BSB119 L W 8

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Management and Human Resources
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BSB119 – GLOBAL BUSINESS LECTURE 8: ETHICAL AND LEGAL REQUIREMENT What is Ethics?  Ethics is defined as an individual's personal beliefs about right and wrong behaviour. Ethics is not just the practice of individuals; it is a value shared by society as a whole. Business Ethics  Applied to business, ethics attempts to describe how people should act within given business structures. o The accepted principles of right or wrong governing the conduct of business people o Ethical strategy: course of action that does not violate ethical principals  The profit motive was once considered to be the only guiding principle of international business.  The interest in business ethics has largely come about because of the corporate scandals of the 1980s in many countries. o It is now more widely recognised that pure greed is no longer good for business. o In a world where rapid communications and enquiring journalists are quick to expose and publicise unethical business practices, a disregard for business ethics in simply bad business. Ethical Issues in International Business  Arise when a manager makes decisions consistent with differing national environments o Political systems o Legal systems o Economic development levels o Culture  What is ethical and “normal” in one environment may not be so in another  Situations arise when managers deal with the following factors in an environment. These environments are different in different countries. o AWB corrupting government officials for wheat contracts. o Using the loop holes in legal systems – union carbide not adhering to the Indian legal system. o Selling inferior products in countries such as Nestle milk powder as substitute for mother milk o Offending other culture – be ethnocentric or stereotyping.  Arise most often in the context of: o Employment practices  What happens when working conditions and pay rates differ? What standards should be applied – the host nation or the home nation?  Hiring practices, labor relations, diversity issues, employment conditions are some specific issues that require careful thought  Example: Nike and sweatshop labour  Suggested safeguards include establishing minimal acceptable standards that project basic rights and dignity of employees, auditing foreign subsidiaries and subcontractors on a regular basis to make sure those standards and met and taking corrective action if they are not o Human rights  Basic human rights are not respected in many developing nations  Rights such as freedom of speech, assembly, association, movement and political choice are not universally available  It is argued that inward investment by MNC can be a force for economic, political and social progress which ultimately improves the rights of people in repressive regimes.  Suggests that it is ethical for a MNC to do business nations which lack the democratic structures and human rights records of developed nations  China: inward investment will help boost living standards, economic growth and human rights o Environmental policy  Many developing nations have less regulation over pollution. Does this mean it’s acceptable for Western MNC’s to go in and pollute?  OCED suggests it isn’t.  Locally mandated environmental standards may be inferior to those an MNC knows it can achieve  Tragedy of the commons: a resource held in common by all, but owned by no one, is overused by some, resulting in degradation.  If a decision is legal but unethical, should it be taken? o Corruption/Bribery  Bribery is universally shameful. …In no country do bribe takers speak publicly of their bribes, nor do bribe givers announce the bribes they pay. No newspaper lists them. No one advertises that he can arrange a bribe. No one is honored precisely because he is a big briber or bribee. …Not merely the criminal law – for the transaction could have happened long ago and prosecution be barred by time – but an innate fear of being considered disgusting restrains briber and bribee from parading their exchange  Government officials may ask for bribes for an MNC to “get things done”  Is an MNC’s manager who agrees a corrupt manager?  Should an MNC ever accede to bribery demands?  Long historical problem  Facilitating payments: payments made to foreign officials to ensure there is no obstruction to a transaction  Ensure officials perform duties they are obliged to perform.  US government allows this type of payment under foreign corrupt practices act (USA)  In Australia, bribery is outlawed under the Bribery Act which prohibits bribes to foreign governments in return for business o Repressive regimes  Is inward investment an agent for change?  What is the limit beyond which inward investment would not be justified under all circumstances?  What if competitors from other nations invest and you don’t? o An MNC’s perceived moral obligations to society  MNC have power which comes from their control over resources and their ability to move production from country to country. Power is constrained by law, discipline of market and competitive process  Perceived power over host country  Along with power arise obligations (?)  Power is morally neutral  How it is used is what matters  Perceptions of how it should be used and of its impact vary o Company view o Host country view o Social Responsibility  Social responsibility: idea that business should consider the social consequences of economic actions and given preference to outcomes with positive social and economic consequences when making business decisions.  Noblesse oblige: honorable and benevolent behavior is the responsibility of those in power  Benevolent behavior responsibility of only successful business? AWB Example  The Boards of AWB Limited and AWB (International) Limited are committed to clearly promoting and demonstrating that their business affairs and operations are at all times being conducted legally, ethically and in accordance with the highest standards of integrity and propriety.  The AWB Code of Conduct policy is based on this principle and its observance provides the foundation on which the Company's reputation with growers, customers, suppliers and stakeholders is based.  The Code of Conduct policy sets out the values, responsibilities and obligations of all Board members and all people employed, contracted by, associated with or acting on behalf of the AWB Group. Agency and facilitation payments  In some countries it is accepted practice for agency payments to be required if a service or contract is to be effected. In such circumstances payments may only be made within the defined policy arrangements as approved by the Board and Executive and are within the law. Local laws as well as Australian laws will apply to all such payments.  Agency payments must be made strictly in accordance with the policy guidelines and have the prior approval of the member of the Executive Leadership Group of the appropriate Division. All payments must be recorded and reported to the Managing Director within one month of payment. The record must show the value of the benefit or payment, the date it was made, the identity of all people involved, why the benefit was given, your name and signature and the date the record was made.  Payments or benefits can only be given in accordance with the Commonwealth Criminal Code as amended or replaced. The Commonwealth Criminal Code provides that it is a criminal offence to bribe a foreign pub
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