CHAPTER TWELVE: INTERNATIONAL BUSINESS AND
GLOBALIZATION
AN INTRODUCTION TO BUSINESS ETHICS
Copyright © 2014 by McGraw-Hill Education. All rights reserved.
THIS CHAPTER SEEKS TO
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Introduce students to the range of ethical issues arising in a
global business context
Examine the issue of ethical relativism in a global setting
Describe the application of human rights to international
business
Explain the ethical issues involved in globalization
Examine business’ role and ethical responsibilities in an
increasingly global economy
Introduce the ethical arguments concerning international
sweatshops
Copyright © 2014 by McGraw-Hill Education. All rights reserved.
12-2
DISCUSSION CASE: BUSINESS IN A GLOBAL SETTING
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For more than 40 years, public attention has focused on ethical issues arising
when businesses operate in foreign countries
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The 1977 Foreign Corrupt Practices Act made illegal U.S. firms’ participation in
any bribery payment to a foreign official to obtain or further business interests
in a foreign land
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In the 1990s and 2000s, attention shifted to include responsibility for the
entire supply chain that produces and distributes a business’ products
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As the economic reality of doing business in the 21st century takes hold,
ethical issues in international business have become a normal state of doing
business
Copyright © 2014 by McGraw-Hill Education. All rights reserved.
12-3
DISCUSSION CASE: BUSINESS IN A GLOBAL SETTING
(CONT.)
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Google learned soon after it began operating in China in the early 2000s that
access to Google, and therefore to the wider Internet, was being hindered and
eventually prohibited by Chinese censors
Such actions violated Google’s own corporate values
Still, Google continued doing business in China with the rationale that staying
engaged in the country would provide a pragmatic approach to changing
policies for the better
From 2006 until 2010, Google conformed to China’s censorship policies
When a 2009 cyber attach that breached security at Google and other firms
was traced to China, Google withdrew its Chinese operations
Copyright © 2014 by McGraw-Hill Education. All rights reserved.
12-4
DISCUSSION CASE: BUSINESS IN A GLOBAL SETTING
(CONT.)
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Recently, issues surrounding working conditions at
foreign supply plants for major U.S.-based corporations
emerged at a Foxconn manufacturing plant in China
Foxconn is among the world’s largest manufacturers of
electronics and among the largest private employers in
China
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It has an estimated 1 million workers in China
At its 13 Chinese plants, Foxconn manufactures such consumer
products as the I-Pad, I-Phone, Kindle tablet, and Xbox 360
Copyright © 2014 by McGraw-Hill Education. All rights reserved.
12-5
DISCUSSION CASE: BUSINESS IN A GLOBAL SETTING
(CONT.)
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In 2012, 150 Chinese workers at a Foxconn plant
threatened to commit mass suicide by leaping
from their factory roof
 This
incident followed as many as 14 actual suicides
at Foxconn in 2010
 Both the actual and threatened suicides were in
protest of working conditions at the Foxconn plants
Copyright © 2014 by McGraw-Hill Education. All rights reserved.
12-6
DISCUSSION CASE: BUSINESS IN A GLOBAL SETTING
(CONT.)
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The Fair Labor Association, an independent watchdog
organization, conducted an investigation of working
conditions at Foxconn
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Results were published investigation in 2012
The report documented excessive overtime, including 80-hour
workweeks, health and safety issues at work, inadequate
overtime pay, squalid living conditions in overcrowded
company dormitories, and aggressive security guards who
kept workers in line
Copyright © 2014 by McGraw-Hill Education. All rights reserved.
12-7
DISCUSSION CASE: BUSINESS IN A GLOBAL SETTING
(CONT.)
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Apple and other companies quickly moved to address these issues working
with Foxconn and the Fair Trade Association to improve and verify working
conditions at these facilities
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Foxconn committed to reduce the workweek to between 48-60 hours, increase
pay, and improve working and living conditions
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A fight among several employees at a Foxconn plant escalated into a riot
involving about 2,000 people when security forces responded to the fight by
attaching the employees
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A Foxconn spokesman said, “If there’s any truth to these allegations, we’ll
take severe action against any security guards, even though we don’t hire
them directly.”
Copyright © 2014 by McGraw-Hill Education. All rights reserved.
12-8
ETHICAL RELATIVISM AND CROSS-CULTURAL VALUES
What do you do when you are faced with different
value systems far from your home?
How do you choose between the values of your
home country and the values of the country you
are visiting for business purposes?
Copyright © 2014 by McGraw-Hill Education. All rights reserved.
12-9
ETHICAL RELATIVISM AND CROSS-CULTURAL VALUES
Given that significant financial benefits can result
from following local ethical practices, it is
tempting for business to take the step from
cultural relativism to ethical relativism.
Copyright © 2014 by McGraw-Hill Education. All rights reserved.
12-10
ETHICAL RELATIVISM AND CROSS-CULTURAL VALUES
Recall: the fact that cultures have different values
does not by itself imply that there are no
objective standards for deciding between
conflicting values.
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12-11
ETHICAL RELATIVISM AND CROSS-CULTURAL VALUES
Example: In 1998, in Indonesia bribes, kickbacks
and extortion were commonplace.
