Ethical Issues and Dilemmas in Business Questions Solution

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Discussion

The discussion this week is based around an ethics audit and is probably the easiest discussion assignment in the course. 250-word (not including in-text citation and references as word count) count minimum with two scholarly sources in APA format. For the two scholarly sources, one from the textbook that’s posted below and the other one from an outside source. Let’s be sure to write it in own work 100% and give credit appropriately when using someone’s else work.

Unit Five asks learners to identify and discuss the specific ethical issue/dilemma that they believe will have an impact in the future.  Choose from the “Ethical Issues and Dilemmas in Business,” that we looked at in Unit 2 (pp. 65-85).  Additional guidance is on the discussion board.

Reflect on the major ethical issues and dilemmas we have covered in this course. Using the categories in “Ethical Issues and Dilemmas in Business,” (Unit Two, pp. 65-85) identify the area of ethics you believe will have the greatest impact in the future.

1) Briefly describe/define that issue. Using evidence from the text or from outside sources, discuss

  • why the      issue is important,
  • the impact      you expect it to have on the competitive landscape, and
  • the impact      the issue will have on your own attitudes and behaviors.

The initial post should be a minimum of 250 words and should be supported with evidence from at least two sources including the book. As always, everyone should update the subject line of the initial post so that it reflects the topic of the post.

Complete

1,300 word count and there is a total of 4 questions (not including in-text citation and references as the word count), a minimum of three scholarly sources are required in APA format. For the three scholarly sources, one from the textbook that’s posted below and the other two from an outside source. Let’s be sure to write it in own work 100% and give appropriately when using someone’s else work.

The Complete assignments are all based on the assigned material, focusing on globalization, the economic foundations of business ethics, multinational corporations, and several global ethics issues.

Q1, Q2, and Q3 will all probably need the use of outside sources.

An article for Q1 is suggested in the Complete section. That article is posted in the Unit 5 Course Materials. 

For Q2, note that the library has made some changes to its website. Use Gale Group Datebase Then scroll down the page and click on the "Criminal Justice" tab.  Select “Opposing Viewpoints in Context,” and search for “cybersecurity” or "cybersecurity threats" or "cybersecurity risks."  Then select “News” and sort the results by date. 

Q3 is about health care.  Current news should be a good source of material for that topic. Try to avoid getting caught up in the politics of health care reform and focus on the ethical issues.

Q4 can be answered fully using information from the Read and Attend sections of the course.

1 Economic Systems
 

Review the material on economic systems in Chapter Ten.  Look at Figure 10.2 and answer the following:
 

1)    What are the differences between capitalism and socialism?
2)    What are the differences between rational economics and behavioral economics?
3)    Explain the US shift from the 1950s-90s rational economics to the 2010 behavioral economics?
 

For additional information on this question, see the article, The End of Rational Economics, from Harvard Business Review (https://hbr.org/2009/07/the-end-of-rational-economics). 

 2Economic Systems
 

Internet security is often in the news. The Carnegie Council identifies it as a risk that “require[s] organizations to make ‘fundamental ethical choices’ when doing business globally” (Ferrell, Fraedrich & Ferrell, 2013, p. 289). Review the material on internet security in Chapter Ten and answer the following:
 

1)    Research a recent incident related to internet security and privacy that has a global or international component. Describe the incident, identify the ethical issues involved, and propose a solution (this doesn’t have to be technical solution). Try to avoid politics unless there is also a clear link to business ethics.
 

Hint: Go Gale Group Datebase. Select “opposing viewpoints in context,” and search for “cybersecurity.” Select “news” and sort the results by date. 

3 Health Care
 

Read the Chapter Ten debate issue on page 296.  Clearly state whether you think
 

1)    Health care is a fundamental right. It protects life, and should be ensured by government, or
2)    Health care is a privilege and should not be provided by government because of the high costs.  
 

Explain your answer.

4 Resolving Ethical Business Challenges – CornCo
 

Read the CornCo scenario on pp. 304-305. Pay particular attention to the global issues and the fact that law is not necessarily a static concept in business because it varies across nations. Answer the following:
 

1)    What should George do? Identify the relevant issues that affect your decision, along with an ethical interpretation of those issues.

Extra Credit

1) Watch one of the following documentaries. Both look at the global components of a large US corporation and some of the ethics issues they have experienced:

a) Watch the documentary “Mark Thomas on Coca Cola.”  It is about an hour long and details some of the broader historical context and global events surrounding the company. Little has changed since the video was produced.  Here’s the link:

https://freedocumentaries.org/documentary/channel-4-dispatches-mark-thomas-on-coca-cola

OR

b) If you didn't complete the Unit 1 extra credit, watch the documentary “Is Walmart Good for America?”  The documentary is about an hour long and was produced by Frontline in 2004. Like the Coca-Cola story, little has changed since the documentary was produced.  Here’s a link to the video:

http://www.pbs.org/wgbh/pages/frontline/shows/walmart/view/

2) Write a one page response (300-400 words) indicating how the video helps (or doesn’t help) create a better understanding of economics, globalization, and global ethics issues.  All of those topics are part of the Unit 5 Complete assignments. Follow APA requirements for a cover page and reference page.

