Politics, Law, and Business Ethics 3 Copyright © 2014 Pearson Education, Inc.

Politics, Law,Politics, Law,and Business and Business

EthicsEthics

3

Copyright © 2014 Pearson Education, Inc.

3 - 2Copyright © 2014 Pearson Education, Inc.

• Describe each main type of political system

• Identify the origins of political risk and how managers can reduce its effects

• Describe each main type of legal system and some important global legal issues

• Explain ethics and social responsibility and key issues facing international companies

• Explain how international relations affect international business activities

Chapter ObjectivesChapter Objectives

PepsiCoPepsiCo


• Healthier snacks

• Lighter impact

• Employee welfare


Roles of History and CultureRoles of History and Culture


Political IdeologiesPolitical Ideologies

Both private and public groups need to balance

each other’s power

Every aspect ofpeople’s lives must be

controlled to preserve order

Only individuals andprivate groups can

preserve personal liberties

TotalitarianismTotalitarianism AnarchismAnarchismPluralismPluralism


ImposedImposedauthorityauthorityImposedImposedauthorityauthority

Lack of Lack of constitutionalconstitutional

guaranteesguarantees

Lack of Lack of constitutionalconstitutional

guaranteesguarantees

RestrictedRestrictedparticipationparticipationRestrictedRestricted

participationparticipation

TotalitarianismTotalitarianism

Leaders govern without people’s support Government controls much of people’s lives Leaders do not tolerate opposing viewpoints


Forms of TotalitarianismForms of Totalitarianism

Theocratic totalitarianism (totalitarian religious leadership)

Secular totalitarianism (military and bureaucratic leadership)

Tribal totalitarianismTribal totalitarianism

Communist totalitarianismCommunist totalitarianism

Right-wing totalitarianismRight-wing totalitarianism


Business in Totalitarian Business in Totalitarian NationsNations

Risk Factors

• Arbitrary nature of business can mean that laws are vague or do not exist

• Bureaucrats may interpret laws however they wish

War’s causes:• Poverty• Slow economic growth• Natural resource dependency

War’s costs:• $5 billion in health losses• GDP falls by 2.2%• Recovery takes 10 years

Global Sustainability:Global Sustainability:From Civil War to Civil SocietyFrom Civil War to Civil Society



DemocracyDemocracy

Government leaders are elected directly by the wide participation of the people or their

representatives


Life and Business in Life and Business in DemocraciesDemocracies

• Freedom of expression• Periodic elections• Full civil and property rights• Minority rights• Nonpolitical bureaucracies


Discussion QuestionDiscussion Question

What are the three main features of totalitarianism and the five freedoms that democracies strive to provide?


Answer to Discussion Answer to Discussion QuestionQuestion

Totalitarian governments tend to share imposed authority, a lack of constitutional guarantees, and restricted political participation

Democracies strive to provide freedom of expression, periodic elections, full civil and property rights, minority rights, and nonpolitical bureaucracies


Types of Political RiskTypes of Political RiskTypes of Political RiskTypes of Political Risk

Conflict and violenceConflict and violence

Policy changesPolicy changes

Terrorism and kidnappingTerrorism and kidnapping

Local content requirementsLocal content requirements

Property seizureProperty seizure


Arises from:

People’s resentment toward government

Territorial disputes between nations

Ethnic, racial, or religious disputes

Reduces ability to:

Obtain materials and equipment

Manufacture and distribute products

Protect employees’ lives and firm’s assets

Conflict and ViolenceConflict and Violence


Fly nonstop when possible and avoid unsecured areas of airports

During your stay, vary your routines and means of transportation

Keep a low profile and refrain from loud, flashy behavior

Give friendly but cautious answers to personal questions

Travel with others when possible and ask directions guardedly

Know local emergency procedures before trouble strikes

Manager’s Briefcase:Manager’s Briefcase:Your Global Security ChecklistYour Global Security Checklist


Property SeizureProperty Seizure

ConfiscationForced transfer of assets from a company to the government

without compensation

ExpropriationForced transfer of assets from a company to the government

with compensationNationalization

Forced asset transfer to the government of an entire

industry


Policies and LawsPolicies and Laws

Policy changes restrict: Local content requirements:

