CHAPTER 10
Globalization of Ethical Decision Making
SUMMARY
Advances in communication, technology, and transportation have further minimized the world’s
borders, creating an ever more interconnected global economy. This chapter discusses how transactions
across international boundaries define global business, and how the variety of cultures and expectations
around the globe complicates the topic of business ethics. International businesspeople must understand
the values, cultures, and ethical standards of his or her home country, as well as every country in which
his or her firm conducts business. Formal codes of conduct are less common internationally, and the
INSTRUCTOR NOTES FOR “AN ETHICAL DILEMMA”
This case examines Dun & Ready (D&R) Company, a U.K. retail store, and its employee Raul. D&R
identifies a growing Latin American market and sends Raul to Mexico City where he must negotiate
contracts for obtaining building permits. The permit process takes a very long time in Mexico, but
D&R management has not been patient. Raul’s manager approved bribery in order to get the permits in
quick fashion. Raul paid more bribes as each new store opened. Raul’s ‘success’ in Mexico led to a
promotion, and the company was very pleased with his job performance. However, soon after, Raul
learned about an investigation into the manner used to obtain the building permits in Mexico.
Students may wish to discuss issues surrounding business practices in other cultures and the
justification, using cultural relativism, of ‘when in Rome, do as the Romans do.’ Bribery is both an
56 Chapter 10: Globalization of Ethical Decision Making
LECTURE OUTLINE
I. Global Culture, Values, and Practices
A. Global business is a practice that brings together people from countries that have different
cultures, values, laws, and ethical standards.
B. Country cultural values are specific to groups, sects, regions, or countries that express
actions, behavior, and intent.
C. National culture consists of everything in our surroundings that is made by people—both
tangible items and intangible things such as concepts and values.
2. Geert Hofstede identified four cultural dimensions that can have a profound impact on
the business environment.
a. The individualism/collectivism dimension refers to how self-oriented cultural
3. The self-reference criterion (SRC) is the unconscious reference to one’s own cultural
values, experiences, and knowledge.
4. Businesspeople tend to fall into the thinking of cultural relativism, the concept that
5. Global common values are shared across most cultures.
a. Although divergent religious values and other aspects of culture can create
ethical issues in international business, many cultures share desirable and
undesirable common values such as
i) Desirable common values: Integrity, family and community unity, equality,
II. Economic Foundations of Business Ethics
A. The last economic recession highlighted the fact that firms were taking extreme risks,
bending rules, and engaging in unethical activity. A major part of the problem was an
excessive focus on rewards and the bottom line that pervaded the global financial industry.
1. Risk compartmentalization occurs when various profit centers within corporations
3. National disasters can also destabilize economies and affect the economic system.
4. The world is still coping with the after effects of the last global recession, which
caused massive distrust in the stability of governmental institutions as well as the
Chapter 10: Globalization of Ethical Decision Making 57
countries.
B. Economic Systems. To understand capitalism and what people are beginning to perceive as
its shortcomings, one needs a historical review of key figures and concepts.
1. Adam Smith was a 19th century professor of logic and moral philosophy and is
considered the father of modern free market (laissez-faire) capitalism and economics.
2. John Maynard Keynes is the father of the second incarnation of capitalism that
gained traction in the 1930s.
3. Milton Friedman represents the most recent form of capitalism, which represented a
swing to the right politically.
a. Friedman stood for a return to the self-regulating free-market capitalism
espoused by Smith. Friedman called for widespread deregulation.
b. Both Keynes and Friedman believed that
C. Socialism refers to economic theories advocating the creation of a society in which wealth
and power are shared and distributed evenly based on the amount of work expended in
production.
2. Karl Marx was one of socialism’s most famous advocates
3. Social democracy formed in the 1940s as an offshoot of socialism. It allows for
private ownership of property, but also has a large government that provides a wide
range of services to citizens.
D. Large multinational corporations have created unprecedented concentrations of wealth and
power that lie, not with states, but with private corporations.
E. There are two main schools of economic thought
1. Rational economics is based on the idea that people are rational and will base their
2. Behavioral economics assumes that humans may not act rationally because of a
F. Capitalism is one of the United States’ many cultural exports.
2. The last recession, combined with the collapse of some of the world’s largest financial
III. Multinational Corporations (MNCs)
A. Multinational corporations (MNCs) are public companies that operate on a global scale
without significant ties to any one nation or region.
B. They represent the highest level of international business commitment and are characterized
by a global strategy of focusing on opportunities throughout the world.
C. Because of their size and financial power, MNCs have been the subject of much ethical
criticism, and their impact on the countries in which they do business is controversial.
1. Critics believe that the size and power of MNCs create ethical issues related to the
2. The activities of MNCs may also raise issues of unfair competition.
4. Some MNCs strive to be good global citizens with strong ethical values.
5. Because of increased stakeholder scrutiny and growing pressures to be sustainable and
7. The U.S. model of the MNC is fading over time as countries such as China, India,
8. Regardless of the MNC model, ethics and social responsibility are always important—
IV. Global Cooperation to Support Responsible Business
A. International Monetary Fund
1. The IMF emerged from the Bretton Woods agreement of 1944, where a group of
leaders decided that the responsibilities for the regulation of monetary relationships
among nations should be carried out by an extra-national body. Member states provide
funds for IMF through quotas that are proportional to the size of their economies.
a. The IMF makes short-term loans to member countries that have deficits and
provides foreign currencies for its members.
