978-1259578113 Chapter 5 Lecture Notes

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Chapter 05 – Ethical Issues in International Business

Ethical Issues in International Business

Learning objectives

Understand the ethical issues faced by international businesses.

Recognize an ethical dilemma.

Identify the causes of unethical behavior by managers.

Describe the different philosophical approaches to ethics.

Explain how managers can incorporate ethical considerations into their decision

making.

This chapter looks at ethics in international business. Ethics becomes an issue across nations

because of differing political systems, economic systems, legal systems and cultural values. What is

acceptable behavior in one nation may be considered unethical in another.

First, the chapter explores some of the more common areas where ethical issues arise in international

business, such as employment practices, human rights, environmental pollution, corruption, and

moral obligations. Then the discussion moves to ethical dilemmas and the roots of ethical and

unethical decision-making. Next, the text examines basic philosophical theories that offer a

foundation for ethical decision-making. Finally, the chapter presents the managerial implications of

ethical decision-making, including hiring and promotion, organizational culture, sustainability, and

corporate social responsibility.

The opening case explores the danger associated with lead contamination in imported toys. Despite

increased safety standards and regulations, studies show that as many as one-third of the toys

imported from China contain dangerous heavy metals. The closing case considers the ethical

dilemma posed by Bitcoin, a digital currency introduced in 2009. Because bitcoins are not backed by

any government and do not have any real value, some economists suggest that they are an unethical

means of avoiding taxes and that they promote illegal activity.

OUTLINE OF CHAPTER 5: ETHICS IN INTERNATIONAL BUSINESS

Opening Case: Making Toys Globally

Introduction

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Chapter 05 – Ethical Issues in International Business

Ethical Issues in International Business

Employment Practices

Management Focus: Ethical Issues at Apple

Human Rights

Management Focus: Unocal in Myanmar

Environmental Pollution

Corruption

Management Focus: Corruption at Daimler

Moral Obligations

Ethical Dilemmas

The Roots of Unethical Behavior

Personal Ethics

Decision-Making Processes

Organizational Culture

Unrealistic Performance Expectations

Leadership

Societal Culture

Philosophical Approaches to Ethics

Straw Men

Utilitarian and Kantian Ethics

Rights Theories

Justice Theories

Focus on Managerial Implications

Hiring and Promotion

Organization Culture and Leadership

Decision-Making Processes

Ethics Officers

Moral Courage

Corporate Social Responsibility

Management Focus: Corporate Social Responsibility at Stora Enso

Sustainability

Management Focus: Sustainability at Umicore

Chapter Summary

Critical Thinking and Discussion Questions

Closing Case: Bitcoin as an Ethical Dilemma

CLASSROOM DISCUSSION POINT

Create a hypothetical business scenario, then ask students to consider the ethics involved.

For example, suppose a British manager pays a Saudi prince 1% of the contract he helps

negotiate in the Kingdom of Saudi Arabia.

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Chapter 05 – Ethical Issues in International Business

Ask students whether the British manager acted ethically. Jot the responses of students

on the board according to whether students believe the action was ethical or unethical,

and the reasoning behind the argument.

Now, ask students about the following scenario. A U.S. law firm has box seats at all the

major professional games (baseball, hockey, basketball) and season tickets to the nearest

Big-10 conference university games. The partners take their prospective clients to these

games, wine and dine them, and play golf together at the firm’s expense at posh courses.

In ethical terms, what are the differences in these behaviors?

Do cultural differences influence responses?

LECTURE OUTLINE

This lecture outline follows the Power Point Presentation (PPT) provided along with this

instructor’s manual. The PPT slides include additional notes that can be viewed by

clicking on “view,” then on “notes.” The following provides a brief overview of each

Power Point slide along with teaching tips, and additional perspectives.

Slide 5-3 What Is Ethics?

Ethics refers to accepted principles of right or wrong that govern the conduct of a person,

the members of a profession, or the actions of an organization.

Slide 5-4 Ethical Issues in International Business

The most common ethical issues in business involve:

employment practices

human rights

environmental regulations

corruption

the moral obligations of multinational companies

Another Perspective: The Carnegie Council on Ethics and International Affairs maintains

a very substantive and thought-provoking website at {http://www.carnegiecouncil.org/}.

This site contains publications that comment on many of the ethical issues that surround

globalization and international business.

Slides 5-5 and 5-6 Employment Practices

Often employment practices differ among nations. What is the MNC’s obligation?

Should home standards be followed, even in less developed countries? Should local

standards be embraced? What is the right basis for employment-related ethical

decisions?

Slides 5-7 and 5-8 Human Rights

The idea of what constitutes human rights varies considerably across national borders.

How can the tensions that this reality fosters be reconciled?

Slide 5-9 Environmental Pollution

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Ethical issues arise when environmental regulations in host nations are far inferior to

those in the home nation.