Specify the portionof a good or service

to be supplied by local firms

Foreign ownership

Investment levels

Business activities

Foreign ownership

Investment levels

Business activities


Managing Political Risk IManaging Political Risk I

AdaptationIncorporate risk intobusiness strategies

AdaptationIncorporate risk intobusiness strategies

Localization

Development assistance

Partnerships

Insurance


Managing Political Risk IIManaging Political Risk II

Agencies specializingin political-risk services

Current employeeswith relevant information

Information gatheringGather data to better

predict and manage risk

Information gatheringGather data to better

predict and manage risk


Managing Political Risk IIIManaging Political Risk III

CorruptionForeign Corrupt Practices Act

LobbyingInfluencing local lawmakers

Influence local politicsPresent firm’s viewson political matters

Influence local politicsPresent firm’s viewson political matters



Incorporating political risk into business strategies by modifying operations, the product mix, or some other business element is called ____________.

a. Specialization

b. Globalization

c. Localization


Common LawCommon Law

PrecedentPast cases before the courts

UsageHow laws are applied

TraditionNation’s legal history


Civil LawCivil Law

Rules and statutes

constitute a legal code

Defines all obligations, responsibilities, and

privileges

Dates to Roman times in

the fifth century B.C.


Theocratic LawTheocratic Law

Legal tradition based on religious teachings

Islamic law Jewish law Hindu law


Global Legal Issues IGlobal Legal Issues I

Intellectual property- Result of intellectual talent and abilities

- Piracy/counterfeits a serious problem

Patent Excludes all but the inventor from making, using, or selling the invention (WTO = 20 years)

Trademark Words or symbols that distinguish a product and its manufacturer ("Coca-Cola")

Copyright Freedom of creator to publish or dispose of original works as they choose ("Happy Birthday to You")


Business Software PiracyBusiness Software Piracy

Source: Based on the Eighth Annual BSA and IDC Global Software Piracy Study (Washington, D.C.; Business Software Alliance, May 2011), pp. 8–9, (www.bsa.org/globalstudy)


Global Legal Issues IIGlobal Legal Issues II

Standardization- Interpreting and applying laws uniformly

Product safety and liability- Responsibility for damage, injury, or death

Taxation- Income, sales, consumption, and VAT

Antitrust (antimonopoly) laws- Prevent market sharing, price fixing, and

unfair advantage



What are intellectual property rights and what is their significance to business?



Intellectual property rights are legal rights to resources that result from intellectual abilities and any income the resources generate.

They can be traded, sold, and licensed in return for fees and/or royalty payments.

Intellectual property laws are designed to compensate people whose property rights are violated.


Friedman ViewFriedman View Cultural RelativismCultural Relativism

UtilitarianismUtilitarianismRighteous MoralismRighteous Moralism

Ethics and Social Ethics and Social ResponsibilityResponsibility

PHILOSOPHIES


Fight to eliminate bribery and corruption

Improve labor conditions and guard human rights

Practice fair trade to help the disadvantaged

Protect the environment and conserve resources

Corporate Social Responsibility Corporate Social Responsibility IssuesIssues

Going beyond legal obligations to balancecommitments to investors, customers,

communities, and other companies


International RelationsInternational Relations

Stable business environments

Improved business communications

Efficient distribution systems

Expanded opportunities

Diminished risk levels

Prompt and equitable dispute resolution

Favorable international political relations foster:



The philosophy of business ethics and social responsibility conveyed by the expression, “When in Rome, do as the Romans do,” is called the __________ view.

a. Righteous moralist

b. Cultural relativist

c. Utilitarian

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any

means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher.

Printed in the United States of America.

Copyright © 2014 Pearson Education, Inc.

3 - 37

Politics, Law, and Business Ethics 3 Copyright © 2014 Pearson Education, Inc.

Documents

Transcript of Politics, Law, and Business Ethics 3 Copyright © 2014 Pearson Education, Inc.