Business Ethics and Globalisation

ETHICS AND GLOBALIZATION
What is globalization?
 Globalization refers to the shift toward a

more integrated and interdependent world
economy
 Globalization involves the integration of

technology, markets, politics, cultures, labor,
production, and commerce. Globalization is
both the process and the result of this
integration.
 Globalization is the expansion of
international trade to a point where national
markets have been overtaken by regional
trade blocs, leading eventually to a global
marketplace.
Globalization has 2 main
components:
 Globalization of markets: the merging of
historically distinct and separate national
markets into 1 huge global marketplace lead to
creating of global products e.g. McDonald’s ,
Coca-Cola, Starbucks, etc.
 Globalization of production: the sourcing of

goods and services from locations around the
globe to take advantage of national differences
in cost and quality of factors of production e.g.
customer service call center in India for US firms
Drivers of Globalization
 Decline trade and investment barriers
 Technological changes
What is MNE(or MNC)?
 Multinational enterprises (MNEs) are

corporations that “own or control production
or service facilities outside the country in
which they are based.”
 MNEs also are referred to as global,
transnational, and international companies.
Multinational corporation
 A multinational corporation (MNC) or
transnational corporation (TNC), also called
multinational enterprise (MNE), is a
corporation or enterprise that manages
production or delivers services in more than one
country. It can also be referred to as an
international corporation.
http://en.wikipedia.org/wiki/Multinational_corporation
Common Characteristics of
Multinational Enterprises (MNE)
 Operating a sales organization, manufacturing
plant, distribution center, licensed business, or
subsidiary in at least two countries
 Earning an estimated 25 to 45% of revenue from
foreign markets
 Having common ownership, resources, and
global strategies
MNE Benefits for Host Country
 Hire local labor

 Create new jobs
 Co-venture with local entrepreneurs and companies
 Attract local capital to projects
 Provide for and enhance technology transfer
 Develop particular industry sectors
 Provide business learning and skills
 Increase industrial output and productivity
 Help decrease the country’s debt and improve its
balance of payments and standard of living
Host Country Benefits for MNE
 Low costs of production that enable MNE sell

its products in the lower prices and get
higher income.
 Less stringent laws and regulations in host
country compared with the home one and
make it more easier to operate.
MNE Perspective on Unethical
Practices by Local Government
 Limit repatriation of MNE assets and earnings.
 Pressure and require MNEs to buy component parts and
other materials from local suppliers.
 Require MNEs to use local nationals in upper-level
management positions.
 Require MNEs to produce and sell selected products in
order to enter the country.
 Limit imports and pressure exports.
 Require a certain amount or percentage of profit to
remain in or be invested in the country.
Host-country Perspective
towards MNE
 MNEs can dominate and protect their core technology
and research and development, thus keeping the host
country a consumer, not a partner or producer.
 MNEs can destabilize national sovereignty by limiting a

country’s access to critical capital and resources, thereby
creating a host-country dependency on the MNE’s
governments and politics.
 MNEs can create a “brain drain” by attracting scientists,

expertise, and talent from the host country.
Host-country Perspective
towards MNE (cont)
 MNEs can create an imbalance of capital outflows over
inflows.
 MNEs can disturb local government economic planning

and business practices by exerting control over the
development and capitalization of a country’s
infrastructure.
 MNEs can destroy, pollute, and endanger host-country

and LDC environment and the health of local
populations.
Dark Sides of Globalization
 Crime and corruption: Narcotics trafficking ,

sex slave business , black market business,
and estimated high corruption costs
 Economic poverty and child slave labor:
Child labor in developing and industrialized
countries .African countries are being ignored
by globalization and are not in the global
economy because of high illiteracy rates, lack
of modern infrastructure, and social chaos.
 The global digital divide: World continues to

have different levels of access to technology,
first and third world countries. Technology
revolution and the internet integration
increased child pornography business.
 Westernization (Americanization) of
cultures: “McDonaldization” and also
education, work, the criminal justice system,
health care, travel, leisure, dieting, politics,
the family, religion, and every other aspect of
society.
 Loss of Nation-State Sovereignty:

Globalization gradually destroys the ability of
governments to protect the interests of their
citizens against more powerful multinational
corporations.
UN Global Compact
 Human Rights
 Businesses should support & respect the
protection of internationally proclaimed human
right.
 Businesses should make sure they are not
complicit in human rights abuses.
UN Global Compact
 Labor Standards
 Businesses should uphold the freedom of
association and the effective recognition of the
right to collective bargaining.
 Businesses should uphold the elimination of all
forms of forced & compulsory labor.
 Business should uphold the effective abolition of
child labor.
 Businesses should uphold the elimination of
discrimination in employment & occupation.
UN Global Compact
 Environment
 Businesses should support a precautionary
approach to environmental challenges.
 Businesses should undertake initiatives to
promote greater environmental responsibility.
 Business should encourage the development &
diffusion of environmentally friendly technologies.
UN Global Compact
 Anticorruption
 Businesses should work against all forms of
corruption, including extortion and bribery.
The OECD Guidelines for
Multinational Enterprises
 Governmental initiative endorsed by 30
members of Organization for Economic
Cooperation and Development (OECD) and
9 nonmembers, promoting principles and
standards of behavior in the following areas:
human rights, information disclosure,
anticorruption, taxation, labor relations,
environment, competition, and consumer
protection.

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ETHICS AND GLOBALIZATION

 Globalization refers to the shift toward a

 Globalization involves the integration of

 Globalization of production: the sourcing of

 Decline trade and investment barriers

 Multinational enterprises (MNEs) are

 Hire local labor

 Low costs of production that enable MNE sell

 MNEs can destabilize national sovereignty by limiting a

 MNEs can create a “brain drain” by attracting scientists,

 MNEs can disturb local government economic planning

 MNEs can destroy, pollute, and endanger host-country

 Crime and corruption: Narcotics trafficking ,

 The global digital divide: World continues to

 Loss of Nation-State Sovereignty:

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