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Rahul Krishnan Kutty
Anu Mariya C J
ETHICS IN INTERNATIONAL
BUSINESS
Introduction
Ethics refers to accepted principles of right or wrong that
govern the conduct of a person, the members of a...
Source and Nature of Ethical Issues
EMPLOYMENT PRACTICES
• When work conditions in a host nation are clearly inferior
to t...
Source and Nature of Ethical Issues
HUMAN RIGHTS
• Rights that we take for granted in developed nations, such
as freedom o...
Source and Nature of Ethical Issues
ENVIRONMENTAL POLLUTION
• Ethical issues arise when environmental regulations in host
...
Source and Nature of Ethical Issues
CORRUPTION
“Corruption has been a problem in almost every society in
history, and it c...
Source and Nature of Ethical Issues
MORAL OBLIGATIONS
• Social responsibility for MNCs to give something back to
the socie...
Source and Nature of Ethical Issues
Ethical Dilemmas
What is the accepted ethical principle in international
business pers...
Determinants of Ethical Behavior
PERSONAL ETHICS
 Personal ethical code exerts a profound influence on
business ethics
A...
Why do managers behave in an unethical manner?
Determinants of Ethical Behavior
DECISION-MAKING PROCESSES
• People simply forget that business decisions may also have
an...
Determinants of Ethical Behavior
ORGANIZATION CULTURE
• Business climate sometimes do not encourage people to
think throug...
Determinants of Ethical Behavior LEADERSHIP
UNREALISTIC PERFORMANCE EXPECTATIONS
• Pressure from the parent company to mee...
Determinants of Ethical Behavior
LEADERSHIP
Leaders help to establish the culture of an organization, and
they set the exa...
Approaches to Business Ethics
 There are several approaches to business ethics including
 Straw men
1. the Friedman doct...
Straw Men
 Straw men approaches are raised by business ethics
scholars primarily for the purpose of demonstrating that
th...
The Friedman Doctrine
• By the Nobel laurite Milton Friedman in1970
• Friedman’s basic position is that the only social
re...
Cultural Relativism
• All ethics are culturally determined - ethics are nothing
more than the reflection of a culture
• Ac...
The Righteous Moralist
• MNC’s home-country standards of ethics are the
appropriate ones for companies to follow in foreig...
The Naive Immoralist
• If firms from other nations are not following ethical norms
in a host nation, then we should not ei...
Utilitarian and Kantian Ethics
 Utilitarian approaches to ethics hold that the moral worth
of actions or practices is det...
 Kantian ethics - people have dignity and need to be
respected, they are not machines.
 This philosophy doesn’t consider...
Rights Theories
 Human beings have fundamental rights and privileges
that transcend national boundaries and culture.
 Ac...
Justice Theories
 Justice theories focus on the attainment of a just
distribution of economic goods and services, where a...
Ethical Decision Making
 How do managers decide upon an ethical course of action
when confronted with decisions pertainin...
1) Favor hiring and promoting people with a well-
grounded sense of personal ethics
2) Build an organizational culture tha...
Hiring and Promotion
 Businesses should strive to identify and hire people
with a strong sense of personal ethics
 Prosp...
Organization Culture and Leadership
 Businesses need to build an organization culture
that places a high value on ethical...
Decision-Making Processes
 A moral compass can help determine whether a
decision is ethical.
 If a manager can answer “y...
A five-step process can also help managers think through
ethical issues
1. The first step requires managers to identify wh...
3. Managers need to establish moral intent.
4. The company should then engage in ethical
behavior.
5. The business must au...
Ethics Officers
 To encourage ethical behavior in a business, a number
of firms now have ethics officers
 Ethics officer...
Moral Courage
 Employees in an international business may need
significant moral courage
 managers need to be able too w...
