MGMT 374 Week 15 Lecture Presentation


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  • Notice that Walmart’s revenues is roughly equal to the GDP of Taiwan, which is the 26 th largest economy in the world.
  • MGMT 374 Week 15 Lecture Presentation

    1. 1. <ul><li>Globalization of Ethical Decision Making </li></ul>C H A P T E R 10
    2. 2. Capitalism, Economics and Business Ethics <ul><li>The first decade of the 21 st century was a turbulent one </li></ul><ul><ul><li>Ethical misconduct and excessive risk-taking seemed rampant </li></ul></ul><ul><ul><li>Many stakeholders lost confidence in businesses </li></ul></ul><ul><li>Lack of fairness, trust and honesty made stakeholders question the stability of major institutions, as well as the intentions of executives </li></ul><ul><li>Even the competence of governmental regulatory institutions was called into question </li></ul>
    3. 3. Risk Compartmentalization <ul><li>Occurs when profit centers within an organization are unaware of the consequences of their decisions on the organization as a whole </li></ul><ul><ul><li>No single person can be blamed for negative outcomes that occur because of systemic problems </li></ul></ul>Source: Flying Colours Ltd.
    4. 4. Key Figures in Modern Economics <ul><li>Adam Smith </li></ul><ul><ul><li>Laissez-faire capitalism </li></ul></ul><ul><li>John Maynard Keynes </li></ul><ul><ul><li>Government can stimulate the private sector </li></ul></ul><ul><li>Milton Friedman </li></ul><ul><ul><li>Return to self-regulating free market system </li></ul></ul>
    5. 5. Keynes and Friedman Agreed That: <ul><li>People have rational preferences among outcomes that can be identified and associated with value </li></ul><ul><li>Individuals seek to maximize utility and firms seek to maximize profits </li></ul><ul><li>People act independently on the basis of full and relevant information </li></ul>
    6. 6. Capitalism, Economics and Business Ethics <ul><li>Socialism: Advocates that wealth and power be shared equally across society based on the amount of work expended in production </li></ul><ul><ul><li>Karl Marx was the most famous advocate </li></ul></ul><ul><li>Social democracy formed in the 1940s as an offshoot of socialism </li></ul><ul><ul><li>Private ownership of property, but large government </li></ul></ul><ul><li>Current global economic system has created bimodal wealth distribution: The middle class shrinks so that there are many poor and a few very wealthy </li></ul>
    7. 7. Two Schools of Economic Thought <ul><li>Rational economics: Assumes that people are rational and base their decisions on maximizing their utility based on the amount of resources available to them </li></ul><ul><li>Behavioral economics: Assumes that humans do not always act rationally </li></ul><ul><ul><li>Also believes that how information is presented can affect people’s choices, which is called the framing effect </li></ul></ul>
    8. 8. The Economic Capitalism Country Differential
    9. 9. Common Values, Goals, and Business Practices <ul><li>Global common values: Shared across most cultures </li></ul><ul><li>Country cultural values: Specific to certain groups that express actions, behavior and intent </li></ul><ul><li>Culture: Everything in our surroundings that is made by people </li></ul><ul><ul><li>Each nation has a distinctive culture beliefs about what business activities are acceptable </li></ul></ul><ul><ul><li>Subcultures can also be found within many nations </li></ul></ul>
    10. 10. Cultural Differences <ul><li>Can become liabilities when firms transfer personnel </li></ul><ul><ul><li>One significant area of cultural differences is language </li></ul></ul><ul><ul><li>Cultural differences in body language can also lead to misunderstandings </li></ul></ul><ul><ul><li>Perceptions of time may differ </li></ul></ul>Source: Corbis, Pacific Rim
    11. 11. Global Business Practices <ul><li>The Self-reference criterion (SRC): An implied perspective of ethical superiority is common </li></ul><ul><ul><li>SRC is an unconscious reference to one’s own cultural values, experiences, and knowledge </li></ul></ul><ul><ul><li>We react on the basis of knowledge, which is accumulated over a lifetime and grounded in the culture of origin </li></ul></ul>
    12. 12. Perceptions of Countries as Least/Most Corrupt
