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Chapter 10
Ethical Issues
in the Global
Arena
© 2012 South-Western, a part of Cengage Learning
1
Backlash Against Globalization
 Outsourcing/Offshoring of jobs to lessdeveloped nations
 Tenth anniversary of NAFTA in 2004
© 2012 South-Western, a part of Cengage Learning
2
Globalists and Antiglobalists
Pros
Open markets across
the globe
Investors, consumers,
employees, and
environmentalists are
better off
Beneficial to poor and
rich nations alike
© 2012 South-Western, a part of Cengage Learning
Cons
Expansion and greed
of corporate
enterprises
Globalization is
responsible for
destruction of
environments and
emerging economies,
abuses of human
rights, undermining of
local cultures, and the
sovereignty of nationstates
Power of international
bodies
3
Pros and Cons of Globalization
Globalists
Antiglobalists
I
M Consumers
P
A Employees
C
T
Free trade promotes lower costs,
etc.
Faster economic growth
Higher wages
Improved working conditions
Benefits the wealth at the expense
of the poor
Places profits above people
O
N
Environment
Creates resources needed to
address environmental issues
Exploits and destroys ecosystems
More pollution
Developing
Nations
Promotes national economic
World financial institutions
development, higher standard of conspire to keep poor nations in
living, better working conditions, debt
cleaner environments.
Human Rights
Creates cultures that support law
and free expression.
Spreads economic / political
freedom to far corners
Corporations pursing profits
ignore human rights violations,
abuse of workers, free speech, etc.
© 2012 South-Western, a part of Cengage Learning
4
Underlying Challenges in a
Multinational Environment
Two major challenges
1. Achieving corporate legitimacy in an
unfamiliar society.
2. Differing philosophies between MNCs
and host countries.
© 2012 South-Western, a part of Cengage Learning
5
The Dilemma of the Multinational
Corporation
Home Country
Stakeholder Pressures
Standards
Practices
Host Country
Stakeholder Pressures
The Multinational
Corporation
Standards
Practices
Ethics
Ethics
Laws
Laws
Culture
Culture
Customs
Customs
System of
Government
System of
Government
Socioeconomic
System
Socioeconomic
System
© 2012 South-Western, a part of Cengage Learning
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The Infant Formula Controversy
•
Classic illustration of ethical questions that
arise when conducting business abroad.
Health risks from using formula:




No refrigeration
Unsanitary conditions
Unclean water
Using diluted concentration
•
Bottle feeding led to increases in
malnourished babies.
Nestlé marketed formula to mothers who did
not know how to use it properly.
Protestors caused Nestlé to change its
marketing practices.
•
•
© 2012 South-Western, a part of Cengage Learning
7
Plant Safety and the Bhopal
Tragedy
•
A leak of methyl isocyanate gas at a Union
Carbide Plan in Bhopal, India killed over 2,000
and injured 200,000.
Raised many ethical questions:




Should MNCs have the same standards at home and
abroad?
Is it acceptable to locate a dangerous plant where the
workforce is unskilled and uneducated, and where the
populace is unaware of the risks?
How wise are laws that require plants to be staffed
entirely by local employees?
What is the responsibility of corporations and
governments in allowing the use of safe products that
become dangerous because of local conditions?
© 2012 South-Western, a part of Cengage Learning
8
Sweatshops, Human Rights, and
Labor Abuses
•
•
MNC’s use of women and children to
cheaply staff factories.
Many major corporations and many
countries have been involved.
Sweatshops
• Characterized by child labor, low pay, poor
working conditions, worker exploitation,
and health and safety violations.
 Increased scrutiny of sweatshop practices
in recent years.
© 2012 South-Western, a part of Cengage Learning
9
Social Accountability 8000
An effort to improve sweatshop conditions
created by Social Accountability
International (SAI)
1.
2.
3.
4.
5.
6.
7.
8.
9.
Child Labor
Forced Labor
Health and Safety
Freedom of Association and Right to
Collective Bargaining
Discrimination
Discipline
Working Hours
Compensation
Management Systems
© 2012 South-Western, a part of Cengage Learning
10
Corruption
• Attempts to influence the outcomes of
decisions wherein the nature and extent of
the influence are not made public.
Instances of corruption
 Bribery of government officials
 Giving of questionable political contributions
 Misuse of company assets for political favors
 Kickbacks and protection money for police
 Free junkets for government officials
 Secret price-fixing agreements
 Insider dealing
© 2012 South-Western, a part of Cengage Learning
11
Arguments For and Against Bribery
For Bribery
Necessary for profits
Common practice
Accepted practice
Form of commission,
tax, or compensation
© 2012 South-Western, a part of Cengage Learning
Against Bribery
Wrong and illegal in
most developed nations
Compromises personal
beliefs
Managers should not
deal with corrupt
governments
Once started, it never
stops
One should take a stand
for honesty, morality, and
ethics
Creates a dependence on
corruption
Deceives stockholders
and costs customers
12
Bribes versus Grease Payments
Grease Payments
•
•
Money given to minor officials to expedite
processes.
Relatively small sums of money given
for the purpose of getting minor officials to:
 Do what they are supposed to be doing
 Do what they are supposed to be doing faster
 Do what they are supposed to be doing better
Bribes
•
•
Relatively large amounts of money given for the
purpose of influencing officials to make decisions
or take actions that they otherwise might not
take.
Money given, often to high-ranking officials, to
get them to purchase goods or services.
© 2012 South-Western, a part of Cengage Learning
13
Balancing and Reconciling Ethics
Traditions
The Challenge of the Multinational
Corporation
Home Country
Ethical Standards
© 2012 South-Western, a part of Cengage Learning
OR
Host Country
Ethical Standards
14
Ethical Choices in Home versus Host
Country Situations
International Law
Global Codes of Conduct
ETHICAL
IMPERIALISM
Home
Country
• Cultural standards
• Ethical/moral
standards of home
country
BROAD
MIDDLE
GROUND
Mix of Home and Host
Country Standards
CULTURAL
RELATIVISM
Host
Country
• Cultural standards
• Ethical/moral
standards of host
country
Application of
Ethical Principles
© 2012 South-Western, a part of Cengage Learning
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