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CHAPTER 10 R I C A R D , A D R I E N N E 4 7 9 T S © Paul Aniszewski, Shutterstock 2 GLOBALIZATION OF ETHICAL DECISION-MAKING Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. CHAPTER OBJECTIVES CHAPTER OUTLINE t To discuss global values, goals, and Global Culture, Values, and Practices business practices within ethics Economic Foundations of Business Ethics Economic Systems t To understand the role of capitalism and economics as factors in business ethics t To assess the role of multinational corporations in business ethics t To assess the role of the International Monetary Fund in business ethics t To assess the role of the United Nations Global Compact in business ethics t To assess the role of the World Trade Organization in business ethics t To explore and discuss common global business practices t To gain awareness of global ethical issues AN ETHICAL DILEMMA* R I C A R D , A D R I E N N E 2 4 7 9 T S At the Dun and Ready (D&R) Company, Sid was responsible for monitoring the Japanese stock market to determine patterns and identify stocks that could become active. One of 10 company representatives in Japan, Sid, who was of Japanese descent and fluent in the language, had been assigned to Tokyo. Being relatively new to the firm, he was told to gather information for his boss, Glenna. Glenna had been with D&R for 10 years, but because of the cultural barriers, she was not Multinational Corporations Global Cooperation to Support Responsible Business International Monetary Fund (IMF) United Nations Global Compact World Trade Organization (WTO) Global Ethics Issues Global Ethical Risks Bribery Foreign Corrupt Practices Act U.K. Antibribery Act Antitrust Activity Internet Security and Privacy Human Rights Health Care Labor and Right to Work Compensation A Living Wage Executive Compensation Consumerism The Importance of Ethical Decision Making in Global Business enthusiastic about her Tokyo assignment. Glenna encouraged Sid to get to know the Japanese brokers, traders, and other key people in the business. Thanks to his background, he found that he blended easily into the culture. In Japan, ceremony and giving favors is a way of life. Sid learned that, by observing Japanese customs and perfecting his Japanese, he became not only an information resource on the Japanese stock market and its players for his company but also a resource Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 274 Part 4: Implementing Business Ethics in a Global Economy for the Japanese who wanted to invest in the U.S. market. He found that the locals would talk to him about important investments rather than coming into the office to see Glenna. Sid’s duties included taking key customers to bars, restaurants, and vacation spots for entertainment. One day a government official in the group that Sid was entertaining hinted that he and the others would like to play golf on some famous U.S. courses. Sid understood what the government official wanted and relayed the request to Glenna, who told him that granting a favor of this kind would normally be against policy, but because such favors seemed to be the custom in Japan, they could do some “creative bookkeeping.” “When in Rome, right, Sid?” was Glenna’s response to the whole situation. By pulling some strings, Glenna managed to enable these officials to play at 10 of the most exclusive U.S. golf courses. Later, several officials passed the word to people in Japan’s elite financial circle about Sid’s helpfulness. Six months later, Glenna was transferred back to the States. Rumor had it that expenses were too high and revenue too low. Her replacement, Ron, didn’t like being sent to Japan either. In his first week on the job, he told the staff that he would shorten his tour in Tokyo by slashing expenses and increasing productivity. Ron was a “by-thebook” person. Unfortunately, company rules had not caught up with the realities of cultural differences. After two months with Ron, seven of the original 10 company representatives had quit or been fired. Sid was barely surviving. Then one of his contacts in the government repaid a favor by recommending several stocks to buy and sell. The information paid off, and Sid gained some breathing room from Ron. Around the same time, some of Sid’s Japanese clients lost a considerable amount of money in the U.S. markets and wanted a “discount”—the term used for the practice in some large Japanese brokerage houses of informally paying off part of their best clients’ losses. When Glenna was still in Tokyo, she had dipped into the company’s assets several times to fund such discounts. Because everything required Ron’s approval, Sid and his colleagues believed that this practice would not be tolerated. However, late one afternoon Sid and a few others provided the proper forms, and Ron signed them without realizing what he had done. Several months passed, and the three survivors resorted to lowering their expenses by using their own funds. This in turn led to Sid “churning” some of his accounts; that is, he bought and sold stocks for the express purpose of increasing his own revenues. Churning was tolerated in Japan, R with other practices that would be deemed along questionable in the United States. Ron was oblivious I to what Sid was doing because his focus was on C expenses. reducing AThe previous month, a group of important D&R clients had thrown a party for a few of their R brokers at one of their local haunts. After the favorite customary toasts and small talk, it was suggested D to Sid that a Japanese cartel might be interested , Sid was cautious and nothing else was in D&R. mentioned. Several weeks later at another party, Sid and the two remaining D&R people were told A that a takeover was imminent. But to make the takeover D painless, the cartel needed certain sensitive information. Sid’s reward for providing it would be a R high position in the new, reorganized company and a I “wink/nod” agreement that he could go anywhere in the world for his next assignment. EThat week Ron announced that headquarters wasNpleased with the productivity of the Tokyo group. “It’sNonly a matter of time before I get transferred, and I want out of Tokyo,” he told them. The office knew thatEif Ron succeeded, his next position would be that of vice president. Ron also informed the group that corporate representatives would be coming to Tokyo the2following week. 4“It seems they’ve heard rumors of a possible hostile takeover attempt on D&R from someone in 7 and they want us to check it out,” Ron said, Japan, with 9a tight smile. “There will be some changes next week.” TSid suspected that this meant there would be even S fewer people working even harder. It might also mean, however, that someone knew that Sid and the other two representatives had been talking to the wrong people. Or maybe one of the three had sold out the other two. If Sid was to gather the information sought by the cartel, he would have to act quickly. Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 10: Globalization of Ethical Decision-Making QUESTIONS | EXERCISES 1. What are the ethical issues in this situation? 2. Identify the pressures that have caused the ethical issues to develop. 275 3. Discuss the advantages and disadvantages of each decision that Sid could make. *This case is strictly hypothetical; any resemblance to real persons, companies, or situations is coincidental. A dvances in communication, technology, and transportation have minimized the world’s borders, creating a new global economy in which more and more counR tries are industrializing and competing internationally. These transactions across national boundaries define global business, a practice that brings together people from I countries that have different cultures, values, laws, and ethical standards. Therefore, the inC ternational businessperson must not only understand the values, culture, and ethical standards of his or her own country, but must also beA sensitive to those of other countries. In this chapter, we explore the ethical complexities and challenges facing businesses R that operate internationally. We try to help you understand how global business ethics has D The global business environment, if more complexity than business in a domestic context. not understood, can destroy the trust companies,need to be successful. To transition from one well-understood culture or country to the global arena requires additional knowledge. Our goal in this chapter is to help you avoid, or at least become aware of, the many ethical quagmires that lurk in this domain. To help you A become more ethically sensitive to the global environment of business ethics, we start with the basics, discussing global values and D to help modify their business practices cultural dimensions that can be used by companies to different countries. Next, we examine the economic R foundations of business ethics. In addition, we help you understand that there are global entities that do not necessarily conform to your country’s view of the world or the way to Ido business. In this chapter we also examine multinational corporations and the ethical problems they face. We move on to discuss E the International Monetary Fund, the United Nations Global Compact, and the World Trade N Organization. We conclude with an analysis of current and future ethical problems facing N global businesses, including global ethical risks, bribery, antitrust activity, Internet security and privacy, human rights, health care, labor and right to work issues, compensation, and E consumerism. Our goal is to help you understand how international business activities can create ethical conflicts and help you improve your ethical decision-making ability. 2 4 GLOBAL CULTURE,VALUES,AND PRACTICES 7 Country cultural values are subjective, are based on the 9 social environment, and are used to develop norms that are socially and legally enforced. These values can be specific to countries, T regions, sects, or groups. National culture is a much broader concept than organizational culture. It includes everything in our surroundings that are S made by people—both tangible items, such as artifacts, and intangible entities, such as concepts and values. Language, law, politics, technology, education, social organizations, general values, and ethical standards are all included within this definition. Each nation contains unique cultures and, consequently, distinctive beliefs about what business activities are acceptable or unethical. Subcultures can also be found within many nations, ethnic groups, and religious groups. Therefore, when transacting international business, individuals encounter values, beliefs, and ideas that may diverge from their own Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 276 Part 4: Implementing Business Ethics in a Global Economy because of cultural differences. When someone from another culture mentions “integrity” or “democracy,” most Americans might feel reassured that these are familiar concepts. However, these concepts mean different things to different people, depending on their culture. Moreover, you must keep in mind that organizational culture is different from national culture, though often organizational cultures are derived from—and influenced by—national cultures. Most cultures need auditors, directors, or other entities associated with corporate governance to provide independent oversight of the operations of an organization. In the Japanese banking system, the concept of “independent oversight” has been blurred by the fact that retired Japanese bureaucrats often become auditors and directors. They are trusted simR ply because of their status. When those providing oversight also have relationships within and/or a vested interest in the success of theI company, a truly independent relationship does not exist and there could be conflicts of interest or corporate governance oversight failure. Different cultural values and how theyCaffect business have intrigued management experts for years. Many have developed frameworks for classifying cultural behavior patterns A that can help businesspeople who work in different countries. One of the most well-known R frameworks was proposed by Dutch management professor Geert Hofstede. Hofstede identified four cultural dimensions that can have D a profound impact on the business environment: individualism/collectivism, power distance, uncertainty avoidance, and masculinity/ femininity.1 We will discuss the first three ,in the following paragraphs. The individualism/collectivism dimension of culture refers to how self-oriented members of a culture are in their behavior. Individualist cultures place a high value on individual A achievement and self-interest. The United States is an example of an individualistic culture. Collectivist cultures value working towardD collective goals and group harmony. Mexico and several countries in Asia adhere to more collectivistic principles. Collectivist cultures tend to R avoid public confrontations and disagreements.2 In Thailand, for instance, negatives such as I By understanding this cultural dimension, you “no” tend to be avoided in business settings. will be more likely to maneuver correctly within E different cultural business settings. The power distance dimension refers to the power inequality between superiors and Nelements of both a higher and a lower power subordinates. The United States has some distance culture. Over the years, the U.S. business environment has adopted forms of manN agement, such as participative management, that place supervisors and subordinates on a more equal footing. In some businesses, E employees address their superiors by their first names and have the power to make decisions that are normally reserved for management. Arab countries score higher on the power distance dimension. Cultures with high power 2 for (or fear of) supervisors may be so great distance tend to be more hierarchal, and respect that managerial misconduct could become4hard to pinpoint.3 Uncertainty avoidance refers to how members of a society respond to uncertainty or 7 ambiguity. Cultures that score high on the uncertainty avoidance dimension, such as Great Britain, tend to want to avoid risk-taking.9Organizations within these cultures may have more rules in place to ensure that employees do not deviate from accepted standards. T Cultures with less uncertainty avoidance, such as Canada, believe that risk-taking and inS outcomes.4 Businesses from either culture novation are important in achieving successful will need to be aware of how a particular culture views uncertainty avoidance. For instance, if a businessperson from the United States is giving a sales presentation