IBUS1101 Lecture Notes - Lecture 4: Smog, Appropriate Behavior, Ethical Dilemma
5 Jun 2018
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Department
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Professor
Appreciate ethical behaviour and its importance in international business
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LO:
4.1 Appreciate ethical behaviour and its importance in international
business
Ethical behaviour and its importance in international business
Ethical behaviour = doing the right things for the company, employees, community, government and
natural environment
Leading corporations ensure that ethical behaviour transcends all international business
activities and figures prominently in management decisions about financial performance and
competitive advantage.
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An integrated, strategic approach to ethical, sustainable, and socially responsible behaviour
provides the firm with competitive advantages, including stronger relationships with
customers, employees, shareholders, customers, suppliers, local governments, and the
communities where they do business
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Components of ethical behaviour
Ethics = moral principles and values that govern behaviour of people, company, government
regarding right and wrong
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CSR = operating a business in a manner that meets or exceeds the ethical, legal and
commercial expectations of customers, shareholders, employees and communities where the
firm does business
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Sustainability = meets humanity needs today without harming future generations needs
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Corporate governance = system of procedures and processes which corporations manage,
direct and control (provides means company can undertake ethical behaviours)
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Four key components to define ethical behaviour:
right thing to do
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often prescribed within laws and regulations.
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Violating laws and regulations has obvious legal consequences.
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Customers, governments, and the news media demand ethical behavior.
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Firms that commit ethical blunders attract unwanted attention from opinion leaders.
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leading to enhanced corporate image and selling prospects.
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Employee morale
Reason to behave ethically:
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Value of ethical behaviour:
Chapter 4 - Ethics, CSR, Sustainability and Governance in
International Business
Thursday, 29 March 2018
11:03 AM
Textbook Page 1
Employee morale
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Reputation
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Before entering a country and throughout the life of the firm’s operations there, management
must be alert to the various ethical challenges that may confront the firm and should scan the
country and potential partners for the possibility of ethical abuses and regard such scanning as
an ongoing process.
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Managers must be constantly vigilant about their current and potential activities.
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With enough practice, management can develop a systematic approach to scanning and create
a culture within the firm that supports alertness and ongoing analysis of potential ethical
concerns
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Top management sets goals and incentives aimed at promoting good outcomes (e.g.,
profits) that instead encourage bad behaviors.
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Employees overlook unethical behavior in others because of peer pressure or self-
interest.
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Managers tolerate lower ethical standards in value-chain activities suppliers
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Unethical practices are allowed to accumulate in the firm slowly over time. When a firm
is awash in bad behavior, smaller infractions seem less noticeable. A corrupt
environment tends to foster further corruption.
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Bad means are justified by good ends (unethical testing procedures)
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Bad behaviour results in:
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Falsify or misrepresent contracts or financial statements.
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Pay or accept bribes, kickbacks, or inappropriate gifts.
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Tolerate sweatshop conditions or otherwise abuse employees.
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Undertake false advertising and other deceptive marketing practices.
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Engage in pricing that is deceptive, discriminatory, or predatory.
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Deceive or abuse intermediaries in international channels.
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Engage in activities that harm the natural environment
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Examples of unethical behaviour
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Unethical behaviour:
Each society develops its own traditions, values, attitudes, norms, customs, and laws.
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Each culture develops its own ethical values and understanding of ethical principles.
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There is no global standard of ethical behavior.
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Appropriate behavior in one culture may be viewed as inappropriate or unethical elsewhere
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Standards vary by levels of economic development
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Right and wrong is not always clear and consistent
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Legal systems can be weak or poorly enforced
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Ethical dilemma = predicament concerning major conflicts among different interests when
determining the most appropriate course of action is confounded by a set of solutions that are
equally justifiable and often equally imperfect.
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Possible actions may be mutually exclusive; the choice of one automatically negates the
others.
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Ethical standards and dilemmas around the world:
Relativism = belief that ethical truths are not absolute but differ from group to group.
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Relativists opt for passive acceptance of the values, behaviors, and practices that prevail in
each of the countries where they do business.
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Normativism = belief that ethical behavioral standards are universal, and firms and individuals
should seek to uphold them consistently around the world
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most firms apply a combination of relativism and normativism abroad.
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Most corporations strike a balance between corporate values developed in the home country
and local ethical values. In countries with questionable ethical norms, it is usually best to
maintain ethical standards superior to what is required by local laws and values. This strategy
helps win goodwill in the local market and prevents potentially damaging publicity in the firm’s
other markets.
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To make ethical practices, CSR, and sustainability succeed in the firm, it is important for
corporate directors and executives to undertake systematic and ongoing education of
employees, suppliers, and intermediaries. As the firm builds a track record of positive ethical
behavioral changes and successes, it will begin to build a culture of appropriate behavior in its
operations worldwide. As they ply the waters of international business, addressing the moral
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Relativism and normativism:
Textbook Page 2
operations worldwide. As they ply the waters of international business, addressing the moral
integrity of strategic and daily operational decisions is a prime consideration for companies
today
4.2 Recognize ethical challenges in international business
Ethical challenges in international business
Companies encounter ethical challenges in a range of international activities.
Corruption
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Bribery
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unethical management practice
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harmful global sourcing
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illicit products and marketing
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intellectual property infringement
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Ethical challenges include:
Corruption = extreme form of unethical behavior.
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It is the practice of obtaining power, personal gain, or influence through illegitimate means
and usually occurs at others’ expense
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Corruption influences our political, social, and economic environments.
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It diminishes trust in public institutions, undermines the rule of law, and challenges democratic
principles.
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It stunts economic development by discouraging foreign direct investment and hurts small
businesses that lack the means to pay up.
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trade and investment help reduce poverty, but MNEs avoid doing business with corrupt
countries.
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Corruption harms the poorest in societies, those forced to pay bribes to gain access to
needed products and services, such as water, electricity, and phone service.
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Widespread corruption hinders economic development.
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Can occur as political corruption
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Bribery = person offers another person a gift, cash, factor to act dishonestly for personal
gain
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Embezzlement = theft or misuse of funds belonging to one's employer
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Fraud = involves wrongfully deceiving a person or other party to give up assets or cash
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Extortion and blackmail = threats of harm against another person or party unless
payment is met
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Money laundering = concealment of origins of funds obtained through illegal means
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Corruption can occur as:
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Corruption:
most notable corruption in international business
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Bribery:
Textbook Page 3
Document Summary
Chapter 4 - ethics, csr, sustainability and governance in. Appreciate ethical behaviour and its importance in international business. 4. 1 appreciate ethical behaviour and its importance in international business. Ethical behaviour and its importance in international business. Ethical behaviour = doing the right things for the company, employees, community, government and natural environment. Leading corporations ensure that ethical behaviour transcends all international business activities and figures prominently in management decisions about financial performance and competitive advantage. An integrated, strategic approach to ethical, sustainable, and socially responsible behaviour provides the firm with competitive advantages, including stronger relationships with customers, employees, shareholders, customers, suppliers, local governments, and the communities where they do business. Ethics = moral principles and values that govern behaviour of people, company, government regarding right and wrong. Csr = operating a business in a manner that meets or exceeds the ethical, legal and commercial expectations of customers, shareholders, employees and communities where the firm does business.
