International Organizational Behavior 2e Chapter 9 Page 1
CHAPTER 9
EFFECTIVE MANAGEMENT OF GLOBAL ETHICS
AND INTERNATIONAL WORKFORCES
CHAPTER INTRODUCTION
I hope that someday it will be more colorful and prettier, too.
—Deutsche Bank Chief Executive Josef Ackermann’s joking
remark in discussing the bank’s desire to add women to its all–
male executive committee
CHAPTER REVIEW OUTLINE
Knowing how to negotiate, motivate, and lead effectively in a cross-cultural context are valuable
MANAGING ETHICS IN AN INTERNATIONAL CONTEXT: THE ROLE OF CULTURE
To many, the concept of “business ethics” is about as murky as it gets when borders are crossed.
I. Universalism and Cultural Relativism
A. Universalism takes the position that objective moral guidelines exist and that they
should be followed by everyone everywhere. Proponents argue that virtually
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(e.g., the Universal Declaration of Human Rights), including global codes of
ethical conduct, but the implementation of universal principles is not easy.
Because such principles tend to be broad, they come with ambiguity that leads to
different interpretations and inconsistent implementation.
B. Cultural relativism has proven a popular alternative to universalism. Proponents feel
that the definition of ethical behavior in a country is shaped by its culture, laws, and
business practices. Research shows that those from Middle Eastern countries (e.g.,
Saudi Arabia) endorse a more universalist view on ethics than those from Western
and Eastern countries. This perspective can have important effects on topics discussed
earlier in the book, such as negotiation, conflict, and communication.
II. Ethics and Corporate Social Responsibility
In many firms, making ethical decisions is a balancing act. Multinationals have been
increasingly asked to inject public interest issues into their corporate decision making
(e.g., to behave in ways that promote the “triple bottom line” of people, planet, and
profits). This is the essence of corporate social responsibility (CSR).
A. Corporate social responsibility
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B. Pressure to engage in CSR
The impact of CSR can be significant for firms and the countries where they do
III. Ethical Differences across Countries
Perspectives on ethics vary across countries. An interesting study compared how
American, French, and German managers reacted to several ethical scenarios,
including offering bribes to obtain business. In most cases, Americans were least
likely to pay a bribe. When asked about their reasoning, nearly half of the American
IV. Bribes and Questionable Payments
Bribery has a long history in international business and is relatively common in much
of the world. Nearly every language in the world has a word for bribery. In addition
to cash, bribery can include providing pricey gifts, free trips, and lavish
To put bribery in perspective, Table 9.2 presents results from a 2013 survey
conducted by Transparency International (TI), a nonprofit group that tracks
corruption worldwide. Based on responses from nearly 114,000 people around the
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world, the table displays the percentage of people in specific countries who reported
paying a bribe in the prior 12 months. Transparency International reports that bribery
A. The impact of the Foreign Corrupt Practices Act
Ironically, while most countries have laws prohibiting bribery, relatively few
The U.S. government started taking bribery more seriously after some
embarrassing high-level cases in the 1970s, with the U.S. Congress responding by
passing the Foreign Corrupt Practices Act (FCPA) in 1977.
Under the FCPA, it is illegal for American firms to offer bribes to foreign
officials in an effort to gain business. Foreign firms whose stock is traded on U.S.
exchanges are also subject to the FCPA. Penalties for violators can include hefty
fines and imprisonment (e.g., in 2011, a U.S. telecoms representative was given a
In some countries it is wise to make small payments to customs officials so they
do what they are supposed to do anyway (e.g., allow shipments of imported items
to pass through customs). Without making grease payments, companies may find
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the issuing of paperwork needed to conduct business or run equipment, such as an
occupancy permits for hotel or licenses to operate restaurants or factories.
Compared to bribes aimed at landing new business, grease payments are small
LABOR RELATIONS IN AND ACROSS CULTURES
The remainder of this chapter looks at how global firms engage in labor relations to manage
employee–firm relationships. These relations are complex, partly because of many differences in
culture, laws, and agreements across nations, even for those countries that share a border (e.g.,
France and Spain, the U.S. and Mexico) or that have detailed trade agreements. The task is tough
I. Management and Worker Perspectives on Labor Relations
Workers in all countries are concerned with pay, job security, benefits, and working
conditions. Of late, labor groups have begun more intensive lobbying of governments
for changes in laws that will permit their needs and demands to be met. There are
other ways to exert influence, but groups of workers ultimately have more direct
control over one method of getting their way on key issues—that of threatening to
reduce or stop work output. This threat may be less effective when the employer is a
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move its operations to another country in response to a strike. In other words,
multinationals have considerable power over employees.
Many countries have enacted “permanent employment” laws as a response to political
and union pressures, and these provide generous protections for workers. For
example, European countries have extensive laws and requirements regarding
termination. The average laid-off U.S. worker gets one week’s severance pay for
Overseas labor laws are complex, with wide differences across borders (even within
one region such as Europe). In France, workers with at least one year of employment
receive severance pay equal to 30 days for each year, graduated for those with over
10 years’ service. Therefore, a 20-year employee making $60,000 a year might be
Because of these mandated benefits, firms operating in Europe have developed work-
arounds to costly severance rules and drawn-out union negotiations. Figure 9.2
presents data on public expenditures for labor market programs (as a percentage of
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LABOR UNIONS ACROSS COUNTRIES
Unions and multinationals can exert influence over each other, even though the multinationals
have the upper hand. This power varies among countries, but there are mechanisms by which
employees try to wrest a degree of control from management—most commonly as an organized
union. In 2015, union members made up 11.1% of the total U.S. workforce, down a half point
from the previous year and well down from 20.1% in 1983.