Thank You
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Ethics in international business (1)

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ethics
international Business

Published in: Economy & Finance
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Ethics in international business (1)

  1. 1. Rahul Krishnan Kutty Anu Mariya C J ETHICS IN INTERNATIONAL BUSINESS
  2. 2. Introduction Ethics refers to accepted principles of right or wrong that govern the conduct of a person, the members of a profession, or the actions of an organization Often a function of differences in economic development, politics, legal systems, and culture Certain practices in one country may be unethical when judged by other countries (Western) standards Most common ethical issues involve employment practices, human rights, environmental regulations, corruption, and the moral obligation of MNCs
  3. 3. Source and Nature of Ethical Issues EMPLOYMENT PRACTICES • When work conditions in a host nation are clearly inferior to those in a multinational’s home nation, what standards should be applied—those of the home nation, those of the host nation, or something in between? • Examples: Nike in Vietnam • International business implications: Establish minimal acceptable working standards and audit foreign subsidiaries and subcontractors on a regular basis
  4. 4. Source and Nature of Ethical Issues HUMAN RIGHTS • Rights that we take for granted in developed nations, such as freedom of association, freedom of speech, freedom of assembly, freedom of movement, freedom from political repression, and so on, are by no means universally accepted • Examples: South Africa until 1994; China’s human rights record; Myanmar (formally known as Burma); Royal Dutch Shell in Nigeria
  5. 5. Source and Nature of Ethical Issues ENVIRONMENTAL POLLUTION • Ethical issues arise when environmental regulations in host nations are inferior to those in the home nation. Should a multinational feel free to pollute in a developing nation? • ‘tragedy of the commons’ occurs when individuals overuse a resource held in common by all • Examples: foreign oil companies in Nigeria; Coca Cola plant in Kerala
  6. 6. Source and Nature of Ethical Issues CORRUPTION “Corruption has been a problem in almost every society in history, and it continues to be one today.” • Corruption is bad, and it may harm a country’s economic development, but there are also cases where payments to government officials can remove the bureaucratic barriers to investments that create jobs – Examples: Bofors case; Enron. • The US Foreign Corrupt Practices Act of 1977 • Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD, 1997)
  7. 7. Source and Nature of Ethical Issues MORAL OBLIGATIONS • Social responsibility for MNCs to give something back to the societies that enable them to prosper and grow. • Example: BP, company policy to undertake “social investments” in the countries where it does business • Sometimes multinationals may abuse their power for private gain • Example: the British East India Company (1600)
  8. 8. Source and Nature of Ethical Issues Ethical Dilemmas What is the accepted ethical principle in international business perspective?  Argument 1: ethics depends upon one’s cultural perspective. – American and European views on capital punishment.  Ethical dilemmas —they are situations in which none of the available alternatives seems ethically acceptable – Employing child labor was not acceptable, but neither was denying the child his/her only source of income
  9. 9. Determinants of Ethical Behavior PERSONAL ETHICS  Personal ethical code exerts a profound influence on business ethics An individual with a strong sense of personal ethics is less likely to behave in an unethical manner in a business setting. Personal ethics comes from sources like our parents, our schools, our religion, and the media.
  10. 10. Why do managers behave in an unethical manner?
  11. 11. Determinants of Ethical Behavior DECISION-MAKING PROCESSES • People simply forget that business decisions may also have an important ethical dimension. • Most often ethical considerations are not incorporated into business decision making • Example: Pfizer’s Drug Testing Strategy in Nigeria; Nike’s subcontracting decision
  12. 12. Determinants of Ethical Behavior ORGANIZATION CULTURE • Business climate sometimes do not encourage people to think through the ethical consequences of business decisions • All decisions are purely economic in nature (profit maximization) – Example: Case of former Enron CEO Kenneth Lay “values” are abstract ideas about what a group believes to be good, right, and desirable, while “norms” are the social rules and guidelines that prescribe appropriate behavior in particular situations
  13. 13. Determinants of Ethical Behavior LEADERSHIP UNREALISTIC PERFORMANCE EXPECTATIONS • Pressure from the parent company to meet unrealistic performance goals that can be attained only by cutting corners or acting in an unethical manner • This creates a pressure-cooker culture – Example: Lesson from the Enron debacle • Conversely, an organization culture can do just the opposite and reinforce the need for ethical behavior – Example: Hewlett- Packard (The HP way)
  14. 14. Determinants of Ethical Behavior LEADERSHIP Leaders help to establish the culture of an organization, and they set the example that others follow – Example: Enron and Hewlett- Packard
  15. 15. Approaches to Business Ethics  There are several approaches to business ethics including  Straw men 1. the Friedman doctrine 2. cultural relativism 3. the righteous moralist 4. the naïve immoralist  Utilitarian and Kantian  Rights theories  Justice Theories
  16. 16. Straw Men  Straw men approaches are raised by business ethics scholars primarily for the purpose of demonstrating that they offer inappropriate guidelines for ethical decision making in a multinational enterprise
  17. 17. The Friedman Doctrine • By the Nobel laurite Milton Friedman in1970 • Friedman’s basic position is that the only social responsibility of business is to increase profits, so long as the company stays within the rules of law. • He rejects the idea that businesses should undertake social expenditures beyond those mandated by the law and required for the efficient running of a business • There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.
