Ethical issues

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International Business and Multinationals

Learning Objectives

After completing this chapter, you should be able to:

• Analyze the reasons why international trade can cause ethical issues for companies and individuals. • Review the role that multinational corporations have in global trade and the ethical standards that they

can meet. • Consider the problem of gift giving and bribery and draw a judgment on corporations engaging in them. • Examine whether child labor and sweatshops are ethically acceptable. • Have an understanding of intellectual property and technological transfer issues as they relate to multina-

tional enterprises and doing business around the world.

Ma jian/Imaginechina/Getty Images

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CHAPTER 8Section 8.1 Introduction

Contents

8.1 Introduction

8.2 Tax and Environmental Issues

Multinationals and Tax Avoidance Gift Giving and Bribery Environmental Restrictions

8.3 Labor Issues

Child Labor Sweatshops Illegal Immigrant Workers

8.4 Technology Issues

Intellectual Property Theft Technological Transfers

8.5 Ethically Evaluating Multinational Business Activities

Relativism: Western Cultural Norms Affecting Other Cultures Pros and Cons of Multinational Businesses Creating a Global Business Ethic

8.6 Conclusion

8.1 Introduction Some decades ago, the American company International Telephone and Telegraph (ITT) was caught interfering in the political operations of the South American country of Chile. At the time, ITT was the eighth largest Fortune 500 company, with 350,000 employees in 80 countries. Chile was poor but politically stable. A presidential candidate named Salvador Allende campaigned on a communist platform, emphasizing the issue of land reform and indicating his desire to take control of privately owned Chilean telephone companies because of their inefficiency. ITT owned 70% of the stock in one of these, and feared that, if elected, Allende would simply take ownership of it with no compensation, as had happened with private businesses in Cuba and Peru during their communist takeovers. As a result, ITT offered money to the American CIA to help block Allende’s election and support a rival candidate. The scandal surfaced, and critics worldwide attacked ITT for interfering in the activity of a foreign government. Some of ITT’s property was even bombed in protest. Allende was elected anyway, and in retaliation, he nationalized ITT’s Chilean property. Allende did not nationalize other firms, although he required some to sell the government shares of their stock. Allende was assassinated shortly after, and ITT later sued for losses.

While ITT’s concerns were justified, its response was not. The issues that we consider in this chap- ter come from the very nature of dealing with foreign companies and people. When companies cross borders, they must deal with foreign laws and politics, but also with customs and expecta- tions concerning how to act and what is proper and improper in business transactions. This can cause misunderstandings and create clashes of values between the trading partners, since what

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CHAPTER 8Section 8.2 Tax and Environmental Issues

is considered right and proper in one society is not necessarily so in another. In Chapter 1 we encountered the theory of moral relativism, in which moral values are held to be different in dif- ferent cultures. When companies engage in international trade, they certainly encounter exam- ples of laws and cultural behavior that can differ radically from those at home. A tension can then emerge when there are clashes of values, in which American businesses working abroad may have to decide between respecting and abiding by local customs and going by their own ethical culture.

In this chapter, we will examine international trade and the general ethical issues that it creates, especially how it relates to the behavior of U.S. multinational companies. In particular, we exam- ine the problems of child labor, sweatshops, gift giving, and bribery, as well as the complex issues of intellectual property and technological transfers between nations.

8.2 Tax and Environmental Issues When trade stretches beyond the national border, international trade begins. At its simplest, inter- national trade involves importing and exporting. When companies go beyond their national borders to set up factories, warehouses, offices, and shops, they are referred to as multinational corpora- tions or multinationals. World trade has increased massively, with merchant shipping alone rising from 8 billion tons to 32 billions in the past four decades (“Value and Volume,” n.d.). The growth of trade across borders, and its cultural impact, is called globalization. The ethical arguments on glo- balization would require another book, so in this chapter we will examine the main issues that crit- ics bring up concerning corporations dealing in international trade and multinational corporations.

The international business environment is characterized by many different nations with different rules, taxes, and customs as well as opportunities to trade with and enrich both corporations and local peoples. But there are many issues that affect the ability of multinationals and international businesses to work efficiently and even ethically. Sometimes, the problem is not the company’s lack of trying but practices that are widespread and that persist despite attempts to change peo- ple’s thinking and outlook. Or perhaps these things just take time.

In this section, we will look at some specific ethical problems that affect international businesses and multinationals. First we will consider the thorny problem of where multinationals should pay their taxes.

Multinationals and Tax Avoidance

One issue that concerns critics of multinational enterprise is who owns the profits these busi- nesses create, and therefore who should tax them. Currently, U.S. tax policy creates an incentive for multinational enterprises to keep their cash abroad rather than return it to the United States. So-called repatriated income, which is money brought back to the United States from foreign sub- sidiaries, is taxed at 35%. This is one of the highest corporate tax rates in the world.

Not surprisingly, companies like Microsoft, Google, and Hewlett-Packard therefore keep much of their cash abroad, sometimes using it to expand further into other countries or letting it earn interest in foreign banks (Kocieniewski, 2011). In the current economic climate, in which the U.S. government faces enormous debt problems, this poses interesting questions:

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CHAPTER 8Section 8.2 Tax and Environmental Issues

• Should U.S. corporations be forced to bring back money earned abroad to help ease the economic crisis, or should they be free to use their money as they see fit?

• Do companies owe any allegiance to the government or people of their homeland, or should they be free to fly any “flag of convenience” and allocate funds according to the cheapest tax zone?

The ethics of the issue relate to the duties that a homegrown corporation (especially one that grew because of the political or economic climate created by U.S. governments of the past) owes to its home nation. Consider General Electric (GE), which in 2010 reported worldwide profits of $14.2 billion, with $5.1 billion coming from the United States—but had a U.S. federal tax bill of zero, through creative accounting procedures (Kocieniewski, 2011).

GE’s zero tax bill is extraordinary, and represents the clash for a company between accepting the local tax policies and enriching its investors and shareholders. For critics of multinationals, it is ammunition for the case that multinationals are above the law in some respects and that govern- ments must accept what they do to avoid paying taxes. For supporters of multinationals, the issue relates more to corporate financial officers doing their job in minimizing external costs (taxes in this case) so they can plow money back into those who support the company with their funds— and that can include the pension policies and mutual funds of many ordinary Americans.

Gift Giving and Bribery

An integral part of some countries’ commercial culture is the presenting of gifts that are designed to pave the way for easier business. There are two kinds of gifting:

• A voluntary one that can be considered part of public-relations exercises. This can be called gift giving.

