International Business and MultinationalsLearning Objec.docx

International Business
and Multinationals
Learning Objectives
After completing this chapter, you should be able to:
• Analyze the reasons why international trade can cause ethical
issues for companies and individuals.
• Review the role that multinational corporations have in global
trade and the ethical standards that they
can meet.
• Consider the problem of gift giving and bribery and draw a
judgment on corporations engaging in them.
• Examine whether child labor and sweatshops are ethically
acceptable.
• Have an understanding of intellectual property and
technological transfer issues as they relate to multina-
tional enterprises and doing business around the world.
Ma jian/Imaginechina/Getty Images
8
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CHAPTER 8Section 8.1 Introduction

Contents
8.1 Introduction
8.2 Tax and Environmental Issues
Multinationals and Tax Avoidance
Gift Giving and Bribery
Environmental Restrictions
8.3 Labor Issues
Child Labor
Sweatshops
Illegal Immigrant Workers
8.4 Technology Issues
Intellectual Property Theft
Technological Transfers
8.5 Ethically Evaluating Multinational Business Activities
Relativism: Western Cultural Norms Affecting Other
Cultures
Pros and Consof Multinational Businesses
Creating a Global Business Ethic
8.6 Conclusion
8.1 Introduction
Some decades ago, the American company
International Telephone and Telegraph (ITT)
was
caught interfering in the political operations of
the South American country of Chile. At

the time,
ITT was the eighth largest Fortune 500 company,
with 350,000 employees in 80 countries. Chile
was poor but politicallystable. A presidential
candidate named Salvador Allende campaigned on
a
communist platform, emphasizing the issueof land
reform and indicating his desire to take control
of privately owned Chilean telephone companies
because of their inefficiency. ITT owned 70% of
the stock in one of these, and feared that, if
elected, Allende would simply take ownershipof
it
with no compensation, as had happened with private
businesses in Cubaand Peru during their
communist takeovers.As a result, ITT offered
money to the American CIA to help block
Allende’s
election and support a rival candidate.The scandal
surfaced, and critics worldwide attacked ITT
for interfering in the activity of a foreign
government. Some of ITT’s property was
even bombed
in protest. Allende was elected anyway, and in
retaliation, he nationalized ITT’s Chilean
property.
Allende did not nationalize otherfirms, although he
required someto sell the government shares
of their stock. Allende was assassinated shortly
after, and ITT later sued for losses.
While ITT’s concerns were justified, its response
was not. The issues that we consider in this

chap-
ter come from the very nature of dealing with
foreign companies and people. When
companies
crossborders, they must deal with foreign laws and
politics, but also with customs and expecta-
tions concerning how to act and what is proper
and improper in business transactions. This can
cause misunderstandings and create clashes of
values between the trading partners, sincewhat
fie66722_08_c08_187-210.indd 188 3/2/12 9:43 AM
CHAPTER 8Section 8.2 Tax and Environmental Issues
is considered right and proper in one society is
not necessarily so in another. In Chapter 1
we
encountered the theory of moral relativism, in
which moral values are held to be
different in dif-
ferent cultures. When companies engage in
international trade, they certainly encounter exam-
ples of laws and cultural behavior that can differ
radically from those at home. A tension
can then
emerge when thereare clashes of values, in
which American businesses working abroad
may have
to decide between respectingand abiding by local
customs and going by their own ethical culture.
In this chapter, we will examine international trade
and the general ethical issues that it creates,

especially how it relates to the behavior of U.S.
multinational companies. In particular, we
exam-
ine the problems of childlabor, sweatshops, gift
giving, and bribery, as well as the complex
issues
of intellectual property and technological transfers
between nations.
8.2 Tax and Environmental Issues
When tradestretches beyond the national border,
international tradebegins. At its simplest, inter-
national tradeinvolves importing and exporting.When
companies go beyond their national borders
to set up factories, warehouses, offices, and shops,
they are referred to as multinational corpora-
tions or multinationals. World tradehas increased
massively, with merchant shipping alone rising
from 8 billion tons to 32 billions in the past
four decades (“Value and Volume,” n.d.). The
growth of
tradeacross borders, and its cultural impact, is
called globalization. The ethical argumentson
glo-
balization would require another book, so in
this chapter we will examine the main issues
that crit-
ics bring up concerning corporations dealing in
international tradeand multinational corporations.
The international business environment is
characterized by many different nations with
different
rules, taxes, and customs as well as

opportunities to tradewith and enrich both
corporations and
local peoples. But thereare many issues that affect
the ability of multinationals and international
businesses to work efficiently and even ethically.
Sometimes, the problem is not the company’s
lack of trying but practices that are widespread
and that persist despite attempts to change
peo-
ple’s thinking and outlook. Or perhaps thesethings
just take time.
In this section, we will look at somespecific ethical
problems that affect international businesses
and multinationals. First we will consider the thorny
problem of where multinationals should pay
their taxes.
Multinationals and Tax Avoidance
One issuethat concerns critics of multinational
enterprise is who ownsthe profits thesebusi-
nesses create, and therefore who should tax them.
Currently,U.S. tax policy creates an incentive
for multinational enterprises to keep their cash abroad
rather than return it to the United States.
So-called repatriated income, which is money brought
back to the United States from foreign sub-
sidiaries, is taxed at 35%.This is one of the
highest corporate tax rates in the world.
Not surprisingly, companies like Microsoft, Google,
and Hewlett-Packard therefore keep much
of their cash abroad, sometimes using it to

expand further into othercountries or letting it
earn
interest in foreign banks (Kocieniewski, 2011). In
the current economic climate, in which the
U.S.
government facesenormous debt problems, this poses
interesting questions:
fie66722_08_c08_187-210.indd 189 3/2/12 9:43 AM
• Should U.S. corporations be forced to bring
back money earned abroad to help ease the
economic crisis, or should they be free to use
their money as they see fit?
• Do companies owe any allegiance to the
government or people of their homeland,or
should they be free to fly any “flagof
convenience” and allocate funds according to
the
cheapest tax zone?
The ethics of the issuerelate to the duties
that a homegrown corporation (especially
one that
grew because of the political or economic climate
created by U.S. governments of the past) owes
to its home nation. Consider General Electric
(GE), which in 2010 reported worldwide
profits of
$14.2 billion, with $5.1 billion coming from the
United States—but had a U.S. federal tax

bill of
zero, through creative accounting procedures
(Kocieniewski, 2011).
GE’s zero tax bill is extraordinary, and represents the
clashfor a company between accepting the
local tax policies and enriching its investors and
shareholders. For critics of multinationals, it is
ammunition for the case that multinationals are above
the law in somerespects and that govern-
ments must accept what they do to avoid paying
taxes. For supporters of multinationals, the
issue
relates more to corporate financial officers doing
their job in minimizing external costs(taxes in
this case)so they can plow money back into those
who support the company with their funds—
and that can include the pension policies and mutual
funds of many ordinary Americans.
Gift Giving and Bribery
An integral part of somecountries’ commercial culture
is the presenting of gifts that are designed
to pave the way for easier business. There are
two kinds of gifting:
• A voluntary one that can be considered part of
public-relations exercises. This can be
called gift giving.
• A so-called involuntary act that cannot be
avoided and typically involves securing licenses
or contracts from public officials. This can be also

