Welcome

Ethical Challenges of

International Management

Dr. Satyendra Singh

Director, Centre for Emerging Markets

Professor, Marketing and International Business

Editor, International Journal of Business and Emerging Markets

www.winnipeg.ca/~ssingh5

Why Study Ethical Issues?

MNCs are accused of a # of abuses relating to business activities:CorruptionChild laborHuman rights, Environment, SafetyDumping

Role of MNCs in societyResponsibility: MNCs vs. Government

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Sued over misleading beefLater charges dropped – counter sue

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The Basic Premise

CorruptionChild labor

Symptom vs. problem

Right vs. wrong?Right vs. right?

(Poverty, Lack of education,Fair trade,…)f

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Corruption…

Pay to get work doneCaused by usually poverty, greed…

Salary lasts for 3 weeks only…?Survival vs. meeting basic needs

Corrupt individualIndividual primary beneficiary at the

cost of organizationCorrupt organization

Selection, and Socialization

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Corruption…

Arguments for being corrupt! TaxCommissionCompensationJob well doneAppreciationIn West, it is called tips, gifts, bonus

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Corruption: from MNC’s Viewpoint…

Western MNCs pay $80b to get contracts or concession (Hawley 2000)$80b can eradicate poverty (UN)

It ↓ GDP in poor countriesBecause it undermines mkt. economy

Decisions based on corruptionNot on price, quality, service,

innovation Raises price for everyone poor suffers

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Corruption: from MNCs Viewpoint…

Divert resources from public services schools and hospitalsto dams… more scope for corruptionPoor does not get public servicesPoor is further impacted

Corruption undermines democratic process and rules of law

Environment is also likely to sufferCorrupt officer Non-enforcement

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Corruption: from MNC’s viewpoint…

Risk of accusation of corruptionWhether proven or not

Can lead to loss of reputationIf pay bribe, more demands likely

It adds costs of doing businessUN convention against corruption

If you cheat, so will your competitorDoing business more difficultEmployees/stakeholders lose trust

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Corruption: from MNC’s viewpoint

Customers do not trust companiesGovernments do not trust companies

↓ likely to give assistance↑ likely to audit transactions↑ expensive to do business

Stock markets react negativelyCompromise personal beliefsNeed justification

Moral philosophies

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The Moral Philosophies…

Ethics moral principles or valuesDeontological philosophy

Rule (whatever) based–no matter whatWe are the best

Teleological philosophyConsequence basedResponsible for the consequence

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The Moral Philosophies…

Utilitarian philosophyBased on net expected benefitsNo absolute, relativeBut, what is benefit? debatable

Contractarian philosophyBased on the law of the land, contractsAnything else is unethicalBut, may be difficult to enforce

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The Moral PhilosophiesPluralism philosophy

Based on “do the right thing”No need for law or contractsWe’ve conscience! Right vs. wrongMost of us like it Yet we had 2 WW

Rawls’s Social Justice TheoryFairness, peace and harmonyBut, social contract is a bit ideal

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The Options…

1 Stay awayNo country is perfect Not everybody is corruptYou lost huge opportunityYou did not try to impact localsBlack-listing a country is easyFind creative ways of doing business

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The Options

2 Embrace local standardsImpact local cultureDevelop ways to combat corruptionDoes context change your values?

3 Maintain high global standardsGlobal firms have global reputationTransfer of people easyCan exceptions be made?

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At Macro Level

Education – a national strategy neededE.g., India, China, USSR, Ghana, Kenya

Build capability Governments enforce moral guidelinesGovernment policies for fair trade

E.g., GM Food, Subsidies, Coca price…

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At Micro Level

Strategic — MNCs have the powerSchool and day care for childrenUN Global Compact implementationContribution to country’s development

Mode of entryIJV vs. Wholly-owned subsidiary

Ethics OfficerPay fair taxes, reduce transfer pricing

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At Personal Level

Personal moral compassOrganizational Culture

Whistle-blower legislation(Un)realistic performance goalsVolunteer for social cause

E.g., Scotia Bank Winnipeg Public Library Board

Win-win situation

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Child Labor (300m)

Poverty—survival urbanizationIf outlaw (Harkin Bill)

↓ Family income ↓labor supply↑ Adult wage children go to school↑ skills ↑ productive ↑ wages↑ family welfare if demand persists

But, ↑ wages ↓ # of jobsEffective only if children go to school

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UN Global Compact -- 5

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• Abolition of child labor – ILO conventions Minimum Age Convention No. 138– Minimum age for admission to employment or work

• Developed countries Developing countries• Light Work 13 Years Light Work 12 Years• Regular Work 15 YearsRegular Work 14 Years• Hazardous Work 18 Years Hazardous Work 18 Years

– Children have distinct rights• Child labour is damaging to a child’s physical, social,

mental, psychological and spiritual development • Deprives them of childhood, dignity; separates from families

UN Global Compact -- 10

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• Work against all forms of corruption – Corruption

• the abuse of entrusted power for private gain

– Extortion• When asking or demand is accompanied by threats that

endanger the personal integrity or the life of the person

– Bribery, Transparency International• gift, loan, fee, reward… from a person to do something

dishonest, illegal or a breach of trust

– Steps to fight corruption• Internal: Anti-corruption policies within organizations• External: Report corruption in the annual Communication• Collective: Join forces with industry peers, stakeholders…

Trends Against Corruption and Child Labor

Transparency InternationalForeign Corrupt Practices Act (US)

Corruption of Foreign Public officials (Canada)

OECD Anti-bribery InitiativesHarkin Bill – Trade BanILO Convention on Minimum Age138UN Global Compact (UNGC 2007)

HR(2), Labor (4), Environment (3), Anticorruption (1)

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