Chapter five

Ethics in International Business

Being good is good business

4-1
 Introduction
Ethics - 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
Ethical strategy is a strategy, or course of
action, that does not violate these accepted
principles

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 Ethical Issues in International Business
The most common ethical issues in business
involve:
employment practices
human rights
environmental regulations
corruption
the moral obligation of multinational
companies

4-3
 Employment Practices
Question: When work conditions in a host nations are
clearly inferior to those in a multinational’s home
nation, what standards should be applied?

The standards of the home nation?

The standards of the host nation?
Something in between?
Tolerating unsafe working /hours conditions or paying
employees below-market rates to reduce costs of
production. Failure to protect workers against toxic
chemicals
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 Human Rights
Question: What is the responsibility of a
foreign multinational when operating in a
country where basic human rights are not
respected?

Basic human 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 not universally accepted
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 Environmental Pollution
Question: Should a multinational feel free to pollute in a
developing nation if doing so does not violate laws?
Answer:
 When environmental regulations in host nations are far
inferior to those in the home nation, ethical issues arise
 Many developed nations have substantial regulations
governing the emission of pollutants, the dumping of toxic
chemicals, the use of toxic materials in the workplace, and
soon.
 Those regulations are often lacking in developing nations,
and according to critics, the result can be higher levels of
pollution from the operations of multinationals than would
be allowed at home. 4-6
 Corruption
Question: Is it ethical to make payments to
government officials to secure business?

4-7
 Corruption
Some economists suggest that the practice of giving
bribes might be the price that must be paid to do a
greater good
In countries where preexisting political structures
distort or limit the workings of the market
mechanism, corruption in the form of black-
marketing, smuggling, and side payments to
government bureaucrats to “speed up” approval for
business investments may actually enhance welfare
However, other economists have argued that corruption
reduces the returns on business investment and leads to
low economic growth
4-8
 Moral Obligations
Question: Do multinationals have a responsibility to
give back to the societies that enable them to grow and
prosper?

Answer:
Social responsibility - 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
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 Ethical Dilemmas
Managers often face situations where the appropriate
course of action is not clear
Ethical dilemmas - situations in which none of the
available alternatives seems ethically acceptable.
They exist because real world decisions are complex,
difficult to frame, and involve various consequences
that are difficult to quantify.
There may be no agreement about accepted ethical
principles. From an international business
perspective, some argue that what is ethical depends
upon one’s cultural perspective.
Employing child labor is not acceptable, but if it is
the only source of income.
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 The Roots of Unethical Behavior
Question: Why do managers behave in an unethical
manner?
Answer:
Managerial behavior is influenced by
Personal ethics
Decision making processes
Organizational culture
Unrealistic performance expectations
Leadership

4-11
 The Roots of Unethical Behavior
Figure 4.1: Determinants of Ethical Behavior

4-12
 Personal Ethics
Business ethics reflect personal ethics (the generally
accepted principles of right and wrong governing the
conduct of individuals),code of ethics.
 Expatriates may face pressure to violate their
personal ethics because
they are away from their ordinary social context
and supporting culture
they are psychologically and geographically
distant from the parent company
it is wrong to lie and cheat, it is unethical and that it is
right to behave with integrity and honor.
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 Decision Making Processes
Studies show that business people may behave
unethically because they fail to ask the
relevant question - is this decision or action
ethical?
decisions are made based on economic
logic, without consideration for ethics

4-14
 Organizational Culture
Unethical behavior may exist in firms with an
organization culture - the values and norms
that are shared among employees of an
organization - that does not emphasize
business ethics
Values and norms shape the culture of a
firm, and that culture influences decision
making

4-15
 Unrealistic Performance Expectations

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 can cause unethical
behavior

4-16
 Leadership

If a firms leaders fail to act in an ethical

manner, other employees may not act ethically
actions speak louder than words

4-17
 LOVE CONTRIBUTION

Co n
trib
utio
n

Par
tici
pat
io
To be a model, bring change,

Sta
g nat
ion

12/30/23 18 4-18
 END!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

4-19
 Don't settle for less!
 A bottle of water in the supermarket is worth about 10Birr. The
same bottle in a bar cost 15 Birr. In a good restaurant or hotel,
it can be worth up to Rs. 20 Birr. At an airport or on the plane,
you may be charged 50Birr. The bottle and the brand are the
same, the only thing that changes is the place. Each place gives
a different value to the same product. When you feel like you are
worth nothing and everyone around you belittles you, change
places, do not stay there. Have the courage to change places
and go to a place where you are given the value you deserve.
Surround yourself with people who really appreciate your worth.
Don't settle for less!

4-20