to a business in Uruguay—a culture with higher uncertainty avoidance—the American businessperson might try to reassure the Uruguayan company by attempting to mitigate the risks involved. As Hofstede’s dimensions suggest, businesspeople who travel to other countries quickly perceive that other business cultures have different modes of operation. The perception Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 10: Globalization of Ethical Decision-Making 277 exists that American companies are different from those in other countries, and some people perceive U.S. companies as being superior to their foreign counterparts. This implied perspective of ethical superiority—“us” versus “them”—is also common in other countries. Figure 10.1 indicates the countries that businesspeople, risk analysts, and the general public have perceived as the most and least corrupt. In business, the idea that “we” differ from “them” is called the self-reference criterion (SRC). The SRC is the unconscious reference to one’s own cultural values, experiences, and knowledge. When confronted with a situation, we react on the basis of knowledge we have accumulated over a lifetime, which usually is grounded in our culture of origin. Our reactions are based on meanings, values, and symbolsR that relate in a certain way to our culture but may not have the same relevance to people ofI other cultures. Walmart’s foray into Germany is one example of how the SRC can cause problems. C code of Walmart Stores, Inc., includA German labor court ruled that parts of the ethics ing a ban on relationships between employees, violate A German law. The same court also ruled against a proposed hotline for employees to report on colleagues’ violations of the R German Walmart stores sued the retail code of conduct. Labor representatives from the 91 giant over the code after it was introduced withoutDtheir prior approval. Under German law, employee–management councils must sign off on a wide range of workplace conditions.5 , These, as well as other cultural differences, led Walmart to close its German stores. Walmart FIGURE 10.1 Transparency International’s Corruption Index Rankings by Country. A The 2010 Corruption Perceptions Index measures the perceived levels of public-sector corruption D in 178 countries around the world. R I E N N E Very Clean 9.0 – 10 8.0 – 8.9 7.0 – 7.9 6.0 – 6.9 5.0 – 5.9 4.0 – 4.9 3.0 – 3.9 2.0 – 2.9 1.0 – 1.9 0 – 0.9 No Data 2 4 7 9 T S Highly Corrupt Source: Reprinted from Corruption Perceptions Index 2010. Copyright 2010 Transparency International: the global coalition against corruption. Used with permission. For more information, visit http://www.transparency.org. Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 278 Part 4: Implementing Business Ethics in a Global Economy learned that its ethical controls, which it had assumed would be accepted without complaint, were not acceptable under German law and in the context of German cultural values. One of the critical ethical business issues linked to cultural differences is the question of whose values and ethical standards take precedence during international negotiations and business transactions. When conducting business outside their home country, should businesspeople impose their own values, ethical standards, and laws on members of other cultures? Or should they adapt to the values, ethical standards, and laws of the countries in which they are doing business? As with many ethical issues, there are no easy answers to these questions. R” or “you must adapt to the cultural practices of “When in Rome, do as the Romans do, the country in which you are operating” are I rationalizations that businesspeople sometimes offer for straying from their own ethical values when doing business abroad. By defending Cof business” and other questionable practices in the payment of bribes or “greasing the wheels the concept that morality varies from one this fashion, they are resorting to cultural relativism, A culture to another and that “right” and “wrong” are therefore defined differently. R between countries, there are also certain valDespite the various differences in values ues that are broadly accepted worldwide. These D global common values are shared across most cultures. Most laws are directly or indirectly the result of values derived from the major re, Judaism, Islam, and Christianity. Although ligions of Hinduism, Buddhism, Confucianism, most of these religions have similar core virtues, the importance placed on these virtues may vary. For instance, cultures that are predominately Hindu tend to value nonviolence, mind A and sense control, and austerity;6 traditional Chinese cultures value respect, righteousness, D tolerance, self-restraint, and mercy;7 Judaism and loyalty; Islamic cultures value wisdom, values the virtues of kindness, peace, and hospitality; predominately Christian cultures tend R to value forgiveness, mercy, and faith;8 and Buddhist cultures place high importance on the I “four immeasurables” of equanimity, joy, loving-kindness, and generosity.9 By understanding what a particular culture values, globalEbusinesses will have a better chance of forming relationships with individuals and organizations in that culture. They may also be able to avoid conduct that is offensive to citizensN of certain countries (e.g., shaking with the left hand in Islamic nations). It is beyond our N scope to explain all such nuances, but there does appear to be a consensus on the following desirable and undesirable common values.10 t t E %FTJSBCMFDPNNPOWBMVFT*OUFHSJUZ GBNJMZBOEDPNNVOJUZVOJUZ FRVBMJUZ IPOFTUZ  fidelity, sharing, and unselfishness 2 QSJEFBOEFHPJTN TFMGJTIEFTJSFT MVTU HSFFE  6OEFTJSBCMFDPNNPOWBMVFT*HOPSBODF adultery, theft, deceit, lying, murder, hypocrisy, slander, and addiction 4 7 9 ECONOMIC FOUNDATIONS OF BUSINESS ETHICS T S disasters can reflect and affect the environEconomic and political events as well as natural ment for global ethical decision making. We first examine how recent developments have influenced global systems that structure the business world. The last economic recession highlighted the fact that firms were taking extreme risks, bending rules, and engaging in unethical activity. A major part of the problem was the excessive focus on rewards and the bottom line that pervaded the global financial industry. The global financial market is a highly interconnected system that can exhibit a lack of Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 10: Globalization of Ethical Decision-Making 279 transparency in decision making, accountability, and accounting methods. This system, combined with rampant leveraging and the widespread use of highly complex financial computer models that many experts did not even fully understand, resulted in a global financial meltdown. Our financial system is very complex, and this complexity can provide ample opportunity to take excessive risks and manipulate various stakeholders. Many who should have known about such risks were ignorant because of risk compartmentalization. Risk compartmentalization occurs when various profit centers within corporations become unaware of the overall consequences of their actions on the firm as a whole. As a result, no R one person, company, or agency should be blamed—the problems were systemic. Before the financial meltdown, most companies tried toIremain in compliance with legal systems, while many simultaneously looked for legal loopholes and unregulated means of maximizC tried to do what was ethical. Yet the ing profits and financial rewards. Many companies complex nature of the global economy prevented A them from seeing the impending disaster, as everyone was too focused on their own bottom lines. As the world continues to recover from the R recession, conflicts and disasters have intensified the risks and challenges that global businesses D will encounter. For instance, widespread changes are occurring in the Middle East. While democracy is becoming more of a possibility, instability within these regions has led, to an exodus of foreign businesspeople.11 The instability of Middle Eastern governments and their views toward global commerce could strain business relations. New technologies are also affecting regimes. For example, A Egyptians used social media during a national uprising to communicate with one another In many ways, the Egyptian protests were and the world about political and social issues.12 D reflections of the widespread dissent felt throughout the region. Although it is possible that R the protests will lead to positive long-term change, the economies of these countries may I affected by the supply and commodity take some time to stabilize. Economic stability is price fluctuations caused by such political events. E Changes in governments result in the necessity for new social and legal processes, processes that will support ethical and legal N systems that fit into the global economy. National disasters can also destabilize economies N and affect the economic system. For example, the devastating 2011 earthquake and tsunami in Japan resulted in a destabilizaE that country. Japan also faced the chaltion of the economic and social institutions within lenge of a nuclear meltdown after the tsunami breached the seawall around the Fukushima Daiichi complex and damaged the reactors. The combined crises caused the Tokyo Stock Exchange to lose $700 billion within a three-day2period.13 The year before, massive earthquakes in Haiti and Chile had severely damaged 4 those countries’ economies. Many ethical issues emerge in coping with crises. The disruption of necessities and 7 global supply chains creates opportunities for individuals and organizations to engage in exploitation. For instance, an unethical organization 9 might charge exorbitant prices during a time of crisis because the people are dependent upon its products for survival. ConT versely, the global community is expected to engage in aid and philanthropic efforts to S particularly multinationals, are often help countries recover from disasters. Corporations, expected to help in recovery efforts since many have profited from doing business within the affected countries. Finally, the world is still coping with the aftereffects of the last global recession, which caused massive public distrust of the stability of governmental institutions as well as of those charged with managing the money of individuals, corporations, and countries. Some countries, such as Iceland, Zimbabwe, Hungary, Ukraine, and Serbia, even declared Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 280 Part 4: Implementing Business Ethics in a Global Economy “Today people are discussing, and even revising, some of the fundamental concepts and assumptions of capitalism.” a form of bankruptcy as a result of the recession. 14 As a lack of trust, honesty, and fairness has caused major investors to question the competence of regulatory institutions, which in turn has caused instability and public mistrust in the entire financial system, many have questioned the foundations of capitalism and the policies needed to make it function. Today people are discussing, and even revising, some of the fundamental concepts and assumptions of capitalism. Because you will enter this new reality, we will briefly explain the global R economic debate. I Economic C Systems To understand capitalism—and the typesA of businesses that operate in different types of economies—you must understand basic economic systems. These systems have a significant impact on business ethics, as they canRdetermine the role of governments in business, the types of laws that regulate businesses,D and the amount of freedom companies have in their activities. The main forms of capitalism and socialism are derived from the works of , Adam Smith, John Maynard Keynes, and Milton Friedman. Adam Smith was a professor of logic and moral philosophy during the late eighteenth century, as we noted earlier in this text, and he developed critical economic ideas that are still A considered important today. Smith observed the supply and demand, contractual efficiency, and division of labor of various companies D within England and wrote about what he saw. His idea of laissez-faire, or the “invisible hand,” is critical to capitalism in that it assumes that the R market, through its own inherent mechanisms, will keep commerce in equilibrium. The second form of capitalism gainedI support at the beginning of the Great Depression. During the 1930s John Maynard Keynes Eargued that the state could stimulate economic growth and improve stability in the private sector—through, for example, controlling interest rates, taxation and public projects.15NKeynes argued that government policies could be used to increase aggregate demand, thus Nincreasing economic activity and reducing unemployment and deflation. He believed that the solution was to stimulate the economy through some combination of a reductionEin interest rates and government investment in infrastructure. President Franklin D. Roosevelt employed Keynesian economic theories during his time in office when he was seeking to pull the United States out of the Great 2 Depression. The third and most recent form of capitalism is associated with Milton Friedman, and it 4 represents a swing to the right of the political spectrum. Friedman had lived through the 7 Great Depression but rejected the Keynesian conclusion that markets sometimes need intervention to function efficiently. Instead,9he believed that deregulation could reach equilibrium without government intervention.16 Friedman’s ideas were the guiding principles T for government policy making in the United States, and increasingly throughout the world, starting in the second half of the twentiethScentury. Both Keynes and Friedman agreed that “(1) People have rational preferences among outcomes that can be identified and associated with a value; (2) Individuals maximize utility and firms maximize profits; (3) People act independently on the basis of full and relevant information.”17 Today, however, these assumptions are being questioned. Socialism refers to economic theories advocating the creation of a society in which wealth and power are shared and distributed evenly based on the amount of work Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 10: Globalization of Ethical Decision-Making 281 expended in production. Modern socialism originated in the late nineteenth century and was a working-class political movement that criticized the effects of industrialization and private ownership. Karl Marx was one of socialism’s most famous and strongest advocates. Marxism was Marx’s own interpretation of socialism, and it was transformed into communism