IB. Chap 04

Chapter 4
Ethics in
International Business
MSc. Pham Thi Phuong
Email: phamthiphuong@vnu.edu.vn
Tel: +84 986 030 195
References
Hill, Charles WL. Global business Chapter 04

today, 10th Edition, New York:
McGraw-Hill Irwin, 2011.
MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

CONTENTS
1. What is Ethics?
2. Ethical Issues in IB
3. The Roots of Unethical Behavior
4. Philosophical Approaches to
Ethics
5. How Can Managers Make

Ethical Decisions?
1. MSc.Pham Thi Phuong – phamthiphuong@vnu.edu

01
WHAT IS ETHICS?

Business Ethical
Ethics
Ethics strategy
Refers to accepted The accepted A strategy, or course
principles of right or wrong principles of right or of action, that does
that govern wrong governing the not violate these
• the conduct of a person conduct of business accepted principles
• the members of a people
profession
• the actions of an
organization
Your Company Name

BUSINESS ETHICS
What “ Business ethics refers to implementing appropriate business policies

and practices with regard to potentially controversial issues
”
Why Enables business people to make responsible decisions and maintain
highly ethical behavior when running a business
Public Approval

10
02
Ethical Issues
in International Business

Ethical Issues in International Business
Employment Environmental
Human rights
practices regulations
The moral
Corruption
obligations

Employment practices
Suppose work conditions in a Which standards should apply?

host nation are clearly inferior • home country standards
to those in the multinational’s • host country standards
home nation • something in between

NIKE: Sweatshop Problem 1990s
Sub-contractors
Indonesia
Vietnam
China

How Nike Solved Its Sweatshop Problem
1999: The Fair Labor Association
2002-2004: 600 factory audits
2005: the first firm in its industry to publish a complete list of the
factories it contracts with.
2005-Present: continues to post its commitments, standards, and

audit data as part of its corporate social responsibility reports.

Human rights
Basic human rights are taken for

granted in developed countries What are the responsibilities of
• freedom of association firms in countries where basic
• freedom of speech human rights are not
• freedom of assembly respected?
• freedom of movement

Environmental Regulations
Tragedy of the commons
Some parts of the environment are occurs when a resource held in
a public good that no one owns, but common by all, but owned by no
one, is overused by individuals,
anyone can despoil resulting in its degradation
Ethichal?
What happens when environmental regulations in host nations are
far inferior to those in the home nation?
Is it permissible for multinationals to pollute in developing countries

simply because there are no regulations against it?
Corruption
Corrupt governments Grease payments
“Gift Giving” à Bribery à speed up standard procedures.
Ethichal?
Is it permissible for multinationals to pay government officials

facilitating payments if doing so creates local income and jobs?

Moral
Obligations
“ the idea that managers should
consider the social consequences of The right way for a business to behave
economic actions when making
business decisions, and that there
should be a presumption in favor of Noblesse Oblige
decisions that have both good à give something back to the societies that
economic and good social
have made their success possible
consequences
” MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

Ethical
Dilemmas The ethical obligations of a multinational
corporation toward employment conditions,
“ situations in which
human rights, corruption, environmental
pollution, and the use of power are not always
none of the available clear cut
alternatives seems
ethically acceptable Culture
Differrences?
” MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn
03
THE ROOTS OF UNETHICAL BEHAVIOR

Personal
ethics
Employment practices
Unrealistic Decision
Performance Making
Environmental regulations
Goals Processes
Unethical
Behavior Human rights
Corruption
Organization
Leadership
Culture The moral obligations

WHY DO MANAGERS BEHAVE UNETHICALLY?
Expatriate managers may face pressure

to violate their personal ethics because
they are away from their ordinary social
1. Personal Ethics out of their context and supporting culture
are derived from parents, environment
from schools, from religion,

from the media,... ß Their Managers fail to question whether a
environment decision or action is ethical, and instead
rely on economic analysis when making
decisions

