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Globalization and Society
- 1. Copyright © 2013 Pearson EducationCopyright © 2013 Pearson Education CHAPTER 5 Globalization andGlobalization and SocietySociety
- 2. Copyright © 2013 Pearson Education AGENDA Foundations of Ethical Behavior Preconventional, Conventional, Postconventional Teleological, Utilitarianism, Deotological Relativism versus Normativıim Ethics and Corporate Bribery Global Warming, Kyoto Protocol Ethical Dimensions of Labor Conditions Code of conduct 5-2
- 3. Copyright © 2013 Pearson Education INTRODUCTION • Companies must satisfy stakeholders; • Shareholders ( Hisse Sahipleri ) • Employees ( Çalışanlar ) • Customers ( Müşteriler ) • Society ( Toplum ) 5-3
- 4. Copyright © 2013 Pearson Education 5-5 FOUNDATIONS OF ETHICAL BEHAVIOR
- 5. Copyright © 2013 Pearson Education • Teleological approach (Teleolojik) • decisions are based on the consequences of the action • Utilitarianism (Yararcılık) • an action is right if it produces the greatest amount of good • Deontological approach (Deontolojik) • moral judgments are made and moral reasoning occurs independently of consequences 5-6 FOUNDATIONS OF ETHICAL BEHAVIOR
- 6. Copyright © 2013 Pearson Education 5-7 FOUNDATIONS OF ETHICAL BEHAVIOR
- 7. Copyright © 2013 Pearson Education • Ethical behavior can help a company • develop a competitive advantage • avoid being perceived as irresponsible 5-8 WHY DO COMPANIES CARE?
- 8. Copyright © 2013 Pearson Education RELATIVISM VERSUS NORMATIVISM • Relativism • ethical truths depend on the groups holding them • «When in Rome, do as the Romans do» • Normativism • there are universal standards of behavior that all cultures should follow 5-9
- 9. Copyright © 2013 Pearson Education LEGAL JUSTIFICATION: PRO AND CON • The law is inadequate because • Some things that are unethical are not illegal • Laws are slow to develop in emerging areas of concern • Laws may be based on imprecisely defined moral concepts • The law often needs to undergo scrutiny by the courts • The law is not very efficient 5-10
- 10. Copyright © 2013 Pearson Education • Legal justification is appropriate because • The law embodies many of a country’s moral principles • The law provides a clearly defined set of rules • The law contains enforceable rules that apply to everyone • The law reflects careful and wide-ranging discussions 5-11 LEGAL JUSTIFICATION: PRO AND CON
- 11. Copyright © 2013 Pearson Education EXTRATERRITORIALITY • Extraterritoriality • imposing domestic legal and ethical practices on the foreign subsidiaries of companies headquartered in their jurisdictions 5-12
- 12. Copyright © 2013 Pearson Education ETHICS AND CORPORATE BRIBERY • Regardless of the reasons for not using the law as a starting point for ethical behavior, it remains a good starting point • Countries looking for solutions to common problems take similar legal steps • Consider • activities that affect the well-being of people • activities that affect the environment 5-13
- 13. Copyright © 2013 Pearson Education CORRUPTION AND BRIBERY • Corruption ( Usulsüzlük ) • the misuse of entrusted power for private gain • Bribes ( Rüşvet ) • payments or promises to pay cash or anything of value • Occurs; • to obtain government contracts • to get public officials to do what they should be doing anyway 5-14
- 14. Copyright © 2013 Pearson Education Where Bribes Are Business As Usual 5-15 CORRUPTION AND BRIBERY
- 15. Copyright © 2013 Pearson Education • International accords to stop bribery • OECD Anti-Bribery Convention • ICC code of rules • UN Convention against Corruption • Regional initiatives include • EU efforts • U.S. Foreign Corrupt Practices Act and Sarbanes-Oxley legislation • Industry initiatives include • 2005 World Economic Forum zero tolerance pact 5-16 CORRUPTION AND BRIBERY
