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 was not 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
ethical and a legal issue. The bribes did get the permits approved quickly, just what the company
wanted, but did Raul make the right choice? If the company hired Raul for his expertise in the culture,
56 Chapter 10: Globalization of Ethical Decision Making
denies all payments from the company. While highly unethical, these acts could deepen Raul’s legal
problems. Should Raul follow his manager’s instructions, or refuse? If Raul cooperates and destroys
evidence, his fines and jail time could reach the maximum limits. If Raul refuses to destroy evidence
and cooperates with the investigation, he could repair and ultimately improve his reputation.
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.
1. Each nation has a distinctive culture and distinctive beliefs about what business
activities are acceptable or unethical.
d. Masculinity/femininity
4. The self-reference criterion (SRC) is the unconscious reference to one’s own cultural
values, experiences, and knowledge.
5. Businesspeople tend to fall into the thinking of cultural relativism,the concept that
morality varies from one culture to another and that “right” and “wrong” are defined
differently. In other words: “When in Rome, do what the Romans do.”
6. Global common values are shared across most cultures.
a. Although divergent religious values and other aspects of culture can create
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
are unaware of the consequences of their decisions on the organization as a whole. No
Chapter 10: Globalization of Ethical Decision Making 57
responsibility of those who manage the money of individuals, corporations, and
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. Keynes believed that the private sector, in order to
3. Milton Friedman represents the most recent form of capitalism, which represented a
swing to the right politically. Friedman stood for a return to the self-regulating free–
market capitalism espoused by Smith. Friedman called for widespread deregulation.
His ideas took off during the 1980 Reagan years in the United States.
a. 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.
1. Modern socialism was a working-class political movement that emerged in the 19th
century
D. Large multinational corporations have created unprecedented concentrations of wealth and
power that lie, not with states, but with private corporations. This has led to bimodal wealth
distribution, which occurs when the middle class shrinks, resulting in highly concentrated
wealth amongst the rich and large numbers of poor people with very few resources.
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
decisions on maximizing their utility based on the amount of resources available to
F. Capitalism is one of the United States’ many cultural exports.
1. The United States practices one kind of capitalism, but there are many forms.
2. The last recession, combined with the collapse of some of the world’s largest financial
firms has dampened global enthusiasm for capitalism in general.
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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.
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
exploitation of both natural and human resources. Critics also accuse MNCs of
exploiting the labor markets of host countries.
2. Sometimes, countries refuse outright to allow MNCs in.
3. The activities of MNCs may also raise issues of unfair competition.
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,
nongovernmental organizations, societies, and the United Nations to overcome
challenges and advocate for positive economic, social, and political change.
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D. The World Trade Organization (WTO)
1. The WTO was established in 1995 at the Uruguay round of negotiations of the General
Agreement on Tariffs and Trade (GATT).
a. It has 159 member and observer nations.
2. The WTO administers its own trade agreements, facilitates future trade negotiations,
settles trade disputes, and monitors the trade policies of member nations.
V. Global Ethics Issues
A. Global risks are becoming an increasingly important ethics issue. Major risks include
1. Emerging markets pose significant investor risk, such as political instability,
imbalances in power, social discontent, and faltering economies
3. The economic outlook for Euro-zone countries remain weak
B. Bribery
1. The U.S. Foreign Corrupt Practices Act prohibits American companies from making
corrupt payments to foreign officials for the purpose of obtaining or keeping business.
Small facilitation payments are allowed to facilitate or expedite routine governmental
transactions.
C. Antitrust Activity
1. In 1890, the United States passed the Sherman Antitrust Act to prohibit antitrust
activities.
2. The European Union has more stringent antitrust laws than many other countries.
D. Internet Security and Privacy
1. Today’s computer hackers can use tools like the Internet and computer viruses to
commit corporate espionage, launch cyber terrorism attacks against government
infrastructures, steal confidential information, and more
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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.
G. Labor and Right to Work
1. More people than ever work in nations other than their homeland, and multinationals
are larger than ever.
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
living wage.
a) While many multinationals choose to do business in other countries because of
the low cost labor, this becomes an ethical issue when workers do not make
I. Consumerism is the belief that consumers, not the interests of corporations, should dictate
the economic structure of society. Part of this theory is that the consumption of goods relates
to increased well-being. However, strains on resources around the world have caused many
to begin to question the idea that greater consumption is always better.
1. Made-to-break or planned obsolescence is part of the consumerist mindset that many
people are finding increasingly difficult to accept. Made-to-break items encourage
consumers to return regularly to buy more items.
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
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
could point out the sanctity of human life and the government’s responsibility to protect its
Chapter 10: Globalization of Ethical Decision Making 61
and add inefficiencies to the system.
“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, evaluating 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 work days are the norm in China and the workers
should be content getting the higher wages Amex pays. Making major changes would make the
company less competitive. Preet is not so sure consumers would not be willing to pay a bit higher
prices if it means Chinese workers have improved working conditions.