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Chapter Five

Globalization
and Society

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Chapter Objectives
To identify problems in evaluating the activities
of multinational enterprises (MNEs)
To evaluate the major economic effects of MNEs
on home and host countries
To understand the foundations of responsible
corporate behavior in the international sphere
To discuss some key issues in the social
activities and consequences of globalized
business
To examine corporate responses to globalization

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Evaluating the Impact of FDI
FDI is Foreign Direct Investment
The large size of some MNEs causes
concern for some countries
MNEs and countries need to understand
the impact of FDI in home and host
countries

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What MNEs Have To Offer

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Considering the Logic of FDI
Need to consider relationship between
those who make foreign investments
(MNEs) and possible effects on receiving
countries
Areas to consider:
Stakeholder trade-offs
Cause-and-effect relationships
Individual and aggregate effects

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Stakeholder trade-offs

The effects of an MNEs activities may be


simultaneously positive for one national
objectives and negative for another.
FDI may result in a win-win, win-lose or
lose-lose situation for both parties
involves.

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Cause-and-effect relationships

It is hard to determine whether the actions


of MNEs cause social conditions
FDI and unemployment. Relationship
Recipient countries economic and social
conditions and FDI impact.

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Individual and aggregate effects

The philosophy, actions and goals of each


MNE are unique.
No generalization about their impact
Evaluation of MNEs on case by case
bases.
Nations develop mechanism to control the
ativities of MNES.

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The Economic Impact of the MNE
Balance-of-Payments effects:
Net import effect
Net capital flow
Growth and Employment effects:
Home-country losses
Host-country gains
Host-country losses

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Balance-of-Payments Effects
For Foreign Exchange Reserves for
imports and par-off debts.
FDI brings inflow as well outflow.
Net Balance-of-Payments Effect

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Why Companies Care About Ethical
Behavior
Instrumental in achieving two objectives:
To develop competitive advantage
To avoid being perceived as irresponsible

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The Cultural Foundations of Ethical
Behavior
Relativism vs. Normativism: do truths
depend on the values of the groups or are
there universal standards
Negotiating between evils

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The Legal Foundations of Ethical
Behavior
Legal justification for ethical behavior may
not be sufficient because not everything
that is unethical is illegal.
The law is a good basis because it
embodies local cultural values.
As countries tackle similar ethical issues,
laws will become more similar.

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Ethics and Bribery
Bribes are payments or promises to pay cash or
anything of value
Bribes are used to get government contracts or
to get officials to do what they should be doing
anyway
Problems with bribery:
Affects performance of company & country
Erodes government authority
Damages reputations when disclosed
Increases cost of doing business

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Where Bribes Are (and Are Not)
Business as Usual

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Whats Being Done About
Corruption?
Cross-National Accords: The OECD, the
ICC, and the UN
The U.S. Foreign Corrupt Properties Act
Industry Initiatives
Relativism, the Rule of Law, and
Responsibility

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Ethics and the Environment

Sustainability
Global Warming and The Kyoto Protocol
National and Regional Initiatives
Company-Specific Initiatives

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Future: How to See the Trees in
the Rain Forest
The Amazon rain forest accounts for 1/3 of
the worlds remaining tropical forest
Kyoto Protocol proposes reforestation to
reduce greenhouse emissions
Major Challenge: protect global
environment while preserving Brazils
sovereignty over resources

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Ethical Dilemmas and the
Pharmaceutical Industry
Tiered pricing and other price-related
issues
WTO Agreement on Trade-Related
Aspects of Intellectual Property Rights
(TRIPS)
R&D and the Bottom Line

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Ethical Dimensions of Labor
Conditions
Ethical Trading Initiative
The Problem of Child Labor
What MNEs Can and Cant Do

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Sources of Worker-Related Pressures in
the Global Supply Chain

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Corporate Codes of Ethics
Motivations for Corporate Responsibility
Developing a Good Code of Conduct

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