CHAPTER
4
Ethics in International
Business
CHAPTER
4
What would you do?
 Would you buy a product if you knew it was made by a
10-year old girl in Africa who was only paid $0.27/day for
her work?
 What if that girls parents were killed and she was the primary
bread winner for her younger siblings?
 Would it bother you that she dropped out of school after 5th
grade to help support her family?
 What if the product normally sold for $150, but you could
get it for $20 because of this?
 What if one of your parents worked in the US for this
company and was earning $100,000+ per year, but had
nothing to do with this product, would you be OK with it?
CHAPTER
4
Introduction
 Ethics
 Moral guidelines which govern good behavior
 Not the same thing as behaving lawfully
 Business Ethics
 The principles and standards that determine acceptable conduct
in business organizations
 Accepted principles of right or wrong that govern
the conduct of a person, the members of a
profession, or the actions of an organization
CHAPTER
4
Ethical Issues in International Business
 Arise when a manager makes decisions consistent with
differing national environments
 Political Systems
 Legal Systems
 Economic Development Levels
 Culture
 What is ethical and “normal” in one environment many
not be so in another
 Who’s guidelines do you follow?
 Home Country
 Host Country
CHAPTER
4
Ethical Issues in International Business
 The most common ethical issues in business involve
 Employment Practices
 Human Rights
 Environmental Regulations
 Corruption
 The Moral Obligation Of Multinational Companies
CHAPTER
Employment Practices
 Child Labor
 the employment of children in any work that deprives them
of their childhood
 interferes with their ability to attend regular school
 mentally, physically, socially or morally dangerous and
harmful
 Before 1940, numerous children aged 5–14 worked in Europe, the
United States and various colonies of European powers
 In 2010, sub-Saharan Africa had the highest incidence rates of child
labor, with several African nations witnessing over 50 percent of
children aged 5–14 working
 Primary cause of child labor – poverty
 Income from working children may be 25% - 40% of household revenue
4
CHAPTER
Incidence Rates for Child Labor 2
Ages 10-14
Yellow
Green
Orange
< 10%
10% - 20%
20% - 30%
Red
Black
30% - 40%
> 40%
SLIDE 7
CHAPTER
Employment Practices
4
 Sweat Shops
 Term for any working environment considered to be
unacceptably difficult or dangerous
 Work long hours for very low pay
 Between 1850 and 1900, sweatshops attracted the rural poor to
rapidly-growing cities, and attracted immigrants to places such
as London and New York City's garment district
 Triangle Shirtwaist Factory Fire
 Led to workplace safety and labor laws
CHAPTER
4
SLIDE 9
CHAPTER
4
Human Rights
 What are human rights?
 Universal Declaration of Human Rights
 Created by United Nations
 Established in 1948
 30 basic Human Rights
We are all free & equal
We all have the same
right to use the law
Innocent until proven
guilty
Don’t discriminate
We are all protected by
the law
The right to privacy
The right to life
Fair treatment by fair
courts
Freedom to move
No slavery
No unfair detainment
The right to asylum
No torture
The right to trial
The right to a nationality
CHAPTER
4
Human Rights
 Universal Declaration of Human Rights
(continued)
Marriage & family
The right to democracy
The right to education
Your own things
The right to social
security
Culture and copyright
Freedom of thought
Workers’ rights
A free and fair world
Free to say what you
want
The right to play
Our responsibilities
Meet where you like
A bed and some food
Nobody can take away
these rights and
freedoms from us
 Do human rights violations still exist?
 Amnesty International findings:
 Torture or abuse in at least 81 countries
 Unfair trials in at least 54 countries
 Restricted freedom of expression in at least 77 countries
CHAPTER
Environmental Regulations
 Environmental Pollution
 Illegal Dumping
 Deforestation
 Stripping of Natural
Resources
4
CHAPTER
4
Toxic Waste
SLIDE 13
CHAPTER
4
Deforestation
SLIDE 14
CHAPTER
Corruption
 International businesses can, and have, gained
economic advantages by making payments to
government officials
 US passed the Foreign Corrupt Practices Act
 Organization for Economic Cooperation and
Development (OECD) adopted the Convention on
Combating Bribery of Foreign Public Officials in
International Business Transactions
 World’s most corrupt nations, 2014





#1
#3
#4
#5
#6
Somalia, North Korea
Sudan
Afghanistan
South Sudan
Iraq
4
CHAPTER
Social Responsibility
4
 Multinational firms have power, wealth from
control over resources and ability to move
production
 Moral philosophers argue that with power comes
the responsibility to give something back to the
societies that enable them to prosper
 Noblesse Oblige - benevolent behavior that is the
responsibility of successful people and enterprises
CHAPTER
4
Social Responsibility
Examples of Social Responsibility
• Using only fair trade ingredients/
materials
• Establishing sustainability
programs
• Donating to less developed
countries
• Steps to reduce companies
carbon footprint
Most Admired Companies
Rank
Company
1
GDF Suez
2
Marquard & Bahls
3
RWE
4
Altria Group
5
Starbucks
6
Walt Disney
7
United Natural Foods
8
Sealed Air
9
Chevron
9
Whole Foods Market
CHAPTER
4
Ethical Dilemmas
Question: What are ethical dilemmas?