called bribery and is sometimes viewed
by business people as a tax on doing
business.
Gift giving can mean different things to
different people and is oftenused to smooth
out the prob-
lems that international tradecan create. Imagine two
delegates meeting for lunch to go over some
figures. It would not be wrong for the one to
offer to pay for lunch, but what about paying
for tick-
ets to see the Super Bowl? The problem with
gift giving comes when it exceeds certain
amounts
or is intended to financially benefit certain
members with preferential treatment. It can easily
be
confused with a corporate-relations exercise, and needs
to be carefully monitored by managers
and auditors. Regulators have also begun to clamp
down on gift giving to foreign state-owned
companies. Employees of thesecompanies are to
be regarded as state officials, so an American’s
providing gifts to them would fall afoulof Department
of Justice and SEC rules on corrupting for-
eign governments (Sender, 2011).
The problem with bribery is that it ofteninvolves an
attempt by a company manager to win
over a state official. The state official privately
benefits from the deal, which may include cash,
tickets, fine art, luxury evenings out, or job
positions for family members. Bribing officials to

gain
licenses or otherprivileges is corrupt and illegal,
but is particularly widespread in civil-
engineer-
ing projects, which can be worth billions.
According to critics, multinationals can engage
in cor-
ruption without much concern, although indeed,
somebig companies have been finedrecently,
fie66722_08_c08_187-210.indd 190 3/2/12 9:43 AM
including IBM, British Aerospace,
Halliburton, and Siemens. In 2008,
the German company Siemens
paid a $1.29 billion settlementto
U.S. and German authorities over
a bribery scandal in which most of
the managers of the company left.
They had generated a fund specifi-
cally for bribery.
On the other hand, bribery only
flourishes when state authorities
have discretionary powers. Com-
panies are interested in doing busi-
ness as effectively as possible: It is
not in corporate interests to engage
in bribery, as it is an extracost. But
of course individual managers can
profit handsomely from winning
dealswith governments abroad, so

corporations need a strong ethic on what is
acceptable and what is not. In the Siemens
case, the
company turned on the managers to sue them for
improper practice.
Corruption such as bribery and gift giving is
big business and is an ongoing concern for
ethicists
and lobby groups demanding greater transparency
around the world. Any form of corruption
dis-
torts trade, holds back economic growth, creates
unnecessary inefficiencies in commercial trans-
actions, runs contrary to the rule of law, and
generates an atmosphere of distrust and
injustice in
which the whimsical decisions of officers can have
influential effects on people’s lives (Klitgaard,
Maclean-Abaroa, & Lindsey Parris, 2000, p. 4;
Mauro, 1997).
A way to reduce corruption going forward is
to expand educational opportunities. One
economist
found that, as the amount spent on education
rises, the extent of corruption falls
(Mauro, 1997).
Usually we turn to governments to educate people,
but in the case of the multinationals, they are
also in a position to encourage investment in
education, both through government channels
and
through investing in educating their own employees
abroad. For those who focus on the social

impact of companies, this is a duty that
multinationals should take up; the longer term
effects of
helping to educate, train, and coach employees,
rather than leaving them at a low skill level,
could
outweigh the initial costs. Governments in turn
must reduce discretionary powers that encourage
officials to accept bribes. As with companies,
more checks and balances and independent audit-
ing would reduce the temptation faced by
officials in powerful positions to gain from
company
contact.
Environmental Restrictions
In addition to tax issues, multinational corporations
must consider environmental regulations in
the countries they operate in. For example, othernations
may have laxerrules on environmental
pollution and standards than the United States has. If
American companies choose to work in coun-
tries with laxerstandards, it may reflect badly on
whatever ethical standards the companies are
James Lauritz
Ethicists demand that businesses conduct their transactions
in the open, but many deals continue to be made behind the
scenes.
fie66722_08_c08_187-210.indd 191 3/2/12 9:43 AM

trying to uphold in the home market. And if
a poorer nation has weaker environmental
standards,
is it right for a U.S. company to lower its
own standards, or should it set an example in
raising local
standards—but then run the risk of incurring higher
costs? Higher costsmay translate into a loss
competitive edge in the global market, and poor
consumers can end up paying more for
products.
For instance, in 2002, Sempra Energy of
California attracted criticism from environmentalists
for
deciding to set up a gas-powered electrical plant3
miles over the Mexican border to supply
San
Diego and Los Angeles. The same project would
not have met Californian regulations without
incurring higher costs(Ross, 2002).
The issue deepens if the product
is to be mined or manufactured
for American consumption. If
Americans benefit from cheaper
products, does it make it right to
produce abroad and generate pol-
lution and health problems for for-
eign populations?
Consider a U.S. company that pays

lower wages to a local population
than it would pay in the United
States. This would seem a proper
course of action: The company
adapts to the local economy and
pays wages accordingly. However,
polluting the environment is a dif-
ferent problem from that of hiring
low-paid workers. Labor is a nec-
essary internal cost of production
for the company, whereas environ-
mental standards are an imposed social cost
affecting others. In the absence of legal or
envi-
ronmental regulations, the company has no economic
incentive to copy U.S. standards while it
operates abroad, and to do so would raise costs.
But should we be thinking purely along
nationalist lines? Ethically, the health impact
on a Mexican
citizen should weigh the same as the impact on
an American citizen. Accordingly, it is wrong
for
a U.S. company to pollute abroad when it
would not do so back home. Since it is
wrong to harm
another, and it does not matter who the person is,
it follows that it is wrong to pollute
another
country’s resources. The managers ought to consider
citizens of othercountries as they would
consider their own neighbors.
However, American companies have moved to

countries with weaker environmental regulations
and have lowered their own standards accordingly. In
the search for larger market share or
higher
profits, the incentive is to seek a looser
regulatoryenvironment. Some have claimed that
because
American companies can enjoy weaker
environmental regulations abroad, they are
pressuring
the U.S. government to make life similarly easy
for them in the United States (Perkin, 1996,
p. 20).
Here thereis an example of a moral inversion:
companies arguing that weaker ethical
guidelines
are better than stricter ones.
Associated Press/Sandy Huffaker
This photo from 2005 shows the beginning of construction
work on Sempra Energy’s new power station near a small fish-
ing village south of Rosarito Beach, in Baja Mexico. Environ-
mentalists complained that the plant would not have passed
Californian environmental controls.
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CHAPTER 8Section 8.3 Labor Issues
The next example involves the troubling problem of
childlaborused around the world by local and
multinational enterprises.

