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Business Ethics in 21 ST Century Lecture 5

m 1) High growth prospects in emerging economies like China and India due to high GNP growth rates of 10% and 7% respectively, providing opportunities in infrastructure development. m 2) However, business also faces issues like environmental degradation, fear of unemployment in richer countries due to imports, and potential corruption due to influence of large MNCs. m 3) International codes for ethical business practices have been established like the UN Global Compact, OECD Guidelines for Multinational Enterprises, and CRT to promote sustainability and stakeholder responsibility.

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386 views17 pages

Business Ethics in 21 ST Century Lecture 5

m 1) High growth prospects in emerging economies like China and India due to high GNP growth rates of 10% and 7% respectively, providing opportunities in infrastructure development. m 2) However, business also faces issues like environmental degradation, fear of unemployment in richer countries due to imports, and potential corruption due to influence of large MNCs. m 3) International codes for ethical business practices have been established like the UN Global Compact, OECD Guidelines for Multinational Enterprises, and CRT to promote sustainability and stakeholder responsibility.

Uploaded by

vinit_shah90
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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m Growth prospects :
m 1) High GNP growth rates in the emerging , locomotive
economies of the 21 st century ---China 10 % ,India at 7
%
m A high investment opportunity in the infrastructure of
power, telecom ,roads , ports, railways etc.
m Faster innovation , better products & services, due to
increasing global competition .
m Rising global trade , rising export and investment
freedom .
M  

 
ô Êusiness is a source of worry too .

ô 1)Ecological & environment degradation as brought out in


the Rio Summit 1992.

ô Fear of higher unemployment in the richer countries, due


to cheaper imports & shifting production bases .

ô Fear of being swamped by the MNCǯs in the developing


countries .Foreign & domestic business may further
corrupt politicians & administrators

ô Excessive consumerism may widen inequalities & cause


alienation, anomie and emasculation of local cultures
¦ 
m A firm's stakeholders are the individuals, groups, or other organizations
that are affected by and also affect the firm's decisions and actions.
Depending on the specific firm, stakeholders may include

m Governmental agencies such as the Securities and Exchange


Commission, SEÊI

m Social activist groups such as Greenpeace, Narmada Êachao Andolan

m Self-regulatory organizations such as the National Association of


Securities Dealers, EXIM , Mutual Fund Association of India (MFAI)

m Employees, shareholders, suppliers, distributors,

m The media and even the community in which the firm is located
among many others
       
m ¦   


          


m    


ºiberalization of trade due to free trade
agreement,& facilitating roles played by intǯl orgs like WTO, International
Monetary fund (IMF) & World Êank .
m ?     
     
Communist nation
of Eastern Europe now open to do business around the world . Other
factors like reunification of east & west Germany , enormous growth in
global tourism, transport & communication which has added to world
trade .
m ÿ      
      


Several countries like Taiwan, Thailand, Malaysia, Singapore and Indonesia
have been growing rapidly in recent years. China, India, Êrazil & Russia
have also emerged as successful global players.
m -      !   
"


   

New technologies & business based on them such as computer hardware &
software, pharmaceuticals & communications that have world wide
investments & markets have transformed world trade .Several ÊPOǯs and
ITES ( Information technology enabled services ) have widened
international business opportunities .
G 
  G   
m £nder the ethnocentric perspective , , the home countryǯs laws were
dominant but nowadays , companies have to adapt their business
practices to different environments & cultures
m E g Companies like M   #$¦ M  & firms like 
"% 
 &  have a number of Indian Managerial personnel
managing not only their subsidiaries , but the parent organizations.
m Some companies get their managers from around the world to meeting
& workshops with a view to widen & deepen their understanding of the
environment in which the company operates.
m Eg When 
 "'   carry on business with India they face
different political systems : India has a vibrant democracy , Pakistan a
dictatorship, & Êangladesh has a fledgling & brittle democracy .
Though all these countries have a common culture , their diversities in
religious& linguistic affinities bring about a difference in the manner
they live & consume things.
m Every country has a different socioeconomic & political environment ,
legal framework , institutional set up , fiscal, monetary & commercial
policies, production techniques ,nature of products and consumption
habits etc . Hence business strategy should be fine tuned accordingly.
  M   
m   

    # 
E g manufacturer like
Nike & traders like Wal Mart provide access to very large markets .Hence
you get quality goods at low prices because of large-scale production &
fierce world competition .
m ?


