International Business

Environments & Operations

14e
Daniels

Radebaugh

Sullivan

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Chapter 5
Globalization and Society

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Learning Objectives

To examine the broad foundation of ethical behavior To demonstrate the cultural and legal foundations of ethical behavior To discuss the importance of social responsibility when operating internationally, especially in the areas of sustainability To discuss some key issues in the social activities and consequences of globalized business To examine corporate responses to globalization in the form of codes of conduct, among other things
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Introduction

Companies must satisfy stakeholders

Shareholders Employees Customers Society

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Foundations of Ethical Behavior

Learning Objective 1: To examine the broad foundation of ethical behavior.

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Foundations of Ethical Behavior

Three levels of moral development 1. Preconventional 2. Conventional 3. Postconventional, autonomous, principled

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Foundations of Ethical Behavior

Teleological approach decisions are based on the consequences of the action Utilitarianism an action is right if it produces the greatest amount of good Deontological approach

moral judgments are made and moral reasoning occurs independently of consequences
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Why Do Companies Care?

Ethical behavior can help a company develop a competitive advantage avoid being perceived as irresponsible

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The Cultural and Legal Foundations of Ethical Behavior

Learning Objective 2: To demonstrate the cultural and legal foundations of ethical behavior

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Relativism versus Normativism

Relativism

ethical truths depend on the groups holding them there are universal standards of behavior that all cultures should follow

Normativism

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Legal Justification: Pro and Con

The law is inadequate because

Some things that are unethical are not illegal Laws are slow to develop in emerging areas of concern Laws may be based on imprecisely defined moral concepts The law often needs to undergo scrutiny by the courts The law is not very efficient

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Legal Justification: Pro and Con

Legal justification is appropriate because

The law embodies many of a countrys moral principles The law provides a clearly defined set of rules The law contains enforceable rules that apply to everyone The law reflects careful and wide-ranging discussions

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Extraterritoriality

Extraterritoriality

imposing domestic legal and ethical practices on the foreign subsidiaries of companies headquartered in their jurisdictions

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Ethics and Corporate Bribery

Regardless of the reasons for not using the law as a starting point for ethical behavior, it remains a good starting point Countries looking for solutions to common problems take similar legal steps

Consider activities that affect the well-being of people activities that affect the environment

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Corruption and Bribery

Corruption

the misuse of entrusted power for private gain

payments or promises to pay cash or anything of value Occurs to obtain government contracts to get public officials to do what they should be doing anyway

Bribes

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Corruption and Bribery

Where Bribes Are Business As Usual

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Corruption and Bribery

International accords to stop bribery

OECD Anti-Bribery Convention ICC code of rules UN Convention against Corruption

EU efforts U.S. Foreign Corrupt Practices Act and Sarbanes-Oxley legislation 2005 World Economic Forum zero tolerance pact
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Regional initiatives include

Industry initiatives include

Ethics and the Environment

Learning Objective 3: To discuss the importance of social responsibility when operating internationally, especially in the areas of sustainability

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Ethics and the Environment

Companies compromise the environment

contamination of air, soil, or water during manufacturing producing products that emit fossil-fuel contaminants
renewable versus non-renewable

Effect of natural resource extraction

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What is Sustainability?

Sustainability

meeting the needs of the present without compromising the ability of future generations to meet their own needs
yes

Is sustainability good business practice?

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Global Warming, Kyoto Protocol

Kyoto Protocol (1997)

signed to require countries to cut greenhouse gas emissions to 5.2% below 1990 levels between 2008 and 2012

Some countries have adopted stricter requirements

others have not ratified the agreement including the U.S., China, India

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Ethical Dilemmas and Other Business Practices

Learning Objective 4: To discuss some key issues in the social activities and consequences of globalized business

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Ethical Dilemmas in the Pharmaceutical Industry

Tiered pricing and other price-related issues

reverse engineering

WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)

generic drugs

R&D and the Bottom Line

India

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Ethical Dimensions of Labor Conditions

Labor issues include

Wages Child labor Working conditions Working hours Freedom of association

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Ethical Dimensions of Labor Conditions

Sources of Worker-Related Pressures in the Global Supply Chain

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Ethical Dimensions of Labor Conditions

Child labor ILO estimates 250 million children aged 517 years work Some companies avoid operating in countries where child labor is common

or establish responsible policies in those countries - IKEA

Some companies refuse to hire individuals who want to work long hours

concerned about exploitation

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Corporate Codes of Ethics

Learning Objective 5: To examine corporate responses to globalization in the form of codes of conduct, among other things

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Corporate Codes of Ethics

How should companies behave? The UN Global Compact establishes guidelines for appropriate behavior in human rights

labor the environment anti-corruption

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Motivations for Corporate Responsibility

Unethical and irresponsible behavior could

result in legal sanctions result in consumer boycotts lower employee morale cost sales because of bad publicity
sets global policy that must be complied with communicates the code to employees, suppliers, and subcontractors ensures that policies are carried out reports results to external stakeholders
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A code of conduct

Corporate Ethics in The Future

Two trends:

There will be greater convergence of proper ethical conduct Individuals will develop skills to address ethical issues

Impact of social media Impact of future business and government leaders

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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
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