Week 10 - Business Ethics in a Global Economy Be sure to read the lecture notes thoroughly, as they supplement the information offered in digital material within the course. You will be responsible to know the information provided here and in your assigned reading. I. Ethical Perceptions And International Business The self-reference criterion (SRC) is the idea that people perceive differences between themselves and citizens of other countries when traveling abroad; they may believe the values of their own country to be ethically superior to those of others. The SRC is an unconscious reference to one's own cultural values, experiences, and knowledge. When confronted with a situation, a person reacts on the basis of knowledge accumulated over a lifetime and usually grounded in the culture of origin. These reactions are based on meanings, values, and symbols that relate to the culture of origin, but may not have the same relevance to people of other cultures. In the United States, for example, dumping---the practice of charging high prices for products sold in domestic markets while selling the same products in foreign markets at low prices, often below the costs of exporting the products---is viewed negatively, and this country has a number of anti-dumping laws. 1. Culture as a Factor in Business 1. Ethical issues that arise from international business activities often differ significantly from those that evolve from domestic business activities. 2. Culture is everything in our surroundings made by people: both tangible items and intangible concepts and values. This definition includes language, religion, law, politics, technology, education, social organization, general values, and ethical standards. 1. Each nation has a distinctive culture and, consequently, distinctive beliefs about what business activities are acceptable or unethical. 2. Distinct subcultures can also be found within many nations. 3. One of the critical ethical issues linked to cultural differences is the question of whose values and ethical standards take precedence in negotiations and business transactions. 2. Adapting Ethical Systems to a Global Framework 1. When businesspeople rationalize straying from their own ethical values when doing business abroad, they are resorting to cultural relativism: the concept that morality varies from one culture to another and that business practices are therefore differentially defined as right or wrong by particular cultures. 2. As business becomes more global and multinational corporations proliferate, the chances of ethical conflict increase. II. Global Values 1. There have been numerous attempts to establish a set of global or universal ethical standards. 1. Many of these efforts show a pattern of shared values, such as truthfulness, integrity, fairness, and equality, which suggest a universal set of ethics that can be applied to business across the globe. 2. The shared values assume that we all have basic rights and res.

1. Week 10 - Business Ethics in a Global Economy
Be sure to read the lecture notes thoroughly, as they supplement
the information offered in digital material within the course.
You will be responsible to know the information provided here
and in your assigned reading.
I. Ethical Perceptions And International Business
The self-reference criterion (SRC) is the idea that people
perceive differences between themselves and citizens of other
countries when traveling abroad; they may believe the values of
their own country to be ethically superior to those of others.
The SRC is an unconscious reference to one's own cultural
values, experiences, and knowledge. When confronted with a
situation, a person reacts on the basis of knowledge
accumulated over a lifetime and usually grounded in the culture
of origin.
These reactions are based on meanings, values, and symbols
that relate to the culture of origin, but may not have the same
relevance to people of other cultures.
In the United States, for example, dumping---the practice of
charging high prices for products sold in domestic markets
while selling the same products in foreign markets at low
prices, often below the costs of exporting the products---is
viewed negatively, and this country has a number of anti-
dumping laws.
1. Culture as a Factor in Business
1. Ethical issues that arise from international business activities
often differ significantly from those that evolve from domestic
business activities.
2. Culture is everything in our surroundings made by people:
both tangible items and intangible concepts and values. This
definition includes language, religion, law, politics, technology,
education, social organization, general values, and ethical
standards.

2. 1. Each nation has a distinctive culture and, consequently,
distinctive beliefs about what business activities are acceptable
or unethical.
2. Distinct subcultures can also be found within many nations.
3. One of the critical ethical issues linked to cultural
differences is the question of whose values and ethical
standards take precedence in negotiations and business
transactions.
2. Adapting Ethical Systems to a Global Framework
1. When businesspeople rationalize straying from their own
ethical values when doing business abroad, they are resorting to
cultural relativism: the concept that morality varies from one
culture to another and that business practices are therefore
differentially defined as right or wrong by particular cultures.
2. As business becomes more global and multinational
corporations proliferate, the chances of ethical conflict
increase.
II. Global Values
1. There have been numerous attempts to establish a set of
global or universal ethical standards.
1. Many of these efforts show a pattern of shared values, such
as truthfulness, integrity, fairness, and equality, which suggest a
universal set of ethics that can be applied to business across the
globe.
2. The shared values assume that we all have basic rights and
responsibilities that must be adhered to when doing business.
2. If there is a universal set of ethics, why then do
businesspeople have trouble understanding what is ethical or
unethical?
3. Although honesty, charity, virtue, and doing good to others
may be universally desirable qualities, differences in
implementing them can raise ethical issues.
To address such problems, a number of companies have agreed
to abide by the Global Sullivan Principles, which seek to
encourage social responsibility around the world, however,
some of these companies have not implemented these principles.

