Lecture 10:

Ethics and
sustainability
 Contents

I. Ethics and business ethics

II. Ethical issues related to globalization

III. Ethical guides for MNCs

IV. Sustainable globalization

 I. Ethics and
business ethics
• Ethics: The basic concepts and fundamental principles
of decent human conduct. It includes study of universal
values such as the essential equality of all men and
women, human or natural rights, obedience to the law of
land, concern for health and safety and, increasingly,
also for the natural environment.
(Business Dictionary Website, 2017)

• Business ethics (also known as corporate ethics) is a

form of applied ethics or professional ethics that
examines ethical principles and moral or ethical
problems that arise in a business environment. It applies
to all aspects of business conduct and is relevant to the
conduct of individuals and entire organizations.
(Stanford Encyclopedia of Philosophy, 2008)
 I. Ethics and
business ethics
Ethical temptations and violations
• Stealing from employees and customers
• Illegally copying soft wares
• Treating people unfairly
• Sexual harassment
• Conflicts of interests
• Accepting kickbacks and bribes for doing business with
another company
• Divulging confidential information
• Misuse of corporate resources
• Extracting extraordinary compensation from organization
• Corporate espionage
• Poor cyber ethics (i.e. ethics relating to cyber technology,
online environment)
 II. Ethical issues
related to Globalization

• How to address the unequal distribution of wealth.

• How to deal with the fact that national systems of
free enterprise are situated within the framework of
their particular national legal, political, and social
system, there is no comparable international
framework for international business.
• How to ensure that both capital and labor can move
freely—a necessary component of capitalism.
• Assuming ethics is important in international
business, whose ethics should business follow?
 II. Ethical issues
related to Globalization
Multinational Corporations and Ethics
• Multinationals operate extensively in more than one country,
and there is no effective way to prevent firms from forming
cartels and controlling prices and production.
• The main criticisms of MNCs in the developing world are:
– MNCs operate immorally in the LDCs by exploiting
workers, exploiting natural resources, and reaping
exorbitant profits;
– MNCs compete unfairly in the LDCs, to the detriment of
the host countries; and
– MNCs are a major cause of the impoverishment of the
LDCs and of the unrest found there. Each of the charges
has some basis in fact and history.
 II. Ethical issues
related to Globalization
1. Multinationals and Exploitation

• Multinational corporations operate in LDCs for a variety

of reasons. They seek cheap labor, available resources,
tax shelters and relief, and markets.
• In such circumstances, the opportunities for exploitation
are numerous
 II. Ethical issues
related to Globalization
2. Multinationals and unfair competition
• The charge that MNCs compete unfairly in the LDCs has
two major components.
– MNCs are able to operate on especially favorable and
uncompetitive terms.
– MNCs do not carry their fair share of the cost of social
development, which imposes greater burdens on local
industries.
• The charges that MNCs use advanced technology, are
more productive, and undercut local firms are in part
true.
 II. Ethical issues
related to Globalization
3. Multinationals and impoverishment
The charge that developed countries are the cause of the impoverishment
of LDCs and of the unrest found rests partly on the following ideas:
– Colonialization contributed to the impoverishment of LDCs.
– People of the LDCs are also impoverished in a comparative sense.
Poverty is not only an absolute condition; it is also relative.
– Improvements in LDCs caused by the involvement of developed
countries is partly responsible for the impoverishment of the LDCs.
Increase in life expectancy has contributed to the population growth
in many LDCs, which poses enormous problems and leads to
increasing poverty and starvation.
– Several MNCs have directly helped produce starvation in some
countries. The typical scenario is this: An MNC goes into a country
and buys up large portions of the productive land. It then grows
cash crops for export, whereas, before, local farmers grew food for
local consumption.
 II. Ethical issues
related to Globalization
Multinationals and Less Developed Countries

• The abuses by MNCs in LDCs need not, and should not, be denied,
ignored, or excused.
• But even taken at their worst, and as a whole, they do not establish the
case that the American free-enterprise system rests on the exploitation
of LDCs.
• The United States, because of its size, wealth, and global importance, intervenes in
the economy of many nations even if it does nothing to them directly.