B. United Nations Global Compact
1. It is a set of 10 principles that promote human rights, sustainability, and the eradication
of corruption.
2. The purpose is to create a collaborative arrangement between businesses, governments,
C. The Association to Advance Collegiate Schools of Business (AACSB) joined with groups
such as the UN Global Compact to inspire a set of principles for business schools.
D. The World Trade Organization (WTO)
1. The WTO was established in 1995 at the Uruguay round of negotiations of the General
3. It addresses economic and social issues involving agriculture, textiles and clothing,
4. It provides legally binding ground rules for international commerce and trade policy.
5. The WTO rules on trade issues, such as dumping, which is the practice of charging
6. Not all countries agree with the WTO’s particular stance on free trade. Protectionism,
V. Global Ethics Issues
A. Global risks are becoming an increasingly important ethics issue. Major risks include
1. Corruption continues to be one of the most visible global and economic risks.
3. Supply chain issues involving human rights violations can be hard to detect in global
supply chains encompassing many different nations.
B. Bribery
1. The U.S. Foreign Corrupt Practices Act prohibits American companies from making
payments to foreign officials for the purpose of obtaining or keeping business. Small
2. The U.K. Bribery Act goes further by holding businesspeople more accountable for
bribery. It does not have provisions for facilitation payments.
a. Unlike the FCPA, this law also classifies bribes between private businesspeople
as illegal, and companies are not required to have explicit knowledge of the
60 Chapter 10: Globalization of Ethical Decision Making
C. Antitrust Activity
1. In 1890, the United States passed the Sherman Antitrust Act to prohibit antitrust
activities.
3. A vertical system is where a channel member (manufacturer, wholesaler, distributor,
or retailer) has control of the entire business system, via ownership, contract, or
through its purchasing ability.
a. Vertical systems create inertia, which causes channel members to stay with their
various retailers and distributors even though competitors may have better
D. Internet Security and Privacy
1. Today’s computer hackers can use tools like the Internet and computer viruses to
2. Many companies use questionable Internet practices such as cookies, which may not be
illegal but could be construed as unethical.
3. While some Internet privacy violations, such as hacking, are clearly unethical, other
4. Another ethical issue is the personal information collected by companies such as
5. In other countries such as China and Saudi Arabia, Internet privacy is not just a
corporate issue, but governments take an active role in censoring citizens’ use of the
Internet.
E. Human rights have been codified in the United Nations Human Rights Declaration. They
are defined as an inherent dignity that should be afforded to all people with equal and
inalienable rights as the foundation of freedom, justice, and peace in the world.
1. While many FTSE 100 firms have basic human rights policies listed in their
2. Child labor has become a big issue, and many special-interest groups are boycotting
F. Health care is a major global human rights issue, with millions of people dying of
preventable diseases each year.
1. Particularly with multinational corporations, the issue of health care availability and
affordability for workers in all nations is becoming a major source of concern.
2. Many businesses have run into ethical trouble over the question of whether access to
health care is a right or a privilege.
3. Global health care fraud is another serious issue. It harms people and causes billions in
losses annually.
G. Labor and Right to Work
1. More people than ever work in nations other than their homeland, and multinationals
are larger than ever.
3. Many countries outlaw or limit workers’ rights to join trade unions.
4. Rights for pregnant workers vary from country to country.
H. Compensation
1. A living wage refers to the minimum wages that workers require to meet basic needs.
Many countries have passed minimum wage laws to try to provide employees with a
2. Recently, many executives of bailed-out financial firms found themselves facing
criticism over their high compensation, which many stakeholders felt was tantamount
to rewarding failure.
I. Consumerism is the belief that consumers, not the interests of corporations, should dictate
the economic structure of society.
1. Part of this theory is that the consumption of goods relates to increased well-being.
2. Made-to-break or planned obsolescence is part of the consumerist mindset that many
3. It is estimated that the richest countries consume 10 times more natural resources than
the world’s poorest countries.
VI. The Importance of Ethical Decision making in Global Business
A. Ethical decision-making is essential to operate successfully within a global business context.
Without a clear comprehension of global ethics issues, companies will face a variety of legal
and political snares that could result in disaster.
B. Many companies choose to adopt global business codes of ethics to provide guidelines for its
international operations. Some organizations create ethics and social responsibility
DEBATE ISSUE: TAKE A STAND
Have your students split into two teams. One team will argue for the first point, and the other will
argue for the opposing view. The purpose is to get students to realize that there are no easy answers
to many of these issues. This debate revolves around an increasingly important question: Is
government–provided health care a universal right? Students who argue that health care is a right
62 Chapter 10: Globalization of Ethical Decision Making
“RESOLVING ETHICAL BUSINESS CHALLENGES” NOTES
Preet lands a prestigious job in the logistics department at Amex, a seller of high-quality electronic
products. Preet works with a team overseeing Amex’s China contractors, ensuring smooth shipments.
Preet visits one of the factories in China to evaluate their practices and finds many infractions.
However, when Preet writes up her report, the logistics department managers do nothing. Her team
discusses their options, and one member justifies the actions of the Chinese factory using cultural
relativism. The team member explains that long workdays are the norm in China, and the workers