Ethical Issues in Global
Business
• Marketing and safety practices
– Nestle: the Baby Killers; Union Carbide: Bhopal
• Sweatshop and labour abuse
- Wal-Mart’s Kathy Lee collection (20 hrs/day @ $0.20hr)
• Corruption and bribery
- Gulf Oil: political contributions to Korea ($4.2 million)
– Lockheed: bribes to Middle East ($22 million) and
Japan ($12.5 million)
Bribes vs. Grease Payments
• Definitions
• Examples
– Grease Payments—
Money given for the
purpose of getting minor
officials to do what they
are supposed to be doing.
– Money given to minor
officials (clerks,
attendants, customs
inspectors) for the purpose
of expediting a project
– Bribes—Relatively large
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.
The Moral Philosophy Framework
•
•
•
•
Cultural Relativism:
Cultural theories
Situational ethics
“When in Rome…do
as the Romans do.”
• Limitation:
• Which Romans?
Arguments For and Against Bribery
For
Against
• A necessary tool
• Wrong/illegal
• Accepted practice • Compromise personal
beliefs
• Form of
commission, tax, or • Promotes government
compensation
corruption
• Benefits recipient only
• Creates dependence on
corruption
• Deceives stockholders
Improving Global Business
Ethics
Integrative Social Contract Theory
(ISCT)
• Hypernorms-- transcultural values including
fundamental human rights
• Consistent norms-- norms that are culturally
specific, but consistent with hypernorms
• Moral free space norms-- strongly held cultural
beliefs in countries that are in tension with
hypernorms
• Illegitimate norms– those norms that are
incompatible with hypernorms
Using ISCT: The Case of Bribery
• Is bribery part of moral free space or is it
an illegitimate norm?
• 1) violates agent / principal contract
• 2) against law in all countries
• 3) violates political participation hypernorm
• 4) violates economic efficiency hypernorm
• Conclusion: Bribery is an illegitimate norm
Trends Against Bribery
• Foreign Corrupt Practices Act
enacted
• Transparency International
developed
• OCED Antibribery Initiatives
launched
• #10 on UN Global Compact
Improving Global Business
Ethics
Fundamental International Rights
1. The right to physical
movement
2. The right to
ownership of
property
3. The right to freedom
from torture
4. The right to a fair
trial
5. The right to
nondiscrimination
6. The right to physical
security
7. The right to freedom
of speech and
association
8. The right to minimal
education
9. The right to political
participation
10.The right to
subsistence
Improving Global Business
Ethics
The Dilemma
of the Multinational Corporation
Home Country
Stakeholder
Pressures
The
Multinational
Corp.
Host Country
Stakeholder
Pressures
No-win situations for MNC’s
1. Labour-saving
technology vs.
employment motives
2. Take the money and
run vs. spreading $$
to gain more power
3. Local wage rates =
exploitation vs.
higher rates =
creaming market
Improving Global Business
Ethics
Ethical Choices in Home vs. Host Country Situations
International Law
Global Codes of Conduct
ETHICAL
IMPERIALISM
Home Country
• Cultural
standards
• Ethical &
moral
standards of
home
country
CULTURAL
RELATIVISM
Broad
Middle Ground
Mix of Home and Host
Country Standards
Application of Ethical Principles
Host Country
• Cultural
standards
• Ethical &
moral
standards of
host
country
Improving Global Business
Ethics
Typology of Global Types
•
•
•
•
Foreign type
Empire type
Interconnection type
Global type
Improving Global Business
Ethics
Seven Moral Guidelines for MNCs
• Inflict no intentional or
direct harm
• Produce more good
than bad for the host
country
• Contribute to host
country’s development
• Respect the human
rights of their
employees
• Pay their fair share of
taxes
• Respect local cultural
beliefs that do not
violate moral norms
• Cooperate with the
government to develop
and enforce
background institutions