Transcript Document

C H A P T E R 10
Globalization of Ethical
Decision Making
Capitalism, Economics and Business
Ethics
• The first decade of the 21st century was a turbulent
one
– Ethical misconduct and excessive risk-taking
seemed rampant
– Many stakeholders lost confidence in businesses
• Lack of fairness, trust and honesty made
stakeholders question the stability of major
institutions, as well as the intentions of executives
• Even the competence of governmental regulatory
institutions was called into question
Risk Compartmentalization
• Occurs when profit centers within an organization are
unaware of the consequences of their decisions on
the organization as a whole
– No single person can be blamed for negative
outcomes that occur because of systemic
problems
Source: Flying Colours Ltd.
Key Figures in Modern Economics
• Adam Smith
– Laissez-faire capitalism
• John Maynard Keynes
– Government can stimulate the private sector
• Milton Friedman
– Return to self-regulating free market system
Keynes and Friedman Agreed That:
• People have rational preferences among outcomes
that can be identified and associated with value
• Individuals seek to maximize utility and firms seek to
maximize profits
• People act independently on the basis of full and
relevant information
Capitalism, Economics and Business
Ethics
• Socialism: Advocates that wealth and power be
shared equally across society based on the amount
of work expended in production
– Karl Marx was the most famous advocate
• Social democracy formed in the 1940s as an
offshoot of socialism
– Private ownership of property, but large government
• Current global economic system has created
bimodal wealth distribution: The middle class
shrinks so that there are many poor and a few very
wealthy
Two Schools of Economic Thought
• Rational economics: Assumes that people are
rational and base their decisions on maximizing their
utility based on the amount of resources available to
them
• Behavioral economics: Assumes that humans do
not always act rationally
– Also believes that how information is presented
can affect people’s choices, which is called the
framing effect
The Economic Capitalism Country
Differential
Common Values, Goals, and Business
Practices
• Global common values: Shared across most
cultures
• Country cultural values: Specific to certain groups
that express actions, behavior and intent
• Culture: Everything in our surroundings that is made
by people
– Each nation has a distinctive culture beliefs about
what business activities are acceptable
– Subcultures can also be found within many
nations
Cultural Differences
• Can become liabilities when firms transfer personnel
– One significant area of
cultural
differences is
language
– Cultural differences in
body
language can
also lead to
misunderstandings
– Perceptions of time
may
differ
Source: Corbis, Pacific Rim
Global Business Practices
• The Self-reference criterion (SRC): An
implied perspective of ethical superiority is
common
– SRC is an unconscious reference to one’s own
cultural values, experiences, and knowledge
– We react on the basis of knowledge, which is
accumulated over a lifetime and grounded in the
culture of origin
Perceptions of Countries as
Least/Most Corrupt
Global Business
• Dumping: The practice of charging high prices for
products sold in domestic markets while selling the
same products in foreign markets at low prices, often
below the costs of exporting them
– The U.S. has multiple anti-dumping laws
Source: Jack Star/PhotoLink
Cultural Relativism
• The concept that morality varies from one culture to
another
• There is a continuum of cultural relativism
– Some believe that only one culture defines ethical
behavior for the whole globe
– For the business relativist, there may be no ethical
standards except for the one in the transaction
culture, or none at all. These people may be in
conflict with their own individual moral standards.
Matrix for Global Relativists When
Making Cross-Cultural Decisions
Consumerism
• The belief that consumers, not the interests of corporations,
should dictate the economic structure of society
– Belief that consumption of goods relates to increased well
being
– Made-to-break (planned obsolescence) encourages
consumers to regularly buy more items
• Consumerism meeting with backlash because of increased
sustainability concerns
Human Rights
• Defined as an inherent dignity that should be afforded
all people with equal and inalienable rights as the
foundation of freedom, justice and peace in the world
• Have been codified in the United Nations Human
Rights Declaration
Source: Nancy Ney
Health Care
• Is a major global human rights issue
• The issue of healthcare availability and affordability
for workers in all nations is becoming a major source
of concern
• Question remains of
whether access to
healthcare is a right or
a privilege
Labor
• More people than ever work in nations other than
their homeland
• Doing business in many different countries, firms
today have many ethical concerns involving labor
issues
• A corporation must always know where the labor
comes from in its entire supply chain so as to avoid
controversy
• Corporations that do not take labor issues seriously
will find themselves in legal and ethical trouble
Sustainable Development
• Is a systematic approach to achieving development in
such a way that the earth’s resources are preserved
for future generations
– Will be a serious issue for most firms in the future
• Some companies conduct their own sustainability
performance reports
The Millennium Ecosystem
Assessment
The International Monetary Fund
• The IMF emerged from the Bretton Woods
agreement of 1944
• The IMF assumed a major role in the 1980s in the
management of the less developed countries (LDC)
debt crisis
• An ethical issue surrounding the IMF has to do with
the increased inequality in LDCs
– Some contend that foreign corporations offload
their debt via IMF bailouts
The World Trade Organization
• The WTO was established in 1995 and now includes
133 member nations and 33 others with observer
status
• Administers its own trade agreements, facilitates
future trading negotiations, settles trade disputes and
monitors the trade policies of member nations
– Addresses economic and social issues in a broad
range of industries
The Multinational Corporation
• Are public companies that operate on a global scale
without significant ties to any one nation or region
– Represent highest level of international business
commitment
• MNCs are subject to ethical criticism over their
impact on the countries in which they do business
• Because of increased scrutiny and pressure to be
socially responsible, many corporations belong to
Business for Social Responsibility
World’s Largest Countries and
Corporations (Based on GDP and
Revenues)