8.3 Labor Issues
Another set of issues with multinationals involves
treatment of workers, in particular the prob-
lems of childlabor, foreign sweatshops, and illegal-
immigrantworkers. We turn to those next.
Child Labor
One of the most emotional issues that international
tradeevokes is the use of children in pro-
duction. It is estimated that globally, over 250 million
children between the ages of 5 and 14 are
engaged in someform of work. Some of this
work may be considered educationally and
culturally
beneficial, but someinvolves dangerous and hazardous
conditions, such as working with chemi-
cals or machinery, being enrolled in the
military, slavery, and childprostitution. Critics
have esti-
mated that 215 million of thesechildren are
working illegally, according to national laws (“Child
Labour Guide,” 2011). The use of childlaborcan
occur directly, within a multinational’s own
facto-
ries, or indirectly, through the supply chains
the company uses.
A Historical Perspective
Mostcountries have prohibitions on childlabor, but
enforcing theselaws can be problematic. India
and China, for example, have largerural areaswhere
traditional working patterns involve children
from an earlyage. In India, children can be sold
into bonded labor, which is a type of

slavery, while
parents pay off a debt. Even if the children are
attracted to working because of the money,
they can
end up working in hazardous conditions, such as in
coal mines or garbage dumps (Magnier, 2011).
America has a tradition of child
labor too. In colonial times, chil-
dren as young as 8 could be bound
to a master to work until the age
of 21 in exchange for food, shelter,
and clothing. As the industrial era
took off, children were routinely
found working in mines, facto-
ries, and farms, as well as running
errands and selling products on the
streets. In 1836, Massachusetts
passed the first law concerning
the employment of children. The
law stated that children under 15
years old should attend school for
at least 3 months a year. In 1842,
the state passed an upper limit of
10 hours of work a day. The rise of
Associated Press/Rajesh Kumar Singh
In this 2010 photo, children in Kanpur, India, are going through
recyclable waste looking for rags to sell.
fie66722_08_c08_187-210.indd 193 3/2/12 9:44 AM

the union movementin the late 19th century also
witnessed calls to ban children under age 14
from working. In the early20th century, American
children could still be found selling
newspapers
and working on farms or in factories and mines;
their images are captured in photographs by
Lewis Hine. (History Place, n.d.).
Charitable organizations continued to support child-
welfare reforms and to push for bans on what
was considered to be childslavery and exploitation,
which culminated in provisions under
the Fair
Labor Standards Act of 1938. Later,
the Supreme Court finally held that
the government had the authority
to regulate the actions and treat-
ment of children.
For an ethicist, the relevant ques-
tion here as it relates to multina-
tionals is whether a childshould be
considered on an equal basiswith
an adultor whether childhood is a
different category of personhood
that generates unique responsibili-
ties to children and rights that adults
do not possess. Should a childbe
protected from becoming an adult
too early, or should children have
rights of access to the adultworld,
including employment?

Protecting Children
Many philosophers, such as John Stuart Mill and
John Dewey, have argued that children deserve
protection from the demands and expectations of the
adultworld and that they should be pro-
tected legally for their own good. But at what
age should society consider a person to be
a child?
Consider the age of consent, when a young
person is legally permitted to engage in
sexual activ-
ity—a boundary that can be said to separate
childhood from adulthood. In Canada and the
United
Kingdom, it is 16, whereas in the United States
it ranges from 16 to 18, dependingon the
state. In
othercountries, such as Italy, it is 14, and in
Spain it is as low as 13. Some states
and countries add
that if one of the parties is in a position of
trust, such as a doctor or a teacher,
the minimum age
rises to between 16 and 19. The age of consent
encourages us to consider what a childis
and, if
we place a boundary on childhood, how
children should be protected.
The nature of the protection is sometimes
confusing and contradictory, however. Up until 1967,
children were seen as legally inferior to adults.
The landmark U.S. Supreme Court case In re Gault

changed that. In that case, the Supreme Court
established that juveniles should have the same
constitutional rights to due process in courts as
adults (Gold, 2008, p. 10). In effect,
this acted to
protect children from being treated as nonpersons
until they passed into legal adulthood.
Copyright Bettmann/Corbis/AP Images
In this 1909 photo, a boy in Augusta, Georgia, changes spindles
in the textile factory where he works.
fie66722_08_c08_187-210.indd 194 3/2/12 9:44 AM
In Defense of Children’s Right to Work
From an alternative perspective, why can’ta
childcompete with adults in the workplace?
For crit-
ics of child-labor laws, the restrictions amount
to a deprivation of rights to earn a
living, gain an
education in a working environment, and compete on
an equal level with adults for money.
This may seema justification for exploitation of
children. Children do not know the
repercussions
of adultwork or the complexity of running a
house and paying the bills.They should not
have to
engage in such worries, and their time is better

spent learning in school and playing. Yet, as
one
critic has noted, society wants children to be
free to consume but forbidden to produce:
Let’ssay you want your computer fixedor your software
explained. You can shell out
big bucks to the GeekSquad, or you can ask—
but you can’thire—a typical teenager,
or even a preteen. Their experience with
computersand the online world is vastly
superior to that of most people over the age of
30. From the pointof view of online
technology, it is the young who rule. And yet
they are professionally powerless: they
are forbidden by law from earning wages from their
expertise. (Tucker, 2008)
From this perspective, the law against childlabor
seems strange. Why not let children earn money
for the skills they can offer? Employers in
turn complain that young people coming out of
high
school or college do not have the
skills needed to succeed in the
workplace, a lack that would be
reduced if young people had free
access to the employment market
from an earlier age.
There certainly seems to be a
demand for work-related activi-
ties. Consider KidZania, which is an
employment-related role-playing
theme park for children that is cur-

rently expandingits franchise glob-
ally. The company claims to provide
“children and their parents a safe,
unique, and very realistic educa-
tional environment that allows
kids between the ages of four to
twelve to do what comes naturally
to them: role-playing by mimicking
traditionally adult activities. As in
the real world, children perform ‘jobs’ and are
either paid for their work (as a fireman, doctor,
police officer, journalist,shopkeeper, etc.) or pay to
shop or to be entertained” (KidZania, n.d.).
Originallyset up in Mexico, KidZania is now a
multinational corporation (Rathbone, 2011).
Won’t Child Labor Just Disappear?
However, thereis clearly a difference between playing
at work and actually working. From a dif-
ferent perspective, what is important to consider is
whether a developing nation naturally reduces
the number of children in work as it becomes
richer. This is what happened across the West:
As the
Kyodo
In this 2011 photo, girls play at being beauticians in the pretend
cosmetics store at the KidZania theme park in Tokyo. At the
park, children can hold “jobs” for which they are paid.
fie66722_08_c08_187-210.indd 195 3/2/12 9:44 AM

economy grew, it became more complex, and that
complexity added value to staying in
school and
getting a deeper and longer education. That is,
the richer a country gets and the more
opportuni-
ties that a family has to increase its income or
decrease its dependency on a local factory or
farm
for work, the less of an incentive thereis for
children to work. Their education becomes a
greater
priority (Cigno, 2005, p. 101). According to
that argument, it would be better for U.S.
corporations
to work with foreign companies that use childlabor,
on the grounds that as the economies of
those
companies’ countries improve, eventually therewill be
no economic need for children to work.
The problem with that argument is that it absolves
the multinational and its managers from acting
as role models or from trying to encourage
alternative and less dangerous workfor children.
Since
poverty is synonymous with childlabor, if a
company pays higher wages, it can have a
beneficial
effect in raising local living standards and hence
reducing the need for children to be employed.
Governments, companies, and charities could also

