Discuss the importance of strategic alignment and the classical visionary approach of built-to-last companies.

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8 Stakeholder Management in the Global Environment 547

8.6 MNEs: Stakeholder Values, Guidelines, and Codes for Managing Ethically

Guidelines for managing international ethical conduct have received detailed attention and eff ort over the past four de cades in the areas of consumer pro- tection, employment, environmental pollution, human rights, and po liti cal conduct.111 Figure 8.6 illustrates issues and ethical concerns that MNEs must manage. The driving institutional forces behind the development of global ethical values, published guidelines, and universal rights include the UN, the ILO, the OECD, the Ceres Principles, the Conference Board, and the Caux Round Table Principles for Business.

The underlying normative sources of the guidelines that these global orga- nizations have developed include beliefs in (1) national sovereignty, (2) social equity, (3) market integrity, and (4) human rights and fundamental freedoms.112 Richard DeGeorge specifi cally off ers the following guidelines that MNEs can use in dealing with LDCs:

1. Do no intentional harm. 2. Produce more good than harm for the host country. 3. Contribute to the host country’s development. 4. Respect the human rights of their employees. 5. Respect the local culture; work with, not against, it. 6. Pay their fair share of taxes. 7. Cooperate with the local government to develop and enforce just

background institutions. 8. Majority control of a fi rm includes the ethical responsibility of

attending to the actions and failures of the fi rm. 9. Multinationals that build hazardous plants are obliged to ensure that the

plants are safe and operated safely. 10. Multinationals are responsible for redesigning the transfer of hazardous

technologies so that such technologies can be safely administered in host countries.113

Other developments involving global companies and business ethics in- clude the following: (1) global companies are, as discussed earlier, developing and using core principles relevant to their business practices; (2) codes of eth- ics with minimum social responsibility standards (e.g., gender discrimination and environmental responsibility) are being adopted and employees are being trained on them; and (3) a broad consensus for ethical requirements is being articulated. The Conference Board, a global network of businesses, academic institutions, governments, and NGOs in more than 60 countries, is working to defi ne global business practice standards, core principles for doing business across cultures, and the requirements for the support of and cooperation be- tween business and nonbusiness institutions.114

Some classic guidelines that continue to infl uence policies and practices of global companies are presented next. The following MNE guidelines are sum- marized under the categories of employment practices and policies, consumer

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548 Business Ethics

protection, environmental protection, po liti cal payments and involvement, and basic human rights and fundamental freedoms.115

Employment Practices and Policies

• MNEs should not contravene the workforce policies of host nations. • MNEs should respect the right of employees to join trade unions and to

bargain collectively. • MNEs should develop nondiscriminatory employment policies and

promote equal job opportunities. • MNEs should provide equal pay for equal work. • MNEs should give advance notice of changes in operations, especially

plant closings, and mitigate the adverse eff ects of these changes. • MNEs should provide favorable work conditions, limited working hours,

holidays with pay, and protection against unemployment. • MNEs should promote job stability and job security, avoiding arbitrary

dismissals and providing severance pay for those unemployed. • MNEs should respect local host- country job standards and upgrade the

local labor force through training. • MNEs should adopt adequate health and safety standards for employees

and grant them the right to know about job- related health hazards. • MNEs should, minimally, pay basic living wages to employees. • MNEs’ operations should benefi t the low- income groups of the host

nation. • MNEs should balance job opportunities, work conditions, job training,

and living conditions among migrant workers and host- country nationals.

Consumer Protection

The following two items summarize best ethical and socially responsible practices for protecting consumers in a host country:

• MNEs should respect host- country laws and policies regarding the protection of consumers.

• MNEs should safeguard the health and safety of consumers by various disclosures, safe packaging, proper labeling, and accurate advertising.

Environmental Protection

The following items summarize best ethical and socially responsible practices for protecting a host country’s environment:

• MNEs should respect host- country laws, goals, and priorities concerning protection of the environment.

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8 Stakeholder Management in the Global Environment 549

• MNEs should preserve ecological balance, protect the environment, adopt preventive mea sures to avoid environmental harm, and rehabilitate environments damaged by operations.

• MNEs should disclose likely environmental harms and minimize the risks of accidents that could cause environmental damage.

• MNEs should promote the development of international environmental standards.

• MNEs should control specifi c operations that contribute to the pollution of air, water, and soils.

• MNEs should develop and use technology that can monitor, protect, and enhance the environment.

Po liti cal Payments and Involvement

Two basic, foundational cautions that argue against MNE’s taking, giving, or being involved in any way with bribes and illegal payments and related poli- tics with host country representatives:

• MNEs should not pay bribes or make improper payments to public offi cials.

• MNEs should avoid improper or illegal involvement or interference in the internal politics of host countries.

Basic Human Rights and Fundamental Freedoms

The following items broadly summarize the general principles underlying universal human rights and fundamental freedoms of all people that should be observed by MNEs:

• MNEs should respect the rights of all persons to life, liberty, security of person, and privacy.