Union density rates (i.e., the percentage of union members in a workforce) is an indirect proxy of
union influence. In practice, bargaining agreements reached by unions and management end up
covering many non-union employees. A high union density does not necessarily mean that
unions are more effective, and a relatively low density may belie the true degree of union
influence, as is the case in France. Sometimes labor is represented by a political party, which can
also increase its influence.
I. Unions in EU Countries
Because union influence is defined in several ways, there is some debate about which
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quarter of those employed in the EU are union members. Membership and strike
activity has continued to decline, but unions are still a force to be reckoned with.
A. Unions in France
Membership in these unions is not large by the standards of other countries. With
a figure of around 8%, France has among the lowest national level of union
density of all industrialized countries. This statistic partly reflects the fact that
there is little need for unions to recruit new members. Likewise, workers do not
feel a strong need to seek out unions, in part because since the mid-1970s the
B. Unions in Germany
Unlike the U.S., where union contracts are negotiated on a company-by-company
basis, Germany relies on a centralized system in which some 60,000 contracts are
set using industry-wide bargaining. Unions typically bargain with a group or
federation of employers in an industry. There is only one union in most major
industries, and membership is entirely voluntary. The German Federation of
Relations between unions and management have been cooperative over the last 20
years or so, with few days lost to strikes every year. Workers have input into how
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situation, unique to Germany, is called codetermination. This policy, set up by the
Allies after World War II, was designed to prevent industry from being in
lockstep with a threatening government.
C. Unions in the U.K.
The union movement in the U.K. has a long history, having been legalized in
1871. British unions are powerful, although their membership and influence has
waned (by about 5%) over the last 15 years. Unions have political roots, but not
D. Unions in Other EU Nations
Because Europe was the first continent to industrialize, there is a great variety of
union representation beyond the sample described above. One example is the
largest union in Holland, the FNV, which was a merger between a socialist and a
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be even higher if there were not so many laws protecting labor. The Belgian
workplace is one of the most highly controlled in the world, with regulations
covering topics such as compensation, severance pay, and other human resource
concerns. While the most important unions are organized around religious or
political bases, there is a “culture of compromise” in their interactions.
The history of union organizing has left many full-time, permanent European
workers covered by an extensive set of regulations and protections (especially
II. Unions in Asia
A. Unions in Japan
Japan has thousands of enterprise unions. This refers to the fact that many
different workers in a firm, regardless of their profession or vocation, are
represented by one omnibus union. There are large national unions in the public
As might be expected from discussions of Japanese culture in this book, the
relationship between union and management is largely harmonious. However,
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Observers often criticize this relationship as being too cozy. Even when Japanese
unions go on strike, they do so for short periods of time—often a half day or less.
There is some cross-union cooperation in Japan. For instance, several enterprise
unions coordinate their bargaining activities during a traditional shunto (spring
In 2002, Japanese unions agreed to the elimination of shunto as hard times settled
in. This led to company-specific agreements and a reduction in union membership
B. Unions in China
One of the traditional hallmarks of China’s labor relations approach has been full
employment, referred to as the “iron rice bowl,” a cradle-to-grave employment
While some pieces of the old system persist, now workers can be laid off and
other Western-type managerial prerogatives are available. Popular sentiment that
foreign multinationals had too much control over workers is reflected in a 2008
Chinese and foreign firms are adjusting to this growing voice of labor by
providing higher pay and a variety of benefits, while others are moving operations
from the expensive coast to more inland cities such as Chongqing. This western
Chinese city of 32 million people has labor costs that are 20-40% lower than those
of coastal cities.
C. Unions in other Asian countries
Countries such as India, Indonesia, the Philippines, Thailand, and Vietnam are
examples of economies—and labor relations—in a state of transition. The other
so–called “Asian Tigers”—Singapore, South Korea, and Taiwan—have become
III. Unions in Mexico, Central, and South America
Since the passage of the North American Free Trade Agreement (NAFTA), much
attention has been focused on Mexico. Federal laws govern labor relations in Mexico,
many of which favor labor—including wage and benefits guarantees. Mexico is a
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each locked entrance signifying a strike. Union members receive pay during the time
IV. Unions in Africa
Overall, union activity in Africa is relatively underdeveloped. South African labor
relations are especially interesting. In the 1970s, when racial segregation (apartheid)
was at its height, white groups were permitted to form unions and allowed to engage
in collective bargaining. In 1980, black groups gained limited union rights, and the
Once released from prison and elected president in South Africa’s first democratic
election, Nelson Mandela’s challenge was to balance the demands made by unions
V. International Employee Unions
Unions around the world have had varying degrees of membership rates and success
in recent years. Perhaps the biggest challenge to domestic unions is that the
multinational can move some or all of its operations to another country. The most
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developing guidelines and standards for labor conditions and treatment. These
guidelines have the same legal status as an international treaty; they must be ratified
One of the most important unions with international membership is the International
Confederation of Free Trade Unions (ICFTU), whose goal is to help national unions
in their dealings with multinationals. The membership of the ICFTU is concentrated
International unions have been largely ineffective due to complex and unique laws of
Many powerful unions within countries are in effect political groups and, as a result,
are more concerned with national issues than international ones. It is more common
VI. Other Forms of Employee Input/Control
Employees can use a variety of other ways to be heard and have an impact in order to
A. Joint consultation committees