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Chapter10.GlobalizationofEthicalDecisionMaking.pptx

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Part Four Implementing Business Ethics in a Global Economy

Chapter 10 Globalization of Ethical Decision Making

Learning Objectives (1 of 2)

Discuss global values, goals, and business practices within ethics

Understand the role of capitalism and economics as factors in business ethics

Assess the role of multinational corporations in business ethics

Assess the role of the International Monetary Fund in business ethics

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Learning Objectives (2 of 2)

Assess the role of the United Nations Global Compact in business ethics

Assess the role of the World Trade Organization in business ethics

Explore and discuss common global business practices

Gain awareness of global ethical issues

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Global Culture, Values, and Practices (1 of 3)

National culture: Broader concept than organizational culture. Includes everything—both tangible items, such as artifacts, and intangible entities, such as concepts and values.

Cultural dimensions

Individualism/collectivism: How self-oriented members of a culture are in their behavior. Individualist cultures place high value on individual achievement and self-interest.

Power distance: The power inequality between superiors and subordinates.

Uncertainty avoidance: How members of a society respond to uncertainty or ambiguity.

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Global Culture, Values, and Practices (2 of 3)

Self-reference criterion (SRC): An unconscious reference to one’s own cultural values, experiences, and knowledge.

Cultural relativism: Morality varies from one culture to another and “right” and “wrong” are defined differently.

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Global Culture, Values, and Practices (3 of 3)

Global common values: Values shared across most cultures.

Desirable common values: Integrity, family and community unity, equality, honesty, fidelity, sharing, and unselfishness

Undesirable common values: Ignorance, pride and egoism, selfish desires, lust, greed, adultery, theft, deceit, lying, murder, hypocrisy, slander, and addiction

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Economic Foundations and Concepts of Business Ethics (1 of 3)

Risk compartmentalization: When profit centers within corporations are unaware of the overall consequences of their actions on the firm as a whole.

Economic systems

Adam Smith and laissez-faire

John Maynard Keynes and the state

Milton Friedman and capitalism

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Economic Foundations and Concepts of Business Ethics (2 of 3)

Socialism: Economic theories advocating the creation of a society when wealth and power are shared and distributed evenly based on the amount of work expended in production.

Social democracy: Allows private ownership of property and also features a large government equipped to offer such services as education and health care to its citizens.

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Economic Foundations and Concepts of Business Ethics (3 of 3)

Rational economics: Based on the assumption that people are predictable and will maximize the utility of their choices relative to their needs and wants.

Behavioral economics: Assumes humans act irrationally because of genetics, emotions, learned behavior, and heuristics, or rules of thumb.

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Economic Concepts and the MNC (1 of 3)

Bimodal wealth distribution: Occurs when the middle class shrinks, resulting in highly concentrated wealth among the rich and increased numbers of poor people with few resources.

Multinational corporations (MNC): Public companies that operate on a global scale without significant ties to any one nation or region. Represent the highest level of international business commitment and are characterized by a global strategy focusing on opportunities throughout the world.

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Economic Concepts and the MNC (2 of 3)

MNC Issues

MNCs use labor-saving devices that increase unemployment in countries where they manufacture.

Size and financial clout enable them to control money, supplies, employment, and even the economic well-being of less-developed countries.

Size and power of MNCs create ethical issues involving the exploitation of both natural and human resources.

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Economic Concepts and the MNC (3 of 3)

MNC Issues

MNCs can borrow money from local capital markets in much higher volume than smaller local firms.

MNCs have been accused of failing to carry an appropriate share of the cost of social development.

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Global Cooperation to Support Responsible Business (1 of 2)

International Monetary Fund

Makes short-term loans to member countries with deficits.

Provides foreign currencies for its members.

Provides information about countries that might default on their debts.

Member states provide resources to fund the IMF through a system of quotas proportional to the size of their respective economies.