- 16. Copyright © 2013 Pearson Education • Companies compromise the environment • contamination of air, soil, or water during manufacturing • producing products that emit fossil-fuel contaminants • Effect of natural resource extraction • renewable versus non-renewable 5-17 ETHICS AND THE ENVIRONMENT
- 17. Copyright © 2013 Pearson Education WHAT IS SUSTAINABILITY? • Sustainability • meeting the needs of the present without compromising the ability of future generations to meet their own needs • Is sustainability good business practice? • YES 5-18
- 18. Copyright © 2013 Pearson Education GLOBAL WARMING, KYOTO PROTOCOL • Kyoto Protocol (1997) • signed to require countries to cut greenhouse gas emissions to 5.2% below 1990 levels between 2008 and 2012 • Some countries have adopted stricter requirements • others have not ratified the agreement including • the U.S., China, India 5-19
- 19. Copyright © 2013 Pearson Education 5-20
- 20. Copyright © 2013 Pearson Education 5-21
- 21. Copyright © 2013 Pearson Education • Tiered pricing and other price-related issues • reverse engineering • WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) • generic drugs • R&D and the Bottom Line • India 5-22 ETHICAL DILEMMAS AND OTHER BUSINESS PRACTICES
- 22. Copyright © 2013 Pearson Education ETHICAL DIMENSIONS OF LABOR CONDITIONS • Labor issues include • Wages • Child labor • Working conditions • Working hours • Freedom of association 5-23
- 23. Copyright © 2013 Pearson Education 5-24 ETHICAL DIMENSIONS OF LABOR CONDITIONS
- 24. Copyright © 2013 Pearson Education • Child labor – ILO estimates 250 million children aged 5– 17 years work • Some companies avoid operating in countries where child labor is common • or establish responsible policies in those countries - IKEA • Some companies refuse to hire individuals who want to work long hours • concerned about exploitation 5-25 ETHICAL DIMENSIONS OF LABOR CONDITIONS
- 25. Copyright © 2013 Pearson Education CORPORATE CODES OF ETHICS • How should companies behave? • The UN Global Compact establishes guidelines for appropriate behavior in human rights • labor • the environment • anti-corruption • https://www.youtube.com/watch?v=x09uTiKzbvI 5-26
- 26. Copyright © 2013 Pearson Education MOTIVATIONS FOR CORPORATE RESPONSIBILITY • Unethical and irresponsible behavior could • result in legal sanctions • result in consumer boycotts • lower employee morale • cost sales because of bad publicity • A code of conduct • sets global policy that must be complied with • communicates the code to employees, suppliers, and subcontractors • ensures that policies are carried out • reports results to external stakeholders 5-27
- 28. Copyright © 2013 Pearson Education CORPORATE ETHICS IN THE FUTURE • Two trends: • There will be greater convergence of proper ethical conduct • Individuals will develop skills to address ethical issues • Impact of social media • Impact of future business and government leaders 5-29
- 29. Copyright © 2013 Pearson Education 5-30 THANK YOU!
Editor's Notes
- Chapter 5: Globalization and Society
- Learning Objective 1: To examine the broad foundation of ethical behavior.
- Learning Objective 1: To examine the broad foundation of ethical behavior.
- Why do companies care about ethical behavior? Ethical behavior can be important for developing a competitive advantage and to avoid being perceived as irresponsible. Today, many nongovernmental organizations, or NGOs, actively encourage companies to comply with certain standards of ethical behavior.
- Corruption – which is defined by Transparency International to be the misuse of entrusted power for private gain - involves multiple issues, one of which is the issue of bribery. Bribery is the main form of corrupt behavior by multinational companies. In fact, while it is impossible to assess the true value of bribery, it’s huge.