After the government was overthrown,
Indonesians passed many anticorruption
reforms, indicating they share many values with
the West.
Copyright © 2014 by McGraw-Hill Education. All rights reserved.
12-12
ETHICAL RELATIVISM AND CROSS-CULTURAL VALUES
Given different circumstances, conduct that
might be condemned or excused in one
context might be excused or condemned in
another.
Does this fact count in favor of ethical
relativism?
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12-13
ETHICAL RELATIVISM AND CROSS-CULTURAL VALUES
Example: Doing business with a state-controlled
phone company.
Excusing unethical behavior is not the same as
justifying it.
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12-14
ETHICAL RELATIVISM AND CROSS-CULTURAL VALUES
Multinational corporations have many more
choices available to them than are available to
local businesses, not the least of which is to
use their economic power to change unethical
practices.
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12-15
ETHICAL RELATIVISM AND CROSS-CULTURAL VALUES
Example: Low wages and unhealthy working
conditions in sweatshops; remember Nike?
Just because local population tolerate
sweatshops does not mean that such
conditions are ethically justified when doing
business in a foreign land.
Copyright © 2014 by McGraw-Hill Education. All rights reserved.
12-16
ETHICAL RELATIVISM AND CROSS-CULTURAL VALUES
In terms of integrity: When doing business in a
foreign land, a person should not abandon
their identity and character.
To abandon oneself in the face of diversity is to
undermine one’s integrity.
Copyright © 2014 by McGraw-Hill Education. All rights reserved.
12-17
ETHICAL RELATIVISM AND CROSS-CULTURAL VALUES
Example: Consider doing business in a culture
that treats women as second-class citizens.
If you believe that women and men are equal,
why would you abandon your values when
dealing with people from this culture?
Copyright © 2014 by McGraw-Hill Education. All rights reserved.
12-18
ETHICAL RELATIVISM AND CROSS-CULTURAL VALUES
Integrity does suggest that sometimes we act
out of principle, rather than just utilitarian, or
economic grounds.
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12-19
ETHICAL RELATIVISM AND CROSS-CULTURAL VALUES
Finally, why are we so quick to judge the values
of other cultures as unethical?
We assume that the ethical of the industrialized
Western democracies are more ethical than
other countries. But are they always?
Copyright © 2014 by McGraw-Hill Education. All rights reserved.
12-20
ETHICAL RELATIVISM AND CROSS-CULTURAL VALUES
When corporations seek to justify or excuse
otherwise unethical behavior by appealing to
local values and customs, such appeals should
be treated as suspect: they may be excuses for
not performing in an ethically responsible
manner.
Copyright © 2014 by McGraw-Hill Education. All rights reserved.
12-21
CROSS-CULTURAL VALUES AND INTERNATIONAL RIGHTS
Are there any values that can be applied across
culture?
Tom Donaldson argues that fundamental human
rights can provide a basis for a list of
international responsibilities for business.
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12-22
CROSS-CULTURAL VALUES AND INTERNATIONAL RIGHTS
1.
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The right to freedom of physical movement
The right to ownership of property
The right to freedom from torture
The right to a fair trial
The right to nondiscriminatory treatment
The right to physical security
The right to freedom of speech and association
The right to minimal education
The right to political participation
The right to subsistence
Copyright © 2014 by McGraw-Hill Education. All rights reserved.
12-23
CROSS-CULTURAL VALUES AND INTERNATIONAL RIGHTS
Donaldson admits there is room for dispute
concerning the details of application or the
range of such rights.
But such rights create duties for others.
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12-24
CROSS-CULTURAL VALUES AND INTERNATIONAL RIGHTS
One of the major challenges to the minimalist approach is
that it does not seem to explain why the
responsibilities correlated with these rights should fall
on the shoulders of multinational businesses.
The minimalist approach does not seem to give much help
when cross cultural values conflict.
Copyright © 2014 by McGraw-Hill Education. All rights reserved.
12-25
CROSS-CULTURAL VALUES AND INTERNATIONAL RIGHTS
Richard DeGeorge has offered 10 ethical guidelines
that can be applied cross culturally.
Multinational corporations should:
1. do no intentional direct harm
2. produce more good than harm for the host
country
3. contribute by their activity to the host
country’s development
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12-26
CROSS-CULTURAL VALUES AND INTERNATIONAL RIGHTS
4. respect the human rights of their employees
5. respect the local culture and work with and
not against it
6. pay their fair share of taxes
7. cooperate with the local government in
developing and enforcing just background
institutions
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12-27
CROSS-CULTURAL VALUES AND INTERNATIONAL RIGHTS
8. recognize that majority control of a firm
carries with it the ethical responsibility for the
actions and failures of the firm
9. make sure that hazardous plants are safe and
run safely
10. when transferring hazardous technology,
make sure it can be safely administered in the
host country
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12-28
CROSS-CULTURAL VALUES AND INTERNATIONAL RIGHTS
One could argue that such a list amounts
simply to the application of more general
minimalist duties…
…another interpretation suggests that these
responsibilities are derived from an implicit
social contract between multinationals and
host countries
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12-29
GLOBALIZATION AND INTERNATIONAL BUSINESS
What is globalization?
