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Chapter 05 – Ethics, Corporate Social Responsibility, and Sustainability
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not have directly participated in the brutality against villagers, Unocal did have a
responsibility to oversee what was going on and ensure that people were treated fairly.
CLOSING CASE: Bitcoin as an Ethical Dilemma
Summary
The closing case describes the rise of bitcoin, a virtual currency introduced in 2009.
Bitcoins are produced by “miners” who devote significant amounts of computational
power to solving complex mathematical equations. Although it is a purely digital
currency with no real value, bitcoin has seen enormous swings in value based on supply
and demand. The currency has generated controversy because of its ambiguous ethics.
Economist Paul Krugman has called it “evil” because it is not a stable store of value like
other currencies. Some critics have suggested that the main purpose of bitcoin is to
undermine governments’ ability to monitor and tax transactions, which in turn makes it
easier to use the currency for illegal activities. Proponents of bitcoin suggest that it is a
simple, efficient currency that can be used anywhere around the world without the need
for complex exchange processes or other barriers to economic activity.
QUESTION 1: Do you think bitcoins are approaching being unethical monetary
instruments without technically carrying a value similar to “real” money?
ANSWER 1: Student responses will vary. Paul Krugman’s argument that bitcoins are evil
because they do not represent a stable store of value highlights the fact that bitcoin
significant amounts of money.
QUESTION 2: If bitcoins are used to buy drugs, firearms, or other products that are
considered illegal in the country in which the bitcoins are being used, does that make
bitcoins unethical?
ANSWER 2: Student opinions will vary. If bitcoins in any way make it easier to purchase
illegal drugs or firearms, then they might very well be considered unethical (and in fact
QUESTION 3: Do you think the bitcoin system is “evil” as Paul Krugman suggests? Is it
similar to a Ponzi scheme?
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ANSWER 3: Student answers will vary. Some students might consider bitcoin unethical,
QUESTION 4: Do you think that bitcoins were created as a weapon intended to damage
central banking and money-issuing banks?
ANSWER 4: Student answers will vary. It seems unlikely that bitcoin was created with
the purpose of damaging the system of central banking in mind. Yet it may very well
have been founded for the purpose of sidestepping international laws and making online
MHE INTERNATIONAL BUSINESS VIDEO LIBRARY
Please click here to visit our International Business Video Library on Pinterest, which is
updated on a monthly basis. While there, be sure to "like" the clips that work well for
you, and add notes that might be helpful to your colleagues.
INCORPORATING globalEDGE™ 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
Exercise 2
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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
Answers to Exercises
Exercise 1
The report can be accessed by searching for the term “Country Reports on Human Rights
Search Phrase: “Country Reports on Human Rights Practices”
Resource Name: U.S. Department of State: Country Reports on Human Rights Practices
Exercise 2
Search Phrase: “Corruption Perceptions Index”
Resource Name: Internet Center for Corruption Research
End of Part Case Notes
Part Two
Siemens Bribery Scandal
Chapter 05 – Ethics, Corporate Social Responsibility, and Sustainability
1. What explains the high level of corruption at Siemens? How did managers engaged in
corruption rationalize it?
Answer: Most students will probably suggest that the high level of corruption at Siemens
is a result of the company’s corporate culture. Prior to 1999, bribery was not prohibited
2. What do you think would have happened to a manager at Siemens if he or she had
taken a stand against corrupt practices?
Answer: Since Siemens appears to have viewed bribery as a necessary part of securing
the contracts it needed to stay in business most students will probably conclude that a
3. How does the kind of corruption Siemens engaged in distort competition?
Answer: Many competitors of Siemens complained that the company’s practices made it
well.
4. What is the impact of corrupt behavior by Siemens on the countries where it does
business?
Answer: Siemens’ continual willingness to bribe government officials in order to win
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5. If you were a manager at Siemens and you became aware of these activities what
would you have done?
Answer: Students will probably respond to this question in different ways. Many
students will probably take the ethical high road and claim that they would have taken a
Disaster in Bangladesh: The Collapse of the Rana Plaza Building
1. From an economic perspective, was the shift to a free trade regime in the textile
industry good for Bangladesh?
Answer: Until 2005, Bangladesh’s opportunities in the developed nations were governed
by a quota system. However, when the quota system was replaced with free trade
2. Economically, who benefits when retailers in Europe and the United States source
textiles from low-wage countries such as Bangladesh? Who might lose? Do the gains
outweigh the losses?
Answer: During the 2008-2009 global recession, Walmart and other retailers increased
their purchases from Bangladesh to take advantage of the country’s low cost garments.
Bangladesh’s low cost, but highly productive workforce and strong supporting
3. What are the causes of the weak safety record of the Bangladesh garment industry? Do
Western companies that import garments from Bangladesh bear any responsibility for
what happened at the Rana Plaza and other workplace accidents?
