INTRODUCTION
• Multinational managers face
complex ethical issues
• With an understanding of key
ethical problems in multinational
management, managers can make
more informed ethical judgments
BUSINESS ETHICS
• Ethics - the rules and values that
determine what goals and actions
people follow when dealing with
other human beings
• Business ethics: all business
decisions with ethical
consequences
INTERNATIONAL
BUSINESS ETHICS
• The unique ethical problems
faced by managers conducting
business operations across
national boundaries
SOCIAL
RESPONSIBILITY
• The responsibility businesses have
to society beyond making profits
• Often reflects the ethical values
and decisions of the top
management team
• Ethics and social responsibilitynot easily distinguished in practice
Excepts from Exhibit 4.1
show examples of
ethical/social responsibility
issues faced by MNCs
S ta k e h o ld e r
A ffe c te d
C u s to m e r
S to c k h o ld e r s
E th ic a l/S o c ia l
R e s p o n s ib ility
Is s u e
E x a m p le P r o b le m F o r th e
MNC
P ro d u c t s a fe ty
S h o u ld a n M N C d e le te s a fe ty
fe a tu re s to m a k e a p ro d u c t
m o r e a ffo r d a b le fo r p e o p le
in a p o o r e r n a tio n ?
F a ir r e tu r n o n
in v e s tm e n t
If a p r o d u c t is b a n n e d
b e c a u s e it is u n s a fe in o n e
c o u n tr y , s h o u ld it b e s o ld in
c o u n tr y w h e r e it is n o t
b a n n e d to m a in ta in p r o fit
m a r g in s ?
E m p lo y e e s
C h ild L a b o r
H o s t C o u n try
F o llo w in g L o c a l
Law s
S o c ie ty in
G e n e ra l
P r o te c tio n o f
th e
E n v ir o n m e n t
S h o u ld a n M N C u s e c h ild
la b o r if it is le g a l in th e
c o u n tr y o f th e ir lo c a tio n ?
S h o u ld a n M N C fo llo w lo c a l
la w s th a t v io la te h o m e
c o u n tr y la w s a g a in s t
d is c r im in a tio n ?
Is a n M N C o b lig a te d to
c o n tr o l its h a z a r d o u s w a s te
to a d e g r e e h ig h e r th a n lo c a l
la w s r e q u ir e ?
ETHICAL PHILOSOPHY
TRADITIONAL
VIEWS
• Two basic systems of ethical
reasoning
– Deontological
– Teleological
DEONTOLOGICAL
THEORIES
• Actions have a good or bad morality
regardless of the outcomes they
produce
TELEOLOCIAL
• Morality from the consequences
of an act
– utilitarianism
MORAL LANGUAGES
• Basic ways that people use to
make ethical decisions and
explain ethical choices
– a contemporary view
SIX BASIC ETHICAL
LANGUAGES
•
•
•
•
•
•
Virtue and vice
Self control
Maximize human welfare
Avoiding harm
Rights/duties
Social contract
NATIONAL
DIFFERENCES
• National culture and social
institutions affect ethical
behavior/social responsibility
E X 4 .2 IN S T IT U T IO N A L A N D C U L T U R A L
E F F E C T S O N B U S IN E S S E T H IC S IS S U E S A N D
MANAGEMENT
K E Y S O C IA L
IN S T IT U T IO N S
R e lig io n
Law s and Legal
S y s te m
M ANAG EM ENT
P R A C T IC E S T O
M O N IT O R A N D
C O N T R O L E T H IC A L
B E H A V IO R IN
O R G A N IZ A T IO N S
(e .g ., co d e s o f e th ics)
IM P O R T A N T E T H IC A L
IS S U E S F O R
B U S IN E S S
(e .g ., e q u a l rig h ts fo r
w omen)
CULTURAL
NO RM S AND
VALUES
(e .g ., n o rm s fo r
g ift g ivin g )
EX 4.3 ETHICAL
ISSUES IDENTIFIED BY
SENIOR U.S. AND
EUROPEAN MANAGERS
an
y/
Au
st
U.
ria
K.
Political and
Local
Involvement
.
Use of
Information
U.
