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Chapter 11

Globalization
and Society
Learning Objectives
 Examine the broad foundations of ethical
behavior
 Demonstrate the cultural and legal foundations of
ethical behavior
 Discuss the importance of social responsibility
when operating internationally, especially in the
areas of sustainability
 Discuss key issues in the social activities and
consequences of globalized business
 Examine corporate responses to globalization in
the form of codes of conduct, among other things
Introduction
 Companies must satisfy stakeholders
 Shareholders
 Employees
 Customers
 Society
Foundations of Ethical Behavior
Learning Objective:
Examine the broad foundation of ethical
behavior
Foundations of Ethical Behavior
 Three levels of moral development
1. Preconventional
2. Conventional
3. Postconventional
Foundations of Ethical Behavior
 Teleological approach
 decisions are based on the
consequences of the action
 Utilitarianism
 an action is right if it produces the
greatest amount of good
 Deontological approach
 moral judgments are made and moral
reasoning occurs independently of
consequences
Why Do Companies Care?
 Ethical behavior can help a company
 develop a competitive advantage
 avoid being perceived as irresponsible
The Cultural and Legal
Foundations of Ethical Behavior
Learning Objective:
Demonstrate the cultural and legal
foundations of ethical behavior
Founders
Story
Story Continues …
Sustainability as a source to
CA
Stonyfield Farm, also
simply called Stonyfield, is
an organic yogurt maker
located in Londonderry, New
Hampshire, USA. Stonyfield
Farm was founded by
Samuel Kaymen in 1983, on
a 19th-century farmstead in
Wilton, New Hampshire, as
an organic farming school.
Relativism versus Normativism
 Relativism
 ethical truths depend on the groups
holding them
 Normativism
 there are universal standards of
behavior that all cultures should follow
Legal Justification: Pro and Con
 The law is inadequate because
 Some things that are unethical are not illegal
 Laws are slow to develop in emerging areas of
concern
 Laws may be based on imprecisely defined
moral concepts
 The law often needs to undergo scrutiny by the
courts
 The law is not very efficient
Legal Justification: Pro and Con
 Legal justification is appropriate because
 The law embodies many of a country’s moral
principles
 The law provides a clearly defined set of rules
 The law contains enforceable rules that apply
to everyone
 The law reflects careful and wide-ranging
discussions
Extraterritoriality
 Extraterritoriality
 imposing domestic legal and ethical practices
on the foreign subsidiaries of companies
headquartered in their jurisdictions
Ethics and Corporate Bribery
 Regardless of the reasons for not using
the law as a starting point for ethical
behavior, it remains a good starting point
 Countries looking for solutions to common
problems take similar legal steps
 Consider
 activities that affect the well-being of people

 activities that affect the environment


Corruption and Bribery
 Corruption
 the misuse of entrusted power for private gain
 Bribes
 payments or promises to pay cash or anything
of value
 Occurs
 to obtain government contracts

 to get public officials to do what they should

be doing anyway
Corruption and Bribery
Where Bribes Are (and Are Not) Business As Usual
Corruption and Bribery
 International accords to stop bribery
 OECD Anti-Bribery Convention
 ICC code of rules
 UN Convention against Corruption
 Regional initiatives include
 EU efforts
 U.S. Foreign Corrupt Practices Act and
Sarbanes-Oxley legislation
 Industry initiatives include
 2005 World Economic Forum zero tolerance
pact
Ethics and the Environment
Learning Objective:
Discuss the importance of social
responsibility when operating
internationally, especially in the areas of
sustainability
Ethics and the Environment
 Companies compromise the environment
 contamination of air, soil, or water during
manufacturing
 producing products that emit fossil-fuel
contaminants
 Effect of natural resource extraction
 renewable versus non-renewable
What is Sustainability?
 Sustainability
 meeting the needs of the present without
compromising the ability of future generations
to meet their own needs
 Is sustainability good business practice?
 yes
Global Warming, Kyoto
Protocol
 Kyoto Protocol (1997)
 signed to require countries to cut greenhouse
gas emissions to 5.2% below 1990 levels
between 2008 and 2012
 Some countries have adopted stricter
requirements
 others have not ratified the agreement
including
 the U.S., China, India
Ethical Dilemmas and
Other Business Practices
Learning Objective:
Discuss key issues in the social activities
and consequences of globalized business
Ethical Dilemmas in the
Pharmaceutical Industry
 Tiered pricing and other price-related
issues
 reverse engineering
 WTO Agreement on Trade-Related Aspects
of Intellectual Property Rights (TRIPS)
 generic drugs
 R&D and the Bottom Line
 India
Ethical Dimensions of
Labor Conditions
 Labor issues include
 Wages
 Child labor
 Working conditions
 Working hours
 Freedom of association
Ethical Dimensions of
Labor Conditions
Sources of Worker-Related Pressures in the Global Supply Chain
Ethical Dimensions of
Labor Conditions
 Child labor – ILO estimates 250 million
children aged 5–17 years work
 Some companies avoid operating in
countries where child labor is common
 or establish responsible policies in those
countries - IKEA
 Some companies refuse to hire individuals
who want to work long hours
 concerned about exploitation
Corporate Codes of Ethics
Learning Objective:
Examine corporate responses to
globalization in the form of codes of
conduct, among other things
Corporate Codes of Ethics
 How should a company behave?
 The UN Global Compact establishes
guidelines for appropriate behavior in
human rights
 labor
 the environment
 anti-corruption
Motivations for
Corporate Responsibility
 Unethical and irresponsible behavior could
 result in legal sanctions
 result in consumer boycotts
 lower employee morale
 cost sales because of bad publicity
 A code of conduct
 sets global policy that must be complied with
 communicates the code to employees,
suppliers, and subcontractors
 ensures that policies are carried out
 reports results to external stakeholders
Corporate Ethics in The Future
 Two trends:
 There will be greater convergence of proper
ethical conduct
 Individuals will develop skills to address ethical
issues
 Impact of social media
 Impact of future business and government
leaders