2. Overview
• Introduction to International Business
• Ethics and Social Responsibility in
International Business
3. Globalisation and International Business
• The idea of one global marketplace: no barriers to
consumption, movement of capital and people.
• The merging of distinctly separate national markets
into a global marketplace
– Falling barriers to cross-border trade have made it easier
to sell internationally
– Tastes and preferences converge onto a global norm
– Firms offer standardised products worldwide creating a
world market
4. The Emergence of Global Institutions
• Globalisation has created the need for institutions to
help manage, regulate and police the global
marketplace
– GATT
– WTO
– IMF
– World Bank
– United Nations
7. Top 25 Global TNCs 2013 (based on foreign assets).
Source: UNCTAD’s World Investment Report 2014
8. Ethics and Social Responsibility
• Issues to consider:
– Bribery/corruption
– Child/forced/bonded labour
– Working conditions/remuneration
– Product safety/environmental concerns
9. The Friedman Doctrine aka The Stockholder
Theory
- “The Social Responsibility of a Business is to Increase its
Profits”.
- A business is an artificial person and has no responsibilities.
- The executives are employees of the business and has
responsibility to the owners.
- As the owners tend to want their business to make as much
money as possible, this should be the responsibility of the
executives.
Source: Friedman, M. (1970) “A Friedman doctrine. The Social Responsibility of a Business is to Increase Its Profits” New York Times, Sep 13.
10. Philosophical Approaches to Ethics: Utilitarian
and Kantian Ethics
• Utilitarian approaches to ethics hold that the 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 consider justice,
so the minority will always be at a disadvantage
11. Philosophical Approaches to Ethics:
Rights Theories
• Rights theories recognise that human beings have fundamental rights
and privileges which transcend national boundaries and cultures
• Rights establish a minimum level of morally acceptable behaviour
12. Philosophical Approaches to Ethics:
Rights Theories
• United Nations Universal Declaration of Human Rights
– All human beings are born free and equal in dignity and rights
– They are endowed with reason and conscience and should act toward one
another in a spirit of brotherhood
– Everyone has the right to work, to free choice of employment, to just and
favorable conditions of work, and to protection against unemployment
– Everyone, without any discrimination, has the right to equal pay for equal
work
– Everyone who works has the right to just and favorable remuneration
ensuring for himself and his family an existence worthy of human dignity, and
supplemented, if necessary, by other means of social protection
– Everyone has the right to form and to join trade unions for the protection of
his interests
The Universal Declaration of Human Rights. United Nations. Available at: http://www.un.org/en/documents/udhr/history.shtml
13. Philosophical Approaches to Ethics:
Justice Theories
• Justice theories focus on the attainment of a just distribution of economic
goods and services
• Valid principles of justice are those with which all persons would agree if
they could freely and impartially consider the situation
– Impartiality is guaranteed by a conceptual device called the veil of
ignorance
– Under the veil of ignorance, everyone is imagined to be ignorant of
all of his or her particular characteristics
• race, gender, intelligence, nationality, family background, and
special talents
Source: Rawls, J. (1971) A Theory of Justice, Harvard University Press.
14. Philosophical Approaches to Ethics:
Justice Theories
• Rawls argues that under the veil of ignorance people would unanimously agree on
two fundamental principles of justice
– Each person be permitted the maximum amount of basic liberty compatible
with a similar liberty for others
– Once equal basic liberty is assured, inequality in basic social goods is to be
allowed only if such inequalities benefit everyone
• Difference principle states that inequalities are justified if they benefit the
position of the least-advantaged person
• Moral philosophers have a problem with Rawls’ concept of the veil of ignorance
because decisions generally include some of the factors
15. Corruption
• Difficult to define.
• Certain acts/gestures/favours may be construed as bribery, nepotism
or corrupt practices in some countries but not others.
• Examples: gift giving, use of networks (guanxi in China, wasta in the
Arab countries)
Hutchings, K. and Weir, D. (2006) Guanxi and Wasta: A Comparison. Thunderbird International Business Review, 48, pp.141-156
16. Corruption
• The United States passed the Foreign Corrupt Practices Act (FCPA) to fight
corruption
– Outlawed the paying of bribes to foreign government officials to gain business.