• MNEs should respect the rights of all persons to equal protection of the law, to work, to choice of job, to just and favorable work conditions, and to protection against unemployment and discrimination.

• MNEs should respect each person’s freedom of thought, conscience, religion, opinion and expression, communication, peaceful assembly and association, and movement and residence within each state.

• MNEs should promote a standard of living to support the health and well- being of workers and their families.

• MNEs should promote special care and assistance to motherhood and childhood.

William Frederick states that these guidelines should be viewed as a “collective phenomenon,” because all do not appear in each of the fi ve inter- national pacts they originated from: the 1948 UN Universal Declaration of

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550 Business Ethics

Human Rights, the 1975 Helsinki Final Act, the 1976 OECD Guidelines for Multinational Enterprises, the 1977 ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy, and the 1972 UN Code of Conduct on Transnational Corporations.116 The guidelines serve as broad bases that all international corporations use to design specifi c policies and procedures; these corporations can then apply their own policies and pro- cedures to such areas as “child care, minimum wages, hours of work, employee training and education, adequate housing and health care, pollution control eff orts, advertising and marketing activities, severance pay, privacy of employ- ees and consumers, and information concerning on- the- job hazards.”117

8.7 Cross- Cultural Ethical Decision Making and Negotiation Methods

“You are a manager of Ben & Jerry’s in Rus sia. One day you discover that the most se nior offi cer of your company’s Rus sian venture has been ‘borrow- ing’ equipment from the company and using it in his other business ventures. When you confront him, the Rus sian partner defends his actions. After all, as a part own er of both companies, isn’t he entitled to share in the equip- ment?”118 These and so many other international business situations confront managers and professionals with dilemmas and gray areas in their decision making. As one author noted, “Global business ethics has now become the ultimate dilemma for many U.S. businesses.”119

“Transnationals operate in what may be called the margins of morality because the historical, cultural, and governmental mores of the world’s nation- states are not uniform. There is a gray area of ethical judgment where standards of the transnational’s home country diff er substantially from those of the host country. . . . There is yet no fi xed, institutionalized policing agency to regularly constrain morally questionable practices of transnational com- merce. Moreover, there is no true global consensus on what is morally ques- tionable.”120 Scholars and business leaders agree that solving ethical dilemmas that involve global, cross- cultural dimensions is not easy. Often there are no “quick fi xes.” Where other laws, business practices, and local norms confl ict, the decision makers must decide, using their own business and value judgments. Ethics codes help, but decision makers must also take local and their own com- pany’s interests into consideration. In short, there is no one best method to solve international business ethical dilemmas. From a larger perspective, exter- nal human rights and corporate monitoring groups are also needed to inform and advise corporations before dilemmas occur about human rights and meth- ods that can prevent abuses of local workers and private citizens.

External Corporate Monitoring Groups

Corporations and their leaders are ultimately responsible for articulating, modeling, and working with international stakeholders to enforce legal and

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ethical standards in their fi rms as they do business around the world. Many do. However, as noted earlier, gray areas and lack of universal laws and norms leave loopholes that companies and local groups might use as competitive, but harmful, cost- saving advantages (e.g., not providing even “living wages” to the poor women and children they employ, polluting the environment, and using undue po liti cal infl uence to beat out competition). Numerous in- ternational groups that work with and monitor MNEs regarding human rights include— but are not limited to— Amnesty International (promotes and advocates human rights), OECD (developed guidelines for MNEs), ILO (publishes and works in the area of human rights), NGOs (combat corruption, assure adequate labor conditions, and establish standards for economic respon- sibility), Transparency International (monitors and publishes the international Corruption Perception Index), Apparel Industry Partnership (which develops codes of conduct regarding child labor practices and working conditions re- lated to “sweat shops” and subcontractors), and the Caux Round Table (an executive group formed in Switzerland that published the noted Caux Prin- ciples and works with other international business professionals on developing and implementing universal ethics codes).121 These groups work with, and some are composed of, MNE executives, governments, legislators, local citi- zenry, and other stakeholders worldwide to inform, monitor, and assist MNEs with ethical global business practices. Sandra Waddock states that

Demands for greater corporate transparency and accountability, as well as anti- corruption mea sures are fostering signifi cant new accountability, reporting, and transparency initiatives among co ali tions of business, labor, human rights, investor, and governmental bodies. . . . A database created by the International Labor Or ga ni za tion and available over the Internet lists nearly 450 web sites of industry and business associations, corporate, NGO and activist groups, and consulting organizations that have developed and are promulgating a wide range of relevant policy initiatives. These initiatives include a mix of trans- parency and reporting initiatives, codes of conduct, principles, and fair trade agreements. Responses to these demands are varied. Many companies, particu- larly those under NGO and social activist pressures to reform labor and human rights abuses in their supply chains, have formulated their own codes of con- duct. Notable among these companies are Levi- Strauss, Nike, and Reebok, all signifi cant targets of activism.122

In the following section, several guidelines are discussed to complement principles and “quick tests” presented in Chapter 2.

