Chapter 4

Ethics & International Management

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Ethics & International

Management

Ethics ???Ethics ??? Study of decision making within a Study of decision making within a

framework of a system of framework of a system of moral moral standardsstandards. .

Study of Study of moralitymorality and and standards of standards of conductconduct..

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Managerial Ethics-IssuesManagerial Ethics-Issues

1. Can there be one fixed moral framework that can provide standards to guide managers every time they face ethical decisions?

2. If a single set of standard is to guide managerial behavior, which is the right set among the conflicting definitions of good and bad behavior?

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Ethical IssuesEthical Issues

Ethical Dilemmas (ED) Ethical Lapses (EL) Managers facing ethical issues fall into

two broad categories-ED and EL.

The issue has two conflicting but arguably valid sides.

Ethical Dilemmas

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Ethical DilemmaEthical Dilemma Permitting or not tobacco

companies to advertise.

Not Allowing to advertise

Restricts their freedom

of speech

Obstructs their ability to do business

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Ethical LapseEthical Lapse Occurs when a manager makes an unethical

decision Unresolved interpretations of ethical issues

lead to-ethical dilemmas. Ethical lapse is associated with cases of

unethical behavior.

Desire of a tobacco company to advertise is an ethical dilemma.

Decision of a top manager to earn profit from inside information is an act of ethical lapse.

Example

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Ethical management practices Must be a proactive stance Must be pursued with diligence Must be pursued with persistence

> For achieving the aim, the need is to recognize various ethical pressures on managers lead to ethical dilemmas

Approaches to Ethical Management

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Ethical Pressure on ManagersEthical Pressure on Managers

Organizational Goals

Competition

Fear Personal Goals Ethical Pressure

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Organization Goals Target sale

Pressure Adopting less ethical course of action

Benefit

Better short-term performance

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Ethical organization Ethical organization recognizerecognize

1. Managers should ask ethical questions while taking decisions.

2. Decision making should consider factors beyond immediate goals.

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Personal Goals Compensation & Promotion

Pressure Unethical behavior (overstate a products benefit to increase the sales volume)

Pressure (Other employees work as his own)

Pressure (Other employees to lower their performance)

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Competition Market Success

Pressure Unethical Practices

(To announce product well before they exist)

Benefit

To beat the competitorsDangerDanger• Mislead customers• Cause financial damages to firms • Late or no arrival of products

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Fear To loose job

Pressure Unethical decisions

(Using of sub-standard material on the instruction of boss)

Cheating Customers

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Ethical issues:

Country differences give rise to some interesting ethical issues

One major ethical dilemma facing firms from the Western democracies (U.S) whether they should do business in totalitarian countries that violates the human rights of their citizens (e.g.: China)

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One ethical concern regards whether firms should invest in countries where the government represses its citizens in political and/or economic freedom

A second ethical concern regards whether an international firm should adopt consistent and high levels of product safety, worker safety, and environmental protection worldwide, or whether they should focus only on meeting local regulations.

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Another ethical concern regards whether firms should pay bribes to governmental officials or business partners in exchange for business access.

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Four Actions for Improving International Business Ethics

Create global codes of conduct Global codes and standards set by

corporations Global Codes and standards set by

international organizations Integrate ethics into a global

strategy Suspend activities in host country Create ethical impact statements

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Global Codes and Standards Developed by International Organizations

Caux Principles Global Reporting Initiative Global Sullivan Principles OECD Guidelines for Multinational

Enterprises Principles for Global Corporate

Responsibility: Benchmarks UN Global Compact

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Code of EthicsCode of Ethics Need to respect laws & regulations of

the host countries Do nothing to compromise with the

health & safety of consumers Should not exploit the weakness in

legislation in host countries Be proactive & assist the government in

preventing marketing of unsafe products

Should not misuse the close relationship developed by firm & government.

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MNCs Marketing Practices –Issues of Ethical Nature

Selling products in LDC, less in demand in Home countries- (Tobacco)

Selling prohibited products in LDC markets-(DDT)

Selling products likely to be misused-(Milk Power)

Dumping Counterfeiting-violating patent & copyright Grey marketing

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Fundamental International Rights: The right to 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

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Seven Moral Guidelines for MNCs

Inflict no intentional or direct harm Produce more good than bad for the host

country Contribute to host country’s development Respect the human rights of their employees Pay their fair share of taxes Respect local cultural beliefs that do not

violate moral norms Cooperate with the government to develop

and enforce background institutions