The tragedy of the commons occurs when a resource held in common by all, but owned

by no one, is overused by individuals, resulting in its degradation.

Another Perspective: Consumers International {http://www.consumersinternational.org/}

is dedicated to protecting the rights of consumers worldwide. In doing so, it promotes

ethical behavior on the part of companies. Go to the site and explore some of the

organization’s current efforts.

Slides 5-10 and 5-11 Corruption

The U.S. Foreign Corrupt Practices Act outlawed the practice of paying bribes to

foreign government officials in order to gain business.

Slides 5-12 and 5-13 Moral Obligations

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.

Slide 5-14 Ethical Dilemmas

Ethical dilemmas are situations in which none of the available alternatives seems

ethically acceptable.

The ethical obligations of a multinational corporation toward employment conditions,

human rights, corruption, environmental pollution, and the use of power are not always

clear cut.

Slides 5-15 through 5-18 The Roots of Unethical Behavior

The causes of unethical behavior are complex and reflect:

Personal ethics

Decision-making processes

Organization culture

Unrealistic performance expectations

Leadership

Societal culture

Business ethics reflect personal ethics (the generally accepted principles of right and

wrong governing the conduct of individuals). The personal ethical code that guides our

behavior comes from a number of sources, including our parents, our schools, our

religion, and the media.

Home country managers working abroad in multinational firms may experience more

than the usual degree of pressure to violate their personal ethics because they are away

from their ordinary social context and supporting culture, and they are psychologically

and geographically distant from the parent company.

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Business people sometimes do not realize that they are behaving unethically simply

because they fail to ask the relevant question—is this decision or action ethical?

The term organization culture refers to the values and norms that are shared among

employees of an organization.

In a company with an organizational culture that de-emphasizes business ethics, all

decisions are reduced to the purely economic.

When there is pressure from the parent company to meet performance goals that are

unrealistic, and can only be attained by cutting corners or acting in an unethical manner,

unethical behavior may result.

Leaders are vital in helping a firm establish its organization culture, and setting examples.

If leaders are not acting ethically, other employees may not act ethically. Societal culture

can also influence behavior.

Slide 5-19 Philosophical Approaches to Ethics

There are several approaches to ethics including the straw men (the Friedman doctrine,

cultural relativism, righteous moralist, and the naïve immoralist), the Utilitarian

approach, the Kantian approach, and rights and justice theories.

Slides 5-20 and 5-21 Straw Men

Straw men approaches to business ethics are approaches that are raised by business ethics

scholars primarily for the purpose of demonstrating that they offer inappropriate

guidelines for ethical decision making in a multinational enterprise. Four such

approaches are the Friedman doctrine, cultural relativism, the righteous moralist, and the

naïve immoralist.

Slides 5-22 and 5-23 Utilitarian and Kantian Ethics

In contrast to the straw men, most moral philosophers see value in utilitarian and

Kantian approaches to business ethics. The utilitarian approach to business ethics dates

back to philosophers such as David Hume, Jeremy Bentham, and John Stuart Mill.

Utilitarian approaches to ethics hold that the moral worth of actions or practices is

determined by their consequences. An action is judged to be desirable if it leads to the

best possible balance of good consequences over bad consequences.

Slide 5-24 Rights Theories

Rights theories recognize that human beings have fundamental rights and privileges that

transcend national boundaries and culture. Moral theorists argue that fundamental human

rights form the basis for the moral compass that managers should navigate by when

making decisions that have an ethical component.

Slide 5-25 Justice Theories

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

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Chapter 05 – Ethical Issues in International Business

argued that all economic goods and services should be distributed equally except when an

unequal distribution would work to everyone’s advantage.

Slide 26 Think Like a Manager: The Ethics of the Gig Economy

Slides 5-27 through 5-35 Ethical Decision Making

Five things an international business can do to make sure that ethical issues are

considered in a business decision are:

(1) Hire and promote people with a well grounded sense of personal ethics

(2) Build an organizational culture that places a high value on ethical behavior

(3) Make sure that leaders within the business not only articulate the rhetoric of

ethical behavior, but also act in manner that is consistent with that rhetoric

(4) Put decision-making processes in place that require people to consider the ethical

dimension of business decisions

(5) Develop moral courage

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.

To foster ethical behavior, businesses need to build an organization culture that places a

high value on ethical behavior.

Business people need a moral compass to help determine whether a decision is ethical.

It is important to recognize that employees in an international business may need

significant moral courage.

Managers can also use a five-step process to think through ethical problems.

To ensure ethical behavior in a business, a number of firms now have ethics officers.

Slide 5-36 Summary of Decision-Making Steps

Not all ethical dilemmas have an obvious solution. In the case of a true dilemma, firms

must rely on the decision-making ability of their managers, and these managers need to

make as balanced a decision as possible.

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