BE5
Business Ethics
Chapter 4—Business Ethics in a Global Marketplace
Globalism
Globalism—Good or Bad?
The World is Flat by Tom Friedman
The tools of the flat world are especially useful for entrepreneurs and individuals who can see opportunities to
create value and move quickly and nimbly to realize them.
– Wider selection of inexpensive goods and services
– Increased material prosperity
– *Closer cooperation and connection globally among peoples*
Jihad v. McWorld by Benjamin Barber
The result of globalism is the proliferation of two opposing identities, both of which are unpalatable for Barber:
entrenched splinter groups discontent with globalism (“jihad”) and those who embrace globalism with an
unhealthy vigor (“McWorld”).
Recurring Ethical Problems in Global Business
Bribery:
There are many kinds of payments that are potentially problematic because they may be considered corrupt
practices. Tips, gifts, perks, entertainment, bribes, and extortion are just a few of them.
Bribery is different from extortion—in a bribe, the payer of the bribe offers it to the other party (exists in
developing and transition countries at an estimated $20–40B); in extortion, the receiver of the payment demands
the payment form the payer. [That’s not exactly how it works. Extortion is understood, and turns into bribery.]
Corruption is often used to refer to either bribery or extortion.
Corruption is often a hallmark of a poor country. Countries that have a lot of this will stay poor.
In the United States, the Foreign Corrupt Practices Act (FCPA) of 1977 prohibits companies from bribing or paying
extortion to foreign officials.
Companies continue to face two primary challenges:
– Companies and their employees have to be clear on what constitutes a bribe and what determines its
inappropriateness. Cultural environments and expectations add to the already difficult task of
distinguishing a bribe from a myriad of other legitimate reciprocities.
– Companies need to strategize approaches to the various challenges they will likely meet in a given
country.
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Gifts are expressions of personal affection; are created by personal relations to convey a personal feeling; are able
to be acknowledged by the done as given by the donor; and are uncoerced and uncoercive.
Tips are remuneration for the work of an employee; are given according to a custom known and consented to by
the employer; are given for service; are size–relevant; and present no conflict of interest for the employee.
Facilitation payments are a type of bribes companies can pay without fear of punishment (allowed under FCPA).
They are of relatively small value and are paid to lower level government officials.
Labor Standards:
The pressure to create responsible conduct across a range of ethically charged issues—from labor standards, to
the environment, to health and quality standards—echoes throughout the supply chain.
The Issue of Difference in a Global Economy:
Every culture has particular ways of doing things that people who are part of that society come to share, thus
mitigating their differences.
The challenge for managers is to take time to learn about and better understand the differences across cultures
and to figure out how they affect their ability to cooperate successfully.
To be successful globally, managers must:
– Show respect to other peoples and cultures
– See opportunities and anticipate risks or costs
– Foster relationships that may be key to one’s ability to do business in another country
– Avoid embarrassing situations or conflicts which may be personally difficult and harmful to their
organization
From Recognizing Differences to Cases When Values Collide: To Adapt or Not?
Both relativism and ethnocentrism represent seductive perspectives that have a kernel of truth in them, but which
eliminate the need for ethics and have the potential to create major problems for your business.
– Relativism says that the answer to any ethical problem is relative, whether to the individual, the group, or
the culture. There is no answer to questions of values, so any answer is as good as the next.
– Ethnocentrism says the opposite—what is right is fixed and is based on my (or my culture’s) values and
that dictates correct behavior regardless of where I am.
– Principalism is an intermediate between these two extremes. It represents the continuum in between,
where people may be more tolerant and accepting of other views, while others may see the world more
clearly in terms of sharp black and white categories that remain fixed regardless of context.
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Cultural Relativism
What is morally right is specific to a particular culture and when visiting a given country, one must live by its moral
standards while ignoring those of one’s home country. People must be tolerant in all circumstances.
Despite its intentions to respect the sensibilities of individuals, cultural relativism entails that people cease to be
reflective and interactive when confronted with issues about how they ought to live as individuals and as a
community.