• A so-called involuntary act that cannot be avoided and typically involves securing licenses or contracts from public officials. This can be also called bribery and is sometimes viewed by business people as a tax on doing business.

Gift giving can mean different things to different people and is often used to smooth out the prob- lems that international trade can create. Imagine two delegates meeting for lunch to go over some figures. It would not be wrong for the one to offer to pay for lunch, but what about paying for tick- ets to see the Super Bowl? The problem with gift giving comes when it exceeds certain amounts or is intended to financially benefit certain members with preferential treatment. It can easily be confused with a corporate-relations exercise, and needs to be carefully monitored by managers and auditors. Regulators have also begun to clamp down on gift giving to foreign state-owned companies. Employees of these companies are to be regarded as state officials, so an American’s providing gifts to them would fall afoul of Department of Justice and SEC rules on corrupting for- eign governments (Sender, 2011).

The problem with bribery is that it often involves an attempt by a company manager to win over a state official. The state official privately benefits from the deal, which may include cash, tickets, fine art, luxury evenings out, or job positions for family members. Bribing officials to gain licenses or other privileges is corrupt and illegal, but is particularly widespread in civil-engineer- ing projects, which can be worth billions. According to critics, multinationals can engage in cor- ruption without much concern, although indeed, some big companies have been fined recently,

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CHAPTER 8Section 8.2 Tax and Environmental Issues

including IBM, British Aerospace, Halliburton, and Siemens. In 2008, the German company Siemens paid a $1.29 billion settlement to U.S. and German authorities over a bribery scandal in which most of the managers of the company left. They had generated a fund specifi- cally for bribery.

On the other hand, bribery only flourishes when state authorities have discretionary powers. Com- panies are interested in doing busi- ness as effectively as possible: It is not in corporate interests to engage in bribery, as it is an extra cost. But of course individual managers can profit handsomely from winning deals with governments abroad, so corporations need a strong ethic on what is acceptable and what is not. In the Siemens case, the company turned on the managers to sue them for improper practice.

Corruption such as bribery and gift giving is big business and is an ongoing concern for ethicists and lobby groups demanding greater transparency around the world. Any form of corruption dis- torts trade, holds back economic growth, creates unnecessary inefficiencies in commercial trans- actions, runs contrary to the rule of law, and generates an atmosphere of distrust and injustice in which the whimsical decisions of officers can have influential effects on people’s lives (Klitgaard, Maclean-Abaroa, & Lindsey Parris, 2000, p. 4; Mauro, 1997).

A way to reduce corruption going forward is to expand educational opportunities. One economist found that, as the amount spent on education rises, the extent of corruption falls (Mauro, 1997). Usually we turn to governments to educate people, but in the case of the multinationals, they are also in a position to encourage investment in education, both through government channels and through investing in educating their own employees abroad. For those who focus on the social impact of companies, this is a duty that multinationals should take up; the longer term effects of helping to educate, train, and coach employees, rather than leaving them at a low skill level, could outweigh the initial costs. Governments in turn must reduce discretionary powers that encourage officials to accept bribes. As with companies, more checks and balances and independent audit- ing would reduce the temptation faced by officials in powerful positions to gain from company contact.

Environmental Restrictions

In addition to tax issues, multinational corporations must consider environmental regulations in the countries they operate in. For example, other nations may have laxer rules on environmental pollution and standards than the United States has. If American companies choose to work in coun- tries with laxer standards, it may reflect badly on whatever ethical standards the companies are

James Lauritz

Ethicists demand that businesses conduct their transactions in the open, but many deals continue to be made behind the scenes.

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CHAPTER 8Section 8.2 Tax and Environmental Issues

trying to uphold in the home market. And if a poorer nation has weaker environmental standards, is it right for a U.S. company to lower its own standards, or should it set an example in raising local standards—but then run the risk of incurring higher costs? Higher costs may translate into a loss competitive edge in the global market, and poor consumers can end up paying more for products.

For instance, in 2002, Sempra Energy of California attracted criticism from environmentalists for deciding to set up a gas-powered electrical plant 3 miles over the Mexican border to supply San Diego and Los Angeles. The same project would not have met Californian regulations without

incurring higher costs (Ross, 2002).

The issue deepens if the product is to be mined or manufactured for American consumption. If Americans benefit from cheaper products, does it make it right to produce abroad and generate pol- lution and health problems for for- eign populations?

Consider a U.S. company that pays lower wages to a local population than it would pay in the United States. This would seem a proper course of action: The company adapts to the local economy and pays wages accordingly. However, polluting the environment is a dif- ferent problem from that of hiring low-paid workers. Labor is a nec- essary internal cost of production for the company, whereas environ-

mental standards are an imposed social cost affecting others. In the absence of legal or envi- ronmental regulations, the company has no economic incentive to copy U.S. standards while it operates abroad, and to do so would raise costs.

But should we be thinking purely along nationalist lines? Ethically, the health impact on a Mexican citizen should weigh the same as the impact on an American citizen. Accordingly, it is wrong for a U.S. company to pollute abroad when it would not do so back home. Since it is wrong to harm another, and it does not matter who the person is, it follows that it is wrong to pollute another country’s resources. The managers ought to consider citizens of other countries as they would consider their own neighbors.

However, American companies have moved to countries with weaker environmental regulations and have lowered their own standards accordingly. In the search for larger market share or higher profits, the incentive is to seek a looser regulatory environment. Some have claimed that because American companies can enjoy weaker environmental regulations abroad, they are pressuring the U.S. government to make life similarly easy for them in the United States (Perkin, 1996, p. 20). Here there is an example of a moral inversion: companies arguing that weaker ethical guidelines are better than stricter ones.

Associated Press/Sandy Huffaker

This photo from 2005 shows the beginning of construction work on Sempra Energy’s new power station near a small fish- ing village south of Rosarito Beach, in Baja Mexico. Environ- mentalists complained that the plant would not have passed Californian environmental controls.

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CHAPTER 8Section 8.3 Labor Issues

The next example involves the troubling problem of child labor used around the world by local and multinational enterprises.

8.3 Labor Issues Another set of issues with multinationals involves treatment of workers, in particular the prob- lems of child labor, foreign sweatshops, and illegal-immigrant workers. We turn to those next.