in countries such as the Soviet Union and Cuba. History has shown that communism, strictly interpreted, causes economies to fail. For example, Cuba has traditionally held an antagonistic view toward capitalism and private enterprise. As a result, most of the population was employed in the public sector. However, during the most recent recession, the Cuban government realized it could not support so many workers. In an attempt to save its struggling economy, the government tookRthe unprecedented step of laying off half a million state workers to make room for privateIsector jobs.18 In the 1940s forms of social democracy emerged. Social democracy allows for the private ownership of property and C such services as education and health also features a large government equipped to offer care to its citizens. Social democracies take on such A problems as disease, ignorance, squalor, and idleness, and advocate governmental intervention. Scandinavian countries such as Denmark, Sweden, and Finland are examples ofR social democracies. Studies indicate that the populations of these small European democratic nations are some of the happiest in the D world.19 , multinational corporation, or that the Past economists could not have imagined the world’s energy resources would be concentrated under the control of a handful of corporations. Our world has grown increasingly bimodal in wealth distribution. Bimodal wealth A distribution occurs when the middle class shrinks, resulting in highly concentrated wealth D with very few resources. This is not a amongst the rich and large numbers of poor people desirable scenario and can result in instability. The size and power of today’s multinational R corporations are immense. For instance, companies can pit one government against another for strategic advantages. One can see the Isame strategy by country group in trade blocs such as NAFTA (North American Free Trade EAgreement), the EU (European Union), and ASEAN (Association of Southeast Nations). These trade blocs give economic leverage N to country groups and use the same economic principles as multinationals. To understand the future global perspective, we next discuss the difference between rational and behavN ioral economics. E that people are predictable and will Rational economics is based upon the assumption maximize the utility of their choices relative to their needs and wants. For example, if you are hungry and have $10 to spend, rational economics suggests that you will spend the 2 wants (it tastes good). However, peomoney on food that satisfies your hunger needs and ple are not always rational. For example, no one4wants to go to jail. Even those who have stolen millions admit that the reward was probably not worth the punishment. Yet this 7 does not stop individuals from engaging in crimes to secure short-term gains. For instance, as mentioned in Chapter 6, so-called fraud investigator Barry Minkow pleaded guilty to 9 securities fraud as a result of trying to manipulate the stock of Lennar Corp. Minkow had T already served seven years in prison after being convicted in 1988 of operating a Ponzi S not act in a rational manner when he scheme through his business.20 Minkow clearly did decided to commit another instance of securities fraud. The second assumption is that people act independently on the basis of full and relevant information. Normally, we might assume that a criminal did not have full or relevant information concerning his/her actions. However, Minkow had already experienced prison time and, as a fraud investigator, likely knew the penalties he would face should he get caught. His example illustrates that some individuals will act irrationally even when Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 282 Part 4: Implementing Business Ethics in a Global Economy they have a clear idea of the consequences of their actions. There are many individuals and organizations that are willing to take risks and act in an irrational manner to achieve their objectives. This high-risk approach often results in manipulation and misconduct. Behavioral economics assumes that humans may not act rationally because of genetics, emotions, learned behavior, and heuristics, or rules of thumb. Heuristics are based upon past experiences and do not always yield the most rational response. In other words, behavioral economics assumes that economic decisions are influenced by human behavior. Figure 10.2 depicts where countries may be in the process of developing economic philosophies, and helps to understand where they may want to go. For example, China, Sweden, R left quadrant, representing socialism as a and the former Soviet Union are in the lower society with behavioral economics as the Ivehicle to happiness. As we mentioned, each of these country’s definitions of happiness is derived from social democratic goals. They are behavioral in that they believe very little inC laissez-faire. The dates on the points are important, because they show that countries canAchange their positions over time. In the upper right quadrant, Figure 10.2 shows how certain countries’ economies have defined happiRupper left quadrant are the United States and ness and government’s role. Finally, in the (again) Sweden, representing Sweden’s shift Dto capitalism and more laissez-faire economics and the United States’ shift to a less laissez-faire economy. , socialism stems partly from the Cold War. The conflict between capitalism and Many in the United States perceive socialism as Marxism; it is not. Outside the United States, socialism is often perceived as group-oriented, as it relates to social problems. A Socialism argues for the good of the community, with government helping people D American form of capitalism is grounded through manipulation of the economy. The R FIGURE 10.2 The Economic Capitalism CountryI Differential Capitalism E N N USA 2010 E Sweden 2010 ©Cengage Learning 2013 Behavioral Economics Sweden 1960s 2 4 7 9 T S USA 1950s–90s USA 1930s China 2010 Russia 2010 Rational Economics China 1940s U.S.S.R. Socialism Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 10: Globalization of Ethical Decision-Making 283 in individualism, where government is perceived as more of a hindrance in the pursuit of happiness. Today, capitalism is one of the United States’ many cultural exports. But while the United States practices one kind of capitalism, there are many other forms. The success of the U.S. model of capitalism during the 1990s and 2000s led many businesses and countries to champion it as the premier economic model. However, the last recession, combined with the collapse of some of the world’s largest financial firms, has dampened global enthusiasm for this model. It is likely that in the future, more attention will be paid to other forms of capitalism.21 Sweden was one of the poorest countries in R Western Europe in the 1880s. During the 1890s, it became more worker friendly. From 1918 I to 1970, Sweden’s standard of living rose faster than most countries’.22 After 1970 the country changed some of its worker policies to C to enjoy one of the highest standards become more corporate friendly and has continued of living in the world. A India and China have introduced the free market into their systems, although their Rcommunist government that blurs the models are very different. China has a very large lines between organizations, businesses, and government because organizations must D comply with government mandates. India, on the other hand, is democratic and has , stand up against the government and a lively civil society that often is empowered to capitalism. These two countries represent about one-third of the world’s population and are considered rising powers—yet their forms of capitalism are radically dissimiA lar. China’s government involvement in business, combined with the rapid growth of D that large governments stand in the its economy, may cause us to question the notion way of business success—in fact, in China government often seems to be the premier R entrepreneur.23 In 2010 China superseded Japan to become the world’s second largest I economy.24 Is capitalism with minimal government interaction and the free flow of goods and E services across national boundaries best? Or should governments be more protectionist N are still searching for the answer. On to give local businesses the upper hand? Economists the one hand, corporations can create competitive N barriers via government legislation or by collusion to form oligopolies for managed competition. The argument is that without government intervention, local businesses could E decline. On the other hand, certain forms of capitalism argue that the corporation should pay shareholders as much as possible and that other stakeholders are of secondary importance. Despite these differing viewpoints, there is a2general consensus amongst experts, academics, and businesspeople that corporations 4 that operate with social responsibility in mind must take into account the norms and mores of the societies in which they operate. 7 Corporations may take varying views of corporate social responsibility (CSR). 25 A broad view would include thinking about the consequences 9 of their actions on a wide range of stakeholders and using the corporation as a tool for public policy, while a very narrow view T would involve only looking at the number of jobs created, for example. These are some of S need to address as they operate on a the ethical questions that businesses and governments globalized scale. There is no agreement that one form of free-market system is more ethical than others. Ethical business systems are not restricted to capitalist models, either; socialist countries also develop ethical businesses. Countries, institutions, social systems, technology, and other cultural factors can have a major effect on organizational ethics. To better understand global ethics, we start by examining some of the ethical dimensions surrounding multinational firms. Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 284 Part 4: Implementing Business Ethics in a Global Economy MULTINATIONAL CORPORATION Multinational corporations (MNCs) are public companies that operate on a global scale without significant ties to any one nation or region. MNCs represent the highest level of international business commitment and are characterized by a global strategy of focusing on opportunities throughout the world. Examples of U.S.–based multinational corporations include Nike, Monsanto, and Cisco Systems. Some of these firms have grown so large that they generate higher revenues than the gross domestic product (GDP)—the sum of all the goods and services produced in a country Rduring one year—of some of the countries in which they do business, as shown in Table 10.1. I Based on revenues versus GDP, Wal-Mart Stores, Inc., is greater in size than the economies of Greece and Denmark, and both C Wal-Mart and Royal Dutch Shell are larger than the economy of Denmark. Because of their Asize and financial power, MNCs have been the subject of much ethical debate, and their impact on the countries in which they do business R European labor unions argue that it is unfair has been controversial. Both American and for MNCs to transfer jobs overseas to countries D where wage rates are lower. Other critics have charged that multinationals use labor-saving devices that increase unemployment in , have been accused of increasing the gap bethe countries where they manufacture. MNCs tween rich and poor nations and of misusing and misallocating scarce resources. Their size and financial clout enable them to control money, supplies, employment, and even the ecoA In some instances, MNCs have controlled nomic well-being of less-developed countries. entire cultures and countries. For example, D a Los Angeles judge determined that former petroleum exporter Unocal may be liable for the conduct of the Myanmar government R TABLE 10.1 A Comparison Between Countries Iand Corporations Based on Gross Domestic Products and Revenues E N Country GDP (millions $ U.S.)* Company Revenues (millions $ U.S.) N United States 14,720,000 Wal-Mart Stores 421,849.0 E China 9,872,000 Royal Dutch Shell 378,152 Japan 4,338,000 Exxon Mobil India 4,046,000 Germany 2,960,000 Iran 863,500 Taiwan 823,600 Argentina 596,000 Greece 321,700 Japan Post Holdings 196,337 Denmark 201,400 Chevron 240,192 2BP 4Sinopec Group 7China National 9Petroleum State Grid T Toyota Motor S 354,674 308,928 221,760 203,958 273,422 226,294 *2010 estimates Source: Adapted from “Global 500: Fortune’s Annual Ranking of the World’s Largest Corporations,” CNNMoney, http://money.cnn.com/magazines/ fortune/global500/2011/index.html (accessed July 7, 2011). CIA World Fact Book, https://www.cia.gov/library/publications/the-world-factbook/rankorder/ rankorderguide.html (accessed March 25, 2011). Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 10: Globalization of Ethical Decision-Making 285 after documents presented in court suggested that forced labor was used in Myanmar to build Unocal projects. According to documents, workers who refused to work were imprisoned and/or executed by the Myanmar army. Unocal’s financial size and willingness to complete certain projects at any cost prompted the Myanmar government to sanction the use of forced labor.26 Years later, Unocal announced that it had reached a final settlement with the parties.27 Critics believe that the size and power of MNCs create ethical issues involving the exploitation of both natural and hu“Critics believe that the man resources. One question is whether MNCs should be able R timber, oil, size and power of MNCs to pay a low price for the right to remove minerals, and other natural resources, and then sell products made from I create ethical issues those resources for a much higher price. In many instances, C resources involving the exploitation only a small fraction of the ultimate sale price of such comes back to benefit the country of origin. This complaint A of both natural and led many oil-producing countries to form the Organization of human resources.” Petroleum Exporting Countries (OPEC) in the R 1960s to gain control over the revenues from oil produced in those D lands. Critics also accuse MNCs of exploiting the labor markets of host countries. As noted , wages. Sometimes MNCs pay higher earlier, MNCs have been accused of paying inadequate wages than local employers can afford to match; then local businesses complain that the most productive and skilled workers go to work for multinationals. Measures have been taken to A curtail such practices. For example, host governments have levied import taxes that increase the prices that MNCs charge for their products andD reduce their profits. Import taxes are meant to favor local industry as sources of supply for an MNC manufacturing in the host country. If R such a tax raises the MNC’s costs, it might lead the MNC to charge higher prices or accept I goal of the law. Host governments also lower profits, but such effects are not the fundamental have imposed export taxes on MNCs to force themEto share more of their profits. The activities of MNCs also raise issues of unfair competition. Because of their diverNcapital markets in much higher volume sified nature, MNCs can borrow money from local than smaller local firms. MNCs also have been accused of failing to carry an appropriate N share of the cost of social development. They frequently apply advanced, high-productivity technologies that local companies cannot affordEor cannot implement because they lack qualified workers. The MNCs thus become more productive and can afford to pay higher wages to workers. Because of their technology, however, they require fewer employees than 2 the local firms would hire to produce the same product. Additionally, given their economies of scale, MNCs also can negotiate lower tax4 rates. By manipulating transfer payments among their affiliates, they pay fewer taxes. All these special advantages explain why some 7 claim that MNCs compete unfairly. Sometimes countries refuse outright to allow9MNCs into their countries. For example, heavy-equipment companies from industrialized nations argue that their equipment will T make it possible to complete infrastructure projects sooner, which could help boost the econS such as India believe that it is better omies of less-developed countries. However, countries in the long run to hire laborers to do construction work since this practice provides muchneeded employment and keeps currency within the local economy. Therefore, they often choose to use local laborers instead of purchasing equipment from foreign countries. Although it is usually MNCs’ unethical or illegal conduct that grabs world headlines, some MNCs also strive to be good global citizens with strong ethical values. Texas Instruments (TI), for example, has adopted a three-tiered global approach to ethical integrity that Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 286 Part 4: Implementing Business Ethics in a Global Economy asks: “(1) Are we complying with all legal requirements on a local level? (2) Are there business practices or requirements at the local level that affect how we interact with co-workers in other parts of the world? (3) Do some of our practices need to be adapted based on the local laws and customers of a specific locale? On what basis do we define the universal standards that apply to TI employees everywhere?”28 One of the ways Texas Instruments puts this approach into practice is by specifying rules on excessive gift giving. Since what is considered to be “excessive” tends to vary depending on country, Texas Instruments has adopted an approach that forbids gift-giving “in a way that exerts undue pressure to win business or implies a quid-pro-quo [sic].”29 R DuPont, Hewlett-Packard, Levi Strauss & Many companies, including Coca-Cola, Co., Texaco, and Walmart, endorse following I responsible business practices abroad. These companies support a globally based resource system called Business for Social Responsibility C provides information on corporate leader(BSR). BSR tracks emerging issues and trends, ship and best practices, conducts educational A workshops and training, and assists organizations in developing practical business ethics tools. It addresses such issues as community investment, corporate social responsibility,Rthe environment, governance, and accountability. BSR also has established formal partnerships with other organizations that focus on D corporate responsibility in Brazil, Israel, the United Kingdom, Chile, and Panama.30 , Although MNCs are not inherently unethical, their size and power often seem threatening to people and businesses in less-developed countries. The ethical problems that MNCs face arise from the opposing viewpoints inherent in multicultural situations. DifA ferences in cultural perspectives may be as important as differences in economic interests. D therefore take extra care to make ethical deciBecause of their size and power, MNCs must sions that not only achieve their own objectives, but also benefit the countries where they R manufacture or market their products. Even the most respected MNCs sometimes find I as a result. themselves in ethical conflict and face liability The U.S. model of the MNC is fading Eas developing countries such as China, India, Brazil, and South Korea form MNCs as alliances, joint ventures, and wholly owned subN model does not mean less concern for ethics sidiaries.31 The turn away from the American and social responsibility. As corporations N expand internationally, ethics and social responsibility are important firm-specific capabilities that can be a resource and lend a company E an advantage for growth and profit. The development of trust and corporate citizenship is a necessary capability, much like technology or marketing. A number of Chinese businesses, for example, have learned that long-term success cannot be achieved by selling products 2 and responsible business conduct is a requirethat are unsafe or of inferior quality. Ethical ment for long-term success in global business. 4 As a result, several global organizations have been formed to support global cooperation and responsible business practices. 7 9 GLOBAL COOPERATION TO SUPPORT T RESPONSIBLE BUSINESS S International Monetary Fund The International Monetary Fund (IMF) originated from the Bretton Woods agreement of July 1944, in which a group of international leaders decided that the primary responsibility for the regulation of monetary relationships among national economies should rest in an extranational Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 10: Globalization of Ethical Decision-Making 287 body, the IMF. The IMF makes short-term loans to member countries that have deficits and provides foreign currencies for its members. The IMF also provides information about countries that might not be able to repay their debts. Member states provide resources to fund the IMF through a system of quotas that are proportional to the size of their respective economies. Member states also receive IMF voting power relative to these quota contributions. Under this rule, the United States has just under one-fifth of the votes. The IMF has become the international coordinator of regulatory policy for the world. Although the IMF’s main function is to regulate monetary relationships between national economies, the organization also has taken steps to promote responsible global business conduct. For instance, the IMF has suggestedRthat governments adopt a “binding code of conduct across nations” to determine the conditions necessary for interceding in trouI bled firms and how to share losses from financial institutions operating across multiple C borders. The IMF has also recommended new regulations for large firms that pose the big32 bailouts took on significant importance gest “systemic risk.” The concept of risk and IMF A during the last global recession. Because of a massive amount of debt, the European counR bailout packages from the IMF. These tries of Greece, Ireland, and Portugal required major bailouts had a negative economic impact that wasDfelt throughout the European Union.33 , United Nations Global Compact The United Nations (UN) was founded in 1945 by 51 nations. Its goals are to promote A worldwide peace, establish beneficial relationships between countries, and support the creation of better standards and human rights on aD global scale. Today, the UN includes 192 member states from across the world. Although the United Nations is generally thought of R as a peacekeeping organization, this coalition of diverse countries also focuses extensively I on sustainable development, human rights and gender equality, global environmental issues, and more.34 Another major concern for theEUN is business development. Recognizing that business is “a primary driver in globalization,” the UN views business as a way to increase the economic outlook of countries, helpNcreate equality with fair labor practices, combat corruption, and promote environmental Nsustainability.35 Conversely, unethical businesses that go global just to take advantage of favorable factors such as cheap labor E could have the opposite effect. To support business as a driver for positive change, the UN created the United Nations Global Compact, a set of 10 principles that promote human rights, sustainability, and the eradication of corruption. Table 10.2 gives a brief2description of these principles. Above all, the UN hopes that the Global Compact will create4a collaborative arrangement among businesses, governments, nongovernmental organizations, societies, and the United Nations to 7 overcome challenges and advocate for positive economic, social, and political change. The Global Compact is voluntary for organizations. However, those that join are held account9 able, and are required to annually post the organization’s progress toward Global Compact T goals and show commitment to UN guiding principles. Global members are also expected S developing nations in which they do to cooperate with the UN on social projects within business. More than 8,700 entities participate in the UN Global Compact.36 While global business ethics is essential knowledge for companies, it is also critical knowledge for business students. The Association to Advance Collegiate Schools of Business (AACSB) International, an international organization that represents about 1,200 business schools, joined with groups such as the UN Global Compact to inspire a set of six principles for business schools. These principles are encapsulated under the title “Principles for Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 288 Part 4: Implementing Business Ethics in a Global Economy TABLE 10.2 Ten Principles of the UN Global Compact for Businesses t 4VQQPSUBOESFTQFDUUIFQSPUFDUJPOPGJOUFSOBUJPOBMMZQSPDMBJNFEIVNBOSJHIUT t &OTVSFUIBUCVTJOFTTFTBSFOPUDPNQMJDJUJOIVNBOSJHIUTBCVTFT t 6QIPMEUIFGSFFEPNPGBTTPDJBUJPOBOEUIFSJHIUUPDPMMFDUJWFCBSHBJOJOH t 8PSLUPXBSEUIFFMJNJOBUJPOPGGPSDFEBOEDPNQVMTPSZMBCPS t 8PSLUPXBSEUIFBCPMJUJPOPGDIJMEMBCPS R 4VQQPSUBQSFDBVUJPOBSZBQQSPBDIUPFOWJSPONFOUBMDIBMMFOHFT I 6OEFSUBLFJOJUJBUJWFTUPXBSEHSFBUFSFOWJSPONFOUBMSFTQPOTJCJMJUZ C 8PSLUPXBSEUIFEFWFMPQNFOUBOEEJGGVTJPOPGFOWJSPONFOUBMMZGSJFOEMZUFDIOPMPHJFT A 3FTJTUDPSSVQUJPOPGBMMGPSNT JODMVEJOHFYUPSUJPOBOECSJCFSZ R D , t &MJNJOBUFEJTDSJNJOBUJPOJOFNQMPZNFOUBOEPDDVQBUJPO t t t t Source: “The Ten Principles,” United Nations Global Compact, http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/index.html (accessed March 25, 2011). Responsible Management Education.”37 The first principle encourages students to become future leaders in creating sustainable value for business, society, and the global economy. A social responsibility into curricula; creating Other principles include incorporating global educational materials that cultivate responsible D leaders; and encouraging dialogue among educators, students, businesses, and other stakeholders to address social responsibility and R sustainability issues. The Principles for Responsible Management Education are powerfully I influenced by the idea of sustainable development and corporate social responsibility.38 E World Trade Organization (WTO) N The World Trade Organization (WTO) was established in 1995 at the Uruguay round of negoN tiations of the General Agreement on Tariffs and Trade (GATT). Today, the WTO has 153 Eits membership, the WTO administers its own member and observer nations. On behalf of trade agreements, facilitates trade negotiations, settles trade disputes, and monitors the trade policies of member nations. The WTO addresses economic and social issues involv2 telecommunications, government purchases, ing agriculture, textiles and clothing, banking, industrial standards, food sanitation regulations, services, and intellectual property. It also 4 provides legally binding ground rules for international commerce and trade policy. The 7 organization attempts to reduce barriers to trade between and within nations and to settle trade disputes. For instance, the WTO ruled 9 in favor of China in a trade dispute against the European Union. The EU believed that China was dumping its Chinese-manufactured T steel fasteners into the EU market. Dumping is the practice of charging high prices for products in domestic markets while selling theS same products in foreign markets at low prices, often at below cost. It places local firms at a disadvantage and is therefore illegal in many countries. In response, the EU instituted a tariff of 63 to 87 percent on Chinese-manufactured steel fasteners. The dispute was brought to the WTO, which ruled that the extremely high tariffs were unfair and discriminatory against Chinese manufacturers.39 Not all countries have agreed with the WTO’s particular stance on free trade. In the past few years, import tariffs have been increased on Asian plastic bags in Europe; oil in Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 10: Globalization of Ethical Decision-Making 289 South Korea; Chinese steel pipes in the United States; and all imports in Ukraine. According to the WTO, shoes, cars, and steel are among the goods most vulnerable to protectionism, or trade restrictions among countries.40 During global downturns, such as the last global recession, countries tend to restrict trading. However, many firms find ways to get around tariffs. For example, if a company wants instant free trade access to the United States, it can manufacture in Israel. If the company wants free trade access for low-tech products to the EU, the company can manufacture in the African country of Senegal because of its free trade agreement with France. Companies with the right knowledge can find a number of bypasses around tariffs, particularly as trading blocs such as the EU conR tinue to grow.41 I C A ISSUES GLOBAL ETHICS R In this section we focus on issues that have a dramatic impact upon global business, D including risks, bribery, antitrust activities, and Internet security and privacy. We also discuss fundamental rights such as human rights, ,health care, labor, and compensation, as well as the issue of consumerism. Bribery and antitrust issues are among the most targeted areas of concern for governments worldwide. However, human and labor rights are some of the more commonly abused in global businessA environments. D Global Ethical R Risks Although globalization has many benefits, it is not I without risks. Risk creates ethical issues for global companies to manage. The organization known as the Eurasia Group has identiE to the Carnegie Council, four of these fied 10 key areas of international risk. According risks require organizations to make “fundamental N ethical choices” when doing business globally. These risks are described as follows. N t t t t 5IFi(;FSPwSJTLSFGFSTUPUIFJEFBUIBUDPVOUSJFTBSFJODSFBTJOHMZPQUJOHUPBEWBODF E their own interests through nationalistic policies instead of adopting more globalized forms of leadership. We see this reflected in businesses with an “us versus them” point of view. If this trend continues, it could affect trade and business with increases in tar2 iffs and taxes. 