INTRODUCTIONINTRODUCTION

Multinational managers face Multinational managers face complex ethical issuescomplex ethical issues

With an understanding of key With an understanding of key ethical problems in multinational ethical problems in multinational management, managers can make management, managers can make more informed ethical judgmentsmore informed ethical judgments

BUSINESS ETHICSBUSINESS ETHICS

Ethics - the rules and values that Ethics - the rules and values that determine what goals and actions determine what goals and actions people follow when dealing with people follow when dealing with other human beings other human beings

Business ethics: all business Business ethics: all business decisions with ethical consequencesdecisions with ethical consequences

The unique ethical problems The unique ethical problems faced by managers conducting faced by managers conducting business operations across business operations across national boundaries national boundaries

INTERNATIONAL BUSINESS INTERNATIONAL BUSINESS ETHICSETHICS

SOCIAL RESPONSIBILITYSOCIAL RESPONSIBILITY

The responsibility businesses to The responsibility businesses to society beyond making profits society beyond making profits

Often reflect the ethical values and Often reflect the ethical values and decisions of the top management teamdecisions of the top management team

Ethics and social responsibility not Ethics and social responsibility not easily distinguished in practiceeasily distinguished in practice

Excepts from Exhibit 15.1 Excepts from Exhibit 15.1 show examples of show examples of

ethical/social responsibility ethical/social responsibility issues faced by MNCsissues faced by MNCs

SSttaakkeehhoollddeerrAAffffeecctteedd

EEtthhiiccaall//SSoocciiaallRReessppoonnssiibbiilliittyy

IIssssuuee

EExxaammppllee PPrroobblleemm FFoorr tthheeMMNNCC

CCuussttoommeerr PPrroodduucctt ssaaffeettyy

SShhoouulldd aann MMNNCC ddeelleettee ssaaffeettyyffeeaattuurreess ttoo mmaakkee aa pprroodduuccttmmoorree aaffffoorrddaabbllee ffoorr ppeeoopplleeiinn aa ppoooorreerr nnaattiioonn??

SSttoocckkhhoollddeerrssFFaaiirr rreettuurrnn oonniinnvveessttmmeenntt

IIff aa pprroodduucctt iiss bbaannnneeddbbeeccaauussee iitt iiss uunnssaaffee iinn oonneeccoouunnttrryy,, sshhoouulldd iitt bbee ssoolldd iinnccoouunnttrryy wwhheerree iitt iiss nnoottbbaannnneedd ttoo mmaaiinnttaaiinn pprrooffiittmmaarrggiinnss??

CChhiilldd LLaabboorrSShhoouulldd aann MMNNCC uussee cchhiillddllaabboorr iiff iitt iiss lleeggaall iinn tthheeccoouunnttrryy ooff tthheeiirr llooccaattiioonn??

EEmmppllooyyeeeess

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HHoosstt ccoouunnttrryyFFoolllloowwiinngg llooccaallllaawwss

SSoocciieettyy iinnGGeenneerraall

PPrrootteeccttiioonn oofftthheeEEnnvviirroonnmmeenntt

IIss aann MMNNCC oobblliiggaatteedd ttooccoonnttrrooll iittss hhaazzaarrddoouuss wwaasstteettoo aa ddeeggrreeee hhiigghheerr tthhaann llooccaallllaawwss rreeqquuiirree??