    13. 13. Global Business <ul><li>Dumping: The practice of charging high prices for products sold in domestic markets while selling the same products in foreign markets at low prices, often below the costs of exporting them </li></ul><ul><ul><li>The U.S. has multiple anti-dumping laws </li></ul></ul>Source: Jack Star/PhotoLink
    14. 14. Cultural Relativism <ul><li>The concept that morality varies from one culture to another </li></ul><ul><li>There is a continuum of cultural relativism </li></ul><ul><ul><li>Some believe that only one culture defines ethical behavior for the whole globe </li></ul></ul><ul><ul><li>For the business relativist , there may be no ethical standards except for the one in the transaction culture, or none at all. These people may be in conflict with their own individual moral standards. </li></ul></ul>
    15. 15. Matrix for Global Relativists When Making Cross-Cultural Decisions
    16. 16. Consumerism <ul><li>The belief that consumers, not the interests of corporations, should dictate the economic structure of society </li></ul><ul><ul><li>Belief that consumption of goods relates to increased well being </li></ul></ul><ul><ul><li>Made-to-break (planned obsolescence) encourages consumers to regularly buy more items </li></ul></ul><ul><li>Consumerism meeting with backlash because of increased sustainability concerns </li></ul>
    17. 17. Human Rights <ul><li>Defined as an inherent dignity that should be afforded all people with equal and inalienable rights as the foundation of freedom, justice and peace in the world </li></ul><ul><li>Have been codified in the United Nations Human Rights Declaration </li></ul>Source: Nancy Ney
    18. 18. Health Care <ul><li>Is a major global human rights issue </li></ul><ul><li>The issue of healthcare availability and affordability for workers in all nations is becoming a major source of concern </li></ul><ul><li>Question remains of whether access to healthcare is a right or a privilege </li></ul>
    19. 19. Labor <ul><li>More people than ever work in nations other than their homeland </li></ul><ul><li>Doing business in many different countries, firms today have many ethical concerns involving labor issues </li></ul><ul><li>A corporation must always know where the labor comes from in its entire supply chain so as to avoid controversy </li></ul><ul><li>Corporations that do not take labor issues seriously will find themselves in legal and ethical trouble </li></ul>
    20. 20. Sustainable Development <ul><li>Is a systematic approach to achieving development in such a way that the earth’s resources are preserved for future generations </li></ul><ul><ul><li>Will be a serious issue for most firms in the future </li></ul></ul><ul><li>Some companies conduct their own sustainability performance reports </li></ul>
    21. 21. The Millennium Ecosystem Assessment
    22. 22. The International Monetary Fund <ul><li>The IMF emerged from the Bretton Woods agreement of 1944 </li></ul><ul><li>The IMF assumed a major role in the 1980s in the management of the less developed countries (LDC) debt crisis </li></ul><ul><li>An ethical issue surrounding the IMF has to do with the increased inequality in LDCs </li></ul><ul><ul><li>Some contend that foreign corporations offload their debt via IMF bailouts </li></ul></ul>
    23. 23. The World Trade Organization <ul><li>The WTO was established in 1995 and now includes 133 member nations and 33 others with observer status </li></ul><ul><li>Administers its own trade agreements, facilitates future trading negotiations, settles trade disputes and monitors the trade policies of member nations </li></ul><ul><ul><li>Addresses economic and social issues in a broad range of industries </li></ul></ul>
    24. 24. The Multinational Corporation <ul><li>Are public companies that operate on a global scale without significant ties to any one nation or region </li></ul><ul><ul><li>Represent highest level of international business commitment </li></ul></ul><ul><li>MNCs are subject to ethical criticism over their impact on the countries in which they do business </li></ul><ul><li>Because of increased scrutiny and pressure to be socially responsible, many corporations belong to Business for Social Responsibility </li></ul>
    25. 25. World’s Largest Countries and Corporations (Based on GDP and Revenues)