2. Decision-making 3. Organizational culture

◈ the values and norms that are ◈ organizational culture can legitimize
shared among employees of an unethical behavior or reinforce the
organization need for ethical behavior
◈ organization culture that does not

emphasize business culture
encourages unethical behavior

4. Unrealistic performance 5. Leadership

expectations ◈ helps establish the culture of an
◈ encourage managers to cut corners organization, and set the examples
or act in an unethical manner that others follow
◈ when leaders act unethically,

subordinates may act unethically,
too

04
PHILOSOPHICAL APPROACHES TO
ETHICS

WHAT ARE THE PHILOSOPHICAL
APPROACHES TO ETHICS?
There are several different approaches to business ethics
v Straw men approaches either deny the value of business ethics

or apply the concept in an unsatisfactory way
v Other approaches are favored by moral philosophers and are the

basis for current models of ethical behavior

The Straw Men Approaches To Business Ethics
Friedman doctrine Cultural relativism
the only social responsibility of ethics are culturally determined and
All approaches
business is to increase profits, so firms should adopt the ethics of the
offer
long as the company stays within the cultures in which they operate
inappropriate
rules of law “when in Rome, do as the Romans do”
guidelines for
ethical
Righteous moralist Naïve immoralist
if a manager of a MNC sees that firms decision
a multinational’s home country
from other nations are not following making
standards of ethics should be
ethical norms in a host nation, that
followed in foreign countries
manager should not either

Utilitarian Kantian ethics
“ the moral worth of actions or practices is
determined by their consequences
” Immanuel Kant
(1724- 1804)
• Actions are desirable if they lead to the
best possible balance of good
consequences over bad consequences
• But, it is difficult to measure the benefits,

costs, and risks of an action • People should be treated as ends
and never purely as means to
• The approach fails to consider justice
the ends of others
Rights Theories Universal Declaration
of Human Rights
specifies the basic principles that
“ human beings have

should always be adhered to
irrespective of the culture in
fundamental rights and which one is doing business
privileges which
transcend national
boundaries and cultures
Moral theorists argue that fundamental human
” rights form the basis for the moral compass that
managers should navigate by when making
decisions which have an ethical component
Justice
Theories John Rawls
(1921-2002)
“ focus on the
attainment of a just
distribution of • All economic goods and services should be
distributed equally except when an unequal
economic goods distribution would work to everyone’s advantage”
and services
”
• Impartiality is guaranteed by the veil of ignorance -
everyone is imagined to be ignorant of all his or her
particular characteristics

PART
05
HOW CAN MANAGERS
MAKE ETHICAL DECISIONS?

HOW CAN MANAGERS MAKE ETHICAL
DECISIONS?
To encourage ethical decision making, firms should
1 Hire and promote people with a well grounded sense of personal ethics
• refrain from promoting individuals who have acted unethically
• prospective employees should find out as much as they can about the ethical climate in
an organization prior to taking a position
2 Build an organizational culture that places a high value on ethical behavior

• articulate values that place a strong emphasis on ethical behavior
• emphasize importance of code of ethics - formal statement of the ethical priorities a
business adheres to
• implement a system of incentives and rewards that recognize people who engage in
ethical behavior and sanction those who do not
DECISIONS?
3 Make sure that leaders within the business articulate the rhetoric of ethical
behavior and act in a manner that is consistent with that rhetoric
4 Develop moral courage

• enables managers to walk away from a decision that is profitable, but unethical
• gives an employee the strength to say no to a superior who instructs her to pursue
actions that are unethical
• gives employees the integrity to go public to the media and blow the whistle on
persistent unethical behavior in a company

DECISIONS?
Put decision making processes in place that require people to
5
consider the ethical dimension of business decisions
Ask whether
• decisions fall within the accepted values of standards that typically apply in
the organizational environment
• decisions can be communicated to all stakeholders affected by it
• if colleagues would approve of decisions

