Lecture 4
Lecture 4
Lecture 4
MCS 271
Unit 4
Ethics in International Business
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INTRODUCTION
Understanding the nature of ethical problems, and
deciding what action to pursue when confronted with
one, is a central theme in this unit.
• The term ethics refers to accepted principles of right or
wrong that govern the conduct of a person, the
members of a profession, or the actions of an
organization
• Business ethics are the accepted principles of right or
wrong governing the conduct of businesspeople,
• and an ethical strategy is a strategy, or course of action,
that does not violate these accepted principles.
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Ethical Issues in Int. Business
• Most ethical issues in IB are rooted in the fact that
political systems, law, economic development, and
culture vary significantly from nation to nation.
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Personal Ethics (PEs)
• PEs are the generally accepted principles of right and wrong
governing the conduct of individuals.
• As individuals, we are typically taught that it is wrong to lie and
cheat—it is unethical—and that it is right to behave with
integrity and honor, and to stand up for what we believe to be
right and true.
• The personal ethical code that guides our behavior comes
from a number of sources, including our parents, our schools,
our religion, and the media.
• Our personal ethical code exerts a profound influence on the
way we behave as businesspeople. An individual with a strong
sense of personal ethics is less likely to behave in an unethical
manner in a business setting.
Decision Making Processes
• Businesspeople sometimes do not realize they are behaving
unethically, primarily because they simply fail to ask, “Is this
decision or action ethical?”
• Instead, they apply a straightforward business calculus to
what they perceive to be a business decision, forgetting that
the decision may also have an important ethical dimension.
The fault lies in processes that do not incorporate ethical
considerations into business decision making
• E.g. In making the decision to award subcontracts,
managers at Nike might have considered business variables
such as cost and quality BUT NOT how the subcontractor
treats employees
Organization Culture
• Just as societies have cultures, so do business
organizations.
• Organization culture refers to the values and norms that
are shared among employees of an organization .
• The climate in some businesses does not encourage people
to think through the ethical consequences of business
decisions.
• This brings us to the third cause of unethical behavior in
businesses—an organizational culture that deemphasizes
business ethics, reducing all decisions to the purely
economic.
Unrealistic Performance Expectations
• There can be pressure from the parent company to meet
unrealistic performance goals that can be attained only by
cutting corners or acting in an unethical manner
• The combination of an organizational culture that legitimizes
unethical behavior, or at least turns a blind eye to such
behavior, and unrealistic performance goals may be
particularly toxic.
• In such circumstances, there is a greater than average
probability that managers will violate their own personal
ethics and engage in unethical behavior.
Leadership
• Leaders help to establish the culture of an organization,
and they set the example that others follow
• Other employees in a business often take their cue from
business leaders, and if those leaders do not behave in an
ethical manner, they might not either.
• It is not just what leaders say that matters, but what they
do or do not do.
Societal Culture
• Societal culture may well have an impact on the propensity of
people, and organizations, to behave in an unethical manner.
• Using Hofstede’s dimensions of societal culture, the study
found that enterprises headquartered in cultures where
individualism and uncertainty avoidance are strong were more
likely to emphasize the importance of behaving ethically than
firms headquartered in cultures where masculinity and power
distance are important cultural attributes.
• Such analysis suggests that enterprises headquartered in a
country such as Russia, which scores high on masculinity and
power distance measures, and where corruption is endemic,
are more likely to engage in unethical behavior than enterprises
headquartered in Scandinavia
Implications for Managers
Here we focus on five things that an international business and its
managers can do to make sure ethical issues are considered in business
decisions. These are:
(1) favor hiring and promoting people with a well-grounded sense of
personal ethics;
(2) build an organizational culture that places a high value on ethical
behavior;
(3) make sure that leaders within the business not only articulate the
rhetoric of ethical behavior, but also act in a manner that is consistent
with that rhetoric;
(4) put decision-making processes in place that require people to
consider the ethical dimension of business decisions; and
(5) develop moral courage.