help set up schools to attract young people
into learning more and enhancing their employment skills.
More opportunities generally mean an
increased incentive to learn, which in turn often
implies an extension of childhood.
In developed countries, childhood can be extended into a
person’s 20s as that person contin-
ues his or her studies into university. Wealth
may bring greater incentives to educate, but
critics
remind us that waiting for an economy to grow
does not alleviate real and serious problems with
childlabortoday.
Sweatshops
An extension of concerns over childlaborare the ethical
problems that arise in employing adults in
sweatshops,
which the U.S. Department of Labor defines as
com-
panies or employersviolating more than one federal
laborlaw. Even if they act within the law, sweatshops
can have conditions that are hazardous or standards
that are below decent for a healthy and safe
workplace.
They may be crowded with employees working without
adequate breaks, or may involve working for abusive
managers. Sweatshops are pervasive in poorer coun-
tries,but they also exist in the United States, particu-

larly in the restaurant, clothing, and meat-processing
industries (U.S. General Accounting Office, 1988,
1994).
A Historical Note
The term sweatshop was coined in the mid-
19th
century from sweater, an employer who was a mid-
dleman contracting work out for manufacturers. Typi-
cally, the sweater employed people desperate to
work
under any conditions and for minimal pay.
Turnover
of workers could be high,which meant that
therewas
no incentive for the sweater to improve conditions
or
pay. Where therewere thriving markets, disgruntled
employees could move onto better conditions
and be
replaced by otherdesperate workers.
Associated Press/Tina Fineberg
In this 2005 photo, demonstrators unfurl a
banner at the Niketown store in New York.
They are protesting against Nike’s use of
sweatshops in its supply chains. Despite
the company’s efforts to raise standards, it
still gets a great deal of criticism that it is
not doing enough.
fie66722_08_c08_187-210.indd 196 3/2/12 9:44 AM

Although the hardship and cruelty of a sweatshop
oftencome to mind, for one cultural
historian
“the sweatshopis as American as apple pie[,] .
. . synonymous with the Singer sewing
machine,
the hard-driving clothing floor subcontractor, the
ingenious immigrantgood with the needle, the
pieceworksystem” (Hapke, 2004, p. 1–3).
The Benefits of Sweatshops
The sweatshopcould be seen as a stepping-stone to
shelter and work experience that poor people
or new immigrants need, or somethingthat is
necessary for a poor country while it
develops and
gains enough money to invest in its safety
standards (Maitland, 1997). If workers have
the right to
leave a sweatshop, it does not seemso right
that sweatshops should be summarily
condemned
and dismissed. Indeed, we must ask, what is the
alternative for poor people seeking to better
their
conditions? For earlyAmericans migrating to the
cities, the sweatshops offered higher wages
and
relatively better conditions than the alternatives.
And if consumer pressure encourages an Ameri-
can company to shut down a sweatshopin
Indonesia, say, the result is that the
workers are now

unemployed rather than employed.Would the
workers prefer to have no job over an
uncomfort-
able job?
As long as the workers are free to leave,
according to supporters of sweatshops, thereis
no prob-
lem, and any intervention to closesweatshops can
create more suffering than it prevents. From
this perspective, the sweatshopis a relative evil
and one that is soon competed out of existence as
workers are provided more opportunities for work. As
one South African commentator has noted,
the problem for the unemployed in South Africa
is not ethical policies but the lack of
businesses
(“Companies Aren’t Charities,” 2010). When
the number of businesses increases, more people
gain work, and the wealth that is created begins
to trickle down to the poorer members of
society.
For critics, however, the sweatshopis synonymous
with exploitation. In 1995, the Immigration
and Naturalization Service raided an illegal
sweatshopin El Monte, near Los Angeles. It
was run
by a family of Thai contractors who kept 72
workers, mainly women, in barracks behind
barbed
wire and worked them 12 to 18 hours a day.
The case was the first in which a federal
courtheld

clothing retailers and manufac-
turers liable for the actions of the
laborcontractor (Watanabe, 2008).
However, the El Monte sweatshop
in effect was an issueof slavery—
and of course, slavery is illegal and
immoral on most ethical accounts.
Ethically, individuals deserve dignity:
No one should aggress against them
nor withhold their right of exit from
a job or a contract. In the El Monte
case, the owners held the women
against their will, which is an obvi-
ous breach of morality, hence the
description of them as slaves. But
is it right to create unhealthy work-
ing conditions and to demand more
than what is fair from workers and
to pay them less than a fair amount?
Associated Press/Nick Ut
In this 2005 photo, several women who were used as slave
labor-
ers in a sweatshop in El Monte, California, are shown about to
give a news conference on the 10th anniversary of their release.
fie66722_08_c08_187-210.indd 197 3/2/12 9:44 AM
A corporation has a duty to respect the innate
dignity of all people, and that means treating

them
as moral equals, providing them with conditions
that managers would wish to work in, and uphold-
ing the expectations of a good life. A manager
would presumably not wish to work in
sweatshop
conditions, so why should he or she expect
others to do so? Regardingforeign subsidiaries
using
sweatshops, rather than excusing the dire local
conditions, an American corporation has a
duty to
offer improved standards and wages. In a sense,
when in Rome, do not do as the Romans
do, but
rather do unto others as you would have them do
unto you. In otherwords, the relative differ-
ences between two countries should not matter.
The American corporation should employ people
on a similar basisabroad as at home.
Illegal-Immigrant Workers
Another concern for international business is
whether a company should hire illegal
immigrants.
Political and economic disturbances around the world
push increasingnumbers of people over
international borders. In 2011, an estimated 47
million were refugees. Many are only temporarily
so and return home as soon as it is viable.
Others end up in refugee camps for years,
while some
seek work in host countries both legally and illegally.

Up to 4% of the American population is
con-
sidered to be in the country illegally, constituting
5.4%of the workforce (Passel & Cohn, 2009).
That is a sizeable amount. Of an estimated 154
million people in the civilian workforce,
that would
mean 8 million are working illegally.
For many, illegal immigrants are by definition
working illegally and should be returned to
their
home countries. Politically, immigration is a
controversial topicin the United States. There
are
over 17,000 guards along the U.S.–Mexican border
(“Crying Wolf,” 2011), and authorities are
try-
ing to clamp down on illegal workers.
For critics of immigration laws, the right to
engage in any contract with anyone forms
the bed-
rock of freedom. Indeed, up until 1875, the United
States welcomed “the world’s poor, huddled
masses” to give them the chance
to realize their potential in a rela-
tively free land. The principle of a
free society is to provide protec-
tion and free migration to any per-
son seeking a new life. Two people
are free to engage in any contract
they wish, and political obstacles
such as a required license to work

in a country should not exist. A
company offers work in return for
the services that the workers pro-
vide. The transaction is voluntary
and victimless. By working, people
are contributing to the national
economy rather than draining it if
through taking government ben-
efits.The workers are also invest-
ing in their lives, and income would
tend to be a positive influence—as
Associated Press/Matt York
In this 2010 photo of the Arizona border between the United
States and Mexico, a U.S. border patrol can be seen driving
along the route. The entire border now employs 17,000 guards.
fie66722_08_c08_187-210.indd 198 3/2/12 9:44 AM
CHAPTER 8Section 8.4 Technology Issues
would employment itself, by keeping people
from falling into criminality if they could
not find
work. They can also learnEnglish while working
and thereby become more American than if they
avoided or had no chance of finding any work.
Legal immigrants contribute an estimated $37
bil-
lion to the U.S. gross domestic product; if there
are 8 million illegal workers in the
country, that
means they could contribute billions to that total

