Ch 4 ethics in international business 1

ethics in international business 1

1. UNIT –4
ETHICS IN INTERNATIONAL
BUSINESS

2. CONTENTS
Introduction
Ethical Issues in International Business
Ethical Dilemmas
The roots of Unethical Behavior
Ethical Decision Making

3. INTRODUCTION
•Ethicsreferstoacceptedprinciplesofrightorwrongthat
governtheconductofaperson,themembersofaprofession,or
theactionsofanorganization.
•Businessethicsaretheacceptedprinciplesofrightorwrong
governingtheconductofbusinesspeople.
•Tobemorespecific,businessethicsisthestudyofgoodand
evil,rightandwrongandjustandunjustactionsof
businessmen.
•Whileanethicalstrategyisastrategy,orcourseofaction,that
doesnotviolatetheseacceptedethicalprinciples.

4. ETHICAL ISSUES IN INTERNATIONAL
BUSINESS
•Manyoftheethicalissuesininternationalbusinessare
causedduetosignificantdifferencesinthepolitical,
legal,economicandculturalsystemsbetweennations.
•Whatisconsiderednormalpracticeinonenationmaybe
consideredunethicalinanother.
•Becausetheyworkforaninstitutionthattranscends
nationalbordersandcultures,managersina
multinationalfirmneedtobeparticularlysensitiveto
thesedifferences.

5. ETHICAL ISSUES IN
INTERNATIONAL BUSINESS
In the international business setting, the most common
ethical issuesinvolve
employment practices,
human rights,
environmental regulations,
corruption, and
the moral obligation of multinational corporations.

6. EMPLOYMENTPRACTICES
•Whenworkconditionsinahostnationareclearly
inferiortothoseinamultinational'shomenation,what
standardsshouldbeapplied?
•Thoseofthehomenation,thoseofthehostnation,or
somethinginbetween?Whilefewwouldsuggestthat
payandworkconditionsshouldbethesameacross
nations,howmuchdivergenceisacceptable?

7. Forexample,while12-hourworkdays,extremelylow
pay,andafailuretoprotectworkersagainsttoxic
chemicalsmaybecommoninsomedevelopingnations,
doesthismeanthatitisOKforamultinationalto
toleratesuchworkingconditionsinitssubsidiariesthere?

8. HOWTOOVERCOMETHESEPROBLEMS
Toovercometheseproblems,multinationalsshould
establishminimalacceptablestandardsthatsafeguardthe
basicrightsanddignityofemployees,
auditingforeignsubsidiariesandsubcontractorsonaregular
basistomakesurethosestandardsaremet,

9. HUMAN RIGHTS
•Basichumanrightsstillarenotrespectedinmany
nations.
•Rightstakenforgrantedindevelopednations,suchas
freedomofassociation,freedomofspeech,freedomof
assembly,freedomofmovement,freedomfrompolitical
repression,andsoon,arebynomeansuniversally
accepted.

10. ENVIRONMENTALPOLLUTION
•Ethicalissuesarisewhenenvironmentalregulationsinhost
nationsareinferiortothoseinthehomenation.
•Manydevelopednationshavesubstantialregulations
governingtheemissionofpollutants,thedumpingoftoxic
chemicals,theuseoftoxicmaterialsintheworkplace,andso
on.
•Thoseregulationsareoftenlackingindevelopingnations,and
accordingtocritics,theresultcanbehigherlevelsofpollution
fromtheoperationsofmultinationalsthanwouldbeallowedat
home.

11. •Anotherissueofgreatconcernthesedaysisofhuman-
inducedglobalwarmingcausedduetocarbondioxide
emissionsfromindustrialandcommercialactivity.
•Consequently,societiesaroundtheworldarestartingto
restricttheamountofcarbondioxidethatcanbeemitted
intotheatmosphereasaby-productofindustrialand
commercialactivity.However,regulationsdifferfrom
nationtonation.

