11 Global Ethics
What is Global Business Ethics?
• Global business ethics apply to the myriad of ethical issues any company faces when
operating in the global environment.
What is the Nature of Differences in Ethics?
• National cultural differences: differences in what people think is the right way to do
things.
• Social institutions: differences in educational systems, religion, etc.
o High achievement: people value achievement.
• Corruption is the misuse of entrusted power for private gain.
o Corruption occurs when someone receives a bribe and does something that they
are legally prohibited from doing.
• Cultures that promote higher corruption:
o Uncertainty avoidance: the degree to which people prefer certainty and order in
their lives.
o Individualism: the degree to which people are focused on themselves.
• Cultures that promote less corruption:
o Gender egalitarianism: degree to which people promote gender equality in a
society.
• Ethical universalism refers to the basic moral principles that transcend cultural and
national boundaries.
Key Global Ethical Issues
Labor Issues
• Labor issues: the many ethical dilemmas pertaining to labor.
Bribery
• Bribery also refers to gifts or payments to someone to expedite a government action or to
gain some business advantages.
• Two major reasons for ethics concerns:
o First, companies put themselves at serious financial risk if they engage in bribery.
• The World Bank argues that bribery often creates obstacles to doing business.
o As multinationals consider foreign investment decisions, they may be dissuaded
because of bribery demands.
• Companies typically make up for bribery by increasing the contract price by the amount
of the bribe.
• Corruption and bribery usually result in higher public spending, lower-quality projects,
undermined competition, and the inefficient allocation of resources.
o Members agree to take measures to make bribery a criminal offense.
• Reason-to-know provision: a firm is liable for bribes or questionable payments made by
agents hired by the firm, even if members of the firm did not actually make the payments
or see them being made.
Multinational Ethics: Going Local or Global?
• Heterogeneous multinationals: regardless of their national culture, companies can agree
with their stakeholders on the basic rules of moral behavior.
• HKH: ethical decision-making approach based on key questions.
• HKH proposes three possible outcomes for the ethical decision-making approach:
o Do business the firm’s way.
o Do business the host’s way.
o Leave the country altogether.
• Five steps of the decision-making process in the HKH model:
o The first step is to determine whether the decision being pondered is actually a
questionable practice.
o In the fifth step of the HKH model, a multinational needs to determine whether it
has leverage to do business its own way.
▪ Leverage refers to the ability of the multinational to have clout based on
its reputation or ability to provide jobs or train employees in the host
country.
What Can Multinationals Do to Become More Ethical?
Codes of Ethics
• Code of ethics is a formalized public statement that articulates the rules and regulations
• Classification of codes of ethics:
o First generation: focus on the legal responsibility of the company.
Whistle-Blowing
• Whistle-blowing programs: shift ethics monitoring to employees by providing the means
• Reasons multinationals are adopting ethics hotlines:
o First, multinationals find it difficult to use only internal controls to control ethical
behavior.