Child Labor

One of the most emotional issues that international trade evokes is the use of children in pro- duction. It is estimated that globally, over 250 million children between the ages of 5 and 14 are engaged in some form of work. Some of this work may be considered educationally and culturally beneficial, but some involves dangerous and hazardous conditions, such as working with chemi- cals or machinery, being enrolled in the military, slavery, and child prostitution. Critics have esti- mated that 215 million of these children are working illegally, according to national laws (“Child Labour Guide,” 2011). The use of child labor can occur directly, within a multinational’s own facto- ries, or indirectly, through the supply chains the company uses.

A Historical Perspective Most countries have prohibitions on child labor, but enforcing these laws can be problematic. India and China, for example, have large rural areas where traditional working patterns involve children from an early age. In India, children can be sold into bonded labor, which is a type of slavery, while parents pay off a debt. Even if the children are attracted to working because of the money, they can end up working in hazardous conditions, such as in coal mines or garbage dumps (Magnier, 2011).

America has a tradition of child labor too. In colonial times, chil- dren as young as 8 could be bound to a master to work until the age of 21 in exchange for food, shelter, and clothing. As the industrial era took off, children were routinely found working in mines, facto- ries, and farms, as well as running errands and selling products on the streets. In 1836, Massachusetts passed the first law concerning the employment of children. The law stated that children under 15 years old should attend school for at least 3 months a year. In 1842, the state passed an upper limit of 10 hours of work a day. The rise of

Associated Press/Rajesh Kumar Singh

In this 2010 photo, children in Kanpur, India, are going through recyclable waste looking for rags to sell.

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CHAPTER 8Section 8.3 Labor Issues

the union movement in the late 19th century also witnessed calls to ban children under age 14 from working. In the early 20th century, American children could still be found selling newspapers and working on farms or in factories and mines; their images are captured in photographs by Lewis Hine. (History Place, n.d.).

Charitable organizations continued to support child-welfare reforms and to push for bans on what was considered to be child slavery and exploitation, which culminated in provisions under the Fair

Labor Standards Act of 1938. Later, the Supreme Court finally held that the government had the authority to regulate the actions and treat- ment of children.

For an ethicist, the relevant ques- tion here as it relates to multina- tionals is whether a child should be considered on an equal basis with an adult or whether childhood is a different category of personhood that generates unique responsibili- ties to children and rights that adults do not possess. Should a child be protected from becoming an adult too early, or should children have rights of access to the adult world, including employment?

Protecting Children Many philosophers, such as John Stuart Mill and John Dewey, have argued that children deserve protection from the demands and expectations of the adult world and that they should be pro- tected legally for their own good. But at what age should society consider a person to be a child?

Consider the age of consent, when a young person is legally permitted to engage in sexual activ- ity—a boundary that can be said to separate childhood from adulthood. In Canada and the United Kingdom, it is 16, whereas in the United States it ranges from 16 to 18, depending on the state. In other countries, such as Italy, it is 14, and in Spain it is as low as 13. Some states and countries add that if one of the parties is in a position of trust, such as a doctor or a teacher, the minimum age rises to between 16 and 19. The age of consent encourages us to consider what a child is and, if we place a boundary on childhood, how children should be protected.

The nature of the protection is sometimes confusing and contradictory, however. Up until 1967, children were seen as legally inferior to adults. The landmark U.S. Supreme Court case In re Gault changed that. In that case, the Supreme Court established that juveniles should have the same constitutional rights to due process in courts as adults (Gold, 2008, p. 10). In effect, this acted to protect children from being treated as nonpersons until they passed into legal adulthood.

Copyright Bettmann/Corbis/AP Images

In this 1909 photo, a boy in Augusta, Georgia, changes spindles in the textile factory where he works.

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CHAPTER 8Section 8.3 Labor Issues

In Defense of Children’s Right to Work From an alternative perspective, why can’t a child compete with adults in the workplace? For crit- ics of child-labor laws, the restrictions amount to a deprivation of rights to earn a living, gain an education in a working environment, and compete on an equal level with adults for money.

This may seem a justification for exploitation of children. Children do not know the repercussions of adult work or the complexity of running a house and paying the bills. They should not have to engage in such worries, and their time is better spent learning in school and playing. Yet, as one critic has noted, society wants children to be free to consume but forbidden to produce:

Let’s say you want your computer fixed or your software explained. You can shell out big bucks to the Geek Squad, or you can ask—but you can’t hire—a typical teenager, or even a preteen. Their experience with computers and the online world is vastly superior to that of most people over the age of 30. From the point of view of online technology, it is the young who rule. And yet they are professionally powerless: they are forbidden by law from earning wages from their expertise. (Tucker, 2008)

From this perspective, the law against child labor seems strange. Why not let children earn money for the skills they can offer? Employers in turn complain that young people coming out of high school or college do not have the skills needed to succeed in the workplace, a lack that would be reduced if young people had free access to the employment market from an earlier age.

There certainly seems to be a demand for work-related activi- ties. Consider KidZania, which is an employment-related role-playing theme park for children that is cur- rently expanding its franchise glob- ally. The company claims to provide “children and their parents a safe, unique, and very realistic educa- tional environment that allows kids between the ages of four to twelve to do what comes naturally to them: role-playing by mimicking traditionally adult activities. As in the real world, children perform ‘jobs’ and are either paid for their work (as a fireman, doctor, police officer, journalist, shopkeeper, etc.) or pay to shop or to be entertained” (KidZania, n.d.). Originally set up in Mexico, KidZania is now a multinational corporation (Rathbone, 2011).

Won’t Child Labor Just Disappear? However, there is clearly a difference between playing at work and actually working. From a dif- ferent perspective, what is important to consider is whether a developing nation naturally reduces the number of children in work as it becomes richer. This is what happened across the West: As the

Kyodo

In this 2011 photo, girls play at being beauticians in the pretend cosmetics store at the KidZania theme park in Tokyo. At the park, children can hold “jobs” for which they are paid.

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CHAPTER 8Section 8.3 Labor Issues

economy grew, it became more complex, and that complexity added value to staying in school and getting a deeper and longer education. That is, the richer a country gets and the more opportuni- ties that a family has to increase its income or decrease its dependency on a local factory or farm for work, the less of an incentive there is for children to work. Their education becomes a greater priority (Cigno, 2005, p. 101). According to that argument, it would be better for U.S. corporations to work with foreign companies that use child labor, on the grounds that as the economies of those companies’ countries improve, eventually there will be no economic need for children to work.