Globalization refers to a process of international
economic integration.
- GATT
- NAFTA
- European Union
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12-30
GLOBALIZATION AND INTERNATIONAL BUSINESS
Globalization is the process of extending free and
open competition beyond national borders…
- this flow of trade is thought to be the best way
to improve the well being of most impoverished
people
- economic integration is a major impediment to
conflict
Copyright © 2014 by McGraw-Hill Education. All rights reserved.
12-31
GLOBALIZATION AND THE POOR
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A free, competitive, and open international
market will result in a more efficient and optimal
distribution of economic goods and services.
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Is this a sound argument?
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12-32
GLOBALIZATION AND THE POOR
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The answer to this question is both empirical and
conceptual.
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empirical answer is ambiguous and is actually a
utilitarian argument about whether such benefits
outweigh the harms of free and open competition.
 Critics charge that exported jobs pay bar subsistence
wages and create sweatshop conditions.
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12-33
GLOBALIZATION AND THE POOR
Market theory tells us that these newly
employed workers are better off because they
have chosen to take these jobs.
 Critics respond that the choice to work under
such conditions is little more than extortion and
exploitation by business.
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Copyright © 2014 by McGraw-Hill Education. All rights reserved.
12-34
GLOBALIZATION AND THE POOR
What are the ethical responsibilities of
international business to their employees in host
countries?
In general, we should conclude that they are the
same responsibilities as their responsibilities to
employees at home.
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12-35
GLOBALIZATION AND THE POOR
People are not just factors of production
- Living wage
- Fair wages
In practice, many international businesses do not
directly employ workers in the host countries.
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12-36
GLOBALIZATION AND THE POOR
A reasonable principle is that if an international
business wants to benefit from less-costly local
labor, they should take full and direct
responsibility for how those workers are treated.
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12-37
GLOBALIZATION AND THE POOR
But are local national economies in host countries
harmed or benefited from the arrival of
international business?
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12-38
GLOBALIZATION AND THE POOR
Even if it is true that freer trade and greater
international economic integration can improve
the economic well being of any nation that
adopts free trade, it does not follow that these
policies can improve the economic well being of
all countries.
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12-39
RACE TO THE BOTTOM
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A second set of challenges to global economic
activity:
 Freer
trade and economic integration creates
incentives to weaken or do away with environmental,
labor, health, and safety regulations.
 There may be a “race to the bottom” in an attempt
to get international business to locate in many
countries.
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12-40
RACE TO THE BOTTOM
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Consider OSHA-type laws
 The
presence of these laws in the U.S. is an incentive
for companies to move out of the country to
countries where these laws do not exist.
 The result is pressure to eliminate these laws so that
industries in this country can compete more
effectively under rules of free trade.
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12-41
RACE TO THE BOTTOM
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Consider environmental regulations
 1992:
Congress passed a law protecting Dolphins
from certain Tuna harvesting practices
 1999: WTO prohibited the U.S. from enforcing this
law
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12-42
RACE TO THE BOTTOM
Regulation on economic activity for any ethical
reason is likely to be judged a barrier to free
trade.
But think on this:
No economic market exists in a vacuum.
- the Montreal Protocol
- the Kyoto Agreement
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12-43
RACE TO THE BOTTOM
If social regulation is to set the minimally
acceptable conditions on market transactions,
and if these regulations are accurately to reflect
the ethical consensus of citizens, business ought
to refrain from trying to influence such policies.
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12-44
DEMOCRACY, CULTURAL INTEGRITY AND HUMAN
RIGHTS
Critics of increase global economic integration
charge that institutions such as the WTO, World
Bank, and IMF are themselves undemocratic
bureaucracies that threaten the political values
of democracy and self-determination in both
poor and industrialized countries.
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12-45
DEMOCRACY, CULTURAL INTEGRITY AND HUMAN
RIGHTS
Critics of the World Bank and the IMF often raise
the challenge that their economic policies
undermine self-determination in poorer
countries seeking international financial help.
- the Golden Straitjack
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12-46
DEMOCRACY, CULTURAL INTEGRITY AND HUMAN
RIGHTS
Critics also charge that the World Bank and the IMF
are secretive and undemocratic.
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12-47
DEMOCRACY, CULTURAL INTEGRITY AND HUMAN
RIGHTS
Referring to the Golden Straitjack, defenders of the
World Bank argue that the policies of the World
Bank and the IMF are simply rational
requirements if a nation chooses prosperity over
poverty.
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12-48
DEMOCRACY, CULTURAL INTEGRITY AND HUMAN
RIGHTS
Defenders offer two responses to the charge that
globalization undermines democracy within
industrialized countries:
- the empirical evidence is ambiguous
- these institutions exist because nations have
freely agreed to give them authority
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12-49
DEMOCRACY, CULTURAL INTEGRITY AND HUMAN
RIGHTS
Finally, defenders of the World Bank and the IMF
argue that the proper model for these
institutions is judiciary not legislative.
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12-50