- This Figure shows how likely companies are to offer bribes in certain countries. Research shows that people from Belgium and Canada are least likely to pay bribes, while people from Russia, China, and Mexico are most likely to pay bribes. En az Belçika, Kanada En çok Rusya, Çin, Meksika
- Companies can damage the environment both in the manufacturing process and also as a result of the products they produce. The impact of companies that extract natural resources is especially complicated. What happens when those resources are nonrenewable? Well, some argue that there is no such thing as a nonrenewable resource because as supplies drop, prices will rise and substitutes will emerge to protect the resource that is less available.
- The idea behind sustainability is to do what’s best for both people and the environment. Today, it’s commonly recognized that sustainability can go hand in hand with good business practice. Moreover it has become an industry in its own right. New companies have emerged that combine the idea of environmental responsibility with profitability to meet the needs of environmentally conscious consumers.
- In addition to the ethical issues related to bribery and global warming, firms also face ethical issues in other parts of their business. Some are industry-specific like the issues that arise in the pharmaceutical industry, others are not industry-specific like labor issues. In the pharmaceutical industry, many firms use tiered pricing whereby they charge a market price for products sold in industrialized countries and a discounted price for products sold in developing countries. Keep in mind though, that drug companies rely on revenue from existing products to fund their R&D. TRIPS allows poor countries to produce generic products for local consumption or import generic products if they themselves don’t have the capacity to produce generics. Pharmaceutical companies worry that the generic products could eventually compromise their sales of real products in developed countries. A third issue for drug companies involves the high cost of developing drugs. The cost of developing drugs is very high in the developed world, but significantly lower in developing countries like India. India has emerged as a major manufacturer of generic drugs and is now moving into developing new drugs.
- Today’s multinationals rely on global supply chains. This reality adds another level of concern for them – namely the working conditions of foreign labor forces. Companies doing business in other countries either through FDI or purchasing from independent suppliers deal with a host of issues including ensuring that fair wages are paid and working conditions are safe, meeting the ethical and legal challenges of child labor, and making sure that freedom of association is permitted.
- Sources of Worker-Related Pressures in the Global Supply Chain This Figure shows the multiple pressures external stakeholders place on companies to force them to adopt responsible employment practices in their foreign operations.
- One area that has received special attention is child labor. The International Labor Organization or ILO estimates that some 250 million children work worldwide. Of these, about 5 percent are involved in export industries. Keep in mind when thinking about child labor that some argue that in some cases, children work because their parents don’t earn enough to support their families. Without the additional wages brought home by the child, the family would be worse off. Some companies like IKEA have addressed this dilemma by helping families increase their earning power and establishing bridge schools for children.
- How should companies behave? The United Nations has developed a Global Compact that recommends broad principles for companies to follow in the areas of human rights, labor, the environment, and anti-corruption.
- So, you know it’s important for companies to act responsibly because unethical and irresponsible behavior could result in legal sanctions, consumer boycotts, lower employee moral, or lost sales. To encourage ethical and responsible behavior, firms can establish a code of conduct. Code of Conduct : Ethics and Expectations for everyone in the company
- So, you know it’s important for companies to act responsibly because unethical and irresponsible behavior could result in legal sanctions, consumer boycotts, lower employee moral, or lost sales. To encourage ethical and responsible behavior, firms can establish a code of conduct. Code of Conduct : Ethics and Expectations for everyone in the company
- What happens in the future? Well, it’s expected that there will be greater convergence in terms of what constitutes ethical behavior. In addition, as individuals gain more experience in international business they will develop new skills to help them deal with ethical issues. Two other factors that will play into corporate ethics in the future is the role of social media in bring issues into the mainstream and the role of future leaders, who as students today have a greater awareness of social responsibility and ethics than their predecessors.
- What happens in the future? Well, it’s expected that there will be greater convergence in terms of what constitutes ethical behavior. In addition, as individuals gain more experience in international business they will develop new skills to help them deal with ethical issues. Two other factors that will play into corporate ethics in the future is the role of social media in bring issues into the mainstream and the role of future leaders, who as students today have a greater awareness of social responsibility and ethics than their predecessors.