EX EX 15.115.1

BALANCING THE NEEDS OF BALANCING THE NEEDS OF THE COMPANY WITH ETHICAL THE COMPANY WITH ETHICAL

CONSEQUENCESCONSEQUENCES

Managers must weigh and Managers must weigh and balance the economic, legal, and balance the economic, legal, and ethical consequences of their ethical consequences of their decisions decisions

EconomicEconomicLegalLegalEthicalEthical

FORMS OF ANALYSESFORMS OF ANALYSES

ETHICAL PHILOSOPHYETHICAL PHILOSOPHY

TRADITIONAL VIEWSTRADITIONAL VIEWS

Two basic systems of ethical Two basic systems of ethical reasoningreasoning

–DeontologicalDeontological

–TeleologicalTeleological

DEOLONTOLOGICAL DEOLONTOLOGICAL THEORIESTHEORIES

Actions have a good or bad Actions have a good or bad morality regardless of the morality regardless of the outcomes they produceoutcomes they produce

TELEOLOCIALTELEOLOCIAL

Morality from the consequences Morality from the consequences of an actof an act

UtilitarianismUtilitarianism

MORAL LANGUAGESMORAL LANGUAGES

A contemporary view A contemporary view Basic ways that people use to Basic ways that people use to

make ethical decisions and make ethical decisions and explain ethical choices explain ethical choices

Virtue and viceVirtue and viceSelf controlSelf controlMaximize human welfareMaximize human welfareAvoiding harmAvoiding harmRights/dutiesRights/dutiesSocial contract Social contract

SIX BASIC ETHICAL SIX BASIC ETHICAL LANGUAGESLANGUAGES

NATIONAL DIFFERENCESNATIONAL DIFFERENCES

National culture and social National culture and social institutions affect ethical institutions affect ethical behavior/social responsibility behavior/social responsibility

See Exhibits 15.2-15.5See Exhibits 15.2-15.5

MANAGEMENTPRACTICES TOMONITOR AND

CONTROL ETHICALBEHAVIOR IN

ORGANIZATIONS(e.g., codes of ethics)

KEY SOCIALINSTITUTIONS

ReligionLaws and Legal

System

IMPORTANT ETHICALISSUES FOR

BUSINESS(e.g., equal rights for

women)

CULTURALNORMS AND

VALUES(e.g., norms for gift

giving)

EXHIBIT 15.2 A MODEL OF INSTITUTIONAL AND CULTURALEFFECTS ON BUSINESS ETHICS ISSUES AND MANAGEMENT

EX 15.3 ETHICAL ISSUES EX 15.3 ETHICAL ISSUES IDENTIFIED BY SENIOR U.S. AND IDENTIFIED BY SENIOR U.S. AND

EUROPEAN MANAGERSEUROPEAN MANAGERS

-100 -50 0 50

Relative Frequency of Concern0 = mean

U.S.

U.K.

Ger

man

y/Aust

riaPolitical andLocalInvolvement

PersonnelIssues

Use ofInformation

EX 15.4 THE MANAGEMENT OF KEY ETHICAL ISSUES

-15 -10 -5 0 50 = MeanU.S

.

U.K.

Germ

any/

Austria

Ethical Issues Addressed in Training

Ethical Issues Addressed in Written Policies

EX 15.5 BELIEFS REGARDING ETHICAL CODES

0 1 2 3 4

5=Agree3=Neutral

1=Disagree

Raise Ethical Level

Aid to Refuse

Define Limits

Violate if not Detected

French German U.S.

ETHICAL RELATIVISM VS ETHICAL RELATIVISM VS ETHICAL UNIVERSALISMETHICAL UNIVERSALISM

Ethical relativism - each society's Ethical relativism - each society's view of ethics considered view of ethics considered legitimate and ethical legitimate and ethical

Ethical universalism - basic Ethical universalism - basic moral principles transcend moral principles transcend cultural/national boundaries cultural/national boundaries

PRACTICAL PROBLEMS OF PRACTICAL PROBLEMS OF FOLLOWING EITHERFOLLOWING EITHER

Convenient relativism - Convenient relativism - companies use ethical relativism companies use ethical relativism to behave any way they pleaseto behave any way they please

Cultural imperialism with ethical Cultural imperialism with ethical universalismuniversalism

ETHICAL CONVERGENCEETHICAL CONVERGENCE

In spite of wide differences in In spite of wide differences in cultures and social institutions, cultures and social institutions, growing pressures for growing pressures for multinationals to follow same multinationals to follow same rulesrules