 Ethical dilemmas are situations in which none of the
available alternatives seems ethically acceptable
 they exist because real world decisions are complex,
difficult to frame, and involve various consequences
that are difficult to quantify
 Managers often face situations where the appropriate
course of action is not clear
CHAPTER
4
The Roots of Unethical Behavior
Question: Why do managers behave in an unethical
manner?
 Managerial behavior is influenced by
 Personal ethics
 Decision making processes
 Organizational culture
 Unrealistic performance expectations
 Leadership
CHAPTER
4
Philosophical Approaches to Ethics
 There are several approaches to business ethics
including
 Straw Men
 Friedman Doctrine
 Cultural Relativism
 Righteous Moralist
 Naïve Immoralist
 Utilitarian and Kantian
 Rights theories
 Justice Theories
CHAPTER
4
What’s a Straw Man?
 Wrong ways to approach ethics
 For combat training, people used to create dummies out
of straw and then practice attacking them
 Today when a thinker seeks to develop good ideas, they
try to increase understanding by proposing weak ideas
and showing why they’re weak
 Scholars raise straw-man approaches to ethics to
demonstrate that they offer inappropriate guidelines for
decision-making in a multinational firm
CHAPTER
4
Friedman Doctrine
 States that the only social responsibility of
business is to increase profits, staying within the
law
 May be defensible in developed countries
 What if you’re in systems that let you destroy a
country’s environment or keep people poor?
CHAPTER
4
Cultural Relativism
 Suggests that ethics are nothing more than the
reflection of a culture
 When in Rome, do as the Romans
 If a culture supports slavery, is it OK to use
slaves?
CHAPTER
Philosophical Straw Men
 Righteous Moralist
 claims that his or her own standards of ethics are the
appropriate ones in all countries
 Naïve Immoralist
 asserts that if a manager sees that firms from other
nations are not following ethical norms in a host
country then they should not either
 If everybody is making payments to a local drug lord,
do you do it too?
4
CHAPTER
A Few Defensible Philosophical
Approaches
 Utilitarian
 Kantian
 Rights Principles
 Justice Theory
4
CHAPTER
4
Utilitarian
 Moral worth of actions or practices is determined
by their consequences
 An action is judged to be desirable if it leads to the
best possible balance of good consequences over
bad consequences
 One problem with utilitarianism is in measuring the
benefits, costs, and risks of an action
 The second problem related to utilitarianism is that it
does not explicitly consider justice, so the minority will
always be at a disadvantage
CHAPTER
4
Kantian
 The philosopher Immanuel Kant
(1724-1804)
introduced the principle that people should be
treated as ends and never purely as means to
the ends of others
 People are not instruments like a machine
 People have dignity and need to be respected
CHAPTER
4
Rights Principles
 Rights theories recognize that human beings have
fundamental rights and privileges, which transcend
national boundaries and cultures
 Rights establish a minimum level of morally
acceptable behavior
 Moral theorists argue that fundamental human rights
form the basis for the moral compass that managers
should navigate by when making decisions which
have an ethical component
 United Nations Universal Declaration of Human Rights
CHAPTER
4
Justice Theories
 Justice theories focus on the attainment of a just
distribution of economic goods and services
 A just distribution is one that is considered fair and
equitable
 There is no one theory of justice
 Several theories of justice conflict with each other in
important ways
 Valid principles of justice are those with which all
persons would agree if they could freely and
impartially consider the situation
CHAPTER
4
Why so many Ethical Approaches?
 Accountants and medical doctors have
organizations that try to establish agreement in
the profession
 And still there are major disagreements
 No one tries to establish agreement among
general managers, marketers
 The situations a general manager faces are so
diverse, no central organization could create
agreement
CHAPTER
4
Why so many Ethical Approaches?
 The world has many different ethical systems
 derived from different religions
 rooted in differences in political systems, law,
economic development, and culture
 Different systems can lead to different opinions
about what is ethical
CHAPTER
Ethical Decision Making
4
 Five things that an international business and its
managers can do to make sure ethical issues
are considered
1.
2.
3.
4.
5.
Favor hiring and promoting people with a well-grounded sense
of personal ethics
Build an organizational culture that places a high value on
ethical behavior
Make sure that leaders within the business not only articulate
the rhetoric of ethical behavior, but also act in a manner that is
consistent with that rhetoric
Implement decision-making processes that require people to
consider the ethical dimension of business decisions
Develop moral courage
CHAPTER
Moral Courage
4
 Moral courage enables managers to walk away from
a decision that is profitable, but unethical
 Moral courage gives an employee the strength to
say no to a superior who instructs her to pursue
actions that are unethical
 Moral courage does not come easy and employees
have lost their jobs when acting on this courage
CHAPTER
Decision-Making Process
4
 According to experts, a decision is acceptable on
ethical grounds if a businessperson can answer yes
to each of these questions:
 Does my decision fall within the accepted values or standards
that typically apply in the organizational environment (as
articulated in a code of ethics or some other corporate
statement)?
 Am I willing to see the decision communicated to all
stakeholders affected by it — for example, by having it reported
in newspapers or on television?
 Would the people with whom I have a significant personal
relationship, such as family members, friends, or even managers
in other businesses, approve of the decision?
CHAPTER
4
Ethics in International Business
 What is seen as unethical in one country
may be seen differently in another