ETHICS AND GLOBALIZATION
What is globalization?
 Globalization refers to the shift toward a
more integrated and interdependent world
economy
 Globalization involves the integration of
technology, markets, politics, cultures, labor,
production, and commerce. Globalization is
both the process and the result of this
integration.
Our focus at this stage…
 We are concerned with globalization as the
expansion of international trade to a point
where national markets have been overtaken
by regional trade blocs, leading eventually to
a global marketplace.
Globalization has 2 main
components:
 Globalization of markets: the merging of
historically distinct and separate national
markets into 1 huge global marketplace lead to
creating of global products e.g. McDonald’s ,
Coca-Cola, Starbucks, etc.
 Globalization of production: the sourcing of
goods and services from locations around the
globe to take advantage of national differences
in cost and quality of factors of production e.g.
customer service call center in India for US firms
Drivers of Globalization = ?
Drivers of Globalization
 Decline trade and investment barriers
 Technological changes
What is MNE(or MNC)?
 Multinational enterprises (MNEs) are
corporations that “own or control production
or service facilities outside the country in
which they are based.”
 MNEs also are referred to as global,
transnational, and international companies.
Multinational corporation
 A multinational corporation (MNC) or
transnational corporation (TNC), also called
multinational enterprise (MNE), is a
corporation or enterprise that manages
production or delivers services in more than one
country. It can also be referred to as an
international corporation.
http://en.wikipedia.org/wiki/Multinational_corporation
Common Characteristics of
Multinational Enterprises (MNE)
 Operating a sales organization, manufacturing
plant, distribution center, licensed business, or
subsidiary in at least two countries
 Earning an estimated 25 to 45% of revenue from
foreign markets
 Having common ownership, resources, and
global strategies
Figure 7.3: World’s Largest
Companies
Source: Fortune.com/Global 500, “World’s largest corporations.” Also reference Hjelt, P. (July 26, 2004). The Fortune Global
500, Fortune, 179.
MNE Benefits for Host Country
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Hire local labor
Create new jobs
Co-venture with local entrepreneurs and companies
Attract local capital to projects
Provide for and enhance technology transfer
Develop particular industry sectors
Provide business learning and skills
Increase industrial output and productivity
Help decrease the country’s debt and improve its
balance of payments and standard of living
Host Country Benefits for MNE
 Low costs of production that enable MNE sell
its products in the lower prices and get
higher income.
 Less stringent laws and regulations in host
country compared with the home one and
make it more easier to operate.
MNE Perspective on Unethical
Practices by Local Government
 Limit repatriation of MNE assets and earnings.
 Pressure and require MNEs to buy component parts and
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other materials from local suppliers.
Require MNEs to use local nationals in upper-level
management positions.
Require MNEs to produce and sell selected products in
order to enter the country.
Limit imports and pressure exports.
Require a certain amount or percentage of profit to
remain in or be invested in the country.
Host-country Perspective
towards MNE
 MNEs can dominate and protect their core technology
and research and development, thus keeping the host
country a consumer, not a partner or producer.
 MNEs can destabilize national sovereignty by limiting a
country’s access to critical capital and resources, thereby
creating a host-country dependency on the MNE’s
governments and politics.
 MNEs can create a “brain drain” by attracting scientists,
expertise, and talent from the host country.
Host-country Perspective
towards MNE (cont)
 MNEs can create an imbalance of capital outflows over
inflows.
 MNEs can disturb local government economic planning
and business practices by exerting control over the
development and capitalization of a country’s
infrastructure.
 MNEs can destroy, pollute, and endanger host-country
and LDC environment and the health of local
populations.
Dark Sides of Globalization
 Crime and corruption: Narcotics trafficking ,
sex slave business , black market business,
and estimated high corruption costs
 Economic poverty and child slave labor:
Child labor in developing and industrialized
countries .African countries are being ignored
by globalization and are not in the global
economy because of high illiteracy rates, lack
of modern infrastructure, and social chaos.
Dark Sides of Globalization
 The global digital divide: World continues to
have different levels of access to technology,
first and third world countries. Technology
revolution and the internet integration
increased child pornography business.
 Westernization (Americanization) of
cultures: “McDonaldization” and also
education, work, the criminal justice system,
health care, travel, leisure, dieting, politics,
the family, religion, and every other aspect of
society.
Dark Sides of Globalization
 Loss of Nation-State Sovereignty:
Globalization gradually destroys the ability of
governments to protect the interests of their
citizens against more powerful multinational
corporations.
MNE Guidelines in dealing
with LDCs by DeGeorge
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Do no intentional harm
Produce more good than harm for the host country
Contribute to the host country’s development
Respect human rights, local culture
Pay fair share of taxes
Cooperate with local government as partners
Attend to actions, consequences, and failures of the firm
Maintain high safety standards and controls
Protect the natural environment
UN Global Compact
 A voluntary corporate citizenship initiative
endorsing 10 key principles that focus on four
key areas of concern: the environment,
anticorruption, the welfare of workers
around the world, and global human rights.
 Consists of more than 2,000 companies in
over 80 countries
UN Global Compact
 Human Rights
 Businesses should support & respect the
protection of internationally proclaimed human
right.
 Businesses should make sure they are not
complicit in human rights abuses.
UN Global Compact
 Labor Standards
 Businesses should uphold the freedom of
association and the effective recognition of the
right to collective bargaining.
 Businesses should uphold the elimination of all
forms of forced & compulsory labor.
 Business should uphold the effective abolition of
child labor.
 Businesses should uphold the elimination of
discrimination in employment & occupation.
UN Global Compact
 Environment
 Businesses should support a precautionary
approach to environmental challenges.
 Businesses should undertake initiatives to
promote greater environmental responsibility.
 Business should encourage the development &
diffusion of environmentally friendly technologies.
UN Global Compact
 Anticorruption
 Businesses should work against all forms of
corruption, including extortion and bribery.
The OECD Guidelines for
Multinational Enterprises
 Governmental initiative endorsed by 30
members of Organization for Economic
Cooperation and Development (OECD) and
9 nonmembers, promoting principles and
standards of behavior in the following areas:
human rights, information disclosure,
anticorruption, taxation, labor relations,
environment, competition, and consumer
protection.