International Business Ethics

MGMT 491
Management Ethics in a Global
Environment
Jeffery D. Smith
Ethics of International Business

Inevitable trend

Fewer institutions for enforcement

National and cultural differences

 Multinational Corporations (MNCs)

financial and political strength technology, information, and organization

multidomestic multinational global multinational

(decentralized) (centralized)
Ethical Relativism Revisited…

Ethical principles, values, decisions, or

judgments are ultimately dependent upon, and
relative to, one’s culture, society, or personal
feelings.

X is right=X is practiced by culture C

X is right=X is practiced by society S

International business is conducted in places

with social and cultural practices distinct from
the United States
Corrupt Payments

• Foreign Corrupt Practices Act (1977, 1988, 1998)

• Bribes vs. Facilitating Payments

A corporation pays a bribe when it offers a special payment or service to

another individual, organization, or government agency in order to influence
the latter’s behavior or judgment so as to obtain or retain a business
arrangement.

A corporation makes a facilitating payment (grease payment) when it

makes a payment at the request of a foreign official in order to expedite
routine government action; a facilitating payment is not made to establish or
renew a business arrangement but to speed up the process of implementing
or carrying out a previously established business arrangement
Corrupt Payments, cont’d

• 1977 FCPA: Facilitating Payments only to

“clerical and ministerial officials” for the purpose
of expediting routine government action

• 1988 and 1998 FCPA: Facilitating Payments to

anyone so long as the payment is intended to
expedite routine government action

• 1998 FCPA: Facilitating Payments permissible if

the payment is lawful under the “written laws” of
the foreign country
Are Standards of Corrupt Payments Relative?

• What is a corrupt payment?

• Are there some payments that are contrary to

the very existence of free markets?

• What standards of corruption should US

businesses abide by, given the new flexibility of
the FCPA?
Thomas Donaldson
“Business Values Away From Home”

Balancing Ethical Relativism and Absolutism

• respect for core human values

• respect for local traditions

• context matters in ethical decision making

 Managing Ethical Conflicts in International Business

conflict of relative conflict of cultural

development tradition

WOULD THE PRACTICE IS THE PRACTICE ESSENTIAL

BE ACCEPTABLE AT HOME TO CONDUCT BUSINESS IN
IF MY COUNTRY WERE AT THE FOREIGN COUNTRY?
A SIMILAR LEVEL OF
DEVELOPMENT?
What is Fair Labor Practice?

Human resource, supply chain and information management practices

adopted by Multinational Enterprises (MNEs) that show respect for, and
support of, the freedom and well-being of employees.

Wages, compensation and benefits

Occupational health and safety
Freedom of thought, expression and association
Absence of coercion and repression
Non-discrimination
Appropriate treatment of children
Problems Thus Far

Growth of Outsourcing and Imports in Key Industries

• Specialization
• Reduced Production Costs
• Cycle Time
• Flexibility and Experimentation

“Race to the Bottom” and “Sweatshops”

Information Gaps

Corruption and Legal Infrastructures

Arnold, D. and Hartman, L. (2006). Worker Rights and Low Wage Industrialization:
How to Avoid Sweatshops. Human Rights Quarterly 28: 676–700.
Cooperation with Non-Governmental Organizations…

Social Accountability International (SAI)

Ethical Trading Initiative (ETI)

Fair Labor Association (FLA)

Consistency
Breadth
Verification Mechanisms
Programmatic Change
Developments: MNE Responses

“When I first began to study management, during and immediately after

World War II, a manager was defined as ‘someone who is responsible
for the work of subordinates.’ A manager in other words was a ‘boss’
and management was rank and power. This is probably still the definition
a good many people have in mind when they speak of ‘managers’ and
‘management.’

But by the early 1950s, the definition of manager had already changed to
one who ‘is responsible for the performance of people.’ Today, we know
that is also too narrow a definition. The right definition of a manager is
one who is responsible for the application and performance of knowledge.’

Peter Drucker, Post-Capitalist Society (1993), p. 44

Nike

1998, Just Did It

• Minimum age requirements

• OSHA-style requirements
• Employee education programs
• Microenterprise loan programs

Audit and Compliance Division

SHAPE Program (Safety, Health, Attitude, People and Environment)

Cooperation with Ministries, NGOs and Auditors

Two hand button pushing…

Arnold, D and Hartman, L. (2004). Rising Above Sweatshops:

Innovative Approaches to Global Labor Challenges. London: Praeger.
adidas-Salomon General Counsel
adidas-Salomon AG
SoE Management

Global Director
Social and Environmental Affairs

Social and Environmental Affairs Social and Environmental Affairs

Head of Asia Head of Americas

Social and Environmental Affairs Regional Team

Regional Team
Head of Europe HSE/Labor Monitors Based In:
HSE/Labor Monitors Based In:

CHINA Regional Team USA

HSE/Labor Monitors Based In:

INDONESIA SOUTH AMERICA

TURKEY

THAILAND

GERMANY
VIETNAM

SINGAPORE

TAIWAN
Prospects

Multi-stakeholder Dialogue/Management

Incremental but Systemic Change

Market-based Objections to Fair Labor Practice are Anecdotally False

Ian Maitland, “The Great Non-Debate Over International Sweatshops”

(2001)

National Center for Policy Analysis, “Sweatshops Offer Ways to Survive”

(1997)

David Henderson, Misguided Virtue: False Notions of CSR (2001)

 Alternative Supply Chain System Chart
Denis Arnold and Laura Hartman, “Moral Imagination and the Future of Sweatshops”
Business and Society Review 108:4 (2003), p. 434

Global Monitoring
Organizations Global Consumer
Groups
External Auditors
MNE American Consumers

Shareholders
Global Labor
In Country Brand Advocates
Professional
Staff In Country Labor
Reps

In Country Labor
FLA Contractor Advocates
ILO
WRC
UN
Global Trade Unions
Global
Compact

Host Contractor Workers

Nations