The problem with that argument is that it absolves the multinational and its managers from acting as role models or from trying to encourage alternative and less dangerous work for children. Since poverty is synonymous with child labor, if a company pays higher wages, it can have a beneficial effect in raising local living standards and hence reducing the need for children to be employed. Governments, companies, and charities could also help set up schools to attract young people into learning more and enhancing their employment skills. More opportunities generally mean an increased incentive to learn, which in turn often implies an extension of childhood.

In developed countries, childhood can be extended into a person’s 20s as that person contin- ues his or her studies into university. Wealth may bring greater incentives to educate, but critics remind us that waiting for an economy to grow does not alleviate real and serious problems with child labor today.

Sweatshops

An extension of concerns over child labor are the ethical problems that arise in employing adults in sweatshops, which the U.S. Department of Labor defines as com- panies or employers violating more than one federal labor law. Even if they act within the law, sweatshops can have conditions that are hazardous or standards that are below decent for a healthy and safe workplace. They may be crowded with employees working without adequate breaks, or may involve working for abusive managers. Sweatshops are pervasive in poorer coun- tries, but they also exist in the United States, particu- larly in the restaurant, clothing, and meat-processing industries (U.S. General Accounting Office, 1988, 1994).

A Historical Note The term sweatshop was coined in the mid-19th century from sweater, an employer who was a mid- dleman contracting work out for manufacturers. Typi- cally, the sweater employed people desperate to work under any conditions and for minimal pay. Turnover of workers could be high, which meant that there was no incentive for the sweater to improve conditions or pay. Where there were thriving markets, disgruntled employees could move onto better conditions and be replaced by other desperate workers.

Associated Press/Tina Fineberg

In this 2005 photo, demonstrators unfurl a banner at the Niketown store in New York. They are protesting against Nike’s use of sweatshops in its supply chains. Despite the company’s efforts to raise standards, it still gets a great deal of criticism that it is not doing enough.

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CHAPTER 8Section 8.3 Labor Issues

Although the hardship and cruelty of a sweatshop often come to mind, for one cultural historian “the sweatshop is as American as apple pie[,] . . . synonymous with the Singer sewing machine, the hard-driving clothing floor subcontractor, the ingenious immigrant good with the needle, the piecework system” (Hapke, 2004, p. 1–3).

The Benefits of Sweatshops The sweatshop could be seen as a stepping-stone to shelter and work experience that poor people or new immigrants need, or something that is necessary for a poor country while it develops and gains enough money to invest in its safety standards (Maitland, 1997). If workers have the right to leave a sweatshop, it does not seem so right that sweatshops should be summarily condemned and dismissed. Indeed, we must ask, what is the alternative for poor people seeking to better their conditions? For early Americans migrating to the cities, the sweatshops offered higher wages and relatively better conditions than the alternatives. And if consumer pressure encourages an Ameri- can company to shut down a sweatshop in Indonesia, say, the result is that the workers are now unemployed rather than employed. Would the workers prefer to have no job over an uncomfort- able job?

As long as the workers are free to leave, according to supporters of sweatshops, there is no prob- lem, and any intervention to close sweatshops can create more suffering than it prevents. From this perspective, the sweatshop is a relative evil and one that is soon competed out of existence as workers are provided more opportunities for work. As one South African commentator has noted, the problem for the unemployed in South Africa is not ethical policies but the lack of businesses (“Companies Aren’t Charities,” 2010). When the number of businesses increases, more people gain work, and the wealth that is created begins to trickle down to the poorer members of society.

For critics, however, the sweatshop is synonymous with exploitation. In 1995, the Immigration and Naturalization Service raided an illegal sweatshop in El Monte, near Los Angeles. It was run by a family of Thai contractors who kept 72 workers, mainly women, in barracks behind barbed wire and worked them 12 to 18 hours a day. The case was the first in which a federal court held clothing retailers and manufac- turers liable for the actions of the labor contractor (Watanabe, 2008). However, the El Monte sweatshop in effect was an issue of slavery— and of course, slavery is illegal and immoral on most ethical accounts.

Ethically, individuals deserve dignity: No one should aggress against them nor withhold their right of exit from a job or a contract. In the El Monte case, the owners held the women against their will, which is an obvi- ous breach of morality, hence the description of them as slaves. But is it right to create unhealthy work- ing conditions and to demand more than what is fair from workers and to pay them less than a fair amount?

Associated Press/Nick Ut

In this 2005 photo, several women who were used as slave labor- ers in a sweatshop in El Monte, California, are shown about to give a news conference on the 10th anniversary of their release.

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A corporation has a duty to respect the innate dignity of all people, and that means treating them as moral equals, providing them with conditions that managers would wish to work in, and uphold- ing the expectations of a good life. A manager would presumably not wish to work in sweatshop conditions, so why should he or she expect others to do so? Regarding foreign subsidiaries using sweatshops, rather than excusing the dire local conditions, an American corporation has a duty to offer improved standards and wages. In a sense, when in Rome, do not do as the Romans do, but rather do unto others as you would have them do unto you. In other words, the relative differ- ences between two countries should not matter. The American corporation should employ people on a similar basis abroad as at home.

Illegal-Immigrant Workers

Another concern for international business is whether a company should hire illegal immigrants. Political and economic disturbances around the world push increasing numbers of people over international borders. In 2011, an estimated 47 million were refugees. Many are only temporarily so and return home as soon as it is viable. Others end up in refugee camps for years, while some seek work in host countries both legally and illegally. Up to 4% of the American population is con- sidered to be in the country illegally, constituting 5.4% of the workforce (Passel & Cohn, 2009). That is a sizeable amount. Of an estimated 154 million people in the civilian workforce, that would mean 8 million are working illegally.

For many, illegal immigrants are by definition working illegally and should be returned to their home countries. Politically, immigration is a controversial topic in the United States. There are over 17,000 guards along the U.S.–Mexican border (“Crying Wolf,” 2011), and authorities are try- ing to clamp down on illegal workers.

For critics of immigration laws, the right to engage in any contract with anyone forms the bed- rock of freedom. Indeed, up until 1875, the United States welcomed “the world’s poor, huddled

masses” to give them the chance to realize their potential in a rela- tively free land. The principle of a free society is to provide protec- tion and free migration to any per- son seeking a new life. Two people are free to engage in any contract they wish, and political obstacles such as a required license to work in a country should not exist. A company offers work in return for the services that the workers pro- vide. The transaction is voluntary and victimless. By working, people are contributing to the national economy rather than draining it if through taking government ben- efits. The workers are also invest- ing in their lives, and income would tend to be a positive influence—as

Associated Press/Matt York

In this 2010 photo of the Arizona border between the United States and Mexico, a U.S. border patrol can be seen driving along the route. The entire border now employs 17,000 guards.