4 *OUFSOFUTFDVSJUZBOEQSJWBDZBSFCFDPNJOHLFZJTTVFTGPSHPWFSONFOUTBOECVTJOFTTFT alike. While some cyberattacks are state or government sponsored, cyberattacks from 7 smaller entities such as WikiLeaks are also becoming a threat. The WikiLeaks scandal 9 has taken on great importance because it brings up the question of security versus freedom of speech. T 3FMBUJPOTXJUI$IJOBBSFCFDPNJOHJODSFBTJOHMZTUSBJOFE BOEUIF$IJOFTFHPWFSOS ment’s reluctance to make quick policy changes and its regulations limiting foreign companies could place additional burdens on businesses. &NFSHJOHNBSLFUTPGGFSNBOZPQQPSUVOJUJFTGPSJOWFTUPSTCVUBSFOPUXJUIPVUTJHOJGicant risks. Political unrest, imbalances in power, nationalism, and faltering economies represent major risks for global businesses hoping to invest in these areas of the world.42 Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 290 Part 4: Implementing Business Ethics in a Global Economy TABLE 10.3 Global Business Ethics and Legal Issues U.S. Ranking European Ranking Important Issues 1 1 Code of Conduct 2 5 U.S. Antitrust 3 3 Mutual Respect 4 7 U.S. Foreign Corrupt Practices Act (FCPA) 5 4 6 9 7 8 6 9 10 11 12 8 R I C A R D , Conflicts of Interest and Gifts Proper Use of Computers Insider Trading Financial Integrity Confidentiality Records Management Labor and Employment Law Intellectual Property A Global Competition Law 10 D Global Antibribery Requirements 11 R Ethics and Values 12 I Export Controls E N Corporations worldwide have become more N global in their compliance actions. Table 10.3 represents a compilation of important compliance issues of global companies based in the United States and in the European Union.EGlobal competition laws, antibribery require2 Source: Adapted from Integrity Interactive Corporation, “Top Compliance Concerns of Global Companies,” http://www.i2c.com (accessed March 20, 2011). ments, ethics and values, and export controls are considered to be more relevant by the EU than confidentiality, records management, and labor and employment laws. These differences give us clues as to what types of laws2 governments will be formulating in the future. 4 Bribery 7 Bribery is a difficult topic because its acceptance varies from country to country. While 9 bribery between businesses is illegal in countries such as the United States, it is an accepted T way of doing business in other countries. Today, most developed countries recognize that S bribery is not a responsible or fair way of conducting business. It has the potential to damage consumers and competition. But companies must determine what constitutes a bribe. In Japan it is considered courteous to present a small gift before doing business. Are such gifts bribes or merely acts of gratitude? Without clear guidelines, the topic of bribery remains ambiguous enough for misconduct to occur. For this reason, both the United States and the United Kingdom have passed regulations defining bribery and set legal precedents for businesses that encounter these situations. Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 10: Globalization of Ethical Decision-Making 291 U.S. FOREIGN CORRUPT PRACTICES ACT (FCPA) The U.S. Foreign Corrupt Practices Act (FCPA) prohibits American companies from making payments to foreign officials for the purpose of obtaining or retaining business. In 1988 Congress became concerned that American companies were operating at a disadvantage compared to foreign companies whose governments do not forbid bribes. In 1998 the United States and 33 other countries signed an agreement intended to combat the practice of bribing of foreign public officials in international business transactions, with an exception for payments made to facilitate or expedite routine governmental actions (known as facilitation or “grease” payments). Prosecution of bribery has increased, with the U.S. Justice Department making violations of the FCPA a top priority. R corporations. IBM, Daimler AG, and Bribery has become a problem for some major Monsanto were all charged with violating the FCPA I and paid heavy fines. Although sometimes bribery is done with the full compliance of top management, larger companies with multiple branches, global operations, and manyC employees have a harder time detecting misconduct such as bribery. The FCPA was modified A recently and now provides a “best practices” guide for companies. The change was prompted by two major cases. In one case, RAE Systems Chinese joint ventures paid about R $400,000 to Chinese officials in exchange for contracts worth $3 million. The company’s sales D force used cash advances to fund the bribes. The SEC claimed that RAE lacked solid internal controls and that it failed to respond , to red flags. The other case related to the company Panalpina and also involved bribery. 43 The resulting settlements led to the creation of guidelines that can be used by the U.S. Department of Justice and the Securities and Exchange Commission in assessing FCPA comA pliance. The guidelines can also be helpful for businesses to ensure that they are complying D with the Foreign Corrupt Practices Act. These guidelines are outlined in Table 10.4. R I The development of clear policies against FCPA violations E Support by senior management for the company’s compliance policy N The development of standards and policies relating to the acceptance of gifts, hospitality, entertainment, N expenses, customer travel, political contributions, charitable donations and sponsorships, facilitation payments, solicitation, and extortion E TABLE 10.4 FCPA “Best Practices” for Compliance Guidelines The development of compliance procedures that include risk assessment and internal controls 2 4 The implementation of policies to properly communicate 7 procedures to directors, officers, employees, and other appropriate stakeholders 9 The establishment of a system that provides legal guidance to appropriate stakeholders T Disciplinary procedures for violations of anticorruption rules S The exercise of due diligence to ensure compliance with anticorruption policies Annual reviews of compliance procedures and updates when needed The development of appropriate financial and accounting procedures The inclusion of anticorruption provisions in agreements and contracts with suppliers, agents, and other partners Periodic reviews of codes and procedures to ensure they measure up to FCPA regulations Prompt reporting of violations to the SEC Source: Adapted from “U.S. Securities and Exchange Commission and Department of Justice Clarify ‘Best Practices’ for FCPA Compliance,” Mayer Brown, January 11, 2011. Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 292 Part 4: Implementing Business Ethics in a Global Economy Violations of the act can result in individual fines of $100,000 and jail time. Penalties for companies can reach into the millions.44 Some FCPA violations are easier to detect than others. For example, some of the riskiest practices include payment for airline tickets, hotel and meal expenses of traveling foreign officials, the wiring of payments to accounts in offshore tax havens, and the hiring of agents recommended by government officials to perform “consulting” services.45 Current enforcement agencies are targeting these thirdparty bribery payments. U.K. ANTIBRIBERY ACT Many nations, including China and European nations, are tak- R the United Kingdom has instituted perhaps ing a tougher stance against bribery. However, the most sweeping antibribery legislationI to date.46 The U.K.’s new Antibribery Act will likely cause companies doing business in the U.K. to dramatically change their compliance CForeign Corrupt Practices Act, it takes further reports. While the act overlaps with the U.S. steps to curb bribery. For example, under the A law British residents and businesses, as well as foreign companies with operations in the U.K., can all be held liable for bribery, no matter where the offense is committed or who inR the company commits the act, even if the bribe itself has no connection with the U.K. Unlike under the FCPA, D companies are not required to have explicit knowledge of a , criminally liable.47 Additionally, the Antibribbribe to be held “Many nations, ery Act classifies bribes between private businesspeople as illeincluding China and gal and does not make provisions similar to those in the FCPA A allowing for “grease payments”—small payments used to speed European nations, are Dotherwise would be delayed. Another part of up services that taking a tougher stance the law requires corporations to find out whether their subsidR iaries or joint-venture partners are involved in bribery at any against bribery.” level.48 The actIhas increased the maximum jail time for bribery from seven to E 10 years.49 Such encompassing provisions against bribery have created concern for businesses that operate in the United Kingdom. Some fearN that something as simple as taking a business client out to dinner will be considered a bribeN under U.K. law. However, U.K. officials and legal experts have stated that acts of hospitality will not be considered illegal. Additionally, busiE nesses can protect themselves from heavy penalties by instituting an effective compliance program that management supports. In other words, managers should set the correct tone at the top along with implementing proper reporting procedures, periodic reviews of the company’s code of conduct and compliance programs,2risk assessments, and other policies discussed in this book and outlined in the U.S. Federal Sentencing Guidelines.50 Some legal experts ques4 tion whether the Serious Fraud Office in the U.K. will choose to prosecute cases that deal with 7 small “grease” payments or prosecute cases that occur outside the United Kingdom.51 9 Antitrust T Activity S countries, with the belief that competition Fair competition is viewed favorably in many yields the best products and services at the best prices. This basic concept of capitalism has begun to change, however. During the nineteenth and early twentieth centuries, U.S. corporations began using what today would be considered anticompetitive practices, creating high barriers of entry for competitors in an attempt to dominate markets. These practices led to higher prices and fewer options for consumers. In 1890 the United States passed the Sherman Antitrust Act to prevent such anticompetitive behavior. Other countries have Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 10: Globalization of Ethical Decision-Making 293 similar laws. However, issues of competition become more complicated when companies do business in different countries with differing laws. For instance, the EU has stricter antitrust laws than does the United States, which makes it harder for some MNCs to compete in Europe. EU antitrust probes have been launched against Google, Microsoft, and IBM, among other companies. Because large MNCs create economies of scale and barriers to entry, they tend to reduce overall competition and can put smaller companies out of business. If these firms continue to remain unregulated, they could engage in a vertical systems approach to become monopolies. A vertical system is where a channel member (manufacturer, wholesaler, R system, via ownership or contract, distributor, or retailer) has control of the entire business or through its purchasing ability. Vertical systems I create inertia, which causes channel members to stay with their various retailers and distributors even though competitors may C use their size to coerce other compahave better products and prices. Sometimes MNCs nies to do business exclusively with them. For instance, A the EU charged Intel $1.45 billion for anticompetitive behavior. Intel had allegedly provided rebates to retailers if they bought R only their computer chips, as well as paying manufacturers for delaying or restricting the distribution of products from their main rival, Advanced Micro Devices (AMD).52 D , Internet Security and Privacy Earlier, we mentioned Internet security as one of the top 10 global risks. Today’s computer A hackers can use tools like the Internet and computer viruses to commit corporate espioD nage, launch cyberattacks against government infrastructures, and steal confidential information.53 Until recently, Internet security has not been a significant part of business ethics. R However, serious Internet crimes have brought this issue to the public’s attention. ComI in the United States and China. For puter hackers have become particularly problematic example, in China two computer hackers created Ea hacking device known as the “Panda Burns Incense” worm, which they used to steal information that they sold to other hackers N emails posing as a harmless message in their network. The worm showed up in people’s that fooled recipients into opening it. Once a computer was infected, every desktop icon N would become a picture of a panda holding three incense sticks. If the user clicked on the E panda, the worm would collect passwords and financial information and relay it back to the senders. Although the two original perpetrators were finally caught, copycat versions and more advanced viruses have since been launched.54 2 Hacking, Trojan horses (devices that look desirable but that steal information once installed), and worms are not necessarily illegal4in some countries. However, the global community has begun to classify many such practices as unethical, arguing they should 7 become illegal. Although companies are developing software to track down viruses and malware and keep them from infecting computers, 9 hackers are constantly creating new ways to bypass these systems. In addition, many companies themselves use questionable T Internet practices that may not be illegal but could be construed as unethical. For instance, S identifying strings of text, onto their many websites that users visit install cookies, or small computers. This allows the website to identify the user’s computer when he or she revisits the site. These companies use cookies as a way to tailor their offerings to specific users. For example, Amazon.com uses cookies to make product recommendations to users when they return to their website. Despite the consumer convenience and competitive advantages of cookies, being able to identify users without their consent or direct knowledge may create an ethical issue: privacy. Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 294 Part 4: Implementing Business Ethics in a Global Economy While some Internet privacy violations, such as breaking into users’ accounts and stealing their financial information, are clearly unethical, many other situations present more challenging ethical dilemmas. For instance, WikiLeaks is a nonprofit organization that publishes information provided by whistle-blowers, leaks, and news sources. Although it has been praised for revealing injustice and creating a more transparent news environment, the site has come under scrutiny for leaking confidential U.S. documents. U.S. government officials launched a criminal investigation into WikiLeaks and claimed that the confidential information it revealed on subjects such as the war in Afghanistan could put soldiers at risk. However, legal experts suggest that the First Amendment right to freedom of speech likely R for or collect the information itself.55 Such conwill prevail as long as WikiLeaks does not pay flicts between freedom of speech and revealing I confidential information that could threaten national security are significant ethical issues that require greater scrutiny by lawmakers. C is the use of personal information by comAnother ethical dilemma regarding privacy panies. Facebook, the most popular socialAnetworking site worldwide, has been criticized for lax privacy policies and for making member information too public. Privacy has beR begun considering new legislation to regucome such a concern that governments have late information collection on the Internet. DFor instance, the United States government is debating on whether to create a “Do Not Track” bill for the Internet to limit what types of , This pending legislation is prompting advertisinformation websites are allowed to track.56 ing firms to engage in self-regulation for digital advertising, and both Google and Facebook have spent money to lobby against government intervention.57 A In countries such as Saudi Arabia and China, Internet privacy is not just a corporate issue. Rather, governments take an active roleDin censoring citizens’ use of the Internet. For instance, Saudi Arabia nearly banned BlackBerry smartphones because Blackberrys use overseas R routing. Overseas routing gives the government less control, and Saudi Arabia feared that it I to gain access to encrypted messages. The Saudi would allow third parties outside the country government also censors websites and provides E users with online messages telling them that they have been denied access to a particular site.58 The Chinese government routinely uses N Firewall” to censor Internet sites. It often does an Internet-filtering system called the “Great not tell its citizens when it is censoring materials. N Instead, the filtering looks like a technical glitch. Some networks, such as YouTube and Facebook, are blocked completely. This has made E which adheres to a “Don’t Be Evil” policy, to it difficult for foreign businesses such as Google, justify doing business with China. Google has experienced repeated clashes with the Chinese government over censorship, including accusations that the government disrupted the compa59 These scenarios demonstrate some of the types ny’s email services among its Chinese users.2 of ethical issues that companies encounter when 4 conducting business globally. 7 Human Rights 9 The meaning of the term human rights has been codified in a UN document, in which it T is defined as an inherent dignity with equal and inalienable rights and the foundation of S concept of human rights is not new in busifreedom, justice, and peace in the world. The ness. It was established decades ago, but few companies took it into consideration until recently. Table 10.5 presents three articles from the UN Human Rights Declaration. Their implementation in the world of business can have serious ethical ramifications. For example, Article 18 concerns freedom of religion. From a Western perspective this appears to be straightforward. However, how should firms respond to employees from countries where it is acceptable to have multiple wives? Should they all be granted health insurance? Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 10: Globalization of Ethical Decision-Making 295 TABLE 10.5 Selected Articles from the UN Human Rights Declaration Article 18. Freedom of religion … either alone or in community … in public or private … Article 23. The right to work … to just and favorable conditions of work and to protection against unemployment … equal pay for equal work … ensuring for himself and his family an existence worthy of human dignity … right to form and to join trade unions … Article 25. Right to a standard of living adequate for the health and well-being … Motherhood and childhood are entitled to special care and assistance. Source: United Nations Human Rights Declaration, http://www.un.org/en/rights/ (accessed June 22, 2009). R I In response to such challenges, Ford Motor Co. started the Ford Interfaith Network to educate employees about different religions and C foster respect for the beliefs of its diverse employees across the world.60 However, for a worker A in Saudi Arabia, such an interfaith group does not exist. The Saudi government prohibits the public practice of non-Muslim R religions. In general, it recognizes the right of non-Muslims to worship in private; however, this right is not extended to the public domain. D Within Saudi Arabia, freedom of religion is not legally defined. , Health Care A Another ethical issue that is gaining in importance is health care. Globally, a billion people lack access to health care systems, and about 11 D million children under the age of five die from malnutrition and preventable diseases each year.61 As a result, global concern about R the priorities of pharmaceutical companies is on the rise. This ethical dilemma involves I profits versus health care. Those who believe pharmaceutical companies are inherently unethical suggest that the quest for profits has led these companies to research drugs aimed at E markets that can afford luxuries, such as cures for baldness or impotence, rather than foN as malaria, HIV, and AIDS. Patents are cusing on cures for widespread deadly diseases such another challenging issue. Since patents give pharmaceutical companies exclusive rights to N their products for a certain period, the companies can charge higher prices—prices that those in emerging economies cannot often afford.EA documentary released by True Vision, an international documentary film company, featured a child in Honduras who ultimately died from the ravages of AIDS. Pfizer produces one of the drugs he needed, but it cost $29 2 generic version of the drug was cheaper per tablet. The family only earned $19 a week. The in neighboring Guatemala, but the maker of that4form of the drug had no license to produce or sell in Honduras.62 7 argue that high prices are needed to reOn the other hand, pharmaceutical companies coup the costs of creating the drugs, and without 9 profits their companies would not be able to function. Another argument is that since other firms are allowed to patent their prodT ucts, pharmaceutical companies should be allowed the same privileges. Yet when the issue is one of life or death, businesses must find ways S to balance profitability with human need. A related issue affecting both developing and developed countries is the affordability of health care. Rising health care costs continue to pose a critical challenge, particularly in the United States, where millions of people remain uninsured. Studies have revealed that the United States spends more per capita on health care than other industrialized countries—but without better results to show for it. Prices of health care products and procedures can vary greatly within the country.63 When health care becomes too costly, businesses tend to either Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. ©Cengage Learning 2013 296 Part 4: Implementing Business Ethics in a Global Economy drop health care packages offered to employees or downgrade to less expensive—and less DEBATE ISSUE TAKE A STAND inclusive—packages. For instance, some unions, companies, and insurers have begun dropping mental health care plans due to a law that states Is Health Care a Right or a Privilege? mental health care, if offered, must be as “robust” The Universal Declaration of Human Rights, adopted as the rest of the medical benefits. Rather than by the United Nations in 1948, proclaims that offer the more costly mental health benefits, com“everyone has the right to a standard of living adequate panies are choosing to drop them entirely.64 for the health and well-being of oneself and one’s R Global health care fraud is a serious ethics family, including food, clothing, housing, and medical issue, I costing businesses and governments milcare.” Hard work and healthy living does not assure lions and depriving individuals of funds needed being healthy. With the high costs of health care, many C critical care. One estimate places the losses for consumers cannot afford health insurance. The U.S. from A global health care fraud at $260 billion government plans to follow other industrialized nations annually. 65 Fraud can include providing less in adopting universal health care. R medicine in packages for the same price, filing However, critics argue that it is the individual’s false Medicare claims, and providing kickbacks D responsibility, not the government’s, to ensure for referrals, and it can be committed by indi, personal health. Many health problems, such as viduals, companies, doctors, and pharmacists. obesity and diabetes, can often be prevented by Insurance companies are not immune, either. individuals choosing to live healthier lifestyles. The Justice Department filed charges against A Another concern involves the cost of health care. Blue Cross Blue Shield of Michigan for allegedly Critics believe universal health insurance will increase D creating illegal agreements with state hospitals. costs because more people will depend upon the According to these agreements, hospitals would R government for health care. This in turn might charge patients insured by Blue Cross’s rivals cause costs to be passed onto the consumers and I or higher prices for the same procedures. equal prompt the government to limit certain types of care. This E would make Blue Cross look less expenGuaranteeing health care for all may lead people to sive and therefore more attractive to patients.66 make riskier decisions because they know that if they N The fundamental issue leading some busiget hurt, they are guaranteed health care coverage. nesses N into ethical and legal trouble around the world is the question of whether health care is 1. Because health care protects life, it is a aEright or a privilege. For example, many people fundamental right and should therefore be in the United States see health care as a privilege, ensured by the federal government. not a right; thus, it is the responsibility of indi2. Health care is a privilege and should not be 2 viduals to provide for themselves. People in other provided by the government because of the high countries, such as Germany, consider it a right. 4 costs involved. German employees have been guaranteed access 7 to high-quality, comprehensive health care since 67 1883. Many countries believe health care9is important because it increases productivity; therefore, governments ought to provide it. As health care costs continue to increase, the T burden for providing it falls on companies, countries, employees, or all three. S Labor and the Right to Work Another global issue that businesses encounter is labor. Today, many people live and work in a country other than their homeland. In the European Union, workers can carry benefits across countries within the EU without any reductions or changes. Many are therefore asking the question, “Am I a multinational employee first and then a citizen of a country, or Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 10: Globalization of Ethical Decision-Making 297 am I a citizen first and an employee second?” Because businesses must make a profit, there are increasing occasions when nationality no longer is a deciding factor. In business, we are becoming global citizens. As a result, firms need to understand that certain employee issues, once country-specific, have become global. One example of a global labor issue involves gender pay inequality. This debate has spread throughout the globe, in both developing and industrialized countries. For instance, a report from the United Nations Development Programme found that female computer programmers in Singapore earn 80 percent of what male workers earn in comparable jobs. Similarly, female computer programmers in Korea earn 90 percent of what male computer programREast. In 2010 the European Commission mers earn.68 Such statistics are not just limited to the reported that women within the EU were earning I82 percent of what their male counterparts were earning.69 Despite these disparities, equal pay is recognized as a fundamental right by the C UN Human Rights Declaration, and gender pay inequality is illegal in many countries. Businesses, particularly multinationals, must considerA this issue carefully. Failure to do so could lead to lawsuits or reputational damages. Walmart spent years fighting a class-action lawsuit from hundreds of female employees who claimed R they were discriminated against in pay and promotions. Companies that work to eliminate gender D pay inequalities within their organizations will not only be acting ethically, but will be protecting themselves legally as well. In addition to equal pay, Article 23 of the UN, Human Rights Declaration discusses the right to work and join trade unions. Within the European Union, trade unions are accepted, but in many other countries, including Burma, North Korea, Cuba, and Iran, trade unionists A risk imprisonment. China, Laos, and Vietnam only allow one trade union.70 European companies with employees in these countries will faceDmany ethically charged decisions. Trade unions are an ethically charged issue in the United States, too. For example, McDonald’s and R Walmart have discouraged attempts to unionize in the United States,...
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Running head: BUSINESS

