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 to
society beyond making profits
Often reflect the ethical values
and decisions of the top
management team
Ethics and social responsibility not
easily distinguished in practice
Excepts from Exhibit 15.1
show examples of
ethical/social responsibility
issues faced by MNCs
S t a k e h o ld e r
A ffe c te d
E x a m p le P r o b le m F o r t h 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 t e s a f e t y
fe a tu re s to m a k e a p ro d u c t
m o r e a f f o r d a b le f o r p e o p le
in a p o o r e r n a t io n ?
S to c k h o ld e r s
F a ir r e tu r n o n
in v e s t m 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 f e in o n e
c o u n t r y , s h o u ld it b e s o ld in
c o u n t r y w h e r e it is n o t
b a n n e d t o m a in t a in p r o f it
m a r g in s ?
E m p lo y e e s
C h ild L a b o r
C u s to m e r
EX
15.1
E t h ic a l/S o c ia l
R e s p o n s ib ilit y
Is s u e
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 t h e
c o u n t r y o f t h e ir lo c a t io n ?
H o s t c o u n try
F o llo w in g lo c a l
la w s
S h o u ld a n M N C f o llo w lo c a l
la w s t h a t v io la t e 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 t io n ?
S o c ie t y in
G e n e ra l
P r o t e c t io n o f
th e
E n v ir o n m e n t
Is a n M N C o b lig a t e d t o
c o n tr o l its h a z a r d o u s w a s t e
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 ?
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
ETHICAL PHILOSOPHY
TRADITIONAL VIEWS
Two
basic systems of ethical
reasoning
– Deontological
– Teleological
DEOLONTOLOGICAL
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
A contemporary
view
Basic ways that people use to
make ethical decisions and
explain ethical choices
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
See Exhibits 15.2-15.5
E X H IB IT 1 5 .2 A M O D E L O F 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 M A N A G E M E N T
K E Y S O C IA L
IN S T IT U T IO N S
R elig io n
L aw s an d L eg al
S ystem
M ANAGEM 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
wom en)
CULTURAL
NORM S AND
VALUES
(e .g ., n o rm s fo r g ift
g ivin g )
EX 15.3 ETHICAL ISSUES
IDENTIFIED BY SENIOR U.S. AND
EUROPEAN MANAGERS
tr
ia
P o litic a l a n d
u
s
Lo cal
n
y
/A
In v o l v e m e n t
.
U
.K
Is s u e s
U se o f
.S
.
In f o r m a t io n
U
G
e
rm
a
P e rs o n n e l
-1 0 0
-5 0
0
R e la tiv e F r e q u e n c y o f C o n c e rn
0 = m ean
50
.
.K
.S
.
U
U
G
er
m
an
y/
A
u
st
ri
a
EX 15.4 THE MANAGEMENT
OF KEY ETHICAL ISSUES
0 = Me an
-1 5
-10
-5
0
5
E th ic al Is s u e s Ad d r es s e d in T ra in in g
E th ic al Is s u e s Ad d r es s e d in W r itten P o lic ie s
EX 15.5 BELIEFS REGARDING
ETHICAL CODES
V io la te if n o t D e te c te d
D e fin e L im its
Aid to R e fu s e
R ais e E th ic al L ev e l
0
1
2
3
4
5=Agree
3 = N e u tr a l
F re n c h
G e rm a n
U .S .
1 = D is a g r ee
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
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
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 15.6
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
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
CODE 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
WHY MULTINATIONALS DO
NOT ALWAYS FOLLOW
ETHICAL PRINCIPLES?
Governments
make agreements
Compliance voluntary
Not all governments subscribe
Each guide is an incomplete
moral guide
HOW SHOULD THE MANAGER
DECIDE?
Consider
whether the action
makes business sense
Conduct and ethical analysis
– See Exhibit 15.8 next
IS TH E B E H A V IO R O R ITS C O N S E Q U E N C E :
V io la t e s H o s t
or H om e
C o u n t ry
Law s?
Legal
A nalysis
Y es
S TO P !
Y es
S TO P !
No
V io la t e s
M N C 's C o d e
of C onduct?
No
O rganizational
E thical
A nalysis
In
V io la t io n o f
t h e C o m p an y's
E th ic a l C o d e ?
Y es
S TO P !
No
S TO P !
No
S TO P !
No
S TO P !
No
C o n s is te n t
w it h C o m p a n y
C u lt u re ?
Y es
C ultural S ensitivity
E thical A nalysis
C o n s is te n t
w it h L o c a l
C u lt u ra l
N o rm s ?
Y es
P er sonal Ethical A nalysis
D o It!
Y es
C o n s is te n t
w it h P e rs o n a l
M o ral B e lief s ?
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