Individual Stakeholder Methods for Ethical Decision Making

In an international environment, the temptations can be strong, and the laws looser, or less obvious. Pressure from headquarters to make the bottom line can also weigh heavily. “Sometimes people confuse norms with ethics— exploitation of child labour, bribery and kickbacks may be the norm, but that doesn’t mean

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552 Business Ethics

they’re right— and that’s what companies need to deal with,” says Joseph Reitz, who is co- director of the International Center for Ethics in Business at the Uni- versity of Kansas. “There’s lots of evidence that companies insisting on doing business in the right way may suff er in the short term, but in the long run they do well.”123

Or do they? When confronted with cross- cultural ethical dilemmas, confl ict- ing norms, and potentially illegal acts in international situations, individual employee and professional stakeholders need guidelines. Professionals and executives preparing to work abroad should ask for country- specifi c training on regional and local laws, customs, and business practices. As noted earlier, these professionals need to know their own fi rm’s acceptable and unacceptable policies and procedures regarding negotiations and business dealings. This section introduces some— but obviously not all— guidelines that are a begin- ning step to becoming aware of the cultural diff erences and potential ethical consequences of doing business in other regions and countries.

DeGeorge off ers the following general tactics that serve as a basic start for preventing, as well as solving, ethical dilemmas internationally:124

1. Do not violate the very norms and values that you want to preserve and that you use to evaluate your adversary’s actions as being unethical. Seek to pursue with integrity economic survival and self- defense tactics. Winning a tactical battle unethically or illegally is not the goal.

2. Use your moral imagination, because there are no specifi c rules for responding to an ethical opponent. Stakeholder analysis can help. Explore dif- ferent options. Use literature, stories, and lives of heroes and saints for creative responses instead of rules.

3. Use restraint and rely on those to whom the use of force is legitimately allocated when your response to immorality involves justifi able force or retali- ation. Use minimal force that is justifi ed as the ultimate solution, realizing that force is a reaction to unethical acts and practices.

4. Apply the principle of proportionality when mea sur ing your response to an unethical opponent. The force you use should be commensurate with the off ense, the harm suff ered, and the good to be gained.

5. Use the technique of ethical displacement when responding to unethical forces. This principle consists of searching for clarifi cation and a solution to a dilemma on diff erent, higher levels than the personal (e.g., as discussed in Chapter 1, look at the problems from these levels: international, industry, or- gan i za tion al, structural, and national or legislative policy).

6. Use publicity to respond to an unethical practice, adversary, or system. Corruption, unethical and illegal practices and actions, operates best in the dark. Using publicity judiciously can mobilize pressures against the perpetrators.

7. Work jointly with others to create new social, legal, or pop u lar struc- tures and institutions to respond to immoral opponents.

8. Act with moral courage and from your values, personally and corporately.

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9. Be prepared to pay a price, even a high one. Innocent people sometimes must pay costs that others impose on them by their unethical and illegal activities.

10. Use the principle of accountability when responding to an unethical activity. Those who harm others must be held accountable for their acts.

Getting to Yes Solving a moral dilemma in an international context is not easy. Roger Fisher, Bruce Patton, and William Ury’s Getting to Yes: Negotiating Agreement Without Giving In (alluded to earlier in this text) remains a classic primer for negotiat- ing. Their four- step approach includes:

1. Separate the people from the problem. 2. Focus on interests, not on positions. 3. Insist on objective criteria, never yield to pressure. 4. Invent options for mutual gain.

The authors note that it is always necessary to determine your best alter- native to a negotiated solution before starting a negotiation.125

Building on Fisher, Patton, and Ury’s method, Nancy Adler states that formal negotiations, especially in an international or cross- cultural context, proceed through four stages after preparing for a negotiation:

1. Build interpersonal relationships (learn about the people)— separate people from the problem.

2. Exchange task- related information— focus on interests, not positions. 3. Persuade—invent options for mutual gain, instead of relying on

preconceived positions, high pressure, or “dirty tricks.” 4. Make concessions and agreements— use objective decision criteria.126

Understand the Local Culture First Is local culture important or are people across cultures becoming more alike, especially with globalization and for those working in MNEs? Studies show that although organizations are becoming more alike in their structures and technologies, individuals maintain and even emphasize their cultural behav- iors even more. National culture explains more about employees’ attitudes and behaviors than does age, gender, role, or race.127 When communicating and negotiating in diff erent cultural contexts, gaining an understanding of the local culture in preparing for the negotiation is recommended before using any specifi c negotiation technique. Cultural miscues and disconnects are grounds for creating and exacerbating ethical problems and dilemmas. Con- sider, then, these cultural diff erences before problem solving or negotiating with counterparts:

• What are the dominant, underlying values of the culture? (Are groups, families, and collectives and their decisions valued over individuals and individual decisions, or vice versa?)