(Drum Major Institute, n.d.). It is also
estimated
that illegal immigrants contribute$7 billion in
Social Security payments using fake
identification
cards. They will not be able to access those
benefits, though (Porter, 2005).
But the counterarguments are just as strong. By
turning a blindeye to illegal workers, govern-
ments might tempt companies that are
engaged in law breaking to break more laws.
There is a
deeply felt sense of injustice when citizens
are overlooked in favor of illegal
immigrants. Illegal
immigrants increase the supply of laborto an
area and thereby depress wages and
opportunities
for citizens. Although the immigrants may contribute
surreptitiously to Social Security funding, the
resulting market for fake identification and Social
Security numbers generates income for those
who regularly engage in black market activity.
That is, thereis a transfer of funds and
jobs from
law-abiding people to criminals and illegal
immigrants.
8.4 Technology Issues
Another set of issues that multinationals face
concerns technology, specifically intellectual-prop-
erty theft and technology transfer, which we will
consider next.
Intellectual Property Theft

One of the most recent challenges facing
businesses operating in a global environment
is that
their technology or patents are stolen and
replicated in othercountries. Other companies
then
reproduce the product at a much lower price
and thereby undermine the original company’s
profits and innovation. Intellectual property (IP) theft is
not the same as employees’ or custom-
ers’ stealing physical goods from shops or offices.
Rather, it is the appropriation of intangible
but
legally protected information, including
• copyrights to written, audio, or video
materials;
• trademarks such as a name, logo,slogan, or
package design;
• trade secrets; and
• patents that cover inventions
(BusinessTheft.com,n.d.).
The advance of the Internet has opened up
opportunities for IP theft to global as well as
national
predators. IP theft has been estimated to cost U.S. firms
between $100 billion and $1 trillion a
year (Burke, 2010, p. 227; Newman, Cai, &
Heugstenberg, 2007, p. 693). The federal
government
has a series of laws against IP theft, and in
2010 introduced a controversial Combating
Online

Infringement and Counterfeits Act. The Act was
designed to modernize IP regulation and to
fol-
low the path of the United Kingdom and France,
who had recently introduced similar updates
and
would have given the Department of Justice
the global power to target piracy Web
sites, illegal
downloading sites, copyright infringers, and
importers of counterfeit goods. However, an
online
protest campaign drew much attention to the Act,
which, in early2012, does not look as if it
will
be passed.
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CHAPTER 8Section 8.4 Technology Issues
Despite the estimated economic cost of IP theft,
many oppose the enforcement of IP laws.
The
American CivilLiberties Union, the Center for
Democracy and Technology, Human Rights
Watch,
and otherorganizations are concerned that moves to
censure rogue Web sites will also act to ham-
per freedom of speech. This would, for example,
affect the social sites that helped the Arab
Spring
movementof 2010–2012 or the funding of
WikiLeaks and otherwhistle-blower sites (Timm,

2011).
But is theresomethingmorally wrong with using
otherpeople’s intellectual property? On first
thought, the misappropriation of another’s work does
seemimmoral. However, othercultures do
not recognize individual or corporate proprietary rights
in the same manner as the West does. For
instance, in China innovations are for sharing
rather than protecting by legal barriers. Unsurpris-
ingly, we find the greatest IP “theft” in China.
Some economists have argued that enforcement of
IP laws actually hampers economic growth
and the sharing of knowledge that is important if
we are to help millions around the world
escape
poverty. The freedom that the Internet brings permits
oppressed people to find a voice, allows
people of varying lifestyles to engage in
communication (rather than violence), and is a
colossal
portal for the outpouring of human knowledge.
If governments try to crack down on IP
theft, they
could ruin the Internet and the freedom it brings,
and they could also hinder human innovation.
Technological Transfers
On the international market, one fear is that
innovation and new products generated in the
United
States will be transferred across national
boundaries without legal protection for the
investors and

shareholders; hence the calls by various governments
for more global action on IP protection.
This
is known as technological transfer. There is
also the concern that exporting someforms of
technol-
ogy may be detrimental or even dangerous for other,
particularly poorer, countries, or may backfire
on the United States and cost the country dearly
in economic or military terms. For example:
• Military hardware such as the new XM25 grenade
launcher could revolutionize infantry
combat, and the U.S. Army would not wish it to
fall into enemy hands.
• Sometimes a new technology can be pushed
into a developing country too quickly and
generate more problems than the benefits it brings.
For instance, nuclear technology can
provide energy to be used in electricityproduction,
but the industry requires a specialized
maintenance and research industry behind it to
ensure that it is run safely. Without such
supporting industries in place, and without a
depth of knowledge and expertise in the
society to make choices about nuclear energy,
the technology and its use remain poten-
tially dangerous.
• Transferring technology over to other
countries enables those countries to compete
against American companies and thereby threaten
jobs.
There are two main rebuttals to thesefears:

1. Once we step outside the military-political
arena, technological transfers can be gener-
ally seen as a helpful way of empowering poorer
countries to become richer. Technology
increases the productivity of workers in all fields
of work, which in turn increases produc-
tion. As a country becomes richer through
technology, it can engage more in world
trade
and become less dependent on othercountries in times
of famine or otherhardships.So a
refusal to share or to export technology
abroad in effect keeps the world’s poor in
poverty.
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CHAPTER 8Section 8.5 Ethically Evaluating Multinational
Business Activities
2. Concerns over IP or technological transfers are
reducible to protectionist policies and the
nationalist ethic behind them: that American jobs
are more important than othercoun-
tries’ jobs, but also that American consumers should
expect to pay more for supporting
their country and its unions rather than import
cheaper goods from abroad. The falla-
cies in such a line of argument are apparent.
Protectionists are typically keen to ensure
that their self-interest is catered to but not the
interests of the majority of their fellow
citizens or those of othercountries. Self-regard is

a powerful motive, but it is not always
an ethical one.
8.5 Ethically Evaluating Multinational Business
Activities
In view of the wide range of ethical issues
that multinationals face, we turn next to a more
general
ethical evaluation of multinational business
activities.
Relativism: Western Cultural Norms Affecting Other Cultures
It is easy for ethical thinking and action to
get lost in the business world, especially when
business crosses borders and cultures. A general
concern that ethicists raise is the extent to
which countries in the West should be interfering
with the norms and values of othercoun-
tries,especially those of less developed nations whose
economic vulnerability may deserve a
softer, more respectful approach. This applies especially to
nations whose cultural identities
are perceived to be untainted by Western culture.
Corporations going in to set up factories or
offices could have a massive impact on how
the culture evolves, which could cause
unintended
disturbances and violate many local traditions.It is
a common complaint of critics of multina-
tional corporations that multinationals do not know
the extent to which they are affecting local
cultures, or if they do, that they possess an
arrogance of assuming they are in the right,