S
G
er
m
Personnel
Issues
-100
-50
0
50
Relative Frequency of Concern
0 = mean
U
.S
.
G
er
m
an
y/
A
us
U
tr
.K
ia
.
EX 4.4 THE
MANAGEMENT OF
KEY ETHICAL ISSUES
-15
-10
-5
0
5
Ethical Issues Addressed in Training
Ethical Issues Addressed in Written Policies
0 = Mean
EX 4.5 BELIEFS
REGARDING ETHICAL
CODES
Violate if not Detected
Define Limits
Aid to Refuse
Raise Ethical Level
0
French
German
1
U.S.
2
3
5=Agree
3=Neutral
1=Disagree
4
FOREIGN CORRUPT
PRACTICES ACT
• Forbids U.S. companies to make
or offer payments or gifts to
foreign government officials to
get or retain business
– “Reason to know" provision
• See Exhibit 4.7
• FCPA does not prohibit some forms
of payments that may occur in
international business
– payments made under duress to
avoid injury or violence are
acceptable
EFFECTS OF THE
“ETHICS GAP”
• FCPA and proliferation of ethical
codes in US are creating and ethics
gap
• FCPA blocked some gains in export
market share and FDI
• Pressure on other countries to follow
US rules
TOWARD
TRANSNATIONAL
ETHICS
ETHICAL
CONVERGENCE
• In spite of wide differences in
cultures and social institutions,
growing pressures for multinationals
to follow same rules
PRESSURES FOR
ETHICAL
CONVERGENCE
• Growth of international trade
– creates pressures for
uniformity
• Increased cross national imitation
• Mixed cultural background
employees
PRESCRIPTIVE
ETHICS FOR THE
MULTINATIONAL
• Donaldson suggests
– guides based on the moral
languages of avoiding harm,
right/duties, and the social
contract
– specified in contracts and
international laws
INTERNATIONAL
CODES OF CONDUCT
• For moral language to work, there
must be codes of conduct
• Current codes exist based on
codes from international
governing bodies (UN, ILO) and
international agreements (Exhibit
4.8)
MULTINATIONALS
DO NOT ALWAYS
FOLLOW ETHICAL
AGREEMENTS
•
•
•
•
Governments make agreements
Compliance voluntary
Not all governments subscribe
Each guide is an incomplete moral
guide
HOW SHOULD THE
MANAGER DECIDE?
ETHICAL
RELATIVISM VS
ETHICAL
UNIVERSALISM
• Ethical relativism - each society's
view of ethics considered
legitimate and ethical
• Ethical universalism - basic moral
principles transcend
cultural/national boundaries
PRACTICAL
PROBLEMS OF
FOLLOWING
EITHER
• Convenient relativism - companies
use ethical relativism to behave
any way they please
• Cultural imperialism with ethical
universalism
BALANCING THE
NEEDS OF THE
COMPANY WITH
ETHICAL
CONSEQUENCES
• Managers must weigh and balance
the economic, legal, and ethical
consequences of their decisions
FORMS OF ANALYSES
• Economic
• Legal
• Ethical
IS T H E B E H A V IO R O R IT S C O N S E Q U E N C E :
V io lates H o st
or Hom e
C o u n try
L aw s?
L eg al
A n a ly s is
Yes
STOP!
Yes
STOP!
No
V io lates
M N C 's C o d e
o f C o n d u ct?
No
O rg a n iza tio n a l
E th ic a l
A n a ly s is
In
V io latio n o f
th e C o m p an y's
E th ical C o d e?
Yes
STOP!
No
STOP!
No
STOP!
No
STOP!
No
C o n sisten t
w ith C o m p an y
C u ltu r e?
Yes
C u ltu ra l S e n s itiv ity
E th ic a l A n a ly s is
C o n sisten t
w ith L o cal
C u ltu r al
N o r m s?
Yes
P erso n al E th ical A n alysis
D o It!
Yes
C o n sisten t
w ith P er so n al
M o ral B eliefs?
CONCLUSIONS
• Multinational managers face ethical
challenges magnified by the
international context
• Need to understand home ethical
codes and impact on ethics of foreign
culture/social institutions
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MULTINATIONAL MANAGEMENT IN A CHANGING WORLD