Answer: The move of Bangladesh to become a dominant player in the global textile
industry in the last decade is a direct result of the country’s relatively low wage rates,
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4. Do you think the legally binding agreement signed by H&M, Zara, Tesco, and others
will make a difference? Does it go far enough? What else might be done?
Answer: Many students will probably suggest that the world’s largest apparel retailers
need to do more than signing this legal agreement. The five-year agreement is a good
5. What do you think about Walt Disney’s decision not to purchase merchandise from
Bangladesh? Is this an appropriate way of dealing with the problem?
Answer: Student answers will vary. Disney is a high-profile global company that
6. What do you think of Walmart’s approach to this problem? Is the company doing
enough? What else could it do?
Answer: Its strategy to hire an outside auditor to inspect Bangladesh factories and publish
the results of the inspections on its website is a decidedly strong move for Walmart. The
company is also trying to make government officials more accountable for the apparel
manufacturing industry in Bangladesh by setting up a call center for garment workers to
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Knights Apparel
1. The case states that higher wage rates at the Alta Gracia factory have raised the cost
per item by 20 percent. Can you see any way in which the philosophy with regard to pay
and working conditions at Alta Gracia might lower costs in the long run?
Answer: Wages at the Alta Gracia factory are roughly three and a half times what other
workers in the area earn and also higher than the industry standard making Knights
2. Do you think Joseph Bozich would have been able to try the Alta Gracia experiment if
Knights Apparel was a publicly traded enterprise?
3. What do you think might stand in the way of Alta Gracia becoming successful? What
strategies might Bozich adopt to minimize the risk of failure while still adhering to his
high ethical standards?
Answer: So far, Alta Gracia seems to be following a very successful strategy. The “fair
labor” model used at the factory should help achieve a loyal workforce and has resonated
4. Alta Gracia serves a niche market, colleges, where there is higher awareness of ethical
issues in apparel production. Do you think the strategy would work if the company tried
to sell to the mass market through retailers like Walmart?
Answer: Many students will probably suggest that the Alta Gracia approach would not
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countries—countries where companies can avoid the costs associated with a business
model like the one used at Alta Gracia.
5. Is it ethical for apparel companies to move production around the world in pursuit of
the lowest possible labor costs, even if this means paying wages that are below a living
wage? What if the alternative is not to produce at all?
Answer: Many students will probably take a stand against companies that continually
shift production around the world in search of lower costs. Students sharing this
6. To what extent does the Alta Gracia experiment suggest that good ethics are also good
business practice?
Answer: The publicity and support that the Alta Gracia experiment has generated is a
clear indication that good ethical practices are good for business. Knights Apparel has
Japan’s Economic Malaise
1. In the 1980s Japan was viewed as one of the world’s most dynamic economies.
Today it is viewed as one of its most stagnant. Why has the Japanese economy
stagnated?
Answer: Japan’s economy reached its high point in 1989 with companies gobbling up
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2. What lessons does the history of Japan over the last 20 years hold for other nations?
What can countries do to avoid the kind of deflationary spiral that has gripped Japan?
Answer: Many students will probably note the similarities between the situation in Japan
that led to its economic collapse and continued malaise to the situation that led to the
3. What do you think would be required to get the Japanese economy moving again?
Answer: Despite very low interest rates and large investments in public infrastructure
Japan’s economy has continued to stagnate. Much of the population and especially
4. What are the implications of Japan’s economic stagnation for the benefits, costs, and
risks of doing business in this nation?
Answer: Japan’s economic malaise offers both opportunities and challenges for
5. As an international business, which economy would you rather invest in, that of Japan
or that of India? Explain your answer.
Answer: Responses to this question will differ by student. Some students will probably
suggest that despite some problems with laws governing business in India, the country’s
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Indonesia: The Next Asian Giant?
1. What political factors explain Indonesia’s relative sluggish economic performance
when compared to some of its Southeast Asian neighbors? What economic factors? Are
these two related?
Answer: Indonesia’s economic growth has been hampered for decades, first because of
the dictatorship of former President Suharto and the massive debts that were accumulated
during his regime and more recently because of the country’s excessive red tape and
2. Why do you think foreign firms exited Indonesia in the early 2000s? What are the
implications for the country? What is required to reverse this trend?
Answer: In the early 2000s Indonesia experienced a significant drop in foreign direct
investment. Most students will probably suggest that foreign companies pulled out of the
Chapter 05 – Ethics, Corporate Social Responsibility, and Sustainability
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3. Why is corruption so endemic in Indonesia? What are its consequences?
Answer: Some students may link Indonesia’s corruption problems to the low salaries
earned by government bureaucrats. Others may also contend that there is probably a
4. What are the risks facing foreign firms that do business in Indonesia? What is required
to reduce these risks?
Answer: Most students will probably agree that the biggest risks facing foreign investors
in Indonesia are its problems with corruption, its excessive red tape, and its poor