12. CORRUPTION
Corruptionhasbeenaprobleminalmosteverysociety
inhistory,anditcontinuestobeonetoday.Therealways
havebeenandalwayswillbecorruptgovernment
officials.Internationalbusinessescanandhavegained
economicadvantagesbymakingpaymentstothose
officials.
Oneshouldnotignorethefactthatcorruption
tendstocorruptboththebribegiverandthebribe
taker.Corruptionfeedsonitself,andoncean
individualstartsdowntheroadofcorruption,pulling
backmaybedifficultifnotimpossible.This
argumentstrengthenstheethicalcasefornever
engagingincorruption,nomatterhowcompelling
thebenefitsmightseem.

13. MORALOBLIGATIONS
Multinationalcorporationshavepowerthatcomesfromtheir
controloverresourcesandtheirabilitytomoveproductionfrom
countrytocountry.
Withpowercomesthesocialresponsibilityformultinationalsto
givesomethingbacktothesocietiesthatenablethemtoprosper
andgrow.Thisreferstotheconceptofcorporatesocial
responsibility(CSR)thatbusinesspeopleshouldconsiderthe
socialconsequencesofeconomicactionswhenmakingbusiness
decisionssuchthatthedecisionsshouldhavebothgoodeconomic
andsocialconsequences.
Largesuccessfulbusinessesshouldrecognizetheirnoblesseoblige
andgivesomethingbacktothesocietiesthathavemadetheir
successpossible.

14. ETHICALDILEMMAS
Someofthemostcommonethicalissuesin
internationalbusinessincludeoutsourcing,
workingstandardsandconditions,workplace
diversityandequalopportunity,childlabour,trust
andintegrity,supervisoryoversight,humanrights,
religion,thepoliticalarena,theenvironment,bribery
andcorruption

15. SOMEEXAMPLESOFETHICALDILEMMA
EXAMPLESINCLUDE:
Taking credit for others' work.
Offering a client a worse product for your own profit.
Utilizing inside knowledge for your own profit.

16. THEROOTSOFUNETHICALBEHAVIOR

17. PERSONALETHICS
Societalbusinessethicsarenotdifferentfrompersonal
ethics.
Asindividuals,wearetypicallytaughtthatitiswrongto
lieandcheatandthatitisrighttobehavewithintegrity
andhonor,andshouldalwaysstandupforwhatwe
believetoberightandtrue.Thisbehaviorcomesfroma
numberofsources,includingourparents,ourschools,
ourreligion,andthemedia.Thisisgenerallytrueacross
societies.
Ourpersonalethicalcodecreatesastronginfluenceon
thewaywebehaveasbusinesspeople.Anindividual
withastrongsenseofpersonalethicsmaybehaveinan
unethicalmannerinabusinesssetting.Thus,itisvery
importantforasocietytoemphasizestrongpersonal
ethics.

18. DECISION-MAKINGPROCESSES
Severalstudiesofunethicalbehaviorinabusiness
settinghaveconcludedthatbusinesspeople
sometimesdonotrealizetheyarebehaving
unethically,primarilybecausetheysimplyfailto
ask,"Isthisdecisionoractionethical?"
Instead,theyapplyastraightforwardbusiness
calculustowhattheyperceivetobeabusiness
decision,forgettingthatthedecisionmayalsohave
animportantethicaldimension.

19. Thefaultliesinprocessesthatdonotincorporate
ethicalconsiderationsintobusinessdecision
making.ThismayhavebeenthecaseatNikewhen
managersoriginallymadesubcontractingdecisions.
Thosedecisionswereprobablymadebasedon
goodeconomiclogic.Subcontractorswereprobably
chosenbasedonbusinessvariablessuchascost,
delivery,andproductqualityandthekeymanagers
simplyfailedtoask,"Howdoesthissubcontractor
treatitsworkforce?"Iftheythoughtaboutthe
questionatall,theyprobablyreasonedthatitwas
thesubcontractor'sconcern,nottheirs.

