Ethics in International Business

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Chapter 4 - Ethics in International Business

Introduction
• Business ethics are the accepted principles of right or wrong governing the conduct of business people • An ethical strategy is a strategy or course of action that does not violate these accepted principles

Ethical Issues in International Business
• Many of the ethical issues and dilemmas in international business are rooted in the fact that political systems, law, economic development, and culture vary significantly from nation to nation • In the international business setting, the most common ethical issues involve - Employment practices

- Human rights
- Environmental regulations
- Corruption
- Moral obligation of multinational corporations

Employment Practices
• Ethical issues associated with employment practices abroad include - When work conditions in a host nation are clearly inferior to those in a multinational’s home nation, what standards should be applied? - While few would suggest that pay and work conditions should be the same across nations, how much divergence is acceptable?

Human Rights
• Questions of human rights can arise in international business because basic human rights still are not respected in many nations - Rights that we take for granted in developed nations, such as freedom of association, freedom of speech, freedom of assembly, freedom of movement, and freedom from political repression are by no means universally accepted • The question that must be asked of firms operating internationally is: ‘What is the responsibility of a foreign multinational when operating in a country where basic human rights are trampled on?’

Environmental Pollution
• Ethical issues arise when environmental regulations in host nations are far inferior to those in the home nation - Developing nations often lack environmental regulations, and according to critics, the result can be higher levels of pollution from the operations of multinationals than would be allowed at home • Environmental questions take on added importance because some parts of the environment are a public good that no one owns, but anyone can despoil - The tragedy of the commons occurs when a resource held in common by all, but owned by no one, is overused by individuals, resulting in its degradation

Corruption
• Corruption has been a problem in almost every society in history, and it continues to be one today • International businesses can, and have, gained economic advantages by making payments to government officials • The United States passed the Foreign Corrupt Practices Act to fight corruption - Outlawed the paying of bribes to foreign government officials to gain business • In 1997, the trade and finance ministers from the member states of the Organization for Economic Cooperation and Development (OECD) followed the U.S. lead and adopted the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions - Obliges member states to make the bribery of foreign public officials a criminal offense

Moral Obligations
• Multinational corporations have power that comes from their control over resources and their ability to move production from country to country • Moral philosophers argue that with power comes the social responsibility for corporations to give something back to the societies that enable them to prosper and grow - Social responsibility refers to the idea that businesspeople should consider the social consequences of economic actions when making business decisions - Advocates of this approach argue that businesses need to recognize their noblesse oblige (benevolent behavior that is the responsibility of successful enterprises)

Ethical Dilemmas
• Managers must confront very real ethical dilemmas
- The ethical...
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