• In 1997, the trade and finance ministers from the member states of the Organization
for Economic Cooperation and Development (OECD) followed the U.S. lead and
adopted the Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions
– Obliges member states to make the bribery of foreign public officials a criminal
offense
17. FCPA
• Exception for routine governmental action
Subsections (a) and (g) of this section shall not apply to any
facilitating or expediting payment to a foreign official, political party,
or party official the purpose of which is to expedite or to secure the
performance of a routine governmental action by a foreign official,
political party, or party official.
18. Bribery and Australia
• the Australian Government has ratified:
- the United Nations Convention against Corruption, the United Nations Convention
against Transnational Organized Crime and
- the OECD Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions (Anti-Bribery Convention).
• Facilitation Payment Defence: the value of the benefit was of a minor nature; and
the person’s conduct was engaged in for the sole or dominant purpose of
expediting or securing the performance of a routine government action of a minor
nature; and as soon as practicable after the conduct occurred, the person made a
record of the conduct.
• The Government is currently re-considering the use of this defence.
19. Corruption Perception Index 2014
• Source: Transparency International. www.transparency.org
Rank Country
1 Denmark
2 New Zealand
3 Finland
4 Sweden
5 Norway
6 Switzerland
7 Singapore
8 Netherlands
9 Luxembourg
10 Canada
11 Australia
12 Germany
14 United Kingdom
15 Japan
17 Hong Kong
17 United States
25 United Arab Emirates
43 South Korea
50 Malaysia
53 Czech Republic
Rank Country
64 Turkey
69 Italy
85 India
85 Thailand
94 Colombia
100 China
107 Indonesia
119 Vietnam
126 Pakistan
133 Madagascar
136 Iran
136 Lebanon
136 Russia
145 Bangladesh
145 Kenya
156 Cambodia
170 Iraq
172 Afghanistan
174 North Korea
20. Bribe Payers Index 2011
Rank Country
1 Netherlands
1 Switzerland
3 Belgium
4 Germany
4 Japan
6 Australia
6 Canada
8 Singapore
8 United Kingdom
10 United States
11 France
11 Spain
13 South Korea
14 Brazil
15 Hong Kong
15 Italy
15 Malaysia
15 South Africa
19 Taiwan
19 India
19 Turkey
22 Saudi Arabia
Source: Transparency International. www.transparency.org
Rank Country
23 Argentina
23 United Arab Emirates
25 Indonesia
26 Mexico
27 China
28 Russia
21. • MNCs continue to be accused of being unethical and socially
irresponsible.
• Some well-known cases include:
– Shell in Nigeria,
– Union Carbide in India
22. Shell in Nigeria
• Royal-Dutch Shell had oil exploration rights in Nigeria.
• The Movement for the Survival of the Ogoni people represented the interests of the
minority Ogoni people who lived in the area called Ogoniland.
• Accusation that the Niger Delta was being polluted and the rights of the Ogoni ppl
were not being protected.
• After numerous attempts to silence Ken Saro-Wiwa, the Nigerian government of
Gen Abacha arrested Ken.
• On 10 Nov 1995 Ken and 8 other supporters were executed.
• In 1996 Ken’s family started legal proceedings against Shell in the USA.
• In June 2009 (before the trial commenced) an out of court settlement was reached
(US$15.5 million).
23. Union Carbide India Limited
• 1969: Union Carbide India Limited (subsidiary of US based Union Carbide-UCC)
builds a pesticide factory in Bhopal, capital city of the State of Madhya Pradesh.
• 2 December 1984: a deadly gas is released due to a suspected leak in the plant.
• Official figures: 3,500 deaths within days and more than 15,000 deaths since then.
• Campaigners claim the figures are close to 25,000 deaths.
• 1989 UCC pays the Indian government US$470 million in an out of court
settlement. Part of this amount when distributed to the half a million victims by the
Indian government totalled 200 rupees per month (roughly US$4)
• 1999: UCC became a wholly owned subsidiary of Dow Chemicals (US$11.6 billion).
• June 2010: The Indian court hands down final verdict. Convicts 8 of the accused
(all Indian nationals). All released on bail of 100,000 rupees each (US$2125).
24. Ethics and Advertising
• More prohibition on promoting products now than ever before (for
example, tobacco).
• Information readily available: cannot make unsubstantiated claims.
• How can companies continue to promote such products?
25. Intellectual Property Protection
• World Intellectual Property Organization (WIPO) convention
(www.wipo.int)
• 188 member states. Part of the United Nations
• Members are expected to protect IP: both industrial property
(inventions, trademarks, industrial designs etc) and Copyrights (art,
literary work, music).