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CHAPTER 8Section 8.4 Technology Issues

would employment itself, by keeping people from falling into criminality if they could not find work. They can also learn English while working and thereby become more American than if they avoided or had no chance of finding any work. Legal immigrants contribute an estimated $37 bil- lion to the U.S. gross domestic product; if there are 8 million illegal workers in the country, that means they could contribute billions to that total (Drum Major Institute, n.d.). It is also estimated that illegal immigrants contribute $7 billion in Social Security payments using fake identification cards. They will not be able to access those benefits, though (Porter, 2005).

But the counterarguments are just as strong. By turning a blind eye to illegal workers, govern- ments might tempt companies that are engaged in law breaking to break more laws. There is a deeply felt sense of injustice when citizens are overlooked in favor of illegal immigrants. Illegal immigrants increase the supply of labor to an area and thereby depress wages and opportunities for citizens. Although the immigrants may contribute surreptitiously to Social Security funding, the resulting market for fake identification and Social Security numbers generates income for those who regularly engage in black market activity. That is, there is a transfer of funds and jobs from law-abiding people to criminals and illegal immigrants.

8.4 Technology Issues Another set of issues that multinationals face concerns technology, specifically intellectual-prop- erty theft and technology transfer, which we will consider next.

Intellectual Property Theft

One of the most recent challenges facing businesses operating in a global environment is that their technology or patents are stolen and replicated in other countries. Other companies then reproduce the product at a much lower price and thereby undermine the original company’s profits and innovation. Intellectual property (IP) theft is not the same as employees’ or custom- ers’ stealing physical goods from shops or offices. Rather, it is the appropriation of intangible but legally protected information, including

• copyrights to written, audio, or video materials; • trademarks such as a name, logo, slogan, or package design; • trade secrets; and • patents that cover inventions (BusinessTheft.com, n.d.).

The advance of the Internet has opened up opportunities for IP theft to global as well as national predators. IP theft has been estimated to cost U.S. firms between $100 billion and $1 trillion a year (Burke, 2010, p. 227; Newman, Cai, & Heugstenberg, 2007, p. 693). The federal government has a series of laws against IP theft, and in 2010 introduced a controversial Combating Online Infringement and Counterfeits Act. The Act was designed to modernize IP regulation and to fol- low the path of the United Kingdom and France, who had recently introduced similar updates and would have given the Department of Justice the global power to target piracy Web sites, illegal downloading sites, copyright infringers, and importers of counterfeit goods. However, an online protest campaign drew much attention to the Act, which, in early 2012, does not look as if it will be passed.

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CHAPTER 8Section 8.4 Technology Issues

Despite the estimated economic cost of IP theft, many oppose the enforcement of IP laws. The American Civil Liberties Union, the Center for Democracy and Technology, Human Rights Watch, and other organizations are concerned that moves to censure rogue Web sites will also act to ham- per freedom of speech. This would, for example, affect the social sites that helped the Arab Spring movement of 2010–2012 or the funding of WikiLeaks and other whistle-blower sites (Timm, 2011).

But is there something morally wrong with using other people’s intellectual property? On first thought, the misappropriation of another’s work does seem immoral. However, other cultures do not recognize individual or corporate proprietary rights in the same manner as the West does. For instance, in China innovations are for sharing rather than protecting by legal barriers. Unsurpris- ingly, we find the greatest IP “theft” in China.

Some economists have argued that enforcement of IP laws actually hampers economic growth and the sharing of knowledge that is important if we are to help millions around the world escape poverty. The freedom that the Internet brings permits oppressed people to find a voice, allows people of varying lifestyles to engage in communication (rather than violence), and is a colossal portal for the outpouring of human knowledge. If governments try to crack down on IP theft, they could ruin the Internet and the freedom it brings, and they could also hinder human innovation.

Technological Transfers

On the international market, one fear is that innovation and new products generated in the United States will be transferred across national boundaries without legal protection for the investors and shareholders; hence the calls by various governments for more global action on IP protection. This is known as technological transfer. There is also the concern that exporting some forms of technol- ogy may be detrimental or even dangerous for other, particularly poorer, countries, or may backfire on the United States and cost the country dearly in economic or military terms. For example:

• Military hardware such as the new XM25 grenade launcher could revolutionize infantry combat, and the U.S. Army would not wish it to fall into enemy hands.

• Sometimes a new technology can be pushed into a developing country too quickly and generate more problems than the benefits it brings. For instance, nuclear technology can provide energy to be used in electricity production, but the industry requires a specialized maintenance and research industry behind it to ensure that it is run safely. Without such supporting industries in place, and without a depth of knowledge and expertise in the society to make choices about nuclear energy, the technology and its use remain poten- tially dangerous.

• Transferring technology over to other countries enables those countries to compete against American companies and thereby threaten jobs.

There are two main rebuttals to these fears:

1. Once we step outside the military-political arena, technological transfers can be gener- ally seen as a helpful way of empowering poorer countries to become richer. Technology increases the productivity of workers in all fields of work, which in turn increases produc- tion. As a country becomes richer through technology, it can engage more in world trade and become less dependent on other countries in times of famine or other hardships. So a refusal to share or to export technology abroad in effect keeps the world’s poor in poverty.

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CHAPTER 8Section 8.5 Ethically Evaluating Multinational Business Activities

2. Concerns over IP or technological transfers are reducible to protectionist policies and the nationalist ethic behind them: that American jobs are more important than other coun- tries’ jobs, but also that American consumers should expect to pay more for supporting their country and its unions rather than import cheaper goods from abroad. The falla- cies in such a line of argument are apparent. Protectionists are typically keen to ensure that their self-interest is catered to but not the interests of the majority of their fellow citizens or those of other countries. Self-regard is a powerful motive, but it is not always an ethical one.

8.5 Ethically Evaluating Multinational Business Activities In view of the wide range of ethical issues that multinationals face, we turn next to a more general ethical evaluation of multinational business activities.

