978-1259929441 Chapter 5 Part 2

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Chapter 05 – Ethical Issues in International Business

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

high value on ethical behavior. A code of ethics provides a formal statement of ethical

priorities.

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. The first

step is to consider the impact of a decision on internal and external stakeholders.

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

Having moral courage, the courage to walk away from a decision that is profitable, but

unethical, is also important.

Some moral philosophers argue that with power comes the social responsibility for

multinationals to give something back to the societies that enable them to prosper and

grow. The concept of corporate social responsibility (CSR) refers to the idea that

businesspeople should consider the social consequences of economic actions when

making business decisions and that there should be a presumption in favor of decisions

that have both good economic and social consequences.

Many companies today are pursuing strategies that are viewed as sustainable. By

sustainable strategies, we refer to 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 its stakeholders.

CRITICAL THINKING AND DISCUSSION QUESTIONS

QUESTION 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 child labor prohibition. 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?

ANSWER 1: This question, which illustrates a potentially very real ethical dilemma

facing managers working in foreign subsidiaries, is designed to stimulate class

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end, many students may agree that allowing the child to continue to work in the factory is

the lesser of two evils.

QUESTION 2: Drawing upon John Rawls’s concept of the veil of ignorance, develop an

ethical code that will (a) guide the decisions of a large oil multinational toward

environmental protection, and (b) influence the policies of a clothing company in the

potential decision of outsourcing its manufacturing operations.

ANSWER 2: John Rawls suggests that a decision is just and ethical if people would

allow for it when designing a social system under a veil of ignorance. Rawls’s veil of

QUESTION 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?

ANSWER 3: This question is likely to stimulate some lively discussion, particularly if

students have personally felt the impact of this practice. Many U.S. companies are

outsourcing not only blue-collar work, but also white-collar positions to the developing

QUESTION 4: Do you think facilitating payments (speed payments) should be ethical?

Does it matter in which country, or part of the world, such payments are made?

ANSWER 4: Students will probably be divided on this question, and a lively debate

QUESTION 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 rundown neighborhood of the city where he was

born. What should the manager do?

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ANSWER 5: Students will probably approach this question in very different ways. Some

QUESTION 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?

ANSWER 6: Student responses will vary. Friedman’s argument, also known as the

Friedman doctrine, is that a corporation’s sole responsibility is to increase profits for its

QUESTION 7: Can a company be good at corporate social responsibility but not be

sustainability oriented? Is it possible to focus on sustainability but not corporate social

responsibility? Based on reading the section on Implications for Business Practice,

discuss how much CSR and sustainability are related and how much the concepts differ

from each other.

ANSWER 7: A firm pursuing a sustainable strategy focuses on making profits but doing

so in a way so that the environment is not harmed and at the same time ensuring that it

CLOSING CASE: UNCTAD Sustainable Development Goals

Summary

The closing case describes the efforts by the United Nations Conference on Trade and

Development to promote sustainable development. The United Nations’ Sustainable

Development Goals (SDG) is a set of 17 goals designed to end poverty, protect the

planet, and ensure prosperity for all countries by 2030. Specifically, the United Nations

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has focused on (1) no poverty; (2) zero hunger; (3) good health and well-being; (4)

quality education; (5) gender equality; (6) clean water and sanitation; (7) affordable and

clean energy; (8) decent work and economic growth; (9) industry, innovation, and

infrastructure; (10) reduced inequalities; (11) sustainable cities and communities; (12)

responsible consumption and production; (13) climate action; (14) life below water; (15)

life on land; (16) peace, justice, and strong institutions; and (17) partnerships for the

goals. The United Nations anticipates that achieving these goals will require

governments, business, and people to work together toward a shared vision. Discussion

of the case can begin with the following questions.

QUESTION 1: In the most recent ranking of how countries are doing in implementing

the UN’s Sustainable Development Goals, Sweden ranked first in the world, followed by

several other countries in Scandinavia. However, even Sweden had only achieved an 85

percent success rate, meaning the country has another 15 percent remaining to be fully

compliant with the SDG initiative. What is the chance that all countries will achieve 100

percent compliance by the year 2030?

ANSWER 1: In 2015, the United Nations released its Sustainable Development Goals

noting that governments, people, and business will need to work together toward a target

QUESTION 2: Some would argue that the Sustainable Development Goals is not

something that should be mandated on countries to achieve by 2030 or any other year.

Countries should be free to set their own sustainability goals. What do you think?

ANSWER 2: Responses to this question will vary by students. Most students will

probably recognize that because we share the planet’s resources like air and water, it is

QUESTION 3: Seventeen Sustainable Development Goals is a large set of goals for the

world’s 260 countries and territories to achieve. Would it be better to focus on a smaller

set of goals, or are the Sustainable Development Goals integrated enough that countries

can tackle all of them at the same time?

ANSWER 3: Students will have varying opinions on whether a smaller set of initiatives

would make more sense than the 17 laid out by the United Nations. Many students will

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multiple initiatives simultaneously is essential. Other students will contend that a series

of smaller, less daunting goals might be appropriate, at least to start the ball rolling.

Another Perspective: To learn more about the United Nations’ Sustainable Development

Goals, go to {https://sustainabledevelopment.un.org/post2015/transformingourworld}.

MHE INTERNATIONAL BUSINESS VIDEO LIBRARY

Please click here to visit our International Business Video Library which provides an

ongoing stream of updated video suggestions correlated by key concept and major topic.

Every new clip posted is supported by teaching notes and discussion questions. Please

feel free to leave comments in the library that you feel might be helpful to your

colleagues.

INCORPORATING globalEDGE™ EXERCISES

Use the globalEDGE™ site {http://globalEDGE.msu.edu/} to complete the following

exercises:

Exercise 1

Promoting respect for universal human rights is a central dimension of many countries’

foreign policy. As history has shown, human rights abuses are an important concern

worldwide. Some countries are more ready to work with other governments and civil

society organizations to prevent abuses of power. Begun in 1977, the annual Country

Reports on Human Rights Practices are designed to assess the state of democracy and

human rights around the world, call attention to violations, and—where needed—prompt

needed changes in U.S. policies toward particular countries. Find the latest annual

Country Reports on Human Right Practices for the BRIC countries (Brazil, Russia, India,

and China), and create a table to compare the findings under the “Workers Rights”

sections. What commonalities do you see? What differences are there?

Exercise 2

The use of bribery in the business setting is an important ethical dilemma many

companies face both domestically and abroad. The Bribe Payers Index is a study

published every three years to assess the likelihood of firms from 28 leading economies

to win business overseas by offering bribes. It also ranks industry sectors based on the

prevalence of bribery. Compare the five industries thought to have the largest problems

with bribery with those five that have the least problems. What patterns do you see? What

factors make some industries more conducive to bribery than others?

Answers to Exercises

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Exercise 1 Answer

rights practices of each country in the world.

Exercise 2 Answer

Search phrase: Bribe Payers Index