• Some real-life examples of unethical corporate scandals:

• Long version with description:
https://www.youtube.com/watch?v=_QepKsfmfSo
• Short version as headlines
https://www.youtube.com/watch?v=u-yForoAZ3U
 III. Ethical
Guidelines for MNCs
• The most striking structural difference between the
American system and the system of international business
is the paucity on the international level of background
institutions—which include laws and accepted practices,
moral norms, and social demands—to control or guide
international business.
• The situation is doubly bad with respect to LDCs, which
tend to have inadequate background institutions internally
as well.
• This situation makes possible many great abuses
 III. Ethical
Guidelines for MNCs
1. General guidelines
The following norms, or rules, could eliminate many of the abuses in LDCs:
– The first norm, “the moral minimum,” is the norm to do no intentional
direct harm. This moral minimum applies to all actions of all people,
corporations, and countries.
– The second norm builds on the first. Not only should the
multinational do no direct intentional harm, but if its activity is to be
morally justified, its activity must benefit the host country.
– The third norm is to respect the human rights of the workers,
consumers, and all others in the host country.
– The fourth norm is to promote the development of just background
institutions internally within the country as well as on the international
level.
– The fifth norm requires a multinational to respect the laws of a host
country, as well its culture and local values, providing these do not
violate human rights or impose immoral laws.
 III. Ethical
Guidelines for MNCs
2. Multinationals and Human Rights

• The UN Universal Declaration on Human Rights is a widely accepted

beginning point to establish the obligations of multinationals with respect
to human rights.
• The multinational has the obligation to respect the human rights of all
those with whom it has contact—its employees, suppliers, customers,
the people in communities who are affected by its actions, and so on.
• The multinationals must be regulated in the use of contractors or
suppliers or engaging in joint partnerships or joint ventures.
• The multinationals must take into account the level of operation in
countries whose governments engage in egregious violations of human
rights.
 III. Ethical
Guidelines for MNCs
3. The Role of the WTO in Global Business

• The central role of the WTO in global business is

undisputed, but it is not without controversy or
complaint. The major complaints are basically three:
– that the conditions of trade are unfair to less developed
nations,
– that the trade law which has developed is actually
detrimental to the development of LDCs and is in fact
exploitation, and,
– that the WTO process is undemocratic and lacks
transparency
 III. Ethical
Guidelines for MNCs
4. International Codes
• The best starting point in the further development of standards for
international business is self-regulation by business within the guidelines
and standards that already exist.
• The UN Global Compact with business was proposed by the UN
secretary-general in January 1999.
• The Compact challenges business to work with other companies, UN
agencies, and nongovernmental organizations (NGOs) to support and
implement ten basic principles stated in the Compact.
• The basic principles deal with respecting human rights, labor standards,
protecting the environment, and eliminating corruption. (open link
http://globalcompactvietnam.org/vn/detail.asp?id=48 for details)
 III. Ethical
Guidelines for MNCs
4. International Codes
• The ILO is a specialized agency of the UN that has set up
principles governing labor standards.
• The Tripartite Declaration of Principles concerning
Multinational Enterprises and Social Policy were launched in
1995.
• These principles emerged from a series of dialogues among
a group of European, Japanese, and American firms.
• The principles are rooted in two basic principles:
– the Japanese principle of kyosei (working together for the common
good); and
– the Western notion of the dignity and value of each human person as
an end and not simply as a means to be used by others.
 III. Ethical
Guidelines for MNCs
5. Cross-Cultural Judgments
• A cross-cultural judgment concerns practices, institutions, general
systems, or theories other than those of one’s culture, society, or
system.
• These judgments are the product of a country’s own point of view or
concept of justice inasmuch as it is impossible to adopt all points of view
at once or to make judgments from no point of view.
• Different systems can be just, and justice does not require that all
countries adopt the U.S. (or any other) view of justice, changing their
political, social, and economic systems to match or suit those of the any
other country.
 III. Ethical
Guidelines for MNCs
Cross-Cultural Negotiation
• Negotiation and compromise are ingredients in the notion of
transactional international justice.
• Negotiation in business sounds political and therefore many treat it as
having little to do with justice.
• Nonetheless, negotiation is morally justifiable and is often the proper
procedure to follow.
• To say that a transaction or practice is just if all those importantly
affected by it freely agree to it as just is to characterize justice by a
procedure rather than by a specific outcome determined by a set of
substantive principles.
 IV. Sustainable
globalization
• Sustainable globalization represents a breakthrough and a
fundamental transformation in how people approach doing
business in a global world in the 21st century.
• It shifts from a zero-sum, selfish, win-lose approach to one
that fully takes into account the short and long-term impacts of
people’s actions on the larger ecosystem of which humans
are a part, recognizes and values our use of precious natural
resources, demonstrates respect for all people on the planet,
supports local communities in creating the best possible
future for themselves, and builds human, social and financial
capital at the local, national and global levels.
(Axelrod et al., 2008)