Relativism: Western Cultural Norms Affecting Other Cultures

It is easy for ethical thinking and action to get lost in the business world, especially when business crosses borders and cultures. A general concern that ethicists raise is the extent to which countries in the West should be interfering with the norms and values of other coun- tries, especially those of less developed nations whose economic vulnerability may deserve a softer, more respectful approach. This applies especially to nations whose cultural identities are perceived to be untainted by Western culture. Corporations going in to set up factories or offices could have a massive impact on how the culture evolves, which could cause unintended disturbances and violate many local traditions. It is a common complaint of critics of multina- tional corporations that multinationals do not know the extent to which they are affecting local cultures, or if they do, that they possess an arrogance of assuming they are in the right, which to many is offensive.

For instance, an American company may be trying to do business in a culture that is predomi- nantly sexist in the workplace, and to advance competent women over men may cause offense. Here, American values of diversity and sensitivity to gender issues may encounter obstinate refusal and skepticism. Similarly, one commentator noted that for many years, American com- panies avoided employing Black workers in overseas posts, in case doing so would offend local people, but that has recently changed, and in fact there is evidence that people from tradition- ally perceived subcultures in the United States have a greater flexibility in the workforce when they are deployed abroad (Solomon, 1994). Thoughtlessness can also cause problems, as when a security company shipped hardware to Saudi Arabia and wrapped the gadgets in magazines with photos of bikini-clad women. The customs officials were offended and delayed delivery for several weeks (Mailes, 2000).

In many respects, the complaint is now an old one. Ever since Columbus encountered the indig- enous population in 1492, European values have been adopted by or imposed on other peoples. Indeed, Columbus’s first thoughts were of Christianizing and conquering the people: “I could con- quer the whole of them with fifty men, and govern them as I pleased” (Columbus, 1492). In other words, we have power and they do not, so we are right in imposing our values and our systems on these people.

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CHAPTER 8Section 8.5 Ethically Evaluating Multinational Business Activities

Ethical Imperialism Columbus’s sentiment characterizes much of the following 500 years of commercial expansion and globalization. Europeans and then Americans have imposed their will on weaker and less technologically advanced countries through military force. The locals encountered by companies and government officers have been assumed to be backward on religious and moral grounds and hence in need of “correcting.”

In many respects, locals have not been slow to take advantage of trade opportunities either. Where Western explorers went, ports and trading towns developed swiftly, for different cultures have much to offer each other: technology, gold, and silver all in exchange for local skills, labor, and natural

resources. And despite the noise and violence of war that takes up so much of the history books, much com- merce developed and persisted between the peoples of the world. World trade emerged in the 15th century and has continued since. As a recent advertisement by the global bank HSBC commented, “in the future there will be no markets left waiting to emerge.” (HSBC, 2011) Commerce has spread everywhere. Yet there are still ethical issues that a multinational corporation must consider in its overseas operations. For example, should American companies operating abroad have a responsi- bility to local stakeholders and their cultural practices?

When working abroad, sensitivity certainly has to be encouraged. Some companies have very strong eth- ics on how their American team should deal with local people. Others are more lax and leave it up to the managers involved. The former policy—the “ethical” policy—may appear a reasonable move. For example, a brief encounter with a foreign delegation may not cause many problems, as everyone involved will be on their best behavior, and lapses in etiquette will be understood. But when people stay longer and begin to relax in each other’s company, there may be cause for alarm. One commentator on international busi- ness etiquette has noted that the American habits of sprawling in chairs or wearing sunglasses inside may be disconcerting to English people but positively unnerv- ing to Germans; and that while a manager would not send a hard-drinking representative to a Saudi Arabian meeting, that same manager might not be aware that asking after the health of any of the women in the household would be offensive (Lewis, 2006, p. 82).

Leaving managers to adapt to the local cultural climate without any guidelines may thus create problems. If, for instance, corruption is culturally acceptable but is illegal, managers could soon find themselves in legal trouble if they follow the example of local companies

What Would You Do?

You are a manager for a multinational corporation that has started up busi- ness in another country. The resource base is excellent and the local work- force is relatively cheap and willing to work and learn. However, two tribal groups in the country compete with each other for power and wealth. You discover that one group is constantly diminishing the other group’s chances of competing for work, especially their women. Sexism prevails. The women are overlooked for promotion by local managers and are underpaid and over- worked in comparison to their male counterparts. You are concerned that if your company attempts to alter the local presumptions regarding gender, it may offend the local population and cause commercial and employment problems and more trouble for the people who are already disadvan- taged. If your company does nothing, it goes against core American values of respect and equality.

1. If you were the manager, would you advance certain women any- way? Why or why not?

2. Do you think it is better to defer to local sensibilities? Why or why not?

3. Would you encourage bringing in more American female staff mem- bers to show the local managers that they can work just as well? Why or why not?

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CHAPTER 8Section 8.5 Ethically Evaluating Multinational Business Activities

and offer gifts and bribes to officials. Likewise, if managers engage in locally acceptable sexist or racist behavior, they fall afoul of American traditions and law.

Yet many American companies learn to adapt to local conditions quietly and under the radar of media attention. McDonald’s, for instance, has adapted its menu choices for different palates around the world to ensure acceptance of its products; and most companies tend to just get on with the job. Nike was forced to respond to Western criticism of its use of sweatshop suppliers in the 1990s: Local factories were content with driving employees into harsh work- ing conditions, but Western con- sumers were not. Both companies have learned to adapt and even to become role models for local busi- nesses, as one business academic has noted: “I truly believe Western firms have played a significant role in raising standards in [the develop- ing world by demonstrating] how we think, how we do things and how we treat our people” (C. Rob- ertson, as quoted in Dutton, 2008).

In the next section, we look at the main vehicle of international trade, namely multinational corporations and the particular ethics of how they operate.

Pros and Cons of Multinational Businesses

It is at the junction between global business aims, local customs and laws, and American values that many of the ethical issues affecting international trade—and in particular multinationals—arise. For some people, multinationals bring a harmonization to the world: You can purchase compatible Hewlett-Packard printer cartridges anywhere. Likewise, your cellular phone can usually adapt to other countries’ signals quickly, and you can rent a car from Budget in just about any country. Such harmonization of product and service helps markets and smooths trade by creating similarities.

Supporters also claim that multinational corporations are the main causes of economic growth and prosperity for the world’s poor. Such companies bring in new technologies and job opportuni- ties and training for local managers. When an American company opens up a new factory in Indo- nesia, say, the locals can benefit from more employment opportunities and usually higher wages: sometimes up to 40% more (Hijzen & Swaim, 2008).

In turn, without global commerce and multinational enterprises, Americans would miss out on a great deal of opportunities in emerging markets such as India, China, and Brazil. Global trade is mutually beneficial, and to turn our backs on it would take the United States and the world back to the protectionist era of the 1930s, which saw a collapse in world trade volumes and a rise in international aggression that eventually broke out in World War II.

