Chapter 10Chapter 10Ethical Issues Ethical Issues in the Global in the Global

ArenaArena

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Backlash Against Globalization

Outsourcing/Offshoring of jobs to less-developed nations

Tenth anniversary of NAFTA in 2004

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Globalists and Antiglobalists

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Pros and Cons of Globalization

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IMPACT

ON

Globalists Antiglobalists

Consumers Free trade promotes lower costs, etc.

Benefits the wealth at the expense of the poor

Employees Faster economic growth Higher wagesImproved working conditions

Places profits above people

Environment Creates resources needed to address environmental issues

Exploits and destroys ecosystemsMore pollution

DevelopingNations

Promotes national economic development, higher standard of living, better working conditions,cleaner environments.

World financial institutions conspire to keep poor nations in debt

Human Rights Creates cultures that support law and free expression.Spreads economic / political freedom to far corners

Corporations pursing profits ignore human rights violations, abuse of workers, free speech, etc.

Underlying Challenges in a Multinational Environment

Two major challenges

1. Achieving corporate legitimacy in an unfamiliar society.

2. Differing philosophies between MNCs and host countries.

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The Dilemma of the Multinational Corporation

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Home CountryStakeholder Pressures

Host CountryStakeholder Pressures

Standards

Practices

Ethics

Laws

Culture

Customs

System ofGovernment

Socioeconomic System

Standards

Practices

Ethics

Laws

Culture

Customs

System ofGovernment

SocioeconomicSystem

The Multinational Corporation

The Infant Formula Controversy

• Classic illustration of ethical questions that arise when conducting business abroad.

Health risks from using formula: No refrigeration Unsanitary conditions Unclean water Using diluted concentration• Bottle feeding led to increases in

malnourished babies.• Nestlé marketed formula to mothers who did

not know how to use it properly.• Protestors caused Nestlé to change its

marketing practices.7

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Plant Safety and the Bhopal Tragedy

• A leak of methyl isocyanate gas at a Union Carbide Plan in Bhopal, India killed over 2,000 and injured 200,000.

Raised many ethical questions: Should MNCs have the same standards at home and

abroad? Is it acceptable to locate a dangerous plant where the

workforce is unskilled and uneducated, and where the populace is unaware of the risks?

How wise are laws that require plants to be staffed entirely by local employees?

What is the responsibility of corporations and governments in allowing the use of safe products that become dangerous because of local conditions?

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Sweatshops, Human Rights, and Labor Abuses

• MNC’s use of women and children to cheaply staff factories.

• Many major corporations and many countries have been involved.

Sweatshops• Characterized by child labor, low pay, poor

working conditions, worker exploitation, and health and safety violations.

Increased scrutiny of sweatshop practices in recent years.

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Social Accountability 8000

An effort to improve sweatshop conditions created by Social Accountability International (SAI)1.Child Labor2.Forced Labor3.Health and Safety4.Freedom of Association and Right to Collective Bargaining5.Discrimination6.Discipline7.Working Hours8.Compensation9.Management Systems

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Corruption

• Attempts to influence the outcomes of decisions wherein the nature and extent of the influence are not made public.

Instances of corruption Bribery of government officials

Giving of questionable political contributions

Misuse of company assets for political favors

Kickbacks and protection money for police

Free junkets for government officials

Secret price-fixing agreements

Insider dealing11

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Arguments For and Against Bribery

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Bribes versus Grease Payments

Grease Payments•Money given to minor officials to expedite processes.•Relatively small sums of money given for the purpose of getting minor officials to:

Do what they are supposed to be doing Do what they are supposed to be doing faster Do what they are supposed to be doing better

Bribes• Relatively large amounts of money given for

the purpose of influencing officials to make decisions or take actions that they otherwise might nottake.

• Money given, often to high-ranking officials, to get them to purchase goods or services. 13

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Balancing and Reconciling Ethics Traditions

The Challenge of the Multinational Corporation

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Home CountryEthical Standards

Host CountryEthical StandardsOR

Ethical Choices in Home versus Host Country Situations

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International LawGlobal Codes of Conduct

BROAD BROAD MIDDLE MIDDLE GROUNDGROUND

Mix of Home and Host Country Standards

CULTURAL RELATIVISM

ETHICAL IMPERIALISM

• Cultural standards

• Ethical/moral standards of home country

HomeCountry

HostCountry

• Cultural standards

• Ethical/moral standards of host country

Application of Ethical Principles