which
to many is offensive.
For instance, an American company may be trying to
do business in a culture that is predomi-
nantly sexist in the workplace, and to
advance competentwomen over men may cause
offense.
Here, American values of diversity and sensitivity
to gender issues may encounter obstinate
refusal and skepticism. Similarly, one commentator
noted that for many years, American com-
panies avoided employing Black workers in
overseas posts, in case doing so would
offend local
people, but that has recently changed, and in fact
thereis evidence that people from tradition-
ally perceived subcultures in the United States
have a greater flexibility in the workforce when
they are deployed abroad (Solomon,1994).
Thoughtlessness can also cause problems, as
when
a security company shipped hardware to Saudi
Arabia and wrapped the gadgets in magazines
with photos of bikini-clad women. The customs
officials were offended and delayed delivery for
several weeks (Mailes, 2000).
In many respects, the complaint is now an old
one. Ever sinceColumbus encountered the indig-
enous population in 1492, European values
have been adopted by or imposed on other
peoples.
Indeed, Columbus’s first thoughts were of

Christianizing and conquering the people: “I
could con-
quer the whole of them with fifty men, and govern
them as I pleased” (Columbus, 1492). In
other
words, we have power and they do not, so we
are right in imposing our values and our systems
on thesepeople.
fie66722_08_c08_187-210.indd 201 3/2/12 9:44 AM
Business Activities
Ethical Imperialism
Columbus’s sentiment characterizes much of the
following 500 years of commercial expansion
and globalization. Europeans and then Americans
have imposed their will on weaker and less
technologicallyadvanced countries through military force.
The locals encountered by companies
and government officers have been assumed to be
backward on religious and moral grounds and
hence in need of “correcting.”
In many respects, locals have not been slow to
take advantage of tradeopportunities either. Where
Western explorers went, portsand trading towns
developed swiftly, for different cultures have much
to offer each other: technology, gold,and silver all
in exchange for local skills, labor, and natural

resources. And despite the noise and violence of
war
that takesup so much of the history books,
much com-
merce developed and persisted between the peoples
of the world. World tradeemerged in the 15th
century
and has continued since. As a recent
advertisement by
the global bank HSBC commented, “in the future
there
will be no markets left waiting to emerge.” (HSBC,
2011)
Commerce has spread everywhere. Yet thereare
still
ethical issues that a multinational corporation
must
consider in its overseas operations. For example,
should
American companies operating abroad have a
responsi-
bility to local stakeholders and their cultural
practices?
When working abroad, sensitivity certainly has to
be
encouraged. Some companies have very strong
eth-
ics on how their American team should deal with local
people. Others are more lax and leave it
up to the
managers involved. The former policy—the “ethical”
policy—may appear a reasonable move. For
example,

a brief encounter with a foreign delegation may
not
cause many problems, as everyone involved
will be
on their best behavior, and lapses in etiquette will be
understood. But when people stay longer and
begin
to relaxin each other’s company, theremay be cause
for alarm. One commentator on international busi-
ness etiquette has noted that the American habits of
sprawling in chairs or wearing sunglasses inside
may be
disconcerting to English people but positively unnerv-
ing to Germans; and that while a manager would
not
send a hard-drinking representative to a Saudi
Arabian
meeting, that same manager might not be aware
that
asking after the health of any of the women
in the
household would be offensive (Lewis, 2006, p.
82).
Leaving managers to adapt to the local cultural
climate
without any guidelinesmay thus create problems. If,
for instance, corruption is culturally acceptable
but is
illegal, managers could soon find themselves in
legal
trouble if they follow the example of local
companies

What Would You Do?
You are a manager for a multinational
corporation that has started up busi-
ness in another country. The resource
base is excellent and the local work-
forceis relatively cheap and willing to
work and learn. However, two tribal
groups in the country compete with
each otherfor power and wealth. You
discover that one group is constantly
diminishing the othergroup’s chances
of competing for work, especially their
women. Sexism prevails. The women
are overlooked for promotionby local
managers and are underpaid and over-
worked in comparison to their male
counterparts. You are concerned that
if your company attempts to alter the
local presumptions regarding gender,
it may offend the local population and
cause commercial and employment
problems and more trouble for the
people who are already disadvan-
taged. If your company does nothing,
it goes against core American values of
respect and equality.
1. If you were the manager, would
you advance certain women any-
way?Why or why not?
2. Do you thinkit is better to deferto
local sensibilities? Why or why not?

3. Would you encourage bringing in
more American female staff mem-
bers to showthe local managers
that they can work just as well?
Why or why not?
fie66722_08_c08_187-210.indd 202 3/2/12 9:44 AM
Business Activities
and offer gifts and bribes to officials. Likewise, if
managers engage in locally acceptable sexist
or
racist behavior, they fall afoulof American traditions
and law.
Yet many American companies learnto adapt to
local conditions quietly and under the radarof
media attention. McDonald’s, for instance, has adapted
its menu choices for different palates around
the world to ensure acceptance of its
products; and most companies tend to just get on
with the
job. Nike was forced to respond to Western
criticism of its use of sweatshopsuppliers in
the 1990s:
Local factories were content with
driving employees into harsh work-
ing conditions, but Western con-
sumers were not. Both companies
have learned to adapt and even to

become role models for local busi-
nesses, as one business academic
has noted: “I truly believe Western
firms have played a significant role
in raising standards in [the develop-
ing world by demonstrating] how
we think, how we do things and
how we treat our people” (C. Rob-
ertson, as quoted in Dutton, 2008).
In the next section, we look at the
main vehicle of international trade,
namely multinational corporations
and the particular ethics of how
they operate.
Pros and Cons of Multinational Businesses
It is at the junction between global business
aims, local customs and laws, and American
values that
many of the ethical issues affecting international
trade—and in particular multinationals—arise.
For somepeople, multinationals bring a
harmonization to the world: You can purchase
compatible
Hewlett-Packard printer cartridges anywhere.Likewise,
your cellular phone can usually adapt to
othercountries’ signals quickly, and you can rent a
car from Budget in just about any country.
Such
harmonization of product and service helps markets
and smooths tradeby creating similarities.
Supporters also claim that multinational corporations
are the main causes of economic growth

and prosperity for the world’s poor. Such companies
bring in new technologies and job opportuni-
ties and training for local managers. When an
American company opens up a new factory in
Indo-
nesia, say, the locals can benefit from more
employment opportunities and usually higher
wages:
sometimes up to 40% more (Hijzen & Swaim,
2008).
In turn, without global commerce and multinational
enterprises, Americans would miss out on a
greatdeal of opportunities in emerging markets such as
India, China, and Brazil. Global tradeis
mutually beneficial, and to turn our backs on it
would take the United States and the world
back
to the protectionist era of the 1930s, which
saw a collapse in world tradevolumes and a
rise in
international aggression that eventually broke
out in World War II.
Associated Press/Hasan Jamali
Two worlds meeting: women dressed in traditional niqabs
in Saudi Arabia shopping at a restaurant by a very American
corporation.
fie66722_08_c08_187-210.indd 203 3/2/12 9:44 AM

