Business Ethics in a Global Economy
Ethical Perceptions and International Business
• When businesspeople travel abroad, they sometimes perceive different modes of operation.
• Research shows that American companies feel they are different from many foreign companies.
• “We” versus “them” is referred to as self-reference criterion— unconscious reference to one’s own culture values, experiences, and knowledge.
Ethical Perceptions and International Business
• Dumping—the practice of charging high prices for products sold in domestic markets while selling the same products in foreign markets at low prices, often below the costs of exporting them
• The United States has a number of anti-dumping laws.
Culture as a Factor in Business
• Culture is everything in our surroundings made by people—both tangible and intangible concepts and values.
– Each nation has a distinctive culture and beliefs about acceptable or unethical activities.
• Citizens of different cultures vary based on their religious beliefs, perceptions of time, and body language.
• The key question: Whose values and ethical standards take precedence internationally?
• The concept that morality varies from one culture to another and business practices are therefore differentially defined as right or wrong by particular cultures
– Ethical relativism—one culture defines
ethical behavior for the whole globe, no
– Business relativist—there may be no ethical standards except for the one in the transaction culture
• A set of global or universal ethical standards, such as Michael Josephson’s:
– Trustworthiness – Responsibility
– Honesty – Fairness
– Integrity – Caring
– Promise keeping – Citizenship
– Respect for others
• Public companies operating on a global scale without significant ties to any one nation/region
– Perceived to be unfair for MNCs to transfer jobs abroad where wage rates are lower
– Have been accused of increasing the gap between the rich and poor nations
– Have been accused of exploiting natural and human resources
– Have been accused of engaging in unfair competition
• Cisco Systems
Global Ethical Issues
• Sexual and racial discrimination
• Human rights
• Price discrimination
• Harmful products
• Pollution and the natural environment
• Telecommunications issues
Sexual and Racial Discrimination
• U.S. and European laws prohibit businesses from discriminating on the basis of sex, race, religion or disabilities in their hiring, firing and promotion decisions.
• Discrimination is sometimes justified on the basis of cultural norms and values.
– For example, businesswomen are rare in the Middle East.
• Discrimination remains one of the more prevalent concerns in international business.
How Companies Might Address Discrimination Issues
• Develop a company policy on discrimination
• Communicate the policy internally and externally
• Determine benchmarks for activities in which discrimination can arise
• Determine indicators of possible noncompliance
• Establish methods to identifying noncompliance
• Develop a plan and implement the plan
• Opportunistic use of child labor, payment of low wages, and abuses in foreign factories are a few of the concerns.
• Relationships with subcontractors have proven problematic for some firms.
• MNCs should view the law as a floor of acceptable behavior and strive for greater improvements in workers’ quality of life.
Advancing Human Rights
• Engage in an open dialog with workers and management.
• Be aware of human rights issues and concerns in each country in which the company engages in business.
• Adopt the prevailing legal standard, but seek to embrace a “best practices” approach and standard.
• Occurs when a firm charges different prices to different groups of consumers
– Allowable if justified, based on costs
• Price gouging—a price increase exceeding the costs of additional expenses (taxes, etc.)
Bribery and the Foreign Corrupt Practices Act
• Bribes and facilitating payments are acceptable in many cultures.
• The U.S. Foreign Corrupt Practices Act prohibits American corporations from offering or providing payments to officials of foreign governments for the purpose of obtaining or retaining business abroad.
– This may place U.S. businesses at a disadvantage.
– This has been supported through global treaties.
Consumer Experience with
Bribery by Country
• Products banned in many industrial nations, considered harmful, are sold in other countries where they are still legal.
• Dumping of hazardous waste materials in less developed countries is a related issue.
• Some products that are not harmful in some countries may be so in others because of issues related to literacy, unsanitary conditions, and cultural values.
Pollution and the Natural Environment
• Many countries are working together to create alliances and standards for environmental responsibility to minimize the negative effects of pollution.
• Some countries are taking legal action against polluting firms in an effort to defend air and water quality.
• Reasonable global emission standards must be established.
• Satellites, e-mail, and the Internet bring ease of information access with resulting ethical issues.
• A few of the ethical issues include:
– Day trading
– Money laundering
Intellectual Property Protection
Intellectual property refers to ideas and creative materials people develop to solve problems, carry out applications, educate, and entertain others.
– Legal document issued to an inventor that grants the right to exclude others from using or selling the product for a period of time
– Protection that covers published and unpublished literary, scientific and artistic works
World Trade Organization
• The WTO administers its own trade agreements, facilitates future trading negotiations, settles trade disputes and monitors the trade policies of member nations.
– Addresses economic and social issues involving agriculture, textiles, banking, telecommunications, government purchases, industrial standards, food sanitation regulations, services and intellectual property
• The WTO was established in 1995 and now includes over 133 member nations.