978-0078112911 Chapter 5 Part 2

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Global Business Today Ninth Edition Chapter 5
L) Justice theories focus on the attainment of a just distribution of economic goods and services.
A just distribution is one that is considered fair and equitable. There is no one theory of justice,
and several theories of justice conflict with each other in important ways. One important and
influential theory of justice was set forth by John Rawls who argued that all economic goods and
services should be distributed equally except when an unequal distribution would work to
everyone’s advantage.
M) Impartiality under Rawls’ theory is guaranteed by the veil of ignorance (everyone is imagined
to be ignorant of all his or her particular characteristics). Rawls suggests that under these
conditions, people would unanimously agree on two fundamental principles of justice. First, that
each person is permitted the maximum amount of basic liberty compatible with a similar liberty
for others, and second, that once equal basic liberty is assured, inequality in basic social goods is to
be allowed only if it benefits everyone.
N) Rawls formulates what he calls the difference principle, which is that inequalities are justified if
they benefit the position of the least advantaged person. The text provides examples of how
Rawls’ theory can be used as the moral compass that managers can use to help them navigate
through difficult ethical dilemmas.
FOCUS ON MANAGERIAL IMPLICATIONS
A) Five things an international business can do to make sure that ethical issues are considered in a
business decision are (1) favor hiring and promoting people with a well grounded sense of
personal ethics; (2) build an organizational culture that places a high value on ethical behavior; (3)
put decision making processes in place that require people to consider the ethical dimension of
business decisions; (4) institute ethical officers in the organization; (5) develop moral courage; (6)
make corporate social responsibility a cornerstone of the enterprise policy; (7) pursue strategies
that are sustainable.
Hiring and Promotion
B) Not only should businesses strive to identify and hire people with a strong sense of personal
ethics, but it is also in the interests of prospective employees to find out as much as they can about
the ethical climate in an organization.
Organization Culture and Leadership
C) To foster ethical behavior, businesses need to build an organization culture that places a high
value on ethical behavior. Three things are particularly important. First, the business must
explicitly articulate values that place a strong emphasis on ethical behavior, perhaps using a code
of ethics (a formal statement of the ethical priorities a business adheres to). Second, leaders in the
business should give life and meaning to the code of ethics by repeatedly emphasizing its
importance, and then acting on it. Third, the business should put in place a system of incentives
and rewards that recognize people who engage in ethical behavior and sanction those who do not.
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Global Business Today Ninth Edition Chapter 5
Decision Making Processes
D) Business people need a moral compass to help determine whether a decision is ethical.
According to experts if a business person can answer “yes” to the following questions, the decision
is ethically acceptable. First, does my decision fall within the accepted values of standards that
typically apply in the organizational environment? Second, am I willing to see the decision
communicated to all stakeholders affected by it? Third, would the people with whom I have
significant personal relationships approve of the decision?
Video Note: Coca Cola has been criticized for its actions in India where it has been accused of
failing to act in a socially responsible way. To learn more, consider the video in the International
Business Library on Pinterest (http://www.pinterest.com/mheibvideos/) Indian Farmers, Coca-
Cola Vie for Scarce Water Supply.
E) Others have recommended a five step process to think through ethical problems. In Step 1,
business people should identify which stakeholders (the individuals or groups who have an
interest, stake, or claim in the actions and overall performance of a company) a decision would
affect and in what ways. Internal stakeholders include those who work for or who own the
business such as employees, the board of directors, and stockholders. External stakeholders are
the individuals or groups who have some claim on a firm such as customers, suppliers, and unions.
F) Step 2 involves judging the ethics of the proposed strategic decision given the information
gained in Step 1. Managers need to determine whether a proposed decision would violate the
fundamental rights of any stakeholders.
G) Step 3 requires managers to establish moral intent (the business must resolve to place moral
concerns ahead of other concerns in cases where either the fundamental rights of stakeholders or
key moral principles have been violated).
H) Step 4 requires the company to engage in ethical behavior. Step 5 requires the business to audit
its decisions, reviewing them to make sure that they are consistent with ethical principles.
Ethics Officers
I) To encourage ethical behavior in a business, a number of firms now have ethics officers who are
responsible for making sure all employees are trained to be ethically aware, that ethical
considerations enter the business decision-making process, and that the company’s code of ethics
is followed.
