Chapter 10:
Globalization of Ethical
Decision Making
Part Four:
Implementing Business Ethics in
a Global Economy
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1
Global Business
Brings together people from different
cultures, values, laws, and ethical standards
 International businesspeople must understand
the values, culture, and ethical standards of
their own country
 Must be sensitive to values and culture of
other countries
The global business environment, if not
understood, can destroy the trust needed to
be successful
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2
Global Cultures, Values, and
Practices
 Country cultural values: Are subjective, based
on the social environment, and used to
develop norms
 National culture: Everything in our
surroundings that is made by people
 Tangible or intangible
 Each nation has a cultural belief about acceptable
business activities
 Subcultures can be found within many nations
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Classifying Cultural Differences
Geert Hofstede identified four cultural
dimensions




Individualism/collectivism
Power distance
Uncertainty avoidance
Masculinity/femininity
Can profoundly impact the business
environment
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Self-Reference Criterion (SRC)
An unconscious reference to one’s own
cultural values, experiences, and knowledge
 The idea that “we” differ from “them”
 Is common in international business
 We react based on our knowledge
 Accumulated over a lifetime
 Grounded in culture of origin
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Cultural Relativism
The concept that morality varies from one
culture to another
 Can be a rationalization for straying from one’s
cultural values
 Involves an idea that business practices are
differentially defined as right or wrong by
cultures
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Global Common Values
Shared across most cultures
 Reflected in laws
 Desirable common values
 Integrity, family and community unity, equality,
honesty, fidelity, sharing, and unselfishness
 Undesirable common values
 Ignorance, pride and egoism, selfish desires, lust
greed, adultery, theft, deceit, lying, murder,
hypocrisy, slander, and addiction
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Economic Foundations of Business
Ethics
Economic and political events and natural
disasters can affect the global ethical
decision making environment
 Financial firms have taken risks and engaged in
unethical activity
 Displayed in the recent global financial meltdown
 Global disasters and upheaval continue to
created challenges for international businesses
 New opportunities for misconduct
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Risk Compartmentalization
Occurs when profit centers within an
organization are unaware of the
consequences of their decisions on the
overall organization
 No single person can be blamed for negative
outcomes that occur because of systemic
problems
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Key Figures in Modern Economics
 Adam Smith
 Laissez-faire capitalism
 John Maynard Keynes
 Government can stimulate the private sector
 Milton Friedman
 Return to self-regulating free market system
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Keynes and Friedman Agreed That:
1. People have rational preferences among
outcomes that can be identified and
associated with value
2. Individuals seek to maximize utility; firms seek
to maximize profits
3. People act independently on the basis of full
and relevant information
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Economic Systems
 Socialism: Advocates that wealth and power
be shared across society, based on the amount
of work expended in production
 Karl Marx
 Social democracy: Private ownership of
property, but a large government
 Formed in the 1940s as an offshoot of socialism
Bimodal wealth distribution: Many poor and a
few very wealthy with a small middle class
•
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Some argue it is a result of the global economic
system
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Two Schools of Economic Thought
 Rational economics: Assumes that people are
predictable and base their decisions on
maximizing utility based on resources available
 Behavioral economics: Assumes that humans
do not always act rationally
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Economic Capitalism Country Differential
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The Multinational Corporation
Public companies that operate on a global
scale, without significant ties to any one
nation or region
 The highest level of international business
commitment
 Are subject to ethical criticism over their
impact on the countries in which they do
business
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Business for Social Responsibility
 Many MNCs have joined because of
stakeholder scrutiny
 Tracks emerging issues and trends
 Provides information on corporate leadership
and best practices
 Conducts educational workshops and training
 Assists organizations in developing practical
business ethics tools
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A Comparison Between Countries and
Corporations
Country
GDP (millions $
U.S.)
Company
Revenues (millions
$ U.S.)