3. 4. A major challenge is how to accommodate inconsistencies in
ethics and regulations, and how to be proactive in developing
responsible conduct.
The concern is not only to develop legal limitations for
behavior, but also to develop incentives for self-regulation and
ethical conduct that are acceptable in a global business
environment.
III. The Multinational Corporation
Multinational corporations (MNCs) are public companies that
operate on a global scale without significant ties to any one
nation or region.
1. They represent the highest level of international business
commitment and are characterized by a global strategy of
focusing on opportunities throughout the world.
2. Because of their size and financial power, multinational
corporations have been the subject of much ethical criticism.
1. Both American and European labor unions argue that it is
unfair for MNCs to transfer jobs overseas, where wage rates are
lower.
2. MNCs have been accused of increasing the gap between rich
and poor nations, and of misusing and misallocating scarce
resources.
3. Critics believe that the size and power of multinationals
create ethical issues related to the exploitation of both natural
and human resources.
4. Although some MNCs have been accused of paying
inadequate wages, the ethical issue of fair wages is complicated.
5. The activities of multinational corporations may also raise
issues of unfair competition.
6. Some MNCs strive to be good global citizens with strong
ethical values.
Many companies endorse business responsibility abroad and
support a globally-based resource system called Business for
Social Responsibility (BSR) which tracks emerging issues and
trends, provides information on corporate leadership and best
practices, conducts educational workshops and training, and

4. assists in developing practical business ethics tools.
7. Although multinational corporations are not inherently
unethical, their size and power often seem threatening to less-
developed countries.
The ethical problems that MNCs face arise from the conflicting
demands made from opposing points of view.
IV. Ethical Issues Around The Globe
The list of issues presented in this chapter is not exhaustive, but
merely a sampling of the complexity of ethical decision-making
in the global arena.
1. Sexual and Racial Discrimination
1. Various laws prohibit businesses from discrimination on the
basis of sex, race, religion, or disabilities, in their hiring, firing,
and promotion decisions, but the problem of sexual and racial
discrimination is still a reality throughout the world.
2. By acknowledging and attempting to curb discrimination,
businesses around the world can realize specific benefits.
2. Human Rights
Corporate concern for global human rights emerged as news
stories depicting opportunistic use of child labor, payment of
low wages, and abuses in foreign factories helped reshape
attitudes about acceptable behavior for organizations.
3. Price Discrimination
A major ethical issue in international business is how products
sold in other countries are priced.
1. When a firm charges different prices to different groups of
customers, charges of price discrimination may occur.
2. When companies market their products outside their own
countries, the costs of transportation, taxes, tariffs, and other
expenses can raise the prices of the products.
1. When prices increase beyond the costs of these additional
expenses, however, an ethical issue emerges.
2. Increasing prices in this way is sometimes referred to as
gouging.
3. Another pricing issue is dumping, which may occur for
several reasons.

5. 4. Bribery
1. In many cultures, giving bribes---also known as facilitating
payments---is an acceptable business practice.
2. The U.S. Foreign Corrupt Practices Act (FCPA) prohibits
U.S. companies from offering or providing payments to officials
of foreign governments for the purpose of obtaining or retaining
business abroad.
5. Harmful Products
In advanced industrialized nations, governments have banned
the sale of certain products that are considered harmful. Some
companies in those nations continue to sell such products,
including ones with genetically modified ingredients, in other
countries where they remain legal.
6. Pollution and Natural Environment
Whereas there are boundaries on the implications of many legal
and ethical violations, in the case of environmental issues, the
effects of abuses can be far-reaching and long-term.
7. Telecommunications Issues
1. Telecommunications technology has greatly facilitated
information access, but this ease of information access also
brings ethical issues, particularly with regard to privacy.
2. Another technology issue is day trading, which involves
placing multiple buy and sell orders for securities, and holding
those positions for a very short time.
3. Questionable financial activities, such as money laundering,
have been made easier by global telecommunication.
1. Money laundering means that illegally received funds are
transferred or used in a financial transaction so as to conceal
their source or ownership, or facilitate an "illegal" activity.
8. Intellectual Property Protection
1. Intellectual property refers to the ideas and creative materials
developed to solve problems, carry out applications, educate,
and entertain others.
2. It is generally protected through patents, copyrights, and
trademarks.
9. World Trade Organization

6. 1. The World Trade Organization (WTO) was established in
1995 at the Uruguay round of negotiations of the General
Agreement on Tariffs and Trade (GATT)
1. a. The WTO addresses economic and social issues such as
agriculture, textiles and clothing, banking, telecommunications,
government purchases, industrial standards, food sanitation
regulations, services and intellectual property.
2. In May 2002, the WTO reorganized as the Trade Regulation
Organization (TRO), changing its focus and establishing new
goals.