Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
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
5-1
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
5
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.
5-2
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
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
5-3
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Chapter 05 – Ethical Issues in International Business
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.
5-4
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Chapter 05 – Ethical Issues in International Business
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
5-5
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
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.
5-6
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
