Transcript Ethical Challenges of International Management

Welcome
Ethical Challenges of
International Management
 Dr. Satyendra Singh
Director, Centre for Emerging Markets
Professor, Marketing and International Business
Editor, International Journal of Business and Emerging Markets
www.winnipeg.ca/~ssingh5
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Why Study Ethical Issues?
MNCs are accused of a # of abuses
relating to business activities:
Corruption
Child labor
Human rights, Environment, Safety
Dumping
Role of MNCs in society
Responsibility: MNCs vs. Government
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Sued over misleading beef
Later charges dropped – counter sue
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The Basic Premise
Corruption
Child labor
Lack of education,
f (Poverty,
Fair trade,…)
Symptom vs. problem
Right vs. wrong?
Right vs. right?
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Corruption…
Pay to get work done
Caused by usually poverty, greed…
Salary lasts for 3 weeks only…?
Survival vs. meeting basic needs
Corrupt individual
Individual primary beneficiary at the
cost of organization
Corrupt organization
Selection, and Socialization
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Corruption…
Arguments for being corrupt!
Tax
Commission
Compensation
Job well done
Appreciation
In West, it is called tips, gifts, bonus
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Corruption: from MNC’s Viewpoint…
Western MNCs pay $80b to get contracts
or concession (Hawley 2000)
$80b can eradicate poverty (UN)
It ↓ GDP in poor countries
Because it undermines mkt. economy
Decisions  based on corruption
Not on  price, quality, service,
innovation
Raises price for everyone  poor suffers
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Corruption: from MNCs Viewpoint…
Divert resources from public services 
schools and hospitals
to dams… more scope for corruption
Poor does not get public services
Poor is further impacted
Corruption
undermines
democratic
process and rules of law
Environment is also likely to suffer
Corrupt officer  Non-enforcement
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Corruption: from MNC’s viewpoint…
Risk of accusation of corruption
Whether proven or not
Can lead to loss of reputation
If pay bribe, more demands likely
It adds costs of doing business
UN convention against corruption
 If you cheat, so will your competitor
Doing business more difficult
Employees/stakeholders lose trust
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Corruption: from MNC’s viewpoint
Customers do not trust companies
Governments do not trust companies
↓ likely to give assistance
↑ likely to audit transactions
↑ expensive to do business
Stock markets react negatively
Compromise personal beliefs
Need justification
Moral philosophies
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The Moral Philosophies…
Ethics  moral principles or values
Deontological philosophy
Rule (whatever) based–no matter what
We are the best
Teleological philosophy
Consequence based
Responsible for the consequence
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The Moral Philosophies…
Utilitarian philosophy
Based on net expected benefits
No absolute, relative
But, what is benefit? debatable
Contractarian philosophy
Based on the law of the land, contracts
Anything else is unethical
But, may be difficult to enforce
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The Moral Philosophies
Pluralism philosophy
Based on “do the right thing”
No need for law or contracts
We’ve conscience! Right vs. wrong
Most of us like it
 Yet we had 2 WW
Rawls’s Social Justice Theory
Fairness, peace and harmony
But, social contract is a bit ideal
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The Options…
1 Stay away
No country is perfect
Not everybody is corrupt
You lost huge opportunity
You did not try to impact locals
Black-listing a country is easy
Find creative ways of doing business
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The Options
2 Embrace local standards
Impact local culture
Develop ways to combat corruption
Does context change your values?
3 Maintain high global standards
Global firms have global reputation
Transfer of people easy
Can exceptions be made?
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At Macro Level
Education – a national strategy needed
E.g., India, China, USSR, Ghana, Kenya
Build capability
Governments enforce moral guidelines
Government policies for fair trade
 E.g., GM Food, Subsidies, Coca price…
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At Micro Level
Strategic — MNCs have the power
School and day care for children
UN Global Compact implementation
Contribution to country’s development
Mode of entry
IJV vs. Wholly-owned subsidiary
Ethics Officer
Pay fair taxes, reduce transfer pricing
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At Personal Level
Personal moral compass
Organizational Culture
Whistle-blower legislation
(Un)realistic performance goals
Volunteer for social cause
E.g., Scotia Bank  Winnipeg Public
Library Board
Win-win situation
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Child Labor (300m)
Poverty—survival  urbanization
If outlaw (Harkin Bill)
↓ Family income  ↓labor supply
↑ Adult wage  children go to school
↑ skills  ↑ productive  ↑ wages
↑ family welfare if demand persists
But, ↑ wages  ↓ # of jobs
Effective only if children go to school
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UN Global Compact -- 5
• Abolition of child labor
– ILO conventions  Minimum Age Convention No. 138
– Minimum age for admission to employment or work
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Developed countries
Light Work 13 Years
Regular Work 15 Years
Hazardous Work 18 Years
Developing countries
Light Work 12 Years
Regular Work 14 Years
Hazardous Work 18 Years
– Children have distinct rights
• Child labour is damaging to a child’s physical, social,
mental, psychological and spiritual development
• Deprives them of childhood, dignity; separates from families
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UN Global Compact -- 10
• Work against all forms of corruption
– Corruption
• the abuse of entrusted power for private gain
– Extortion
• When asking or demand is accompanied by threats that
endanger the personal integrity or the life of the person
– Bribery, Transparency International
• gift, loan, fee, reward… from a person to do something
dishonest, illegal or a breach of trust
– Steps to fight corruption
• Internal:
• External:
• Collective:
Anti-corruption policies within organizations
Report corruption in the annual Communication
Join forces with industry peers, stakeholders…
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Trends Against Corruption and Child Labor
Transparency International
Foreign Corrupt Practices Act (US)
Corruption of Foreign Public officials (Canada)
OECD Anti-bribery Initiatives
Harkin Bill – Trade Ban
ILO Convention on Minimum Age138
UN Global Compact (UNGC 2007)
 HR(2), Labor (4), Environment (3), Anticorruption (1)