Chapter 9

Ethics and
Globalization
Instructor: Dr. Tôn Nữ Ngọc Hân
Center for Public Administration
International University
Vietnam National University HCMC

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 Learning Outcomes
• Understand the ethical issues arising in global business.
• Explain the issue of ethical relativism in a global environment.
• Explain the challenges in developing a global code of ethics.
• Analyze the ramifications of the UN Global Compact.
• Explain the OECD Guidelines for Multinational Enterprises.

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 Ethics and Globalization 1

Business transactions in different countries in different

languages and different cultures force companies to revisit
ethical principles.

Discussion of business ethics must distinguish between

developed and less-developed nations.
• Less-developed nation: Lacks the economic, social, and technological
infrastructure of a developed nation.
• Developed nation: Enjoys a high standard of living as measured by
economic, social, and technological criteria.

Utilitarianism: Ethical choices that offer the greatest good for

the greatest number of people.
• Negates accountability for individual actions.
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• Both less-developed nations and developed nations are busy
playing the game of globalization.
• Everyone is pursuing the same goal of maximum profits with
minimum costs, and if individual cultures present some
challenges, those can be overcome with translations and
cultural adaptations

Game of Maximum Minimum

globalization profits costs

Cultural
Translation
adaptation

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 Ethics and Globalization 2

Globalization: Expansion of international trade to a point where

national markets have been overtaken by regional trade blocs.
• Leads to a global marketplace.

Multinational Corporation (MNC): Company that provides and

sells products and services across multiple national borders.
• Pursues revenue on the basis of operating strategies that ignore national
boundaries.
• Also known as a transnational corporation.

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TOP 9 MULTINATIONAL COMPANIES IN VIETNAM

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Reasons Why MNCs Ignore Ethical Standards
• If they didn’t pursue the business, somebody else would.
• They operate in full compliance with local laws and
regulations, which are far less restrictive than those in their
own country.

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 Ethical Relativism 1

Gray area in which ethical principles are defined by:

• Traditions of one’s society.

• Personal opinions.
• Circumstances of the present moment.

Ethical relativism is a gray area in which your ethical principles are defined by
the traditions of your society, your personal opinions, and the circumstances
of the present moment.

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 Ethical Relativism 2

In less developed nations, the ideal black and white world of

ethics must give way to a gray area of ethical relativism.
• Policies and procedures can be hard to follow when one's customers do
not have comparable policies in their own organizations.
• Policies that have been outlawed in developed nations may be standard
operating procedure in less-developed nations.
• Social and political chaos can generate a bureaucracy that bears no
relation to a logical reality, leaving companies with the tough decision
whether to stand by their Western principles of ethical conduct or submit
to the practical reality of the local market and “grease the appropriate
palms” to get things done.

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 Pursuit of Global Ethics
Advantages of globalization.
• Bringing unprecedented improvements in the wealth and the standards of
living of citizens in developing nations.
• Access to resources enables lower production costs that equate to lower
prices and higher income standards for businesses of economically
advanced nations.

Disadvantages of globalization.
• Developing countries are destroyed for their raw materials with no
concern for the longer-term economic viability of their national
economies.
• Workers are exploited.
• Corporations are free to take full advantage of less restrictive legal
environments.
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 WATCHING SHORT VIDEO
How do multinational companies avoid tax?

Link: https://www.youtube.com/watch?v=49LajEBRWMo

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 Global Code of Conduct
General standard of business practice that can be applied
equally to all countries over and above their local customs and
social norms.
• Any organization that commits itself to establishing and sticking with a
clearly defined code of ethics will face considerable challenges.
• Moving that ethical commitment to a global stage requires a great deal more
planning than simply increasing the scale of the policies and procedures.

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 Ethical Guidelines for Organizations 1

• Do no intentional harm.
• Produce more good than harm for the host country.
• Contribute to the host country’s development.
• Respect the human rights of their employees.
• Respect the local culture.
• Pay their fair share of taxes.
• Cooperate with the local government to develop and enforce
just background institutions.

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 Ethical Guidelines for Organizations 2

Majority control of a firm includes the ethical responsibility of

attending to the actions and failures of the firm.

Multinationals that build hazardous plants are obliged to ensure

that the plants are safe and operated safely.
• Responsible for redesigning the transfer of hazardous technologies so that
such technologies can be safely administered in host countries.

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Challenges in Developing a Global Code of Ethics
In pursuit of profit and continued expansion, MNCs have been
found guilty of:

• Bribery.
• Pollution.
• False advertising.
• Questionable product quality.
• Abuse of human rights in the utilization of sweatshop production facilities.

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 Enforcing Global Ethics 1

Enforcing a global ethical standard would require all parties

involved to agree on:

• Acceptable standards of behavior.

• Appropriate consequences for failing to abide by those standards.

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 Enforcing Global Ethics 2

United Nations (UN) and the Organization for Economic

Cooperation and Development (OECD) promote behavior
guidelines that MNCs can publicly support and endorse.
• To give a strong message to their stakeholders that they are committed to
ethical corporate conduct wherever they do business in the world.

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 UN GLOBAL COMPACT
• Main website: https://unglobalcompact.org/

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 UN Global Compact 1

Voluntary corporate citizenship initiative endorsing 10 key

principles that focus on:

• Environment.
• Anticorruption.
• Welfare of workers around the world.
• Global human rights.

Not a regulatory instrument.

• Does not police, enforce, or measure the behavior or actions of
companies.

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 UN Global Compact 2

Relies on public accountability, transparency, and the

enlightened self-interest of companies, labor, and civil society.
• To initiate and share substantive action in pursuing the principles on which
the Global Compact is based.

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 UN Global Compact: Human Rights
• Businesses should support and respect the protection of
internationally proclaimed human rights.
• Businesses should make sure they are not complicit in human
rights abuses.

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 UN Global Compact: Labor Standards
• Businesses should uphold the freedom of association and the
effective recognition of the right to collective bargaining.
• Businesses should uphold the elimination of all forms of
forced and compulsory labor.
• Businesses should uphold the effective abolition of child labor
• Businesses should uphold the elimination of discrimination in
employment and occupation.

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 UN Global Compact: Environment
• Businesses should support a precautionary approach to
environmental challenges.
• Businesses should undertake initiatives to promote greater
environmental responsibility.
• Businesses should encourage the development and diffusion
of environmentally friendly technologies.

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 UN Global Compact: Anticorruption
Businesses should work against all forms of corruption, including
extortion and bribery.

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OECD Guidelines for Multinational Enterprises 1

• Promote principles and standards of behavior in human

rights, information disclosure, anticorruption, taxation, labor
relations, environment, competition, and consumer
protection.
• Governmental initiative endorsed by 30 members of the
Organization for Economic Cooperation and Development and
nine nonmembers.
• Carry no criminal or civil enforcement.

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OECD Guidelines for Multinational Enterprises 2

Offer the following principles and standards of behavior:

• Concepts and principles.

• General policies.
• Disclosure.
• Employment and industrial relations.
• Environment.
• Combating bribery.
• Consumer interests.
• Science and technology.
• Competition.
• Taxation.

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Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.