Other Forms of Relativism
– Cultural Relativism—What is morally right is specific to a particular culture.
– Naive Relativism—the idea that what is right is based on each individual’s values and that we should make
our decisions based on our values and not question the values used by others.
– Role Relativism—the idea that what is right is dictated by our role in an organization (e.g., follow orders
when at work).
– *Social Group Relativism*—the idea that what is right is determined by what is being done by prominent
groups within society (e.g., if other companies are hiring children in their factories and that is accepted, it
is fin for us to do so).
Universal Principles
There is widespread agreement that there are some moral universals, or as business ethics scholar Patricia
Werhane calls it, “moral minimums.”
UN Global Compact
• Human Rights
o Principle 1—Businesses should support and respect the protection of internationally proclaimed
human rights; and
o Principle 2—Make sure that they are not complicit in human rights abuses
• Labor Standards
o Principle 3—Businesses should uphold the freedom of association and the effective recognition
of the right to collective bargaining;
o Principle 4—The elimination of all forms of forced bargaining;
o Principle 5—The effective abolition of child labor; and
o Principle 6—The elimination of discrimination in respect of employment and occupation.
• Environment
o Principle 7—Businesses should support a precautionary approach to environmental challenges;
o Principle 8—Undertake initiatives to promote greater environment responsibility; and
o Principle 9—Encourage the development and diffusion of environmentally friendly technologies.
• Anti–Corruption
o Principle 10—Businesses should work against all forms of corruption, including extortion and
bribery.
Aristotle and Aristotle’s approach
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As image–bearers of Christ, we have universal principles—Just Business
World View
A worldview is a macro–model, attempting to explain all of reality, not just some aspect of it.
Seven major worldviews:
1. Theism—an infinite God is beyond and in the universe
2. Atheism—God does not exist, beyond the universe or in it
3. Pantheism—God is the universe
4. Panentheism—God is in the universe
5. Deism—God is beyond the universe but not in it
6. Finite Godism—a finite God is beyond and in the universe
7. Polytheism—there is more than one god in the universe
Cultural Beliefs That Will Encourage Economic Growth
The Poverty of Nations by Wayne Grudem
Lawrence Harrison, Basic Assertions (Taken from the 1948 UN Declaration)
– Life is better than death (prizing the value of human life)
– Health is better than sickness
– Liberty is better than slavery
– Prosperity is better than poverty
– Education is better than influence
– Justice is better than injustice
Important Religious Beliefs
– There is a God who holds people accountable
– God approves of character traits related to work
o Religious background of national culture and per capita GDP (rounded values)
§ Protestant $30K
§ Jewish $19K
§ Roman Catholic $9K
§ Orthodox $7K
§ Confucian $7K
§ Buddhist $5K
§ Islamic $3K
§ Hindu $2K
Important Moral Standards
– Values truthfulness
– Respects property ownership
– Follows nine of the ten commandments (exclusion of the Sabbath commandment)
– Believes both good and evil are in the human heart
– Believes in individual responsibility
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– Opposes discrimination
– Values marriage and family
– Believes people are the earth’s most important inhabitants
– Values responsible stewardship of the earth
Deciding Whether to Engage in Foreign, Culturally Acceptable Activities
– Do I have to engage in the practice (i.e., what locals do) to compete?
– Does the practice violate a basic human right?
A key for managers is to sort out how much of what is taken as accepted or common practice in less–developed
countries represents the shared values of a country versus what is tolerated out of a sense of necessity.
Trust by Francis Fukuyama:
Social capital of countries provides a source of competitive advantage.
Countries with a significant degree of spontaneous sociability—the ability to have significant degrees of trust with
relative strangers—will outperform countries where trust is largely confined to family relations.