Business Activities
But for critics, multinational corporations and their
global agendas are exploiters of cheap foreign
laborwho deplete othercountries’ resources and take the
profits back to the United States. They
give little to their host countries but violate local
traditions and cultures by imposing American
standards and expectations on commercial life.
Moreover,the multinational corporation is a
pow-
erful, rich, and independent beastthat will look after its
own interests and treadon domestic
and international governments and people to raise its
turnover. People pointto the Deepwater
Horizon oil spill and BP’s laxity with regulations, or
to the Bhopal disaster and Union Carbide’s
evading safety standards in a foreign land. Some
have even seen American multinationals as part
of postwar American foreign policy to control
trade
and countries around the world (Shearer, 1999).
Still
others see all multinational corporations as forces
to
be controlled and highly regulated, or else they would
oppress people with poor wages and bad
working
conditions and undermine union attempts to
secure
a better life for members. From all the
examples that
we have considered in this chapter, thereare many

recurring themes regarding questionable practices of
multinationals:
• Improper political influence on foreign govern-
ments.
• Pushing for the deregulation of local
markets
so that they may enterthem and undercut local
businesses.
• Pursuit of profit over social use such as
when
multinationals do not have any regard for other
stakeholders whom they may be affecting and
when they concentrate solely on increasingprof-
its and dividends for shareholders to the cost of
local people.
• Externalized costs. Multinationals can be particu-
larly guilty of ignoring their tradeand production’s
impact on the environment and local cultures, as
they can ultimately cut production and leave the
host country reeling from any disasters that they
have created (Weissman, 2008).
Debate nonetheless rages on as to the
benefits and problems that multinational corporations
cre-
ate. Indeed, as we have discussed throughout this
book, acting ethically within the United
States is
complicated, and when a U.S. company begins to
operate abroad, the ethical intensity increases. A

few decades ago, multinationals could operate around
the world in relative privacy from national
enforcers. But today, the spread of electronic
commerce and correspondence means that multi-
national operations are never far from scrutiny by
the government or consumer activist groups.
Today, their products, advertisements, safety
standards, wages, and employment are all acces-
sible for critics to analyze, which can affect
local sales, should those critics choose to
publicize a
multinational corporation’s ethical misdemeanors.
Despite having a strictset of ethical guidelineson
standards and behavior going back to 1992,
Nike still managed to fall afoulof consumer activists,
who waged an influential war against the
Associated Press/Shuji Kajiyama
In this 2011 photo, the famous American
investor Warren Buffett (center), CEO
of Berkshire Hathaway, is opening up a
Japanese subsidiary factory of one of his
companies.
fie66722_08_c08_187-210.indd 204 3/2/12 9:44 AM
Business Activities
company’s use of substandard factories. In 2004,
Nike employed 80 corporate social-responsibility
and compliance officers, and its factories were

inspected weekly, yet even the company admit-
ted that standards in 80% of its factories had failed
to improve (Hijzen & Swaim, 2008).
Victoria’s
Secret was also caught using childlaboron its
organic cotton farms in Burkina Faso
(Carpenter,
2011). Perhaps being a perfect ethical
multinational is beyond the reach of
companies because
local conditions are to someextent beyond their
control. But it is certainly better to try to
change
obviously unethical situations and to act as a role
model for local companies.
Creating a Global Business Ethic
To relieve the potential for ethical conflict, the
philosopher Richard De George created a
list of
principles regarding operating businesses abroad:
1. Do no intentional harmto the host country.
2. Produce more good than bad for the host country.
3. Contribute to the host country’s development.
4. Respect the human rights of employees.
5. Pay the host country’s taxes.
6. Respect and work with the local culture.
7. Co-operate with reform in the host country,
such as in land and tax reforms (De George,
1993).
De George’s principles are useful guides for
international businesses, but as we have seen,

the
reality and complexity of doing business abroad
are much more difficult to navigate than the
principles imply. Nonetheless, thereare moves to
form a global business ethic that all companies
should subscribe to.
The work of De George and others has helped
form the ethical framework of doing work
abroad.
One of the earlyexecutives to pick up the mantle
was Sir Geoffrey Chandler, whose actions in
1976 as the CEO of the multinational petroleum
company Shellultimately helped change the
moral thinking of multinationals: “To suggest that
doing right needs to be justified by its
eco-
nomic reward is amoral, a self-inflicted wound
hugely damaging to corporate reputation,” he
com-
mented. “Doing right because it is right needs to
be the foundation of business” (as quoted in
Davison, 2011). Today thereare many
businesspeople who try to emulate the moral
stance of
Chandler and others, who believe in setting an
example within the companies they run and
also
for the people they deal with.
Indeed, one New York institute, Ethisphere, attempts to
monitor ethical performance around the
world and to score companies on their actions.
According to the institute, acting ethically

also
translates into profitability. The criteria that the
institute looks for are in line with what
ethicists
look for in corporate behavior, including
• corporate citizenship and responsibility,
• innovation contributing to public well-being,
• industry leadership,
• executiveleadership,
• legal, regulatory, and reputation trackrecord,
and
• internal systems and ethics-compliance programs
(Ethisphere, n.d.).
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Business Activities
Of the top five U.S. companies on Forbes’s list of
the 10 largest multinationals in the world,
Ethi-
sphere included only General Electric for 2011.
Nonetheless, many other U.S. companies do
appear on the list, including Rockwell Collins, eBay,
Gap, Timberland, Ford Motor Company,
Microsoft, Colgate-Palmolive, Xerox, PepsiCo, General
Mills, Caterpillar, and Cisco Systems. What
Ethisphere calls the world’s most ethical companies
are said to outperform the S&P 500 index in

the United States (“World’s Biggest Public
Companies,” 2011).
But critics of Ethisphere’s system ask, can
companies and their ethical outlook actually be
scored?1
If a company seeks to eradicate sexism in its
foreign subsidiary, does it get points?
Utilitarians,
who are interested in cost-benefit analyses, may nod in
agreement, sincethey see ethical life
as adding up the good things and subtracting
the bad things. Other ethicists do not agree.
For
them, doing the right thingis not about scoring
points; it is about doing the right thing
because it
is the right thingto do, or because
it reflects the innate ethical culture
and principles of the company.
Also, the fact that the ethical com-
panies have done well compared to
the S&P 500 may not mean much.
Ethisphere’s companies come in
and out of its tables more than
companies exit the S&P Index,
sincethey lose points one year and
gain them back the next, which can
cause problems in comparing like
with like. Nonetheless, Ethisphere’s
objective is quite clear: When a
company seeks to run itself ethi-
cally, respecting stakeholders and
contributing to public welfare and
corporate transparency, it should
be publicly applauded.