20. ORGANIZATIONCULTURE
Thetermorganizationculturereferstothevalues
andnormsthataresharedamongemployeesofan
organization.
Justassocietieshavecultures,sodobusiness
organizations.Together,valuesandnormsshape
thecultureofabusinessorganization,andthat
culturehasanimportantinfluenceontheethicsof
businessdecisionmaking.
Example:CorruptionatDaimler,strongly
suggeststhatpayingbribestosecurebusiness
contractswaslongviewedasanacceptablewayof
doingbusinesswithinthatcompany.Thismadeita
commonorganizationcultureoverthere.

21. UNREALISTICPERFORMANCE EXPECTATIONS
Afourthcauseofunethicalbehavioristhepressure
fromtheparentcompanytomeetunrealistic
performancegoalsthatcanbeattainedonlyby
cuttingcomersoractinginanunethicalmanner.
Toomuchpressurebytopmanagementforhigh
performancetotheiremployeescanmotivatethe
employeesforbehavingunethicallytowards
customersforgettingsells.

22. LEADERSHIP
Thefifthrootcauseofunethicalbehavioris
leadership.
Leadershelptoestablishthecultureofan
organization,andtheysettheexamplethatothers
follow.
Employeesinabusinessoftentakecuefromtheir
businessleaders,andifthoseleadersdonot
behaveinanethicalmanner,theotheremployees
willalsonotfollow

23. SOCIETALCULTURE
Societalculturemayalsohaveanimpactonthe
propensityofpeople,andorganizations,tobehave
inanunethicalmanner.
Onestudyof2,700firmsin24countriesfoundthat
thereweresignificantdifferencesamongtheethical
policiesoffirmsheadquarteredindifferent
countries.

24. ETHICALDECISIONMAKING
Inadditiontoestablishingtherightkindofethical
cultureinanorganization,businesspeoplemustbe
abletothinkthroughtheethicalimplicationsof
decisionsinasystematicway.
Apartfromethicaltheories,someexpertsonethics
haveproposedastraightforwardpracticalguideto
determinewhetheradecisionisethical.

25. Accordingtotheseexperts,adecisionis
acceptableonethicalgroundsifabusinessperson
canansweryestoeachofthesequestions:
Doesmydecisionfallwithintheacceptedvalues
orstandardsthattypicallyapplyinthe
organizationalenvironment?
AmIwillingtoseethedecisioncommunicatedto
allstakeholdersaffectedbyitforexample,by
havingitreportedinnewspapersoron
television?
WouldthepeoplewithwhomIhaveasignificant
personalrelationship,suchasfamilymembers,
friends,orevenmanagersinotherbusinesses,
approveofthedecision?

26. PROCESS OF ETHICAL DECISION
MAKING
Identify the ethical problem
Collect the relevant information
Evaluate the information
Consider Alternatives
Make Decision
Act or Implement
Review the Action

27. FIVE -STEP PROCESS ETHICAL
DECISION MAKING
STEP–1
Businesspeopleshouldidentifywhichstakeholders
willbeaffectedbyadecisionandinwhatways.
Stakeholdersforacompanyareitsemployees,the
boardofdirectors,stockholders,customers,
suppliers,lenders,governments,unions,local
communities,andthegeneralpublic.
Allstakeholdersareinanexchangerelationship
withthecompany.Eachstakeholdergroupsupplies
theorganizationwithimportantresources(or
contributions),andinexchangeeachexpectsits
intereststobesatisfied.

28. Forexample,employeesprovidelabor,skills,
knowledge,andtimeandinexchangeexpect
commensurateincome,jobsatisfaction,job
security,andgoodworkingconditions.Customers
provideacompanywithitsrevenuesandin
exchangetheywantqualityproductsthatrepresent
valueformoney.

29. STEP -2