Moral Courage
J) It is important to recognize that employees in an international business may need significant
moral courage.
Corporate Social Responsibility
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Global Business Today Ninth Edition Chapter 5
K) The concept of social responsibility refers to the idea that business people should take the
social consequences of economic actions into account when making business decisions, and that
there should be a presumption in favor of decisions that have both good economic and good social
consequences.
L) In its purest form, social responsibility can be supported for its own sake simply because it is
the right way for a business to behave. Advocates of this approach argue that businesses need to
recognize their noblesse oblige (honorable and benevolent behavior that is the responsibility of
successful companies) and give something back to the societies that have made their success
possible.
M) Some multinationals believe they have a moral obligation to enhance social welfare in
communities where they do business. The text provides examples of the social investments of
companies operating in Algeria and Finland.
Management Focus: Corporate Social Responsibility at Stora Enso
Summary
This feature explores Stora Enso’s sustainability strategy. Stora Enso, a Finnish pulp and paper
manufacturer, has made sustainability a central focus for the organization. The company clearly
outlines on its website and company reports its commitment to ensuring that it acts in a socially
responsible, environmentally friendly way. All decisions at Stora Enso are guided by this
commitment.
1. Why is a sustainable strategy so important to Stora Enso? What message does its publically
stated commitment to sustainability send? Consider your response from the perspective of various
stakeholders including investors and local communities.
2. As an employee of Stora Enso, what does its commitment to a sustainable strategy mean to you?
How does Stora Enso’s strategy affect its position in the global marketplace?
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Global Business Today Ninth Edition Chapter 5
© 2016 by McGraw-Hill Education.
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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negatively impact its employees. As such, it is likely to attract well-qualified employees and
create a loyal workforce. Students will probably recognize that a strong workforce will be
beneficial in the global marketplace, as will Stora Enso’s environmentally friendly approach to
doing business. Some students may also point out that as more local governments signal their
commitment to protecting the environment through policy decisions, companies like Stora Enso
stand to benefit.
Lecture Note: To extend this discussion, consider {http://www.businessweek.com/articles/2013-
12-12/corporate-social-responsibility-reports-in-china-progress-or-greenwashing}.
Teaching Tip: To learn more about Stora Enso go to {http://www.storaenso.com/}.
Sustainability
N) Sustainable strategies are strategies that not only help the multinational firm make good
profits, but that also do so without harming the environment while simultaneously ensuring that
the corporation acts in a socially responsible manner with regard to the stakeholders.
O) The basic idea of sustainability is that the organization does not exert a negative impact upon
the ability of future generations to meet their own economic needs and that its actions impart long-
run economic and social benefits to stakeholders.
P) Well thought out sustainable strategies can be good for shareholders, for the environment,
suppliers, local communities, employees, and customers. Business does not need to be a zero-sum
game.
Lecture Note: To extend this discussion, consider {http://www.businessweek.com/articles/2014-
07-01/business-schools-should-make-sustainability-a-mainstream-part-of-the-curriculum}.
Management Focus: Sustainability at Umicore
Summary
Umicore, a Belgian materials technology company, has been described as being the most
sustainable multinational company on the planet. Umicore has achieved this distinction by clearly
making sustainability a central focus across all areas of its business.
1. How can strategy at Umicore best be described as a zero sum game or a positive-sum game?
Support your answer.
Discussion Points: Most students will probably suggest that Umicore is pursuing a strategy that
can best be described as a positive-sum game. Umicore is committed to ensuring it is generating
strong returns for its shareholders while at the same time protecting the environment and being a
good corporate citizen. Umicore also emphasizes employee safety and employee development.
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Global Business Today Ninth Edition Chapter 5
2. Reflect on strategy at Umicore. Consider why Umicore has chosen to pursue a sustainability
strategy and why other companies in the industry may not share its passion for doing what’s good
for the planet. In your opinion, should all companies be required to take an approach similar to the
one that Umicore has chosen? What is the ethical responsibility of companies?
Teaching Tip: To learn more about Umicore, go to {http://www.umicore.com/en/}.
Critical Thinking and Discussion Questions
1. A visiting American executive finds that a foreign subsidiary in a poor nation has hired a 12-
year old girl to work on a factory floor, in violation of the company’s prohibition on child labor.