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554 Business Ethics

• How formally or informally are relationships viewed? (Is it necessary to get to know someone before negotiating, or is jumping to the facts fi rst acceptable?)

• How do people understand and value rules versus spontaneity and bending rules? (Do friendships come before rules or are rules seen as unbreakable and applicable to all?)

• How are authority and power viewed? (Is position and status valued more than experience? Is the boss more often seen as being right regardless of “the facts”?)

• Is age respected as indicating wisdom and authority? • To what extent does the culture avoid or embrace uncertainty and risk? (Are

people threatened by ambiguity and therefore avoiding unpredictability?)

Sources that address these and other comparative cultural diff erences are readily available.128

Figure 8.7 illustrates diff erent negotiating strategies among North Amer- icans, Japa nese, Chinese, and Latin Americans, based on cultural values and characteristics. Can you see how ethical problems and dilemmas could arise from communication miscues among professionals from these countries ne- gotiating a complex transaction?

American Negotiators

Japa nese Negotiators

Chinese (Taiwanese) Negotiators

Brazilian Negotiators

Preparation and planning skill

Dedication to job Per sis tence and determination

Preparation and planning skill

Thinking under pressure

Perceive and exploit power

Win respect and confi dence

Thinking under pressure

Judgment and intelligence

Win respect and confi dence

Preparation and planning skill

Judgment and intelligence

Verbal expressiveness

Integrity Product knowledge Verbal expressiveness

Product knowledge Demonstrate listening skill

Interesting Product knowledge

Perceive and exploit power

Broad perspective Judgment and intelligence

Perceive and exploit power

Integrity Verbal expressiveness

Competitiveness

Figure 8.7

Four Typical Styles of International Ethical Decision- Making Negotiating Strategies with American, Japa nese, Chinese, and Brazilian Cultures

Source: LeBaron, M. (July 2003). Culture- based negotiation styles. BeyondIntractability.org. http:// www .beyondintractability .org /essay /culture _negotiation /, accessed January 10, 2014.

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It is helpful to understand how other cultures perceive, understand, and perhaps even ste reo type American cultural characteristics. (Obviously, not everyone from every culture refl ects all of his/her national culture’s charac- teristics.) For example, characteristics most commonly associated with Amer- icans from the diff erent nationals reveal interesting patterns (e.g., although Americans were largely seen as industrious, inventive, intelligent, decisive, and friendly by an interview sample of French, Japa nese, Western Germans, British, Brazilians, and Mexicans, Americans were also seen as nationalistic, rude, and self- indulgent by Japa nese; sophisticated by western Germans; nationalistic by Brazilians; and greedy by Mexicans).129 Becoming self- aware of one’s cultural characteristics (attitudes, values, behaviors, and others’ perceptions of us) is an important step toward business transactions in order to prevent and negotiate ethical dilemmas.

Four Typical Styles of International Ethical Decision Making

At a more macro level, George Enderle identifi ed four distinctive international ethical decision- making styles that companies often use when making decisions abroad: (1) Foreign Country style: a company applies the values and norms of its local host—“When in Rome, do as the Romans do”; (2) Empire style: a company applies its own domestic values and rules; this can be an imperialis- tic practice; (3) Interconnection style: a company applies shared norms with other companies and groups; national identities and interests are transcended and blurred, as when states make commercial decisions and rely on North American Free Trade Agreement (NAFTA) or the EU members to off er agreed- on pro cesses and solutions; and (4) Global style: a company abstracts all local and regional diff erences and norms, coming up with a more cosmo- politan set of standards and solutions for its actions in the host country.130

The Foreign Country and Empire styles have obvious drawbacks in reach- ing ethical decisions. The Foreign Country style may result in gross injustices and inequities that are inherent in the norms adopted. Some local country norms and business practices, for example, do not prohibit child labor. The Empire style is a form of imperialism that disregards local norms and prac- tices. The Global style, seemingly the “right answer,” also presents problems. This style imposes its own interpretation of a “global morality and truth” on a host culture and norms. The Global style can also suff er from shortcomings shared by the Foreign Country and Empire styles. The Interconnection style “acknowledges both universal moral limits and the ability of communities to set moral standards of their own. It balances better than the other types a need to retain local identity with the ac know ledg ment of values that tran- scend individual communities. The drawbacks of this style are practical rather than moral.” Companies and individual employees usually do not have quick or direct access to a commonly shared local, national, and international source to advise on a par tic u lar issue. Of the four styles, the Interconnection style appears to be less arbitrary and absolutist.131 Another option is creative ethical navigation (which Thomas Donaldson and Thomas Dunfee term

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“integrative social contracts theory” [ISCT]). This is not really a “style” of decision making; rather, it is the pro cess of a decision maker navigating among “hypernorms,” company interests, and local norms, as explained in the fol- lowing section.