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Global Cooperation to Support Responsible Business (2 of 2)

United Nations Global Compact

Promote worldwide peace, establish beneficial relationships between countries, and support the creation of better standards and human rights on a global scale.

Set of 10 principles that promote human rights, sustainability, and the eradication of corruption.

World Trade Organization

Administers its own trade agreements, facilitates trade negotiations, settles trade disputes, and monitors the trade policies of member nations.

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TABLE 10–2 United Nations Global Compact

Human Rights

Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights.

Principle 2: Make sure that they are not complicit in human rights abuses.

Labor

Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining.

Principle 4: The elimination of all forms of forced and compulsory labour.

Principle 5: The effective abolition of child labour.

Principle 6: The elimination of discrimination in respect of employment and occupation.

Environment

Principle 7: Businesses should support a precautionary approach to environmental challenges.

Principle 8: Undertake initiatives to promote greater environmental responsibility.

Principle 9: Encourage the development and diffusion of environmentally friendly technologies.

Anticorruption

Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.

Source: “The Ten Principles,” United Nations Global Compact, https://www.unglobalcompact.org/what-is-gc/mission/principles (accessed April 27, 2017).

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Global Ethics Issues (1 of 2)

Corruption

Variations in international regulation

Supply chain issues involving human rights violations

Bribery

Antitrust activity: Vertical systems

Internet security and privacy

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Global Ethics Issues (2 of 2)

Human rights

Health care

Labor and right to work

Compensation: A living wage

Executive compensation

Consumerism: Made-to-break

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Table 10-6: Current Global Issues Perceived by Upper Management Level

Economic conditions may significantly restrict growth. (72%)

Regulatory changes and scrutiny may affect the manner in which products and services are produced or delivered. (66%)

Cyber threats that disrupt core operations and/or damage our brand. (63%)

Rapid speed of disruptive innovations, new technologies outpacing firms. (63%)

Privacy/identity management and information security/systems. (57%)

Sustaining customer loyalty and retention. (57%)

Ability to attract/retain top talent to achieve operational targets. (55%)

Volatility in global financial markets/currencies (53%)

Organizational culture may not sufficiently encourage or timely identify risk issues that may significantly affect core operations and strategic objectives. (55%)

Resistance to change issues (54%)

There was plenty of uncertainty this year, from the Brexit vote to the Presidential election, but what are CFOs most worried about ahead of 2017?

Sources: Sean Allocca, “Top 10 CFO Risks for 2017,” CFO Newsletters, December 13, 2016 http://ww2.cfo.com/risk-management/2016/12/top-10-cfo-risks-2017/ (accessed April 11, 2017); “NC State Poole College of Management: Executive Perspectives on Top Risks for 2017,” NC State, https://erm.ncsu.edu/az/erm/i/chan/library/NC-State-Protiviti-Survey-Top-Risks-2017.pdf (accessed April 11, 2017); “The Top Risks for 2017: 10 Common Uncertainties Plaguing Businesses”, Corporate Compliance Insights, April 4, 2017, http://www.corporatecomplianceinsights.com/the-top-risks-for-2017/(accessed April 11, 2017). 14436_ch10_rev03_244-277.indd 265 11/11/17 4:18 PM

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International Laws

The U.S. Foreign Corrupt Practices Act (FCPA): Prohibits American companies from making payments to foreign officials for the purpose of obtaining or retaining business.

U.K. Anti-Bribery Act: Foreign companies with operations in the United Kingdom, can be held liable for bribery, no matter where the offense is committed or who in the company commits the act, even if the bribe itself has no connection with the United Kingdom.

Law classifies bribes between private businesspeople as illegal.

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Importance of Ethical Decision Making in Global Business

Companies should:

Incorporate global and domestic ethical issues in their risk management strategies.

Formulate their own global ethical codes.

Appoint ethics officers or committees to oversee and handle global compliance issues.

Provide extensive training to its employees.

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