He tells the local manager to replace the child and tell her to go back to school. The local manager
tells the American executive that the child is an orphan with no other means of support, and she
will probably become a street child if she is denied work. What should the American executive
do?
2. Drawing upon John Rawls’ concept, the veil of ignorance, develop an ethical code that will
(a) guide the decisions of a large oil multinational towards environmental protection, and
(b) influence the policies of a clothing company to outsource its manufacturing process.
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© 2016 by McGraw-Hill Education.
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
96
3. Under what conditions is it ethically defensible to outsource production to the developing world
where labor costs are lower when such actions also involve laying off long-term employees in the
firm’s home country?
4. Do you think facilitating payments (speed payments) should be ethical?
5. A manager from a developing country is overseeing a multinational’s operations in a country
where drug trafficking and lawlessness are rife. One day, a representative of a local “big man”
approaches the manager and asks for a “donation” to help the “big man” provide housing for the
poor. The representative tells the manager that in return for the donation, the “big man” will make
sure that the manager has a productive stay in his country. No threats are made, but the manager is
well aware that the “big man” heads a criminal organization that is engaged in drug trafficking.
He also knows that the big man does indeed help the poor in the run down neighborhood of the
city where he was born. What should the manager do?
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© 2016 by McGraw-Hill Education.
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
97
6. Milton Friedman stated in his famous article in The New York Times in 1970 that “the social
responsibility of business is to increase profits.” Do you agree? If not, do you prefer that
multinational corporations adopt a focus on corporate social responsibility or sustainability
practices?
7. Reread the Management focus feature on Unocal and answer the following questions:
a) Was it ethical for Unocal to enter into a partnership with a brutal military dictatorship for
financial gain?
b) What actions could Unocal have taken, short of not investing at all, to safeguard the human
rights of people impacted by the gas pipeline project?
Summary
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Global Business Today Ninth Edition Chapter 5
The closing case explores the growing use of bitcoins. Bitcoin, an open-source, peer-to-peer
digital currency, came into circulation in 2009. Since then, it has become one of the most popular
forms of virtual currency, yet at the same time it has been widely criticized and been called “evil.”
Some governments have raised concerns that the bitcoin is being used to fund illegal activities
including drug and firearms purchases. Discussion of the case can revolve around the following
questions.
QUESTION 1: Do you think bitcoins are approaching being unethical monetary instruments
without technically carrying a value similar to “real” coins?
QUESTION 2: If bitcoins are used to buy drugs, firearms, or other products that are considered
illegal in the country in which bitcoins are being used, does that make bitcoins unethical?
QUESTION 3: Do you think the bitcoin system is “evil” as Paul Krugman suggested? Is it similar
to a Ponzi scheme?
QUESTION 4: Do you think bitcoins were created as a weapon intended to damage central
banking and money-issuing banks?
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Global Business Today Ninth Edition Chapter 5
traditional currencies have been established using policies designed to preserve economic and
fiscal stability and that by circumventing these safeguards, the bitcoin is indeed unethical.
Lecture Note: To learn more about how bitcoin works and issues related to the virtual currency,
consider {https://bitcoin.org/en/how-it-works} and {http://www.businessweek.com/articles/2013-12-
12/bitcoin-needs-banks-for-wider-acceptance-as-regulatory-scrutiny-rises}.
Continuous Case Concept
The auto industry, as Continuous Case Concept in Chapter 1 demonstrated, is a global one.
Manufacturing takes place across the globe, and auto companies rely on suppliers around the
world to produce quality parts at a reasonable cost.
Ask students whether the auto companies should run their foreign operations according to
the ethical standards in the host country or according to home country standards. The
recent recall of Japanese-made Takata airbags has affected many key players in the global
auto industry including Honda, Toyota, and General Motors. Discuss the responsibility of
those automakers to their consumers.
The recall of Takata airbags is expected to involve some 12 million vehicles globally, but it
is just one of many recalls that seem to have become common-place in the industry. Audi,
for example, just announced a recall of airbags made by a different company. Ask students
how companies like Audi and General Motors can reconcile how their suppliers run their
operations with their own ethics policies. Do these companies have any responsibility to
ensure that suppliers make ethical decisions?