United States
14,720,000
Walmart Stores
421,849
China
9,872,000
Royal Dutch Shell
378,152
Japan
4,338,000
Exxon Mobil
354,674
India
4,046,000
BP
308,928
Germany
2,960,000
Sinopec Group
273,422
Iran
863,500
China National
Petroleum
240,192
Taiwan
823,600
State Grid
226,294
Argentina
596,000
Toyota Motor
221,760
Greece
321,700
Japan Post Holdings
203,958
Denmark
201,400
Chevron
196,337
Source: Adapted from "Global 500: Fortune's Annual Ranking of the World's Largest Corporations," CNNMoney,
http://money.cnn.com/magazines/fortune/global500/2011/index.html (accessed July 7, 2011).
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The International Monetary Fund
Emerged from the Bretton Woods
agreement, 1944
 Makes short-term loans to member countries
with deficits
 Provides foreign currencies for its members
 Promotes responsible business conduct
 Recommended new rules for large firms that
represent a systemic risk
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The United Nations
 Founded in 1945; 192 member nations
 Goal to promote world peace, improve intercountry relations, and support better
standards and human rights
 Focuses on environmental and human rights
issues
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The United Nations Global
Compact for Businesses
 10 principles that promote human rights,
sustainability, and the eradication of
corruption
 Collaborative arrangement between businesses,
governments, NGOs, societies, and the UN
 Voluntary membership
 Members report on progress toward goals
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Ten Principles of the UN Global Compact
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The World Trade Organization
Established at the Uruguay round of the
General Agreement on Tariffs and Trade
(GATT) in 1995
 Administers trade negotiations, settles trade
disputes, and monitors trade policies of
member nations
Addresses economic and social issues in
many industries
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Dumping
The practice of charging high prices for
products in domestic markets, while selling
the same products in foreign markets at low
prices
 Places local firms at a disadvantage
 The U.S. has anti-dumping laws in place
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Global Ethical Risks
Key risk areas




The “G-Zero” risk
Internet security and privacy
Relations with China
Political unrest, imbalances in power,
nationalism, and faltering economies in
emerging markets
Laws differ between countries
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Global Business Ethics and Legal Issues
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Bribery
 Acceptance of bribes varies by country
 Can be a challenge to determine what is a bribe
 The U.S. Foreign Corrupt Practices Act (FCPA)
prohibits companies from paying foreign
officials to keep/obtain business
 The U.K. Anti-Bribery act goes even further
Many major corporations have had issues
with bribery
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Antitrust Activity
Antitrust laws are meant to encourage fair
competition
 Countries have differing levels of protections
 Can create difficulties in international business
 Vertical system: A channel member controls
the entire business system
 Can occur when MNCs are allowed to grow
unchecked
 Reduces competition and can put small
competitors out of business
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Internet Security and Privacy
Internet security is considered a top global
risk to business
 Laws and regulations have lagged behind
technological change
Is a fairly recent business ethics issue
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Human Rights
An inherent dignity that should be afforded
all people with equal and inalienable rights
 The foundation of freedom, justice, and peace in
the world
 Codified in the UN Human Rights Declaration
 Is becoming a serious issue for companies
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Health Care
A major global human rights issue
 Over a billion people lack access to health care
globally
 Is becoming a major business concern
Question remains whether access to health
care is a right or a privilege
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Labor and the Right to Work
Many people work outside their homeland
 International firms today have many ethical
concerns related to labor
 Gender pay equality
 Right to join unions
 Standards of living
Corporations must take labor issues
seriously to avoid legal and ethical trouble
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Compensation
 Living wage: The minimum wage that
workers require to meet basic needs
 Executive compensation
 A major topic during the recent recession
 Global demand for alignment between
performance and compensation
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Consumerism
The belief that consumers should dictate the
economic structure of society
 States that consuming goods at an increasing rate
is desirable
 Equates personal happiness with purchasing and
consuming products
 Made-to-break (Planned obsolescence):
Encourages consumers to buy more items
Meeting with backlash from stakeholders who do
not believe that consumerism leads to happiness
•
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Not sustainable as resources diminish
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The Importance of Ethical Decision
Making in Global Business
Ethical decision making is essential to
successfully operating in global business
 Potential legal and political snares without a
knowledge of global ethics issues
 Some large firms created officers/committees
to oversee global compliance issues
 Successful ethics program implementation
requires employee training
 Global firms must tailor programs to
international markets
 Ethics is not “one size fits all”
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