HOW CAN MANAGERS MAKE ETHICAL DECISIONS?
Managers can also use a five step process to think through ethical problems
2. Determine whether a 3. Establish moral intent

1. Identify which
proposed decision (place moral concerns ahead of
stakeholders a decision
would violate the other concerns in cases where
would affect and in either the fundamental rights of
fundamental rights of
what ways stakeholders or key moral
any stakeholders principles have been violated)
5. Audit decisions and

review them to make
4. Engage in ethical
sure that they are
behavior
consistent with ethical
principles

WHAT IS AN ETHICS OFFICER?
v Ethics officers ensure
• all employees are trained in ethics
• ethics is considered in the decision-making process
• the company’s code of conduct is followed
v In the end, there are clearly things that an international business should do, and
there are things that an international business should not do
v But, not all ethical dilemmas have a clean and obvious solution

REVIEW
QUESTION
Your Company Name 39

ThS. Phạm Thị Phượng – phamthiphuong@vnu.edu.vn
REVIEW QUESTION
All of the following except ____ contribute to unethical
behavior by international managers.
a) Decision-making processes
b) Leadership
c) Personal ethics
d) National culture

REVIEW QUESTION
According to ________, a company’s home country standards of ethics
are the appropriate ones to follow in foreign countries.
a) the righteous moralist
b) the naïve immoralist
c) the Friedman doctrine
d) cultural relativism

REVIEW QUESTION
________ recognize that human beings have fundamental rights and
privileges which transcend national boundaries and cultures.
a) Kantian ethics
b) Utilitarian approaches
c) Straw men
d) Rights theories

REVIEW QUESTION
The _____ suggests that everyone is imagined to be ignorant of all his
or her particular characteristics.
a) tragedy of the commons
b) veil of ignorance
c) code of ethics
d) the Universal Declaration of Human Rights

REVIEW QUESTION
What is a company’s formal statement of ethical priorities called?
a) Mission statement
b) Code of ethics
c) Code of values
d) Organizational culture

REVIEW QUESTION
Which is not an area where multinational firms are concerned
about ethics?
a) Human rights
b) Trade regulations
c) Environmental regulations
d) Corruption

THE END
Your Company Name 46
ThS. Phạm Thị Phượng – phamthiphuong@vnu.edu.vn

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Chapter 4

Hill, Charles WL. Global business Chapter 04

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

3. The Roots of Unethical Behavior

5. How Can Managers Make

1. MSc.Pham Thi Phuong – phamthiphuong@vnu.edu

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

Your Company Name

What “ Business ethics refers to implementing appropriate business policies

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

Suppose work conditions in a Which standards should apply?

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

2002-2004: 600 factory audits

2005-Present: continues to post its commitments, standards, and

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

Basic human rights are taken for

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

Is it permissible for multinationals to pollute in developing countries

“Gift Giving” à Bribery à speed up standard procedures.

Is it permissible for multinationals to pay government officials

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

” MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

Expatriate managers may face pressure

from schools, from religion,

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

2. Decision-making 3. Organizational culture

◈ organization culture that does not

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

4. Unrealistic performance 5. Leadership

or act in an unethical manner that others follow

◈ when leaders act unethically,

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

There are several different approaches to business ethics

v Straw men approaches either deny the value of business ethics

v Other approaches are favored by moral philosophers and are the

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

• But, it is difficult to measure the benefits,

“ human beings have

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

2 Build an organizational culture that places a high value on ethical behavior

4 Develop moral courage

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

• decisions can be communicated to all stakeholders affected by it

• if colleagues would approve of decisions

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

2. Determine whether a 3. Establish moral intent

5. Audit decisions and

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

Your Company Name 39

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn

a) the righteous moralist

b) the naïve immoralist

c) the Friedman doctrine

MSc.Pham Thi Phuong – phamthiphuong@vnu.edu.vn