BUSINESS DISCUSSION QUESTIONS
NAME
COURSE
INSTITUTION
DATE

BUSINESS
Business Discussion Questions
Briefly describe/define that issue. Using evidence from the text or outside sources, discuss
why the issue is important,
the impact you expect it to have on the competitive landscape, and
the impact the issue will have on your attitudes and behaviors.
Some of the major ethical issues described in this course so far include gross misconduct
and fraud in various places of work. These ethical issues have greatly affected the normal
running of various activities. Additionally, the above-mentioned mentioned issues have
contributed to the failure of various business in the market spectrum around the world. Just to
mention, these issues have also contributed to losses in many business organizations. This is
evidenced by the various managers and other management personnel engaging themselves in
various activities which are aimed at making the company lose a large amount of money at their
gains (Fraedrich, Ferrell & Ferrell, 2013). Further, ethical misconduct issue has made the many
employees be in a state of dilemma whether to go on with their employment terms or not.
Needless to mention, fraud is one of the ethical issues that will affect the most business in
the market context in future. This will lead to massive losses in various business organizations in
terms of financial losses. Fraud, which is closely connected to cybersecurity keep on advancing
day in day out (Hess, & Cottrell, 2016). Therefore, most business organizations suffer the risk of
being at losing end in the future. However, if the companies come up with succinct mitigations
measures, they will be able to cater to most of the cybersecurity issues. Needless to mention, this
will make most people in the society to change their attitudes concerning business activities. One
of the attitudes may involve people shifting from many and heavy business investments. As a
result, this will affect most economies around the globe adversely.

BUSINESS
References
Fraedrich, J., Ferrell, O., & Ferrell, L. (2013). Ethical decision making for business. Mason,
Ohio: South-Western.
Hess, M. F., & Cottrell Jr, J. H. (2016). Fraud risk management: A small business perspective.
Business Horizons, 59(1), 13-18.

BUSINESS
What are the differences between capitalism and socialism?
What are the differences between rational economics and behavioral economics?
Explain the US shift from the 1950s-90s rational economics to the 2010 behavioral
economics?
According to various researches and studies, socialism refers to economic models and
rationales that encourage the creation of a society whereby wealth and power are distributed and
shared equally among people. However, the amount of work expended on production is the key
determinant when the aforementioned activity is taking place. Karl Marx is one of the most
famous socialists since its existence. Whereas, capitalism refers to an economic system where
means of production in the society are owned by particular individuals. Production decisions are
made by the private people
Rational economics works on the assumption that people's decisions are predictable and
will strive to maximize the utility of their...


Anonymous
Excellent! Definitely coming back for more study materials.

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