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Ethics in International Business

Law and Ethics

Ethics A set of moral principles or values that governs the conduct of an individual or a group.  What is lawful conduct is not always ethical conduct.

The law may permit something that would be

ethically wrong.

Ethics in International Business

Source of ethical challenges in IB Effect of ethical challenges on decisions in IB Causes of poor ethical decisions in IB Different conceptual underpinnings for

ethical decisions in IB What managers can do to

Promote an awareness of ethical issues throughout the organization Ensure that ethical considerations enter into decision making

Ethical Issues in International Business


when a manager makes decisions consistent with differing national environments

Political systems Legal systems Economic development levels Culture

 What is

ethical and normal in one environment may not be so in another

Ethical Issues in International Business

 Arise most often in the context of: Employment practices Human rights Environmental policy Corruption An MNCs perceived moral obligations

to society

Employment Practices
 What standards Home nations Host nations Other  Should the

should be applied?

MNC adapt its policies? Standardize?  Hiring practices, labor relations, diversity issues, employment conditions are some specific issues that require careful thought

Human Rights

manager can assume as universal her/his views on freedom of:

Association Speech Assembly Movement Political repression

 What is

the responsibility of an MNC to uphold different standards of human rights?

Repressive Regimes

it ethical for MNCs to operate in countries with repressive regimes?

Is inward investment an agent for change? What is the limit beyond which inward

investment would not be justified under all circumstances?

What if competitors from other nations

invest and you dont?

Environmental Policies

Locally mandated environmental standards may be inferior to those an MNC knows it can achieve

Tragedy of the commons: a resource held in common by all, but owned by no one, is overused by some, resulting in degradation.

If a decision is legal but unethical, should it be taken?


Government officials may ask for bribes for an MNC to get things done
Is an MNCs manager who agrees a corrupt

Should an MNC ever accede to bribery demands?

Foreign corrupt practices act (USA) Convention on Combating Bribery of Foreign Officials in International Business Transactions (OECD)

Bribes vs. Grease Payments

Grease Payments

Money given to minor

Money given for the purpose of getting minor officials to do what they are supposed to be doing.
BribesRelatively large

officials (clerks, attendants, customs inspectors) for the purpose of expediting a project

amounts of money given far the purpose of influencing officials to make decisions or take actions that they otherwise might not take.

Money given, often to

high-ranking officials. Purpose is often to get these persons to purchase goods or services from the bribing firm.

Improving Global Business Ethics

Fundamental International Rights
6. 7. 8. 9. 10. 1. 2. 3. 4. 5.

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 nondiscrimination

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

MNC Power and Moral Decisions

 MNCs have

power over a host country

They can move production away Along with power arise obligations (?)
 Power is

morally neutral

How it is used is what matters Perceptions of how it should be used and of

its impact vary

Company view  Host country view

MNC and Social Responsibility

 Social responsibility: business decisions

should be made after consideration of social consequences of economic actions Noblesse oblige: honorable and benevolent behavior is the responsibility of those in power Benevolent behavior responsibility of only successful business?

Ethical Choices in Home vs. Host Country Situations

International Law Global Codes of Conduct

Improving Global Business Ethics



Home Country Cultural standards Ethical & moral standards of home country

Broad Middle Ground

Host Country Cultural standards Ethical & moral standards of host country

Mix of Home and Host Country Standards Application of Ethical Principles



BP, one of oil companies, has made social investments in Algeria, the desert town of Salah. it built two desalination plants to provide drinking water for the local



in a poor nation, a 12-yearold girl works in a factory.

Determinants of Ethical Behavior

 Organization culture  Personal  Decision

ethics making processes

 Leadership  Unrealistic

/ realistic performance goals

Philosophical Approaches to Ethics

Ethical Fundamentalism Utilitarianism

Ethical Relativism

Rawlss Social Justice Theory

Kantian Ethics

Theories of Ethics Summary (1 of


Theory Utilitarianism Kantian ethics

Description Persons look to an outside source or central figure for ethical guidelines. Persons choose the alternative that would provide the greatest good to society. A set of universal rules establishes ethical duties. The rules are based on reasoning and require (1) consistency in application and (2) reversibility.

Theories of Ethics Summary

(2 of 2)

Theory Rawlss social justice theory


Moral duties are based on an implied social contract. Fairness is justice. Rules are established from an original position. Ethical relativism Individuals decide what is ethical based on their own feelings as to what is right or wrong.

Ethical Decision Making

 Hiring and

promotion  Organization culture and leadership  Decision-making processes

Stakeholder perspectives
 Ethics  Moral


Codes of ethics

courage: walk away from profitable and unethical decision