   
 MNCǯs headquartered in
developed countries have access to large quantum of capital îTheir stocks
are listed in international stock exchange Apart from their own capital they
bring in large amounts from pension funds .
m ÿ!
  (  !   )MNCs due to their large presence
worldwide and heavy investments in technology and R&D transferred
superior technology to poor & developing countries who cant afford the
same .
m -      
      E g MNCǯs like
Ford & Hyundai outsource their spare parts& components to small Indian
companies which flourish & provide employment to thousands of people.
m r  
 &  MNCǯs establish their manufacturing units in
low income countries like India & China and use cheap labour thereby
reducing the price of the product . This also provides job opportunity for
many .
  M    
m [(     MNCǯs offer extensive training of
their labour force.
m À  

    ! Many MNCǯs recruit their


future managers from IIMǯs & IITǯs & train them not only for India but
to work in their offices abroad.
m    
 M
 
They are the ones who benefit a lot
. They are able to enjoy all amenities which their counterparts enjoy in
other countries . They get latest products at affordable prices î
m ½& * 
  
 +     
Due to increase in
efficiency, MNC;s can produce goods on a large scale , get materials
from cheaper sources thereby bringing down the price .
m , - 
     %
  Exports contribute
favorably & hence bring revenue to the poorer nations . For eg Hyundai
& Nokia export thousands of cars & mobiles & bring in considerable
amount of foreign exchange to the country .
G  M 
 
m ºoss of National sovereignty as the host nation cannot control what an
MNC does in other nations .

m Political Interests of MNCǯs may mirror the political interest of their


respective home nations. For e g an American MNC may serve the interest
of America while operating in India.

m The host nation may lose control over its own economy

m Negative impact on the hostǯs balance of payments because of heavy


imports of spares & components .

m Exploitation of the hosts irreplenishable natural sources

m Exploitation of labor of the host when the country needs it

m Indulgence in Harmful environmental acts.


 
m In response to the growing world trade & increasing influence of
MNCǯs several attempts have been made to establish international
codes for ethical business practices.
m The various initiatives taken were :
m 1) ’    &   . /’&0****For better labor
practices ---(1970)
m 2) 'M 

 !
 M  
/'M!M)---
creation of a new economic order & creation of code of conduct for
transnational enterprise (1974)
m ÿ) 0 .     M *  "
1    /0 M1***prohibiting bribing of foreign officials (1977)
m 4) M-  ! /M!+¦  (    )’    
/¦(’+    ’    /’+***(1985 )
m Among these the CRT had a widespread acceptance by the global
business community & its contribution to the evolution of business
ethics on a wider horizon .
M
!"
#$w   %    
 
 
m Founded in the year 1986 by Fredrick Philips , former president of Philips
Electronics and Oliver Giscard dǯEstaing former Vice Ȃchairman of
INSEAD.
m The CRT principle seeks to serve a global society by offering guidelines for
ethical principles for world wide business.
m ! 
2   


m Responsibility of business beyond shareholders & towards stakeholders
m Respect for rules
m Support for multinational trade (GATT/WTO)
m Avoiding illicit operations , for e g Êribery, money laundering, gun
running, drug trafficking
m ?¦#   

m Provide highest quality of products ,services etc at reasonable prices
m Ensure human dignity in goods or services offered
m Respect the integrity & culture of customers.
m Remedy customer dissatisfaction
M
!"
#$w   %     

  
m ÿ   )

m Work conditions to be fair & improve consistently


m Health & Dignity of the worker to be bone in mind
m No discrimination on any ground
m £pdate the skills & knowledge of employees
m -0 
+’ 
 

m Fair & competitive return on capital by efficient management
m Conserve, protect and increase owners assets.
m Respect their complaints for solutions
m r¦  

m Pricing to be fair
m No coercion or litigation
m ºong term stability
D%
 
 
m The CRT affirms primary purpose of the corporation is to
manage its business and has a responsibility towards the
community it serves & depends upon .The issues that need
to be examined in the context of the fundamental social,
economic, political & technological changes taking place
throughout and which have to be given precedence are :

m !    )   


m ?¦
    
"

m ÿ!
$
) 
 )
m -M      

  
   G  
m Êusiness has a responsibility to provide working conditions
that respect each employees health & dignity & to provide
jobs & compensation that improve the living conditions of
workers & their families .

m Global business leaders & their counterparts in


governments must draw from past successes to develop
policies that promote job creation ,review regulatory
constraints that inhibit job creation & consider new risk
sharing between business & government .
¦
   &'

m Apart from business the long term considerations involving
the effects of business on its environment has to be
considered .Êusiness should define its role in areas such as
:
m Resource management
m Technology transfer
m Human exploitation
m Employee development
m Illicit substances & their abuse
m The family
m Encouragement of sound values in society
#
( &#    

Organization as well as professionals have a duty to the


society to be trust worthy, honest & transparent in their
dealings. Global business should not participate in or
condone bribery, money laundering or other corrupt
practices but should co operate with others to eliminate
them.
M   &w       

m CRT believes that solutions to complex global issues


require the co-operative efforts of business,
government and other institutions because working
alone these powerful players are likely to fail .Working
together they can apply local models to international
situations & find multifaceted solutions to complex
problems .

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