Finally, reflect on the recent announcements by both Honda and Nissan of the creation of
new positions to oversee safety. At Honda, executives are taking pay cuts as a signal of
their responsibility and concern over performance and quality lapses. What do these
actions communicate to employees and other stakeholders?
This exercise is useful for expanding the discussion of Ethical Dilemmas, Philosophical
Approaches to Ethics, and Organizational Culture and Leadership. The exercise also works well
with the discussion of the role of leaders in ethical decision making, and with the material on
ethics officers.
globalEDGE Exercises
The resources for each exercise can be easily located by using the search box at the top of the
globalEDGE website at http://globalEDGE.msu.edu
Exercise 1
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Global Business Today Ninth Edition Chapter 5
Search phrase: Country Reports on Human Rights Practices
Resource Name: U.S. Department of State: Country Reports on Human Rights Practices
Website: http://www.state.gov/j/drl/rls/hrrpt/
globalEDGE Category: Multi-Country
Additional Info:
Each report is drafted by the U.S. Department of State and outlines in detail the human rights
practices of each country in the world.
Exercise 2
Search phrase: Bribe Payers Index
Resource Name: Transparency International: Bribe Payers Index
Website: http://bpi.transparency.org/bpi2011/
globalEDGE Category: Corporate Governance
Additional Info:
Published every other year (odd years) by Transparency International, this index ranks the
likelihood of companies from 28 leading economies to win business abroad by paying bribes. You
can view the results by country, or also by sector (i.e., companies from which sectors are more or
less likely to bribe). Higher scores indicate a lower likelihood to engage in bribery.
Additional Readings and Sources of Information
Wal-Mart Taps a Start-Up for a Window Into Bangladesh Factories
http://www.businessweek.com/articles/2013-05-16/wal-mart-taps-a-startup-for-a-window-into-
bangladesh-factories
Ex-BizJet Official Pleads Guilty in Foreign Bribery Scheme
http://www.businessweek.com/news/2014-07-24/ex-bizjet-official-pleads-guilty-in-foreign-bribe-
scheme
Fifa has to change its culture - ethics investigator Michael Garcia
http://www.bbc.com/sport/0/football/29603170
Carney and Lagarde IMF Panel on Ethics and Finance
http://www.businessweek.com/videos/2014-10-12/carney-and-lagarde-imf-panel-on-ethics-and-
finance
Narrow Appoaches to Teaching Negotiation Have Resulted in a Generation of Leaders Who Make
Ethical Comprises
http://www.businessweek.com/articles/2014-05-15/narrow-approaches-to-teaching-negotiation-
have-resulted-in-a-generation-of-leaders-who-make-ethical-compromises
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Global Business Today Ninth Edition Chapter 5
A Sustainable Business Model Pays Off
http://www.businessweek.com/articles/2013-11-26/a-sustainable-business-model-pays-off
How Big Data Can Simplify Sustainability
http://www.businessweek.com/videos/2014-06-18/how-big-data-can-simplify-sustainability
Mexico Purported Gulf Drug Cartel Leader Caught
http://www.businessweek.com/ap/2012-09-13/mexico-purported-gulf-drug-cartel-leader-caught
The U.S. Goes After Bribery on a Budget
http://www.businessweek.com/magazine/the-us-goes-after-bribery-on-a-budget-01192012.html
Judge in No Hurry to Hear Wal-Mart Bribery Lawsuit
http://www.businessweek.com/ap/2012-07-16/judge-in-no-rush-to-hear-wal-mart-bribery-lawsuit
News Summary: Pfizer Settles Bribery Allegations
http://www.washingtonexaminer.com/news-summary-pfizer-settles-bribery-
allegations/article/feed/2021335
Will Foxconn Findings Change Apple’s Supply Chain
http://www.businessweek.com/videos/2012-03-29/will-foxconn-findings-change-apples-supply-
chain
No Company Follows Apple's Expanded China Factory Audits
http://www.businessweek.com/technology/no-company-follows-apples-expanded-china-factory-
audits-02272012.html
The Higher Costs of Bribery in China
http://www.businessweek.com/magazine/content/10_29/b4187011931530.htm
Toyota Recalls Mount as Automaker Faces More Scrutiny
http://www.businessweek.com/videos/2014-10-15/toyota-recalls-mount-as-automaker-faces-more-
scrutiny

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