Be sure to read the lecture notes thoroughly, as they supplement the information offered in digital material within the course. You will be responsible to know the information provided here and in your assigned reading.I. Ethical Perceptions And International BusinessThe self-reference criterion (SRC) is the idea that people perceive differences between themselves and citizens of other countries when traveling abroad; they may believe the values of their own country to be ethically superior to those of others.The SRC is an unconscious reference to one?s own cultural values, experiences, and knowledge. When confronted with a situation, a person reacts on the basis of knowledge accumulated over a lifetime and usually grounded in the culture of origin.These reactions are based on meanings, values, and symbols that relate to the culture of origin, but may not have the same relevance to people of other cultures.In the United States, for example, 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 the products?is viewed negatively, and this country has a number of anti-dumping laws.1. Culture as a Factor in Business 1. Ethical issues that arise from international business activities often differ significantly from those that evolve from domestic business activities. 2. Culture is everything in our surroundings made by people: both tangible items and intangible concepts and values. This definition includes language, religion, law, politics, technology, education, social organization, general values, and ethical standards. 1. Each nation has a distinctive culture and, consequently, distinctive beliefs about what business activities are acceptable or unethical. 2. Distinct subcultures can also be found within many nations. 3. One of the critical ethical issues linked to cultural differences is the question of whose values and ethical standards take precedence in negotiations and business transactions. 2. Adapting Ethical Systems to a Global Framework 1. When businesspeople rationalize straying from their own ethical values when doing business abroad, they are resorting to cultural relativism: the concept that morality varies from one culture to another and that business practices are therefore differentially defined as right or wrong by particular cultures. 2. As business becomes more global and multinational corporations proliferate, the chances of ethical conflict increase. II. Global Values1. There have been numerous attempts to establish a set of global or universal ethical standards. 1. Many of these efforts show a pattern of shared values, such as truthfulness, integrity, fairness, and equality, which suggest a universal set of ethics that can be applied to business across the globe. 2. The shared values assume that we all have basic rights and responsibilities that must be adhered to when doing business. 2. If there is a universal set of ethics, why then do businesspeople have trouble understanding what is ethical or unethical? 3. Although honesty, charity, virtue, and doing good to others may be universally desirable qualities, differences in implementing them can raise ethical issues.To address such problems, a number of companies have agreed to abide by the Global Sullivan Principles, which seek to encourage social responsibility around the world, however, some of these companies have not implemented these principles. 4. A major challenge is how to accommodate inconsistencies in ethics and regulations, and how to be proactive in developing responsible conduct. The concern is not only to develop legal limitations for behavior, but also to develop incentives for self-regulation and ethical conduct that are acceptable in a global business environment.III. The Multinational CorporationMultinational corporations (MNCs) are public companies that operate on a global scale without significant ties to any one nation or region.1. They represent the highest level of international business commitment and are characterized by a global strategy of focusing on opportunities throughout the world. 2. Because of their size and financial power, multinational corporations have been the subject of much ethical criticism. 1. Both American and European labor unions argue that it is unfair for MNCs to transfer jobs overseas, where wage rates are lower. 2. MNCs have been accused of increasing the gap between rich and poor nations, and of misusing and misallocating scarce resources. 3. Critics believe that the size and power of multinationals create ethical issues related to the exploitation of both natural and human resources. 4. Although some MNCs have been accused of paying inadequate wages, the ethical issue of fair wages is complicated. 5. The activities of multinational corporations may also raise issues of unfair competition. 6. Some MNCs strive to be good global citizens with strong ethical values. Many companies endorse business responsibility abroad and support a globally-based resource system called Business for Social Responsibility (BSR) which tracks emerging issues and trends, provides information on corporate leadership and best practices, conducts educational workshops and training, and assists in developing practical business ethics tools. 7. Although multinational corporations are not inherently unethical, their size and power often seem threatening to less-developed countries.The ethical problems that MNCs face arise from the conflicting demands made from opposing points of view. IV. Ethical Issues Around The GlobeThe list of issues presented in this chapter is not exhaustive, but merely a sampling of the complexity of ethical decision-making in the global arena.1. Sexual and Racial Discrimination 1. Various laws prohibit businesses from discrimination on the basis of sex, race, religion, or disabilities, in their hiring, firing, and promotion decisions, but the problem of sexual and racial discrimination is still a reality throughout the world. 2. By acknowledging and attempting to curb discrimination, businesses around the world can realize specific benefits. 2. Human Rights Corporate concern for global human rights emerged as news stories depicting opportunistic use of child labor, payment of low wages, and abuses in foreign factories helped reshape attitudes about acceptable behavior for organizations. 3. Price Discrimination A major ethical issue in international business is how products sold in other countries are priced. 1. When a firm charges different prices to different groups of customers, charges of price discrimination may occur. 2. When companies market their products outside their own countries, the costs of transportation, taxes, tariffs, and other expenses can raise the prices of the products. 1. When prices increase beyond the costs of these additional expenses, however, an ethical issue emerges. 2. Increasing prices in this way is sometimes referred to as gouging. 3. Another pricing issue is dumping, which may occur for several reasons.4. Bribery 1. In many cultures, giving bribes?also known as facilitating payments?is an acceptable business practice. 2. The U.S. Foreign Corrupt Practices Act (FCPA) prohibits U.S. companies from offering or providing payments to officials of foreign governments for the purpose of obtaining or retaining business abroad. 5. Harmful ProductsIn advanced industrialized nations, governments have banned the sale of certain products that are considered harmful. Some companies in those nations continue to sell such products, including ones with genetically modified ingredients, in other countries where they remain legal. 6. Pollution and Natural EnvironmentWhereas there are boundaries on the implications of many legal and ethical violations, in the case of environmental issues, the effects of abuses can be far-reaching and long-term. 7. Telecommunications Issues 1. Telecommunications technology has greatly facilitated information access, but this ease of information access also brings ethical issues, particularly with regard to privacy. 2. Another technology issue is day trading, which involves placing multiple buy and sell orders for securities, and holding those positions for a very short time. 3. Questionable financial activities, such as money laundering, have been made easier by global telecommunication. 1. Money laundering means that illegally received funds are transferred or used in a financial transaction so as to conceal their source or ownership, or facilitate an ?illegal? activity. 8. Intellectual Property Protection 1. Intellectual property refers to the ideas and creative materials developed to solve problems, carry out applications, educate, and entertain others. 2. It is generally protected through patents, copyrights, and trademarks. 9. World Trade Organization 1. The World Trade Organization (WTO) was established in 1995 at the Uruguay round of negotiations of the General Agreement on Tariffs and Trade (GATT) 1. a. The WTO addresses economic and social issues such as agriculture, textiles and clothing, banking, telecommunications, government purchases, industrial standards, food sanitation regulations, services and intellectual property. 2. In May 2002, the WTO reorganized as the Trade Regulation Organization (TRO), changing its focus and establishing new goals.
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