Hypernorms, Local Norms, and Creative Ethical Navigation

It would be helpful to have a set of norms that everyone agreed on. Hyper- norms represent such an ideal. “Hypernorms are principles so fundamental that, by defi nition, they serve to evaluate lower- order norms, reaching to the root of what is ethical for humanity. They represent norms by which all others are to be judged.”132 Hypernorms relate to universal rights: for example, the right not to be enslaved, the right to have physical security, the right not to be tortured, and the right not to be discriminated against.133 However, the problem even with hypernorms is that when “rights,” local traditions, country economic systems, or business practices confl ict, decisions have to be made; in such cases, it is necessary for a manager or professional to use his or her hyper- norms as a starting principle, but then to be creative in considering the local context and competing norms. Reaching a win– win situation without violating anyone’s norms is an ideal goal. An example of such a trouble- some gray area, along with a suitable solution, is off ered by Donaldson and Dunfee:

Consider another situation confronted by Levi- Strauss, this time involving hypernorms connected with child labor. The company discovered in the early 1990s that two of its suppliers in Bangladesh were employing children under the age of fourteen— a practice that violated the company’s principles but was tolerated in Bangladesh. Forcing the suppliers to fi re the children would not have insured that the children received an education, and it would have caused serious hardship for the families depending on the children’s wages. In a cre- ative arrangement, the suppliers agreed to pay the children’s regular wages while they attended school and to off er each child a job at age fi fteen. Levi- Strauss, in turn, agreed to pay the children’s tuition and provide books and uniforms. This approach allowed Levi- Strauss to uphold its principles and pro- vide long- term benefi ts to the host country.134

Donaldson and Dunfee’s “Global Values Map” illustrates confl icting local- country versus foreign- company norms and values that can clash when negotiating business contracts across cultures. The challenge for both local- country business professionals and foreign- country- company business profes- sionals is to creatively navigate among value and norm diff erences to reach agreement on acceptable business practices.135 Donaldson and Dunfee intro- duce “hypernorms,” which are universal values acceptable to all cultures and organizations. “Consistent norms” are culture- specifi c values but are still con- sistent with both hypernorms and other legitimate norms. Ethical codes of companies, such as Johnson & Johnson’s Credo (see Chapter 6), are examples of consistent norms. When a “foreign- company” representative’s norms clash

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with a host- country business individual’s local norms, each must seek “moral free space” to negotiate value and norm diff erences. Both parties can encoun- ter inconsistent norms when each holds to their own values and preferences, which may confl ict with hypernorms and/or local business practices. Either party can experience illegitimate norms— values or practices that transgress hypernorms (e.g., exposing workers to asbestos or other carcinogens)— when negotiating individual business interests. In the “moral free space,” a com- pany and host- country professional can explore how to reach a negotiated deal that satisfi es both their values and norms, while each gives up certain practices to do so. The above example of Levi Strauss illustrates such a nego- tiating pro cess when Levi Strauss had to decide among a “hypernorm” (child labor is wrong), while embracing its own company norms (“consistent norms”— children cannot be hired or used by company suppliers). At the same time, Bangladesh suppliers’ endorsed child-labor practices (“illegitimate norms” from Levi Strauss’ perspective). An agreement had to be reached that would benefi t the children and their families and the Bangladesh suppliers. The company and the Bangladesh suppliers, each desiring and needing the benefi ts of a negotiated contract, entered the “moral free space” and worked out what seems to have been a win– win situation for all parties involved— and an arrangement that brought no harm to any party.

Finding such creative solutions to international moral dilemmas involves balancing and combining business pressures, legal enforcement, and po liti cal will. A company attempting to make tough decisions with local groups could also seek to do so with the cooperation of other companies, local government offi cials, or even an external human rights group, as the Interconnectedness style of decision making would suggest. The ultimate decision may very well entail no compromise after refl ecting on the situation, the hypernorm, and a company norm. Still, the methods discussed here can enable a decision maker— individual or global or company team— to look for options without getting trapped into blind absolutes, amoral gray zones, or relativism. Enter- ing “moral free space” requires fl exibility and negotiating.

Chapter Summary

The global environment consists of MNEs managing a dynamic set of rela- tionships among country governments, international organizations, and each other. Elements of those relationships consist of fi nancial markets, cultures, po liti cal ideologies, government policies, technologies, and laws. There are estimates of between 40,000 to 100,000 MNEs doing business across national boundaries and contributing to the global economy. It is likely these numbers will increase. Also, emerging markets in countries referred to as the BRICs (Brazil, Rus sia, India, and China) have and are helping to reshape the global landscape. New and competitive opportunities created by information tech- nologies and the “fl attening” of boundaries through the emergence of global supply chains, outsourcing, and China’s “cost innovation” business model abound through mass production.

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558 Business Ethics

Globalization is the integration of technology, markets, politics, cultures, labor, production, and commerce. Globalization is both the pro cess and the result of this integration. The global economy is estimated at $33 trillion. As the complexity and volatility of the global environment increases, the prob- ability of ethical dilemmas and confl icts is also enhanced. The post-9/11 world has also created diff erent constraints and costs on business and nations: the economic, legal, moral, and social pressures businesses face have several indus- tries continuing to struggle for survival and profi tability.

