NOTES TOPIC 4 IB
Transcript of NOTES TOPIC 4 IB
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Lecture 4
Ethics in
International Business
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What is Ethics?
Ethicsrefers to accepted principles of right or wrong
that govern
the conduct of a person
the members of a profession
the actions of an organization
Business ethics are the accepted principles of right
or wrong governing the conduct of business people
Ethical strategy is a strategy, or course of action, thatdoes not violate these accepted principles
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Which Ethical Issues are Most
Relevant to International Firms?
The most common ethical issues in businessinvolve
1. employment practices2. human rights
3. environmental regulations
4. corruption5. the moral obligation of multinational
companies
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How Are Ethics Relevant
To Employment Practices?
Suppose work conditions in a host nation are
clearly inferior to those in the multinationals
home nation
Which standards should apply?
home country standards
host country standards
something in between
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How are Ethics Relevant
to Human Rights?
Basic human rights are taken for granted in
developed countries
freedom of association
freedom of speechfreedom of assembly
freedom of movement
What are the responsibilities of firms incountries where basic human rights are notrespected?
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How are Ethics Relevant
to Environmental Regulations?Question: Is it permissible for multinationals topollute in developing countries simply becausethere are no regulations against it?
Answer:
Some parts of the environment are a public goodthat no one owns, but anyone can despoil
When environmental regulations in host nationsare far inferior to those in the home nation, ethical
issues arise The tragedy of the commons occurs when a
resource held in common by all, but owned by noone, is overused by individuals, resulting in itsdegradation
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How are Ethics Relevant
to Corruption?Question: Is it ethical to make payments togovernment officials to secure business?
Answer:
The U.S. Foreign Corrupt Practices Actoutlawed thepractice of paying bribes to foreign governmentofficials in order to gain business
The Convention on Combating Bribery of ForeignPublic Officials in International Business
Transactions adopted by the Organization forEconomic Cooperation and Development (OECD),obliges member states to make the bribery of foreignpublic officials a criminal offense
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Corruption
Some economists suggest that the practice ofgiving bribes might be the price that must be paid
to do a greater good
In countries where preexisting political structures
distort or limit the workings of the market mechanism,
corruption in the form of black-marketeering,
smuggling, and side payments to government
bureaucrats to speed up approval for business
investments may actually enhance welfare
However, other economists have argued that
corruption reduces the returns on business
investment and leads to low economic growth
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How are Ethics Relevant
to Moral Obligations? Social responsibility refers to the idea that managers
should consider the social consequences of economicactions when making business decisions, and that thereshould be a presumption in favor of decisions that have
both good economic and good social consequences it is the right way for a business to behave
Advocates argue that businesses need to recognize theirnoblesse oblige - honorable and benevolent behavior thatis the responsibility of successful companies
give something back to the societies that have made their successpossible
But, are multinationals morally required to use theirpower to enhance local welfare?
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What are Ethical Dilemmas?
Ethical dilemmas are situations in which none
of the available alternatives seems ethically
acceptable
The ethical obligations of a multinational
corporation toward employment conditions,
human rights, corruption, environmental
pollution, and the use of power are not alwaysclear cut
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Why do Managers Behave
Unethically?
Several factors contribute to unethical behaviorincluding:
1. Personal ethics - the generally accepted principles ofright and wrong governing the conduct of individuals
Expatriates may face pressure to violate their personal
ethics because
they are away from their ordinary social context and
supporting culture
they are psychologically and geographically distant
from the parent company
Managers fail to question whether a decision or action is
ethical, and instead rely on economic analysis when
making decisions
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Why do Managers
Behave Unethically?
2. Decision Making Processes - the values and
norms that are shared among employees of an
organization
Studies show that business people may behaveunethically because they fail to ask the relevant
questionis this decision or action ethical?
decisions are made based on economic logic, without
consideration for ethics
Organization culturethat does not emphasizebusiness culture encourages unethical behavior
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Why do Managers
Behave Unethically?
3. Organizational culture - organizational culturecan legitimize unethical behavior or reinforcethe need for ethical behavior
4. Unrealistic performance expectations -encourage managers to cut corners or act in anunethical manner
5. Leadership - helps establish the culture of an
organization, and set the examples that othersfollow
when leaders act unethically, subordinates may actunethically, too
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Why do Managers
Behave Unethically?
Determinants of Ethical Behavior
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What are the Philosophical
Approaches to Ethics?
There are several different approaches to
business ethics
Straw men approaches deny the value ofbusiness ethics or apply the concept in an
unsatisfactory way
Others approaches are favored by moralphilosophers and are the basis for current
models of ethical behavior
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Philosophical Approaches to
Ethics
There are several approaches to business
ethics including
Straw men
the Friedman doctrine
cultural relativism
the righteous moralist
the nave immoralist
Utilitarian and Kantian
Rights theories
Justice Theories
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What are the Philosophical
Approaches to Ethics?
There are several different approaches to
business ethics
Straw men approaches deny the value ofbusiness ethics or apply the concept in an
unsatisfactory way
Others approaches are favored by moralphilosophers and are the basis for current
models of ethical behavior
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The Straw Men Approaches
There are four common straw men approaches:1. Friedman doctrine - the only social responsibility of
business is to increase profits, so long as the company
stays within the rules of law
companies should not undertake expendituresbeyond those mandated by law and those
required for the efficient running of a business
2. Cultural relativism - ethics are culturally determined
and firms should adopt the ethics of the cultures in which
they operate
when in Rome, do as the Romans do
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The Straw Men Approaches
3. Righteous moralist- a multinationals home country
standards of ethics should be followed in foreign
countries
approach is common among managers from developed countries
4. Nave immoralist- if a manager of a multinational sees
that firms from other nations are not following ethical
norms in a host nation, that manager should not either
actions are ethically justified if everyone else is doing the same
thing
All approaches offer inappropriate guidelines for
ethical decision making
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Utilitarian and Kantian
Approaches Utilitarian ethics - the moral worth of actions or practices is
determined by their consequences
actions have multiple consequences, some good, some not
actions are desirable if they lead to the best possible
balance of good consequences over bad consequences
Problems with this approach
it is difficult to measure the benefits, costs, and risks of an
action
the approach fails to consider justice
Kantian ethics - (Immanuel Kant) - people should be treated
as ends and never purely as means to the ends of others
people have dignity and need to be respected, they are not
machines
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What are Rights Theories?
Rights theories- human beings have fundamentalrights and privileges which transcend nationalboundaries and culturesestablish a minimum level of morally acceptable
behavior the Universal Declaration of Human Rights specifiesthe basic principles that should always be adhered toirrespective of the culture in which one is doingbusiness
Moral theorists argue that fundamental humanrights form the basis for the moral compass thatmanagers should navigate by when makingdecisions which have an ethical component
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What are Justice Theories?
Justice theories focus on the attainment of a justdistribution of economic goods and services
a just distribution is one that is considered fair andequitable
John Rawls argued that all economic goods andservices should be distributed equally exceptwhen an unequal distribution would work toeveryones advantage
impartiality is guaranteed by the veil of ignorance-everyone is imagined to be ignorant of all his or herparticular characteristics