The role of ethics in international business PDF

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MG1054: International Business Environment Week 20 notes

The role of ethics in international business Ethical issues in international business Ethics – accepted principles of right or wrong that govern - The conduct of a person - The members of a profession - The actions of an organization Business ethics – accepted principles of right or wrong governing the conduct of business people Ethical strategy – a strategy, or course of action, that does not violate these accepted principles Ethical Issues relevant to international firms 1. Employment practices 2. Human rights 3. Environmental pollution 4. Corruption 5. Moral obligations of multinational companies Business ethics and employment - Variation of working conditions between host nation and multinationals home nation o What standards should apply?  Home country standards or host country standards or somewhere in between? o E.g. some developing nations have poor working conditions (12hour work days/extremely low pay/failure to protect workers against toxic chemicals etc.) Business ethics and human rights - Responsibilities of firms in countries where basic human rights are not respected o Freedom of association  right to form societies, clubs, and other groups of people, and to meet with people individually, without interference by the government. o Freedom of speech  the power or right to express one's opinions without censorship, restraint, or legal penalty. o Freedom of assembly  individual right or ability of people to come together and collectively express, promote, pursue, and defend their ideas

Business ethics and environmental regulations/pollution - some parts of the environment are a public good (non-excludable and nonrivalrous) - variations of environmental regulations between host and home nations o usually developing nations have less restrictions on pollution laws  but does this make it okay for MNC’s to pollute in these countries  ethical VS legal behaviour The Tragedy of Commons It occurs when a resource held in common by all, but owned by no one, is overused by individuals, resulting in degradation. -

Corporations can contribute to the global tragedy of commons by moving production to locations where they are free to pump pollutants in to the atmosphere or dump then in oceans or rivers

Business ethics and corruption

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The U.S. Foreign Corrupt Practices Act outlawed the practice of paying bribes to foreign government officials in order to gain business The Convention on Combating Bribery of Foreign Public Officials in International Business Transactions was adopted by the Organization for Economic Cooperation and Development (OECD) > obliges member states to make the bribery of foreign public officials a criminal offense

Business ethics and moral obligations - MNC’s have the power to control resources and ability to move production from country to country Corporate Social Responsibility (CSR) – managers should consider the social consequences of economic actions when making business decisions

Philosophical approaches to ethics Straw men approaches: deny the value of business ethics 1. Friedman Doctrine – the only social responsibility of business is to increase profits, so long as the company stays within the rules of law a. In international business “rules of the game” are not well-established and differ from country to country. It is permissible for multinationals to pollute in developing countries because there are no regulations against it!! 2. Culture relativism – ethics are culturally determined and firms should adopt the ethics of the cultures in which they operate 3. Righteous moralist – a multinationals home country standards of ethics should be followed in foreign countries a. What about multination companies from countries where basic human rights are not respected? 4. Naïve immoralist – if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, the manager should not either  Key point from approaches is that All approaches offer inappropriate guidelines for ethical decision making

The Utilitarian approach to ethics Utilitarian ethics – (David Hume, Jeremy Bentham, John Stuart Mill) - The moral worth of actions or practices is determined by their consequences - 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.

Rights Theories – human beings have fundamental rights and privileges which transcend national boundaries and cultures > Rights establish a minimum level of morally acceptable behaviour Universal Declaration of Human Rights (1984) - basic principles that should always be adhered to irrespective of the culture in which one is doing business

Justice theories – the attainment of a just distribution of economic goods and services > a just distribution is one that is considered fair and equitable • All economic goods and services should be distributed equally except when an unequal distribution would work to everyone’s advantage (Rawls).

Rawls’ Theory Is it just, to pay foreign workers less than workers in the firm’s home country?  According to the Rawls’ theory, it is, so as long as the inequality benefits the leastadvanced members of the global society.

Why do managers behave unethically? Personal ethics – the generally accepted principles of right and wrong governing the conduct of individuals Organization culture – organization culture can legitimize unethical behaviour or reinforce the need for ethical behaviour Unrealistic performance expectations – encourage managers to cut corners or act in an unethical manner  Leadership - helps establish the culture of an organization, and set the examples that others follow > when leaders act unethically, subordinates may act unethically, too How can managers make ethical decisions? 1. Hire and promote people with a well- grounded sense of personal ethics 2. Build an organizational culture that places a high value on ethical behaviour 3. Make sure that leaders within the business articulate the rhetoric of ethical behaviour and act in a manner that is consistent with that rhetoric...