Supporting a global business ethic assumes, though,
that thereare objective or common values by
which communities all live by. And while most
communities do have similar levels of respect
for
issues like birth and death, the sanctity of holy
places, and the responsibility to care for the
vulner-
able, thereare also a host of issues that people
differ on. Relativism is the ethical theory
that says
that people’s values differ on many things,
which implies that it would be wrong
for one group to
impose an ethical standard on another.
1 There are critics of the institute who note
that those scoring well tend to advertise with
Ethisphere or use its partner company—a
conflict of interest that the institute’s director is
seeking to resolve (Evans, 2010)—but the
more important pointremains.
PR Newswire/Anonymous
In this 2011 photo, Ethisphere’s director, Alex Brigham (right),
is presenting an award to Paul Arnos of Aflac for winning the
2011 World’s Most Ethical Company award.
fie66722_08_c08_187-210.indd 206 3/2/12 9:44 AM
CHAPTER 8Summary

8.6 Conclusion
The world is moving increasingly towards greater
commercial integration as multinationals spread
in both numbers and jurisdictions. Because of the
Internet and the growth of social networking
sites, consumer activists also can keep a better
eye on world news and what multinationals are
up to. The power of boycotting or of raising
awareness of ethical issues and corporate
disasters
is such now that companies will find it very
difficult to hide their problems. Ethisphere and
other
organizations are actively working on a global
ethics standard that companies can subscribe to
and in turn be judged by, and companies are
listening. Many now employ specialists who
work
internally to make sure that managers are not bribing
local officials, employing sweatshops and
childlaborin the supply chain, or otherwise
undermining the corporate image.
In business, image and reputation mean a lot, so
when a company is tarnished by a disaster
any-
where around the world, such as BP following
the Deepwater Horizon explosion or the
Siemens
bribery scandal, it must work hard to rehabilitate its
name. Ethical analysis is helping: more and
more managers become aware of the risks of acting
unethically and of the heightened scrutiny

they now face.
Large international firms have an incentive to
tighten their standards, as Nike is trying to
do,
and they can act as role models for smaller
companies in othercountries (Baker, n.d.).
Nonethe-
less, businesses work in a legal and moral
framework, and while they can help form the
moral
framework, they cannot affect the legal framework
so well. Some of the problems that we have
discussed in this chapter, such as childlabor, IP
theft, illegal immigrantworkers, and especially
bribery, reflect national government failings.
Companies will have a greatincentive to bribe
offi-
cials if governments have discretionary powers. Once
the regulatoryframework is impenetrable
and state dealings more transparent, corruption in its
various forms should dwindle.
Summary
In this chapter, we discussed issues relating to
doing business around the world, including
gift giv-
ing and bribery. The American and European governments
are acting together to clamp down on
such corrupt practices, but such practices are not likely
to disappear until governments change the
way that they do business. A grave problem for
lawyers is intellectual-property(IP) theft. Some
argue that IP theft results from the way Americans
and Europeans view intellectual property and

that othercultures do not see IP as capable of
being stolen—it is merely recycled. Finally,
we
looked at the issueof technological transfer, which
can be highly sensitive in the military
industry,
and we considered whether it is wrong to
halt such transfers, sincemost of them improve living
standards in poorer countries.
We also reviewed how ethics dealswith international
tradeand multinational companies. The
initial problem was whether companies should
abide by local customs or by a global
standard of
corporate behavior. If companies subscribe to an
overarching ethical agenda, they run the risk of
being arrogant—entering foreign nations with
American ways of doing things and expecting
the
local people to change their behavior accordingly.
But business is ultimately about adaptation,
and while somecompanies try to uphold noble
ethical standards, others bend to local rules and
customs. This becomes a problem when corporations
engage in practices that Americans find
immoral or even illegal back home, such as the
use of childlabor. Sweatshops are a more
complex
fie66722_08_c08_187-210.indd 207 3/2/12 9:44 AM

CHAPTER 8Summary
case:As long as people are free to leave them,
the ethical problem is diminished, although it
does
not look good for a company to be seen driving
workers hard in poor conditions for low pay. So
too
with the issueof employing illegal immigrants:
For somepeople, their illegal status is
sufficient for
them to be arrested and sent back home, but many
recognize that illegal immigrants contribute to
the U.S. economy and, strangely enough, to Social
Security funds.
Discussion Questions
1. International tradebrings with it international
customs and different ways of living and
doing business. There are many books on
how to do business in different parts of the
world; but should U.S. companies and their agents
feel obliged to support local customs,
regardless of how they reflect on home values?
Why or why not?
2. Environmental standards differ across nations.
Poorer countries tend to have weaker
regulations that are less well enforced than richer
nations. If thereis a chance of improv-
ing profits by setting up in a country with
laxerrestrictions, do American companies have
a duty not to set up production there? Why or
why not?

3. Child laboris endemic to the poorer
countries of the world, and for many
children it is
seen as way of keeping their families out of
poverty. Critics pointout that if the govern-
ments were to invest more in educating children,
the children could be more produc-
tive and create more wealth for their nations when
they grew older. In the meantime,
multinational enterprises oftensecure suppliers who
use children. In your opinion, what
is the best way to reduce childlaborfor
multinational corporations?
4. Bribery and corruption have gone on in the
business world for centuries and remain
a staple of doing business not only in
transitional and poor countries, but also in well-
developed economies. Should companies have a
strictrule on bribing and gift giving
to public officials and members of otherlarge
corporations, or should they accept that
sometimes the only way to get business is to
offer “incentives”?
5. Intellectual property involves a range of
products and services that are sold around the
world. But somecultures do not recognize IP as
being anything special, so when people
download a movie from an illegal Web site, they
may not feel that they are stealing.
Does IP law have any ethical basis, or is it
just an attempt to secure monopoly earnings
by largecorporations?
Key Terms

bribery The giving of money, vouchers, goods,
or services to public officials in the hope of
securing a license or contract.
gift giving The presentation of money, vouch-
ers, goods, or services to another in business;
this may be a normal part of business eti-
quette in dealing with otherbusiness people
or public officials, but when used to encour-
age the signing of a contract or when the
gifts
become relatively large, ethical issues arise.
globalization The expansion of international
trade; the term also implies a movement
towards a similar global culture and, by impli-
cation, ethics.
intellectual property (IP) Intangible assets
protected by law such as copyrights, trade-
marks, packaging designs, and tradesecrets.
intellectual property theft The illegal misap-
propriation of intellectual property that has
been secured by a company or individual.
fie66722_08_c08_187-210.indd 208 3/2/12 9:44 AM
CHAPTER 8Summary
multinational corporation A corporation that
has production centers and offices in more
than one country.

repatriated income Money earned by an
American multinational that is transferred
back to the United States; it is subject to
cor-
porate tax.
sweatshops Factories whose workplacestan-
dards on health and safety and pay fall below
a
legal minimum, or whose standards are below
what is commonly acceptable in a community.
technological transfer Selling or distributing
technology from one country to another; often
concerned with the transfer of sensitive com-
mercial or military technology.
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fie66722_08_c08_187-210.indd 210 3/2/12 9:44 AM

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