Forces that have accelerated globalization include the end of communism and the opening of closed economies; information technologies and the In- ternet, which accelerate communication and productivity within and across companies globally; entrepreneurship and entrepreneurs who are more mo- bile, skilled, intelligent, and thriving worldwide; free trade and trading agreements among nations; the fl ow of money through the World Bank and the IMF, which off ers a conduit to bring needed capital to countries partici- pating in building the global economy; the growth and the spread of transna- tional fi rms, which open new markets and create local employment; and a shift to ser vice economies and educating workers using technologies, which has also propelled innovation and productivity worldwide. A question com- monly asked is: Will globalization and accelerated business integration across national borders be slowed or rejuvenated through new and changing busi- ness, governmental, and entrepreneurial alliances, including ongoing cor- ruption and “bubbles” bursting in diff erent national economies felt around the world?

The “dark side” of globalization includes such issues as corporate crime and corruption, child slave labor, Westernization (Americanization) of values, the global digital divide, and loss of nation- state sovereignty. Also, critics argue that the “McDonaldization of Society” delivers cultural values as well as fast food. This is a debatable issue and was discussed in the chapter.

The power of MNEs, or global companies, lies in their size, economic prowess, and ability to locate and operate across national borders. MNEs off er benefi ts to their host countries by employing local populations, investing cap- ital, co- venturing with local entrepreneurs and companies, providing enhanced technology, developing par tic u lar industry sectors, providing business learning and skills, and increasing industrial output and productivity.

MNEs also abuse their power by committing corporate crimes, exerting undue po liti cal infl uence and control, determining and controlling plant clos- ings and layoff s, and damaging the physical environment and human health. Guidelines drawn from more than four de cades of international agreements and charters were summarized to illustrate a consensus of host- country rights that have been used to help MNEs to design equity into their policies and procedures.

Finally, principles from Getting to Yes: Negotiating Agreement Without Giv- ing In were extended to include understanding cross- cultural characteristics of decision makers to prevent ethical dilemmas and negotiate complex busi- ness transactions. A creative model was summarized enabling companies to

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reach agreements among confl icting hypernorms (universal rights), consis- tent norms (company ethics and values codes), and illegitimate norms. Being able to balance local cultural norms, a company’s norms, and competing busi- ness practices involves creative and responsible navigation and decision- making skills based on personal, professional, company, and universal values.

Questions

1. Briefl y characterize the emerging competitive global business environment and identify some of the forces that defi ne it.

2. What is “globalization”? What are some of the forces driving this pro cess? 3. What competencies do you (a) have, and (b) need if you were to join— or are

already working for— a global company in which you would spend time in dif- ferent countries?

4. What differences, if any, in your ethical principles and morals do you be- lieve you would have to adjust to in negotiating with other cultures (see Figure 8.7)?

5. What adjustments to your values and ethical decision- making style have you had to make in teams in your own culture, and with others from different cultures in your studies and/or work? Explain.

6. What is the difference between a gift and a bribe? How would you, as a representative of your company, respond to the offer of a questionable bribe from an international government or business professional? Explain.

7. Does globalization result in cultural and economic homogenization (alike- ness) through a heightened emphasis on consumerism, or is this an exag- geration? Explain and defend your position.

8. Do local and global values change as a result of international integration? Why or why not? If so, in what ways? Offer a few examples.

9. Do you believe that globalization “promotes the conversion of national econ- omies into environmentally and socially harmful export- oriented systems for business competition” that is not in the best interests of consumers? Why or why not? Defend your position.

10. Select two global companies mentioned in this chapter and locate their cor- porate web sites. Find their codes of conduct or ethics statements. Down- load these and evaluate whether or not they serve any practical purposes or help meet the companies’ social responsibility goals and why.

11. Explain what the “dark side” of globalization means to you. Offer some exam- ples. Offer an additional issue that could be considered a dark side of glo- balization. After doing so, offer a realistic solution that could either eliminate, change, or transform the dark side of your issue.

12. Do you believe Facebook, MySpace, and other such social- networking sites are, will, or can promote more commonly shared values of people across cultures— knowing that some countries have their own such web sites in their language? Explain.

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13. Are you or have you thought about becoming a “social entrepreneur”? Do you believe this practice and movement can help make a difference in the world? Explain.

14. Explain the differences in perception and experience with regard to moral issues for (a) a host country viewing an MNE and (b) an MNE viewing a host country. Which perspective are you more inclined to support or sympathize with? Why?

15. In a paragraph or list, describe dominant cultural characteristics of yourself as could be seen from another country or regional perspective. Include some of your core values. Then proceed to the next question.

Using your description from question 15, what diffi culties or misunder- standings, based only on your answer, would you predict that you might en- counter when negotiating an ethical dilemma with someone who had opposite cultural characteristics? Explain.

