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
skills for international managers to have. These and a solid understanding of base cultural
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.
Culture clearly impacts what people in various countries feel is “ethical behavior” for businesses
managers.
I. Universalism and Cultural Relativism
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every culture sees certain behavior as wrong (e.g., harming others) and that
certain principles for doing business are widely accepted. Proponents of
universalism have been active in articulating universal guidelines (e.g., Universal
An important code for business practices is the United National Global Compact
(UNGC). Table 9.1 lists the elements of the UNGC. This code lists a set of
general principals, but also provides specific proscriptions for companies in the
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 Universalist view on ethics than are 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.
business in different countries.
II. Ethics and Corporate Social Responsibility
In many firms, making ethical decisions is a balancing act. Multinational firms 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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another grandstanding opportunity for CEOs to brag (e.g., about their passion for
the environment and the like).
B. Pressure to engage in CSR
The impact of CSR can be significant for the firms and the countries where they
do business. A review of over 160 studies also suggests a modest link between
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,
Research also shows that even if views about ethical issues are similar across
countries, they may result from different moral reasoning processes. And cross–
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
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To put bribery in perspective, Table 9.3 presents annual results from a 2013 survey
conducted by Transparency International (a nonprofit group that tracks corruption
worldwide). Based on responses from nearly 92,000 people around the world, the
A. The impact of the Foreign Corrupt Practices Act
Ironically, while most countries have laws prohibiting bribery, relatively few
make it illegal for their citizens to bribe foreign officials. The “when in Rome”
perspective applies—common local practices should be followed by citizens
when doing business in foreign nations. And up until fairly recently, German,
French, and Swiss laws allowed bribes to be deducted from corporate tax burdens.
At a minimum, such laws were a tacit endorsement of corruption.
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, one U.S. telecom representative was given
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., to allow shipments of imported
parts to pass through customs). Without making grease payments, companies may
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more quickly; (2) making modest payments to supplement poorly paid officials’
low salaries in exchange for services performed, such as having the installation of
Because of the FCPA, managers at many American firms have developed clear
guidelines about illegal payments and communicated them to employees. Most
corporate guidelines dealing with bribery and other questionable payments are
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 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
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themselves from actions by disgruntled employees. A multinational may simply
outlast a union strike by absorbing losses at a particular location. Or they could as
Hyster threatened in Scotland, increase production temporarily at another facility to
offset production declines where there is unrest. A large company may also threaten
to move its operations to another country in response to a strike. Multinationals have
considerable power over employees.
Many countries have enacted “permanent employment” laws, as a response to
political and union pressures, which provide generous protections for workers. In
European countries, there are extensive laws and requirements regarding termination.
The average laid-off U.S. worker gets one week’s severance pay for every year of
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 and graduated for those over 10
years of service. A 20-year employee making $60,000 a year might be entitled to
termination benefits of $100,000 or more. If a large-scale layoff occurs, law requires
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expenditures across countries reflect “passive” spending to augment unemployment
income and support. The U.S. is still well below the OECD average, while most of
Europe already had a strong employment safety net prior to those tough times.
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
Other highly developed countries have seen a general decline in union membership. Table 9.7
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
I. Unions in EU Countries
Because union influence is defined in several ways, there is some debate about which
unions are influential and why. Union membership has declined over the last two
decades in the European Union. Table 9.8 shows a two decade-long drop in
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membership, many in the double-digits. Most EU members have less than half of the
A. Unions in France
French unions have been dominated by a handful of national unions. Like some
other countries (e.g., Japan), most large employers also have a company union
and these groups are among the most political in the world. The chief difference
among French unions is not the industry or occupations they cover, but their
political and social leanings.
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
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into how their firm is run, including representation on the board of directors.
Firms with over 2,000 employees are required to give 50% of board seats to
workers. This 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 (5% drop) over the last 15 years. Unions have political roots, but not as
strong as those of France. The desire for unions to push political agendas led to
D. Other European unions
Because Europe was the first continent to industrialize, there is 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
Belgium, too, has a relatively high union density rate (52%). It might be even
higher if there were not as many laws protecting labor. The Belgium workplace is
one of the most highly controlled in the world, 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
relative to those of the U.S. Multinationals have long complained about this state
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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security and good benefits in exchange for no labor strife. Both groups have
largely kept the bargain as there is little friction in Japan.
There is some cross-union cooperation in Japan. For instance, several enterprise
unions coordinate their bargaining activities during a traditional shunto, or Spring
Wage Offensive, to establish a national pattern of increases. The individual
enterprise unions then use this rate as a standard for their own bargaining. This
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
system with a (relatively) egalitarian wage system. Employees expect their jobs
were secure and permanent. An employee could not be fired, while pay and
housing were guaranteed. With dramatic reforms and WTO and ILO membership,