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Final Exam Study Notes - Chapter 4-Ethics

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University of Toronto Mississauga

MGT491 FINAL EXAM NOTES CHAPTER 4: ETHICS N Ethical issues can arise when doing business in different nations N Often a function of differences in economic development, politics, legal systems, culture N Should be auditing regularly to check labour practices N Ethics accepted principles of right or wrong that govern the conduct of a person, the members of a profession, or the action of an organization N Business ethics accepted principles of right or wrong governing the conduct of businesspeople N Ethical strategy strategy or course of action that does not violate these accepted principles Ethical Issues in International Business N Political systems, law, economic development, cultures vary significantly o What is considered normal in one may be considered unethical in another N Managers in a multinational firm need to be particularly sensitive to these differences when working N Most common ethical issues in international business: o Employment practices o Human rights o Environmental regulations o Corruption o Moral obligation of multinational corporations Employment Practices N Issue when work conditions in a host nation are inferior to those in the home nation, which standards should be applied? N [ LN08574-O02L3L093,2 p. 125 o Outcome: establishment of a code of conduct for subcontractors, instituted annual monitoring by independent auditors of all subcontractors N Good way to guard against ethical issues: o Establishing minimal acceptable standards that safeguard the basic rights and dignity of employees o Auditing foreign subsidiaries and subcontractors on a regular basis to make sure those standards are met o Taking corrective action if they are not met N Ex. Levi Strauss p. 125 o Outcome: ended a long-term contract with a large supplier after discovering it was forcing workers to work 74 hours per week in guarded compounds Human Rights N Basic human rights are still not respected in many nations N Freedom of association, freedom of speech, freedom of assembly, freedom of movement, freedom from political repression, etc. N Ex. apartheid in South Africa until 1994 p. 125 o Western businesses continued to operate there even though the ethics of it was questioned o GM $:OOL;,357L3.L5O08 argued that it was ethically justified to operate there as long as 1) do not obey the apartheid laws in its own operations, 2) do everything in its power to promote the abolition of apartheid laws o These principles widely adopted in US firms operating in South Africa o South African govt ignored their violation of the apartheid laws bc wanted the foreign investment o Determined that it was not doing enough so numerous huge companies exited their South African operations, persuaded other companies to leave o These divestments along with imposition of economic sanctions contributed to abandonment of apartheid and introduction of democratic elections o Helped improve human rights in South Africa N Many repressive regimes still exist N Argued that inward investment by a multinational can be a force for economic, political and social progress that improves rights of people in repressive regimes o Economic progress in a nation could create pressure for democratization o Suggests that it is ethical for a multinational to do business in nations that lack the democratic structures and human rights records of developed nations o Ex. pressure on Chinese government for more participative government, political pluralism and freedom of expression and speech
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