Chapter 10
Ethical Issues in the Global Arena
LEARNING OUTCOMES
After studying this chapter, you should be able to:
2. Summarize the key implications for managers of the following ethical issues: infant
formula controversy, Bhopal tragedy, factory collapses, sweatshops, and human rights
abuses.
4. Identify and discuss strategies companies may employ for improving global business
ethics.
TEACHING SUGGESTIONS
INTRODUCTION – This chapter serves dual purposes. First, it introduces the students to
ethical issues in the global marketplace, including two infamous examples that demonstrate some
of the difficulties encountered by operating in multiple nations. Second, it offers several takes
on ways to improve ethical performance in the global economy, using four different popular
strategies.
KEY TALKING POINTS – Students will likely have a vague notion of multinational
corporations (MNCs) and the difficulties of operating in widely divergent nations and cultures.
However, they are unlikely to know any of the details about cases like Nestlé and infant formula,
or the Union Carbide Bhopal incident. The textbook offers concise synopses of both cases,
which should be eye-opening revelations for most students. The chapter also examines two
Some of the most intractable ethical issues arise in developing countries, due to the vast
differences in the level (or stage) of economic development in the home and host countries. For
example, a company based in the United States is more likely to encounter difficult ethical issues
Immanuel Wallerstein proposed a world-system theory, in which he identified core regions that
benefited most from the capitalist world economy, and peripheral zones, such as Africa and Latin
America. His book, The Modern World-System: Capitalist Agriculture and the Origins of the
European World-Economy in the Sixteenth Century (New York: Academic Press, 1976) provides
a compelling case for how theses differences developed and how the core regions continue to
profit from exploitation of the peripheral regions. While Wallerstein offers a historical account
of how the world economic system developed, David Korten writes about the current effects of
PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of:
Cases:
14-Something’s Rotten in Hondo
15-Nike, Inc. and Sweatshops
18-Dole’s DBCP Legacy
21-Big Pharma’s Marketing Tactics
30-Targeting Consumers – (& Using Their Secrets)
Ethics in Practice Cases:
Is the Fair-trade Movement Sustainable?
Helping Factories to Pass Sweatshop Audits – Using Cheating Consultants
Violations of the Foreign Corrupt Practices Act or Not?
Spotlight on Sustainability:
Earth Hour: A Global Ethical Sustainability Movement
LECTURE OUTLINE
I. BUSINESS CHALLENGES IN A GLOBAL ENVIRONMENT
II. ETHICAL ISSUES IN THE GLOBAL BUSINESS ENVIRONMENT
A. Questionable Marketing and Plant Safety Practices
1. The Infant Formula Controversy
2. Plant Safety and the Bhopal Tragedy
a. Factory Fire and Building Collapse in Bangladesh
B. Human Rights, Sweatshops, and Labor Abuses
1. Fair Labor Association (FLA)
4. Alien Tort Claims Act and Human Rights Violations
C. Corruption, Bribery, and Questionable Payments
1. Debates about Bribery
2. The Foreign Corrupt Practices Act (FCPA)
3. The Growing Anticorruption Movement
a. Transparency International
III. IMPROVING GLOBAL BUSINESS ETHICS
A. Balancing and Reconciling the Ethics Traditions of Home and Host Countries
1. Ethical Imperialism
2. Cultural Relativism
B. Strategies for Improving Global Business Ethics
2. Ethics and Global Strategy
a. Levi Strauss & Co.
b. Starbucks
3. Suspension of Activities
4. Ethical Impact Statements and Audits
C. Corporate Action against Corruption
SUGGESTED ANSWERS TO DISCUSSION QUESTIONS
Students should recognize that their answers to these discussion questions should be well
reasoned and supported with evidence. Although some answers will be more correct than others,
1. Question: Drawing on the notions of moral, amoral, and immoral management introduced
in Chapter 7, categorize your impressions of (a) Nestle, in the infant formula controversy;
(b) Union Carbide, in the Bhopal tragedy; and (c) Google, in moving its search engine out
of China. Why is Google planning to return to China?
Answer: One of the things that students must keep in mind is that they have the benefit of
hindsight, and that case writers have analyzed the events to point out the errors that
occurred in each of these cases. This question requires that we approach the situations as if
we were in the time period before these events took place, without knowledge of what is
about to happen.
In the Union Carbide incident, it is a fine line between amoral and immoral management.
The key issue in this case is the fact that the plant was constructed pursuant to lower
standards than those required in the United States. Presuming that the U.S. standards were
in place in order to assure safety, it seems that the Union Carbide managers made a
conscious decision to place a higher risk of accident on the employees and citizens of India
than it imposed on its American workers. This is a direct violation of Kant’s categorical
imperative, “treat people only as ends, never as means.” If Union Carbide had followed
this maxim, it would have decided to adhere to the higher standards, simply to ensure the
safety of its Indian stakeholders.
2. Question: As an MNC seeks to balance and honor the ethical standards of both the home
and host countries, conflicts inevitably will arise. What criteria do you think managers
should consider as they try to decide whether to use home or host country ethical
standards? Does the use of hypernorms help? Explain.
Answer: To me, the answer to this question seems quite simple and straightforward—use
the “higher” ethical standard, regardless of whose it is, how much it costs or the ethical
issue involved. One would find it difficult to encounter trouble for using a higher ethical
standard. If adhering to the higher standard is cost prohibitive, then the decision would
simply be to forego that particular opportunity. If the only way to make a profit is to lower
one’s ethical standards, then one should find another way to make money. Further,
3. Question: Differentiate between a bribe and a grease payment. Give an example of each.
Answer: A grease payment is an expected, small, customary payment to an official in order
to get him or her to do whatever s/he was supposed to do in the first place. We often think
of grease payments as existing only in foreign countries (e.g., paying a customs officer to
4. Question: Conduct research, for purposes of updating the latest rankings of Transparency
International and the activities of the OECD, UNCAC, and individual country initiatives.
How could countries such as China, India, and Russia most effective improve their TI
rankings?
Answer: This question is left to the class instructor as time and events will have altered the
information available at the time this is being written. While Russia, China and India are
all countries with emerging economies, the textbook notes that these countries could do
5. Question: What are the major strategies companies might employ in improving global
business ethics? What are the key steps research has shown are important to successful
company anticorruption efforts?
Answer: As noted in the text, companies can improve global ethics by (1) developing
According to a report issued by The Conference Board and the Ethics and Compliance
Officers Association (ECOA), the following are five key steps that companies can take to
fight bribery and corruption:
3. Training and Discussion of Policies and Procedures
4. Hotlines and Helplines for All Organizational Members
GROUP ACTIVITY
Divide students into groups of four to five students. Ask each group to draft a general global
code of conduct that could be used by any multi-national corporation. Students should explore
which issues might be difficult to implement on a global scale (i.e., issues related to gifts/bribes,
discrimination concerns, sexual harassment, etc.). Students should reach a resolution on how to
INDIVIDUAL ASSIGNMENT
Ask students to categorize the following as a facilitating payment (grease payment), a bribe or
neither of these under the Foreign Corrupt Practices Act. Students should explain why they
chose a certain answer.
(1) Jane Jones, who works for XYZ Corporation (a U.S. publicly-traded company), has
documents that she needs to clear customs in order to make it to an important business
meeting on time. She decides to pay the customs official $500 in order to move to the
front of the line.
(3) Jane gives a steel letter opener with XYZ Corporation imprinted on it to a foreign
government official as a gift.