Exercises

1. Argue and defend your positions on the following statements: (a) The United States is already and will continue to lose its status as a cen-

tral, pivotal global superpower, including its cultural and values infl uence, in the world in the next 10 to 20 years, if not sooner.

(b) Censorship restrictions in other countries on such information technol- ogy as Google and other web sites are justifi able; the United States and other Western nations should not try to impose their values and norms on censoring practices.

(c) A “global set of ethics” is impossible. Each culture and region of the world should have its own ethics as well as values and cultural differences.

(d) To succeed, globalization must involve justice and fairness practices from First World countries toward Third World nations and peoples.

(e) Although it is preferable that transnational and multinational companies act ethically, it is really not practical in every region of the world, including the United States.

(f) MNEs cannot fi nancially afford to follow the guidelines in Section 8.5; it would be too costly for them.

(g) When two MNEs are both right on a controversial issue— for example, vio- lation of patent or intellectual property rights— ethics should be avoided, and other, more concrete issues should be used to resolve the dispute.

(h) Without transnational companies and MNEs doing business in poorer countries, peoples of those countries who are striving to survive would suffer even more.

2. Offer an example of and explain why one of your own values or an ethical standard you deeply believe in and follow might confl ict with a different cul- tural or regional ethic in, for example, China, Rus sia, the Middle East, or the United States (if you are from a different culture). How fl exible would you be,

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or not be, in negotiating one of your core beliefs in another culture? What would be your constraints on being fl exible and changing your value- based position? Explain.

3. Evaluate and argue different sides of this statement: “McDonaldization is not a ‘bad’ thing. Everyone has a choice of what and how much to buy and con- sume. People are lucky to have a low- cost food option like McDonald’s.”

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Real- Time Ethical Dilemma

You ( Jane) are a 29- year- old single woman who has an MBA and has been working in your current marketing position for a year. Your fi rm recently opened a new pi lot branch in a somewhat remote Rus sian location. The CEO of your company believes there are real growth opportunities for your fi rm’s products in that region and also wants visibility there. The company has de- cided to launch a small offi ce there for visibility as well as to introduce the product. You are one of the most outgoing and talented marketing profession- als in your fi rm. It is believed that you’ll make a positive impression and rep- resent the company well. There is a small community of American business professionals there who will assist you.

Country values there are very diff erent from what you are accustomed to. You overhear a discussion between two of your male colleagues who were recently in that country completing arrangements for the offi ce. One says, “Jane’s going to have some interesting challenges with the men she has to do business with. . . . It’s like the Wild West.” The other answered, “Yeah, she’s got some real surprises coming.” Your research suggests that country laws and norms on issues you take for granted (like women’s rights and sexual harass- ment) are not well defi ned.

You have a confl ict over wanting to advance with your company but not wanting to take this assignment. You are aware that the CEO has his mind set. In fact, you’ve already had a discussion expressing your concerns and fears. He brushed your issues aside when he told you earlier, “Jane, try it. You need the international exposure and experience.” The second time you approached him with your concerns, he blurted out, “Look, Jane. I understand your con- cerns, but this is important to me and our company. There are some people there who can help you. I know it’s going to be a challenge. But after a couple of years, you’ll thank me.” You still don’t feel right.

Questions 1. What do you do, and why? 2. If you do decide to go, what specifi c preparations should you make? 3. If you decide not to go, draft out the dialogue you would have with your CEO.

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Real- Time Ethical Dilemma

You are attending a sexual- harassment training seminar for local managers in your company’s branch offi ce in a Middle Eastern, predominantely Muslim, country. You were fl own over with the trainers to observe their techniques and become familiar with the training materials because you, as a new hu- man resource staff member, would be expected to give this course. The course has been a success for managers in the United States. The same materials have been perfected and are being used in the United States. The instructors call on local Muslim managers (men and women) to role- play and openly share stories about sexual harassment that involved them or that they had heard about. Near the end of the half- day session, several of the host country employees uncharacteristically walk out. The trainers are dazed and become upset.

Questions 1. What do you think went wrong? 2. What would you do in this case if you were one of the trainers? 3. Read the epilogue following, then return and answer this question: Assume

the trainers have been briefed on the research you just read. Who should do what, if anything, with the Muslim managers after this cultural mishap? Why?

Epilogue “In 1993, a large U.S. computer- products company insisted on using exactly the same sexual- harassment exercises and lessons with Muslim managers half- way around the globe that they used with American employees in California. It did so in the name of ‘ethical consistency.’ The result was ludicrous. The managers were baffl ed by the instructors’ pre sen ta tion, and the instructors were oblivious of the intricate connections between Muslim religion and sexual manners.

The U.S. trainers needed to know that Muslim ethics are especially strict about male/female social interaction. By explaining sexual harassment in the same way to Muslims as to Westerners, the trainers off ended the Muslim managers. To the Muslim managers, their remarks seemed odd and disre- spectful. In turn, the underlying ethical message about avoiding coercion and sexual discrimination was lost. Clearly sexual discrimination does occur in Muslim countries. But helping to eliminate it there means respecting— and understanding Muslim diff erences.”