  18. 18. Cultural Relativism • All ethics are culturally determined - ethics are nothing more than the reflection of a culture • Accordingly, a firm should adopt the ethics of the culture in which it is operating . If a culture supports slavery, is it OK to use slave labor in a country? – In some countries, payment of bribes to government officials is necessary to get business done, and if not ethically desirable, it is at least ethically acceptable. “When in Rome do as the Romans do”
  19. 19. The Righteous Moralist • MNC’s home-country standards of ethics are the appropriate ones for companies to follow in foreign countries . Examples: American bank manager in Italy – U.S. laws set down strict guidelines regarding minimum wage and working Conditions. Should US MNCs apply the same in a foreign country? It will nullify the reason for investing in that country
  20. 20. The Naive Immoralist • If firms from other nations are not following ethical norms in a host nation, then we should not either – Examples: Child labour issues • Objections to this view: – An action is not always ethically justified if everyone is doing it – MNCs do have the ability to change the prevailing practice in a country. It can use its power for a positive moral purpose – Example: BP’s zero-tolerance policy to bribes
  21. 21. Utilitarian and Kantian Ethics  Utilitarian approaches to ethics hold that the moral worth of actions or practices is determined by their consequences.  Carefully weigh all of the social benefits and costs of a business decision, and only pursue those choices where the benefits clearly outweigh the costs.  Eg : Rather than simply looking at the additional profits drilling for oil might bring, a company would also consider the damage that would occur to the eco-system.
  22. 22.  Kantian ethics - people have dignity and need to be respected, they are not machines.  This philosophy doesn’t consider justice.  A decision that’s made because it’s beneficial for many, could result in unjustified treatment of a minority.
  23. 23. Rights Theories  Human beings have fundamental rights and privileges that transcend national boundaries and culture.  According to this approach, managers are compelled to respect these rights when they make decisions.  The idea that some fundamental rights transcend national borders and cultures was the underlying motivation for the UN’s Universal Declaration of Human Rights.
  24. 24. Justice Theories  Justice theories focus on the attainment of a just distribution of economic goods and services, where a just distribution is one that is considered to be fair and equitable.  John Rawls is credited with arguing that economic goods and services should be distributed equally except when an unequal distribution would work to everyone’s advantage.
  25. 25. Ethical Decision Making  How do managers decide upon an ethical course of action when confronted with decisions pertaining to working conditions, human rights, corruption, and environmental pollution?  Five things that an international business and its managers can do to make sure ethical issues are considered in business decisions
  26. 26. 1) Favor hiring and promoting people with a well- grounded sense of personal ethics 2) Build an organizational culture that places a high value on ethical behavior 3) Make sure that leaders within the business not only articulate the rhetoric of ethical behavior, but also act in a manner that is consistent with that rhetoric 4) Implement decision-making processes that require people to consider the ethical dimension of business decisions 5) Develop moral courage
  27. 27. Hiring and Promotion  Businesses should strive to identify and hire people with a strong sense of personal ethics  Prospective employees should find out as much as they can about the ethical climate in an organization
  28. 28. Organization Culture and Leadership  Businesses need to build an organization culture that places a high value on ethical behavior  To develop this, firms need to articulate values that place a strong emphasis on ethical behavior.  Some firms do this by establishing a formal code of ethics.  Companies can encourage employees to adopt the code by offering incentives and rewards to employees that behave in an ethical manner.
  29. 29. Decision-Making Processes  A moral compass can help determine whether a decision is ethical.  If a manager can answer “yes” to the following questions, the decision is ethically acceptable  does my decision fall within the accepted values of standards that typically apply in the organizational environment?  am I willing to see the decision communicated to all stakeholders affected by it?  would the people with whom I have significant personal relationships approve of the decision?
  30. 30. A five-step process can also help managers think through ethical issues 1. The first step requires managers to identify which stakeholders a decision would affect and in what ways.  Internal stakeholders  External stakeholders - customers, suppliers, and unions 2. Managers need to determine whether a proposed decision would violate the fundamental rights of any stakeholders
  31. 31. 3. Managers need to establish moral intent. 4. The company should then engage in ethical behavior. 5. The business must audit its decisions, reviewing them to make sure that they were consistent with ethical principles.
  32. 32. Ethics Officers  To encourage ethical behavior in a business, a number of firms now have ethics officers  Ethics officers ensure that 1. employees are trained to be ethically aware 2. ethical considerations enter decision-making 3. the company’s code of ethics is followed
  33. 33. Moral Courage  Employees in an international business may need significant moral courage  managers need to be able too walk away from decisions that are profitable, but unethical  employees need to be able to say no to actions that are unethical
  34. 34. Thank You

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