Associated Press/Hasan Jamali

Two worlds meeting: women dressed in traditional niqabs in Saudi Arabia shopping at a restaurant by a very American corporation.

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CHAPTER 8Section 8.5 Ethically Evaluating Multinational Business Activities

But for critics, multinational corporations and their global agendas are exploiters of cheap foreign labor who deplete other countries’ resources and take the profits back to the United States. They give little to their host countries but violate local traditions and cultures by imposing American standards and expectations on commercial life. Moreover, the multinational corporation is a pow- erful, rich, and independent beast that will look after its own interests and tread on domestic and international governments and people to raise its turnover. People point to the Deepwater Horizon oil spill and BP’s laxity with regulations, or to the Bhopal disaster and Union Carbide’s evading safety standards in a foreign land. Some have even seen American multinationals as part

of postwar American foreign policy to control trade and countries around the world (Shearer, 1999). Still others see all multinational corporations as forces to be controlled and highly regulated, or else they would oppress people with poor wages and bad working conditions and undermine union attempts to secure a better life for members. From all the examples that we have considered in this chapter, there are many recurring themes regarding questionable practices of multinationals:

• Improper political influence on foreign govern- ments.

• Pushing for the deregulation of local markets so that they may enter them and undercut local businesses.

• Pursuit of profit over social use such as when multinationals do not have any regard for other stakeholders whom they may be affecting and when they concentrate solely on increasing prof- its and dividends for shareholders to the cost of local people.

• Externalized costs. Multinationals can be particu- larly guilty of ignoring their trade and production’s impact on the environment and local cultures, as they can ultimately cut production and leave the host country reeling from any disasters that they have created (Weissman, 2008).

Debate nonetheless rages on as to the benefits and problems that multinational corporations cre- ate. Indeed, as we have discussed throughout this book, acting ethically within the United States is complicated, and when a U.S. company begins to operate abroad, the ethical intensity increases. A few decades ago, multinationals could operate around the world in relative privacy from national enforcers. But today, the spread of electronic commerce and correspondence means that multi- national operations are never far from scrutiny by the government or consumer activist groups. Today, their products, advertisements, safety standards, wages, and employment are all acces- sible for critics to analyze, which can affect local sales, should those critics choose to publicize a multinational corporation’s ethical misdemeanors.

Despite having a strict set of ethical guidelines on standards and behavior going back to 1992, Nike still managed to fall afoul of consumer activists, who waged an influential war against the

Associated Press/Shuji Kajiyama

In this 2011 photo, the famous American investor Warren Buffett (center), CEO of Berkshire Hathaway, is opening up a Japanese subsidiary factory of one of his companies.

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CHAPTER 8Section 8.5 Ethically Evaluating Multinational Business Activities

company’s use of substandard factories. In 2004, Nike employed 80 corporate social-responsibility and compliance officers, and its factories were inspected weekly, yet even the company admit- ted that standards in 80% of its factories had failed to improve (Hijzen & Swaim, 2008). Victoria’s Secret was also caught using child labor on its organic cotton farms in Burkina Faso (Carpenter, 2011). Perhaps being a perfect ethical multinational is beyond the reach of companies because local conditions are to some extent beyond their control. But it is certainly better to try to change obviously unethical situations and to act as a role model for local companies.

Creating a Global Business Ethic

To relieve the potential for ethical conflict, the philosopher Richard De George created a list of principles regarding operating businesses abroad:

1. Do no intentional harm to the host country. 2. Produce more good than bad for the host country. 3. Contribute to the host country’s development. 4. Respect the human rights of employees. 5. Pay the host country’s taxes. 6. Respect and work with the local culture. 7. Co-operate with reform in the host country, such as in land and tax reforms (De George,

1993).

De George’s principles are useful guides for international businesses, but as we have seen, the reality and complexity of doing business abroad are much more difficult to navigate than the principles imply. Nonetheless, there are moves to form a global business ethic that all companies should subscribe to.

The work of De George and others has helped form the ethical framework of doing work abroad. One of the early executives to pick up the mantle was Sir Geoffrey Chandler, whose actions in 1976 as the CEO of the multinational petroleum company Shell ultimately helped change the moral thinking of multinationals: “To suggest that doing right needs to be justified by its eco- nomic reward is amoral, a self-inflicted wound hugely damaging to corporate reputation,” he com- mented. “Doing right because it is right needs to be the foundation of business” (as quoted in Davison, 2011). Today there are many businesspeople who try to emulate the moral stance of Chandler and others, who believe in setting an example within the companies they run and also for the people they deal with.

Indeed, one New York institute, Ethisphere, attempts to monitor ethical performance around the world and to score companies on their actions. According to the institute, acting ethically also translates into profitability. The criteria that the institute looks for are in line with what ethicists look for in corporate behavior, including

• corporate citizenship and responsibility, • innovation contributing to public well-being, • industry leadership, • executive leadership, • legal, regulatory, and reputation track record, and • internal systems and ethics-compliance programs (Ethisphere, n.d.).

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CHAPTER 8Section 8.5 Ethically Evaluating Multinational Business Activities

Of the top five U.S. companies on Forbes’s list of the 10 largest multinationals in the world, Ethi- sphere included only General Electric for 2011. Nonetheless, many other U.S. companies do appear on the list, including Rockwell Collins, eBay, Gap, Timberland, Ford Motor Company, Microsoft, Colgate-Palmolive, Xerox, PepsiCo, General Mills, Caterpillar, and Cisco Systems. What Ethisphere calls the world’s most ethical companies are said to outperform the S&P 500 index in the United States (“World’s Biggest Public Companies,” 2011).

But critics of Ethisphere’s system ask, can companies and their ethical outlook actually be scored?1 If a company seeks to eradicate sexism in its foreign subsidiary, does it get points? Utilitarians, who are interested in cost-benefit analyses, may nod in agreement, since they see ethical life as adding up the good things and subtracting the bad things. Other ethicists do not agree. For them, doing the right thing is not about scoring points; it is about doing the right thing because it is the right thing to do, or because it reflects the innate ethical culture and principles of the company. Also, the fact that the ethical com- panies have done well compared to the S&P 500 may not mean much. Ethisphere’s companies come in and out of its tables more than companies exit the S&P Index, since they lose points one year and gain them back the next, which can cause problems in comparing like with like. Nonetheless, Ethisphere’s objective is quite clear: When a company seeks to run itself ethi- cally, respecting stakeholders and contributing to public welfare and corporate transparency, it should be publicly applauded.

