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• Identify the internationalization and globalization of business
• Summarize arguments for and against globalization
• Discuss multinationals in the global environment
• Identify ethical challenges at the global level
• Define ISCT, hypernorms and moral free space
• Outline strategies for improving global ethics
• Introduce seven moral guidelines for global business
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• The New, New World of
International Business
• Multinational Corporations (MNCs) and the Global Environment
• Ethical Issues in the Global
Business Environment
• Improving Global Ethics
• Summary
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The focus of the chapter is on:
– Transnational economy
– Internationalization
– Global ethics
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• 1945-55 The Post-World War II Decade
A period of reconstruction dominated by the United States.
• 1955-70 The Growth Years
Japanese and European firms recover and the first U.S.based international firms become multinational.
• 1970-80 The Troubled Years
A U.S. balance of payments deficit and worldwide oil crisis have a negative impact.
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• 1980-now The New International
Order
Though the U.S. role in the world economy is diminished, it is pressured to be a world leader in the ethics arena.
• 1999-now The New, New World
A backlash against globalism began.
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• Internationalization
• Globalization
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Pros and Cons of Globalization
I Globalists
M Consumers Free trade promotes lower costs, etc.
P
A
C
Employees Faster economic growth promotes
Higher wages, etc.
T Environment Creates resources needed to address the issue
Antiglobalists
Benefits the wealth at the expense of the poor
Places profits above people
Exploits and destroys ecosystems
O
N
Developing
Nations
Promotes national economic development, higher standard of living, etc.
World financial institutions conspire to keep poor nations in debt
Human
Rights
Creates cultures that support law and free expression
Corporations pursing profits ignore human rights violations
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• Change scope and nature of U.S.-based multinationals
• Face challenges of operating in new world of business
– Corporate legitimacy
– MNC and host country philosophy
– MNC and host country challenges
• Cultural differences
• Business and government differences
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• Questionable marketing and safety practices
• Sweatshop and labor abuse
• Corruption, bribery, and questionable payments
Search the Web
For student activists interested in sweatshop practices, visit http://www.usasnet.org/
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Arguments For and Against Bribery
For Against
• Necessary to do business
• Wrong
• Illegal
• Common practice
• Compromise personal beliefs
• Promotes government corruption
• Accepted practice
• Slippery slope
• Form of commission, tax, or compensation
• Prohibits taking a stand for honesty, etc.
• Benefits recipient only
• Creates dependence on corruption
• Deceives stockholders
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• Foreign Corrupt Practices Act enacted
• Transparency International developed
• OCED Antibribery Initiatives launched
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• Definitions
– Grease Payments —Relatively small sums of money given for the purpose of getting minor officials to:
• Do what they are supposed to be doing
• Do what they are supposed to be doing faster or sooner.
• Do what they are supposed to be doing better than they would otherwise.
• Examples
– Money given to minor officials
(clerks, attendants, customs inspectors) for the purpose of expediting. This form of payment helps get goods or services through red tape or administrative bureaucracies.
– 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. If the officials considered the merits of the situation only, they might take same other action.
– Money given, often to high-ranking officials.
Purpose is often to get these persons to purchase goods or services from the bribing firm. May also be users to avoid taxes, forestall unfavorable government intervention, secure favorable treatment, etc.
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The Dilemma of the Multinational Corporation
Home Country
Stakeholder
Pressures
The
Multinational
Corp.
Host Country
Stakeholder
Pressures
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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
Broad
Middle Ground
Mix of Home and Host
Country Standards
Application of Ethical Principles
(see notes)
CULTURAL
RELATIVISM
Host Country
• Cultural standards
• Ethical/moral standards of host country
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Typology of Global Types
• Foreign type
• Empire type
• Interconnection type
• Global type
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Integrative Social Contract Theory (ISCT)
• Hypernorms consist of transcultural values including fundamental human rights
• Consistent norms consist of norms that are culturally specific, but consistent with hypernorms
• Moral free space norms consist of strongly held cultural beliefs in particular countries that are in tension with hypernorms
• Illegitimate norms consist of norms that are incompatible with hypernorms
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Four Actions for Improving
International Business Ethics
• Create global codes of conduct
– Global codes and standards set by corporations
– Global Codes and standards set by international organizations
• Integrate ethics into a global strategy
• Suspend activities in host country
• Create ethical impact statements
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Global Codes and Standards Developed by
International Organizations
• Caux Principles
• Global Reporting Initiative
• Global Sullivan Principles
• OECD Guidelines for Multinational Enterprises
• Principles for Global Corporate Responsibility: Benchmarks
• UN Global Compact
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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 nondiscriminatory treatment
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
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Seven Moral Guidelines for MNCs
• Inflict no intentional or direct harm
• Pay their fair share of taxes
• Produce more good than bad for the host country
• Respect local cultural beliefs that do not violate moral norms
• Contribute to host country’s development
• Respect the human rights of their employees
• Cooperate with the government to develop and enforce background institutions
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• Anticorruption movement
• Bhopal tragedy
• Bribes
• Consistent norms
• Ethical impact statements
• Globalization
• Grease payments
• Hypernorms
• Illegitimate norms
• Infant formula
• Internationalization
• Less-developed countries
(LDC)
• Moral free space
• Multinational corporation
(MNC)
• Sweatshops
• Transnational economy
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