12
ETHICS IN THE GLOBAL
ENVIRONMENT
Learning Outcomes
At the end of this chapter, you should be able to:
Discuss the ethical conduct of multinational corporations
Analyze the different ethical theories in the context of
international business
Describe ethics in an international cross-cultural context
Explain the framework for ethical decision-making
Discuss the current ethical issues impacting the global
environment
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Introduction
The need of an adjustment in how businesses address their
strategies is ever relevant, due to globalization and the
liberalization of various policies around the world.
This has been brought about because of the change in
demographics, uncertainties in the market, a push for diversity
and an increase in competition. There are now more cross-
border operations with actions, such as investment, marketing,
technology transfer and production.
The various occurrences of globalization may cause
deterioration of the physical environment and pose many
ethical issues such as exposure of toxic substances,
exploitation of workers and consumers, discrimination, urban
decay and other social problems.
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Ethics in International Business
Whenever multinational corporations (MNCs) do business,
managers must not only avoid breaking the law, but also
follow high ethical standards.
For some companies, being ethical goes beyond doing what
is right.
It also means being ethical in sourcing for the components
that make up the product.
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The Ethical Conduct of
Multinational Corporations
Multinational corporations (MNCs) operate on a global scale
without significant ties to any one nation or region.
MNCs represent the highest level of international business
commitment and are characterized by a global strategy of
focusing on opportunities throughout the world.
Due to their size and financial power, MNCs can have a
serious impact on the countries where they do business,
which may create ethical issues.
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The Ethical Conduct of
Multinational Corporations (cont.)
Although it is unethical or illegal acts by (MNCs) that makes
international news, some make it a point to be responsible
good citizens with good ethical values.
For example, Texas Instruments (TI) has a global approach
to ethical integrity:
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Ethical Theories in International
Business
Cultural Relativism
Moral Imperialist
Normative Ethical Standards
Dialogue Idealism
Rights Theories
Justice Theories
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Ethics in Cross-Cultural and
International Contexts
How an organization treats its employees
– An organization can hire the best people, to provide ample
opportunity for skill and career development, to provide
appropriate compensation and benefits and to generally respect
the personal rights and dignity of each employee.
– On the other hand, a firm can
• Hire using prejudicial or preferential criteria
• Intentionally limit development opportunities
• Provide the minimum compensation allowable
• Treat employees callously and with little regard to personal dignity
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Ethics in Cross-Cultural and
International Contexts (cont.)
How the employees treat the organization
– Numerous ethical issues also relate to how employees treat the
organization.
– The central ethical issues in this relationship include conflicts of
interest; secrecy and confidentiality; and honesty.
– A conflict of interest occurs when a decision potentially benefits
the individual to the possible detriment of the organization.
– Ethical perceptions of the importance of conflicts of interest vary
from culture to culture.
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Ethics in Cross-Cultural and
International Contexts (cont.)
How the employees and organization treat other
economic agents
– The primary agents of interest include customers, competitors,
stockholders, suppliers, dealers and labour unions.
– The behaviour between the organization and these agents may
be subject to ethical ambiguity, including in the areas of
advertising and promotions; financial disclosures; ordering and
purchasing; shipping and solicitations; bargaining and
negotiation; and other business relationships.
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Ethical Dilemmas
Most firms attempt to satisfy ethical standards wherever they
do business. However, deciding what is right and wrong is
not always clear.
Ethical problems arise when requirements are ambiguous,
inconsistent or based on multiple legal or cultural norms.
An ethical dilemma is a predicament with which determining
the most appropriate course of action is confounded by a set
of solutions that are equally justifiable and often equally
imperfect.
Possible actions may be mutually exclusive—the choice of
one automatically negates the other(s).
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Framework for Ethical Decision-
Making
A four-step framework for arriving at ethical decisions:
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Current Ethical Issues in
International Business
Price Discrimination
Harmful Products
Employment Practices
Environmental Pollution
Bribery and Corruption
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Value of Ethical Behaviour
Behaving ethically is important for several reasons:
– Ethical behaviour is simply the right thing to do.
– It is often prescribed within laws and regulations. Violating laws
and regulations has obvious legal consequences.
– Ethical behaviour is demanded by customers, governments and
the news media.
– Ethical behaviour is good business, leading to an enhanced
corporate image and selling prospects.
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