This helps with three things:
– The global nature of the economy (pulling from a global talent pool)
– The importance of knowledge (trust people with information)
– The need for change (adapt quickly to change—decentralize authority for faster decision–making)
Determining Whether or Not to Work with Stakeholders in a Given Environment
1. Are they a reliable and stable potential partner?
2. Do we all share one another’s values?
3. Do we enhance one another’s value proposition?
4. Is there sufficient social capital?
5. Are there complementary management styles and cultures?
Benchmarks for Responsible Business
– Industry Initiatives [Fair Labor Association (FLA)]
– Prominent National and International Organizations [United Nations (UN), International Organization for
Standardization (ISO)]
– Guidance from Ethicists
o Donaldson’s Ethical Algorithm
o DeGeorge’s Principles—Multinational corporations should:
§ Do no intentional direct harm
• Make due compensation for any harm they cause
§ Produce more good than harm for host
§ Contribute to host’s development
§ Respect human rights for employees
§ Respect and work with, not against, local culture
§ Pay their fair share of taxes
§ Cooperate with local government to support just institutions
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§ Accept ethical responsibility of actions and failures of the business, if the corporation is
the majority controller
§ Ensure the safe building and operation of hazardous work environments
§ Appropriately redesign hazardous technology when transferring to less developed
countries to ensure save operation in that country
§
Donaldson’s Ethical Algorithm
Is a given business practice permissible for an multinational company when it is morally or legally permitted in the
host country, but not in the company’s home country?
Type 1 conflict (economic): The moral or legal support for her practice in the host country is defined by the current
economic conditions in the host country: lower wages, lower environmental standards, etc.
Solution: The practice is permissible in the host country if it were to be permissible in the home country
under similar economic circumstances.
Type 2 conflict (cultural): The moral or legal support for a practice in the host country is defined by current cultural
conditions in the host country: social loyalties, historic customs, etc.
Solution: The practice is permissible if it meets the following criteria:
1) Business cannot be conducted in the host country if this practice is not undertaken
2) This practice does not directly violate international rights
Business Ethics
Chapter 5—Leadership
Bass and Stogdill’s Handbook of Leadership
Comprehensive review of over 100 years of scholarly leadership.
Despite its length and comprehensiveness, it fails to address three key deficiencies that have long plagued the
study of leadership.
1. We still do not know very much about leadership despite all of the studies and historical examples we
have. “Leadership” has been used in so many ways by so many people that it is in danger of becoming a
meaningless term.
2. Leadership is still generally perceived as existing in a vacuum.
3. Leadership is understood pretty much using a top–down, attribute–based approach where the monolithic
leader proposes a set of plans which the followers execute accordingly.
“Lead me, follow me, or get out of my way.” –Gen. George Patton
“You don’t need a title to be a leader.” –Attributed to many
“To command is to serve, nothing more and nothing less.” –Andre Malraux
“The key to successful leadership today is influence, not authority.” –Kenneth Blanchard
“Effective leadership is not about making speeches or being liked; leadership is defined by results not attributes.”
–Peter Drucker
“In matters of style, swim with the current; in matters of principle, stand like a rock.” –Thomas Jefferson
“A man who wants to lead the orchestra must turn his back on the crowd.” –Max Lucado
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“Leadership” and “Management” are not the same thing.
Manager—The root of the word manage is “manus”, which means hand. Managers handle things—budgets,
forecasts, schedules, etc. Their eyes are on today.
Leader—the root of the word lead means to go, guide, or travel; it implies moving toward a new destination. A
leader’s eyes are on tomorrow as well as on today. So leading is about going somewhere—about guiding people on
a journey.
People managers are continually striving to find the appropriate balance between management and leadership.
This is difficult because of sin nature. We are innately unbalanced.
A Canonical Framework for Leadership
Four variables that have emerged:
– Leader
– Follower
– Leadership Processes and Skills
– Situation or Context
These come together to produce outcomes.
Amoral Leaders and Amoral Leadership Theories
Effective leaders were viewed as those capable of achieving effective outcomes.
Great Man and Trait Theories—sought simply to bring about an understanding of those (universal) characteristics