Source Donaldson, T., and Dunfee, T. (Summer 1999). When ethics travel: The promise and peril of global business ethics. California Management Review, 41(4), 60.

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Cases

Case 21

Google in China: Still “Doing No Evil”?

In 2010, “Google Inc. co- founder Sergey Brin pushed the Internet giant to take the risky step of abandoning its China- based search engine as that country’s efforts to censor the Web and suppress dissidents smacked of the ‘totalitarian- ism’ of his youth in the Soviet Union.” Although that decision took Google in a different direction, the company’s 2006 decision to conduct business in China was based on an agreement that the company would offer a self- censored ver- sion (“Google.cn”) of its search engine as required by the government in Bei- jing. The main issue critics had and have with Google’s decision is that the company violated its own values and original philosophy, indicated in the state- ment “You Can Make Money without Doing Evil.” For example, Beijing prohibits users from bringing up any results about “the Tiananmen Square protests of 1989, sites supporting the in de pen dence movements of Tibet and Taiwan or the Falun Gong movement and other information perceived to be harmful to the People’s Republic of China.”

The Chinese government’s strict Internet censorship policy screens what users can access. A user of Google.cn who tries, for example, to access “the Falun Gong spiritual movement” is denied access and is directed to a string of condemnatory articles of that movement. A Google spokesperson said that its e-mail, chat room, and blogging ser vices would also not be made available, since the Chinese government could demand users’ personal information. A Google spokesperson did say that the company planned to notify users when access had been restricted on par tic u lar search terms.

Google’s Response Google offered an explanation of their position to operate in China on the Chi- nese version of Google News China on September 28, 2004. The following is an excerpt:

“There has been controversy about our new Google News China edition, specifi cally regarding which news sources we include. For users inside the People’s Republic of China, we have chosen not to include sources that are inaccessible from within that country. This was a diffi cult decision for Google, and we would like to share the factors we considered before taking this course of action. For Internet users in China, Google remains the only major search engine that does not censor any Web pages. However, it’s clear that search results deemed to be sensitive for po liti cal or other reasons are inaccessible within China. For last week’s launch of the Chinese- language edition of Google News, we had to decide whether sources that cannot be viewed in China should be included for Google News users inside the PRC. Naturally, we want to pres- ent as broad a range of news sources as possible. For every edition of Google

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News, in every language, we attempt to select news sources without regard to po liti cal viewpoint or ideology. For Internet users in China, we had to consider the fact that some sources are entirely blocked. Leaving aside the politics, that presents us with a serious user experience problem. Google News does not show news stories, but rather links to news stories. So links to stories published by blocked news sources would not work for users inside the PRC— if they clicked on a headline from a blocked source, they would get an error page.”

A Google spokesperson stated in another interview that the company can play a more helpful role in China by being there than by boycotting the invitation, even with the concessions. “While removing search results is inconsistent with Google’s mission, providing no information (or a heavily degraded user experi- ence that amounts to no information) is more inconsistent with our mission,” a statement said.

Business Incentives Why do business in China? China is the world’s largest online Internet market, when projected through the year 2008, according to the China Internet Network Information Center (CNNIC). The total number of users in China was estimated at 210 million at the end of 2007. The Nielsen/NetRatings estimated the U.S. Internet population at 216 million during that same period. Statistics from the CNNIC show that there are 107 million Internet users in China below age 25; that is almost half of the online population. “These users are ahead of the curve when it comes to social media and new technology take- up. About 33% of young Web users said they had updated their blogs within the previous six months, higher than the aver- age of 23.5% across all users. Similarly, more than 30% said they had used mobile phones to surf the Internet, again higher than the national average.”

Although Google was a late entrant to the China market (behind Yahoo, AOL, and Microsoft), it accounted for 26% of that country’s Internet- search revenue in the fourth quarter of 2007, up from 17% in 2006, according to Beijing research fi rm Analysis International. Baidu .com’s (China’s online search leader) share of the market climbed from 58% to 60% during the same period.

Other Internet Companies Enter China Google followed some of its competitors and related technology fi rms into China. Yahoo!, AOL, Microsoft, MySpace, and Skype also agreed with China’s censorship requirements. Yahoo fi rst purchased a $1 billion, 40% stake in Alibaba .com, which owned China’s largest auction site. Following this transaction, eBay, Amazon, and InterActiveCorp— owner of online travel fi rm Expedia— purchased Chinese fi rms outright during 2004– 2005. Google— before negotiating for di- rect access in China— acquired a small strategic stake in the online retailer Baidu .com (it has since sold that 5% stake). MySpace, owned by Rupert Murdoch’s News Corp., used a strategy that Yahoo and eBay adopted— to operate as locally owned and managed businesses. MySpace is run by IDG, MySpace Inc., and China Broadband Capital Partners LP.

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