OF UNETHICAL BEHAVIOR

Decision Making Processes

Unrealistic Performance Expectations

PHILOSOPHICAL APPROACHES TO ETHICS

The Friedman Doctrine

The Righteous Moralist

The Naïve Immoralist

Utilitarian and Kantian Ethics

equally except when an unequal distribution would work to everyone’s advantage.

FOCUS ON MANAGERIAL IMPLICATIONS

Hiring and Promotion

Organization Culture and Leadership

Decision Making Processes

Summary of Decision-Making Steps

Critical Thinking and Discussion Questions

4. Are facilitating payments ethical?

5. A manager from a developing country is overseeing a multinational’s operations in a country where

Closing Case: Working Conditions in a Chinese Factory

Continuous Case Concept

Use the globalEDGE Resource Desk {http://globalEDGE.msu.edu/ResourceDesk/} to complete the

Search Phrase: "Guidelines for Multinational Enterprises"

Search Phrase: "integrity performance"

Additional Readings and Sources of Information

The U.S. Goes After Bribery on a Budget

Judge in No Hurry to Hear Wal-Mart Bribery Lawsuit

News Summary: Pfizer Settles Bribery Allegations

Will Foxconn Findings Change Apple’s Supply Chain

No Company Follows Apple's Expanded China Factory Audits

The Higher Costs of Bribery in China

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