Lesson 7:Business Ethics

Business Ethics

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What are the various ethical principles governing global business?
The ethical principles governing global business include:
NAFTA
Caux Principles
US Model Business Principles
 These principles are based on notion that we can all live
together and act for the common good.
 The Caux principles are rooted from : Kyosie and human
dignity.
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 The Japanese concept of Kyosei means living and working
together for co-operation, mutual prosperity and to coexist
with healthy and fair competition.
The principle included under the above three heads are:

1. The value of a business to society is the employment it crates

and the marketable product and practices it provides with
quality.

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2. To create such a value, a business must maintain its own economic
health and viability; only survival is not a sufficient goal
3. business established in foreign countries to develop, produce or
sell, should also contribute to the social advancement of those
countries.

4. Business should also contribute to human rights, education,

welfare of the countries in which they operate.

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5. To promote fair trade, equal conditions of competitions for all
participants, business should respect international and domestic
rules.
6. Business should support the multilateral trade systems of the
WTO and similar international agreements.

7. A business should not participate in bribery, money

laundering, or other corrupt practices.

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Some of the issues that makes international business ethics more
complex

 Three important issues that make international business

ethics more complex because of cultural differences of
countries:
1. The ethics of doing business in nations that violate human
rights.
2. Doing business in countries where not strict labor and
environmental regulations
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Ethics and Human Rights:

 Major ethical problems facing companies from democratic

nations, when they are doing business in totalitarian
countries, such as China, that routinely violate the human
rights of their citizens.
 There are two side of issues. Some argue that investing in
totalitarian countries provides comfort to dictators and can
help these regimes that abuse basic human rights.

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 Some argue that western investments, by raising the level of
economic development of a totalitarian country, can
cultivate democratization.
 They note that economic well being and political freedoms
often go hand in hand.
Since both positions have some merit and difficulties. Unless
firms must make its own judgments about the ethical
implications of investing in totalitarian states.

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Ethics and regulations:
 Second important ethical issues is whether an international
firm should hold to the same standards of product safety,
work safety and environmental protection that are required in
its home country.
 In western nations, where product safety, worker safety, and
environmental protection laws are among the toughest in the
world.

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 Should Western firms investing in less developed countries
apply the western standards, even though local regulation
don’t require them to do so?
 in recent years claimed, that Western enterprises have been
using child labor or very poorly paid “Sweatshop” labor in
developing nations.

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 if apply the western standards will make the foreign
investment unprofitable, thereby denying the host country job
and income creation? Which one is ethical to do?

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Ethics and Corruption:

 Should an international business pay bribes to corrupt

government officials to gain market access to a foreign
country?
 On western nations bribery seems to be a corrupt and
morally unacceptable.

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 In many part of the world, payment to government officials
are common.
 Some argue that not investing ignores the fact that such
investment can bring substantial benefits to the local people in
terms of income and jobs.
 The practice of giving bribes, although a little evil, might be
better to pay, to do a greater good (assuming that investment
creates jobs and assuming the practice is not illegal).

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 Several economist suggesting that in the context of
cumbersome regulations in developing countries, corruption
may actually improve efficiency and help growth!
 However, other economists have argued that corruptions
reduce the returns of business investments and leads to low
economic growth.

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 Operating abroad, especially in low developing countries
creates more problem as people would blame the operators for
serious ethical feelings.
 Multinational corporations generally recognize a social
responsibility and attempt to fulfills the responsibility at all
places.

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