Ethics
Accepted principles of right or wrong that govern.
- The conduct of a person
- The members of a profession
- The actions of an organization
The most common ethical issues in international business involve:
- Employment practices
- Human rights
- Environmental regulations
- Corruption
- Moral obligations of multination corporations
Employment Practices
Suppose work conditions in a host nation are inferior to those in a multinational’s home nation.
- To guard against ethical abuses, firms should:
- Establish minimal acceptable standards that safeguard the basic rights and dignity of employees.
- Audit foreign subsidies and contractors regularly to ensure standards are being met.
- Take corrective action as necessary.
Human Rights
Basic human rights found in developed nations are not universally accepted worldwide.
- Freedom of association
- Freedom of speech
- Freedom of assembly
- Freedom of movement
- Freedom from political repression
Environmental Pollution…Tragedy of the Commons:
A social and political problem in which each individual incentivized to act in a way that will ultimately be harful to all individuals.
Corruption
Corruption has been a problem in almost every society in history and continues to be one today.
- U.S. Foreign Corrupt Practices Act (FCPA) amended to allow for “facilitating payments”.
- The Convention on Combating Bribery of Foreign Public Official in International Business Transactions.
Nature of ethical dilemmas:
- Ethical obligations of multinational corporations are not always clear-cut.
- Pressure from customers and stakeholders to be transparent in ethical decision making.
- No universal worldwide agreement about what constitutes accepted ethical principles.
Determinants of Ethical Behavior
- Societal Culture
- Personal Ethics
- Decision Making Processes
- Organizational Culture
- Leadership
- Unrealistic Performance Goals
Personal Ethics
Formation of ethics is guided by our parents, our schools, our religion, and the media
- Expatriate managers may face pressure to violate their personal ethics because they are away from their ordinary social context and culture.
Decision-Making Processes
Businesspeople may act unethically when they fail to ask “Is this decision or action ethical?”
- Problems arise in processes that do not incorporate ethical considerations into business decision making.
Organizational Culture
Culture in some organizations does not encourage people to think through ethical consequences of decisions.
Unrealistic Performance Goals
Pressure from parent company to meet unrealistic performance goals by cutting corners or acting unethically.
Leadership
Helps to establish the culture of an organization and set the examples that others follow
- Employees often take their cue from business leaders.
Societal Culture
Cultures that emphasize individualism and uncertainty avoidance are more likely to stress ethical behavior than cultures where masculinity and power distance are emphasized.
Straw Men
Offer inappropriate guidelines for ethical decision making.
Cultural relativism
Ethics are a reflection of culture.
Kantian Ethics
Based on the philosophy of Immanuel Kant.
- People should be treated as ends and never as purely means to the ends of others.
- People have dignity and need to be respected.
Rights Theory
Moral theorists argue that fundamental human rights form the basis for a moral compass that managers can use in ethical decision making. (Article 1, article 23)
- Along with rights come obligations.
Obligations fall on more than one class of moral agents – any person or institution that is capable of moral action.
A government
A corporation
Justice Theories
Focus on the attainment of a just distribution of economic goods and services.
- John Rawls argued that all economic goods and services should be distributed equally except when an unequal distribution would work to everyone’s advantage.
Veil of ignorance
Difference principle
How can managers make ethical decisions?
- Hire and promote people with a well-grounded sense of personal ethics.
- Refrain from promoting individuals who have acted unethically.
- Try to hire only people with strong ethics.
- Prospective employees should find out as much as they can about the ethical climate in an organization prior to taking a position. - Build an organizational culture that places a high value on ethical behavior.
- Articulate values that place a strong emphasis on ethical behavior.
- Emphasize the importance of a code of ethics.
- Implement a system of incentives and rewards that recognize people who engage in ethical behavior and sanction those who do not. - Put decision-making processes in place that require people to consider the ethical dimension of business decisions.
- Does the decision fall within the accepted values of standards that typically apply in the organizational environment?
- Is there a willingness to see the decision communicated to all stakeholders affected by it?
- Would people close to me (family members, friends, colleagues) approve of the decision? - Institute ethical officers to:
-Assess the needs and risks that an ethics program must address
-Develop and distribute a code of ethics
-Conduct training programs for employees
-Establish and maintain confidentiality of employees
-Comply with government laws and regulations
-Monitor and audit ethical conduct
-Take action, where appropriate
-Periodically reviewing and updating the code of ethics - Develop moral courage.
-Enables managers to walk away from a decision that is profitable but unethical
-Gives an employee the strength to say no to a superior who instructs employee to pursue actions that are unethical
-Gives employees the integrity to go public to the media and blow the whistle on persistent unethical behavior in a company. - Make corporate social responsibility a cornerstone enterprise policy.
- Power can be used in a positive way to increase social welfare, which is ethical, or used in a manner that is ethically and morally suspect. - Pursue sustainable strategies.
-Core idea is that an organization’s actions do not exert a negative impact on the ability of future generations to meet their own economic needs.
- Actions impart long-run economic and social benefits on stakeholders.
Managers can also use a five-step process to think through ethical problems:
Step 1: Identify which stakeholders a decision would affect and in what ways.
Step 2: Determine whether a proposed decision would violate the fundamental rights of any stakeholders.
Step 3: Establish moral intent - place moral concerns ahead of other concerns in cases where either the fundamental rights of stakeholders or key moral principles have been violated.
Step 4: Engage in ethical behavior.
Step 5: Audit decisions to make sure they are consistent with ethical principles.