PRESSURES FOR ETHICAL PRESSURES FOR ETHICAL CONVERGENCECONVERGENCE

Growth of international tradeGrowth of international trade–Creates pressures for Creates pressures for

uniformityuniformity

Increased cross national imitationIncreased cross national imitationMixed cultural background Mixed cultural background

employeesemployees

FOREIGN CORRUPT FOREIGN CORRUPT PRACTICES ACTPRACTICES ACT

Forbids U.S. companies to make Forbids U.S. companies to make or offer payments or gifts to or offer payments or gifts to foreign government officials to foreign government officials to get or retain business get or retain business

““Reason to know" provisionReason to know" provisionSee Exhibit 15.6 See Exhibit 15.6

FCPA does not prohibit some FCPA does not prohibit some forms of payments that may forms of payments that may occur in international businessoccur in international business

–Payments made under duress Payments made under duress to avoid injury or violence are to avoid injury or violence are acceptableacceptable

EFFECTS OF THE “ETHICS EFFECTS OF THE “ETHICS GAP”GAP”

FCPA and proliferation of ethical FCPA and proliferation of ethical codes in US are creating and ethics codes in US are creating and ethics gapgap

FCPA blocked some gains in export FCPA blocked some gains in export market share and FDImarket share and FDI

Pressure on other countries to Pressure on other countries to follow US rulesfollow US rules

PRESCRIPTIVE ETHICS FOR PRESCRIPTIVE ETHICS FOR THE MULTINATIONALTHE MULTINATIONAL

Donaldson suggestsDonaldson suggests

–Guides based on the moral Guides based on the moral languages of avoiding harm, languages of avoiding harm, right/duties, and the social right/duties, and the social contract contract

–Specified in contracts and Specified in contracts and international lawsinternational laws

CODE OF CONDUCTCODE OF CONDUCT

For moral language to work, For moral language to work, there must be codes of conduct there must be codes of conduct

Current codes exist based on Current codes exist based on codes from international codes from international governing bodies (UN, ILO) and governing bodies (UN, ILO) and international agreementsinternational agreements

WHY MULTINATIONALS DO WHY MULTINATIONALS DO NOT ALWAYS FOLLOW NOT ALWAYS FOLLOW ETHICAL PRINCIPLES?ETHICAL PRINCIPLES?

Governments make agreementsGovernments make agreementsCompliance voluntaryCompliance voluntaryNot all governments subscribeNot all governments subscribeEach guide is an incomplete Each guide is an incomplete

moral guidemoral guide

HOW SHOULD THE MANAGER HOW SHOULD THE MANAGER DECIDE?DECIDE?

Consider whether the action Consider whether the action makes business sensemakes business sense

Conduct and ethical analysisConduct and ethical analysis

–See Exhibit 15.8 nextSee Exhibit 15.8 next

IS THE BEHAVIOR OR ITS CONSEQUENCE:

No

No

No

No

Yes

Yes

Yes

Yes

Yes

No

Do It!

LegalAnalysis

OrganizationalEthical

Analysis

Cultural SensitivityEthical Analysis

Personal Ethical Analysis

No

Violates Hostor HomeCountryLaws?

Violates MNC's Codeof Conduct?

InViolation of

the Company'sEthical Code?

Consistentwith Company

Culture?

Consistentwith Local

CulturalNorms?

Consistentwith PersonalMoral Beliefs?

STOP!

STOP!

STOP!

STOP!

STOP!

STOP!

Yes

CONCLUSIONSCONCLUSIONS

Multinational managers face Multinational managers face ethical challenges magnified by ethical challenges magnified by the international contextthe international context

Need to understand home ethical Need to understand home ethical codes and impact on ethics of codes and impact on ethics of foreign culture/social institutionsforeign culture/social institutions