Supporting a global business ethic assumes, though, that there are objective or common values by which communities all live by. And while most communities do have similar levels of respect for issues like birth and death, the sanctity of holy places, and the responsibility to care for the vulner- able, there are also a host of issues that people differ on. Relativism is the ethical theory that says that people’s values differ on many things, which implies that it would be wrong for one group to impose an ethical standard on another.

1 There are critics of the institute who note that those scoring well tend to advertise with Ethisphere or use its partner company—a conflict of interest that the institute’s director is seeking to resolve (Evans, 2010)—but the more important point remains.

PR Newswire/Anonymous

In this 2011 photo, Ethisphere’s director, Alex Brigham (right), is presenting an award to Paul Arnos of Aflac for winning the 2011 World’s Most Ethical Company award.

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CHAPTER 8Summary

8.6 Conclusion The world is moving increasingly towards greater commercial integration as multinationals spread in both numbers and jurisdictions. Because of the Internet and the growth of social networking sites, consumer activists also can keep a better eye on world news and what multinationals are up to. The power of boycotting or of raising awareness of ethical issues and corporate disasters is such now that companies will find it very difficult to hide their problems. Ethisphere and other organizations are actively working on a global ethics standard that companies can subscribe to and in turn be judged by, and companies are listening. Many now employ specialists who work internally to make sure that managers are not bribing local officials, employing sweatshops and child labor in the supply chain, or otherwise undermining the corporate image.

In business, image and reputation mean a lot, so when a company is tarnished by a disaster any- where around the world, such as BP following the Deepwater Horizon explosion or the Siemens bribery scandal, it must work hard to rehabilitate its name. Ethical analysis is helping: more and more managers become aware of the risks of acting unethically and of the heightened scrutiny they now face.

Large international firms have an incentive to tighten their standards, as Nike is trying to do, and they can act as role models for smaller companies in other countries (Baker, n.d.). Nonethe- less, businesses work in a legal and moral framework, and while they can help form the moral framework, they cannot affect the legal framework so well. Some of the problems that we have discussed in this chapter, such as child labor, IP theft, illegal immigrant workers, and especially bribery, reflect national government failings. Companies will have a great incentive to bribe offi- cials if governments have discretionary powers. Once the regulatory framework is impenetrable and state dealings more transparent, corruption in its various forms should dwindle.

Summary In this chapter, we discussed issues relating to doing business around the world, including gift giv- ing and bribery. The American and European governments are acting together to clamp down on such corrupt practices, but such practices are not likely to disappear until governments change the way that they do business. A grave problem for lawyers is intellectual-property (IP) theft. Some argue that IP theft results from the way Americans and Europeans view intellectual property and that other cultures do not see IP as capable of being stolen—it is merely recycled. Finally, we looked at the issue of technological transfer, which can be highly sensitive in the military industry, and we considered whether it is wrong to halt such transfers, since most of them improve living standards in poorer countries.

We also reviewed how ethics deals with international trade and multinational companies. The initial problem was whether companies should abide by local customs or by a global standard of corporate behavior. If companies subscribe to an overarching ethical agenda, they run the risk of being arrogant—entering foreign nations with American ways of doing things and expecting the local people to change their behavior accordingly. But business is ultimately about adaptation, and while some companies try to uphold noble ethical standards, others bend to local rules and customs. This becomes a problem when corporations engage in practices that Americans find immoral or even illegal back home, such as the use of child labor. Sweatshops are a more complex

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CHAPTER 8Summary

case: As long as people are free to leave them, the ethical problem is diminished, although it does not look good for a company to be seen driving workers hard in poor conditions for low pay. So too with the issue of employing illegal immigrants: For some people, their illegal status is sufficient for them to be arrested and sent back home, but many recognize that illegal immigrants contribute to the U.S. economy and, strangely enough, to Social Security funds.

Discussion Questions

1. International trade brings with it international customs and different ways of living and doing business. There are many books on how to do business in different parts of the world; but should U.S. companies and their agents feel obliged to support local customs, regardless of how they reflect on home values? Why or why not?

2. Environmental standards differ across nations. Poorer countries tend to have weaker regulations that are less well enforced than richer nations. If there is a chance of improv- ing profits by setting up in a country with laxer restrictions, do American companies have a duty not to set up production there? Why or why not?

3. Child labor is endemic to the poorer countries of the world, and for many children it is seen as way of keeping their families out of poverty. Critics point out that if the govern- ments were to invest more in educating children, the children could be more produc- tive and create more wealth for their nations when they grew older. In the meantime, multinational enterprises often secure suppliers who use children. In your opinion, what is the best way to reduce child labor for multinational corporations?

4. Bribery and corruption have gone on in the business world for centuries and remain a staple of doing business not only in transitional and poor countries, but also in well- developed economies. Should companies have a strict rule on bribing and gift giving to public officials and members of other large corporations, or should they accept that sometimes the only way to get business is to offer “incentives”?

5. Intellectual property involves a range of products and services that are sold around the world. But some cultures do not recognize IP as being anything special, so when people download a movie from an illegal Web site, they may not feel that they are stealing. Does IP law have any ethical basis, or is it just an attempt to secure monopoly earnings by large corporations?

Key Terms

bribery The giving of money, vouchers, goods, or services to public officials in the hope of securing a license or contract.

gift giving The presentation of money, vouch- ers, goods, or services to another in business; this may be a normal part of business eti- quette in dealing with other business people or public officials, but when used to encour- age the signing of a contract or when the gifts become relatively large, ethical issues arise.

globalization The expansion of international trade; the term also implies a movement towards a similar global culture and, by impli- cation, ethics.

intellectual property (IP) Intangible assets protected by law such as copyrights, trade- marks, packaging designs, and trade secrets.

intellectual property theft The illegal misap- propriation of intellectual property that has been secured by a company or individual.

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CHAPTER 8Summary

multinational corporation A corporation that has production centers and offices in more than one country.

repatriated income Money earned by an American multinational that is transferred back to the United States; it is subject to cor- porate tax.

sweatshops Factories whose workplace stan- dards on health and safety and pay fall below a legal minimum, or whose standards are below what is commonly acceptable in a community.

technological transfer Selling or distributing technology from one country to another; often concerned with the transfer of sensitive com- mercial or military technology.

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