Globalization and Ethics Omnibus Lecture Raj K. Singh, Ph.D. September 7, 2016 1
Globalization Definition: An economic phenomenon? A social phenomenon? A cultural phenomenon? The movement towards the expansion of economic and social ties between countries through the spread of corporate institutions and the capitalist philosophy that leads to the shrinking of the world in economic terms. 2
Globalisation 3
Integration of Economies Stock Markets are now accessible from anywhere in the world! Copyright: edrod, stock.xchng The increasing reliance of economies on each other The opportunities to be able to buy and sell in any country in the world The opportunities for labor and capital to locate anywhere in the world The growth of global markets in finance 4
Integration of Economies Made possible by: Technology Communication networks Internet access Growth of economic cooperation trading blocs (EU, NAFTA, ASEAN etc.) Collapse of communism Movement to free trade 5
Trade versus Aid? Benefits of Trade: Increased choice Greater potential for growth Increase international economies of scale Greater employment opportunities Trade has led to massive increases in wealth for many countries. Copyright: budgetstock, stock.xchng 6
Trade versus Aid? Disadvantages of trade: Increase in gap between the rich and the poor Dominance of global trade by the rich, northern hemisphere countries Lack of opportunities for the poor to be able to have access to markets Exploitation of workers and growers How far does trade help children like these? Copyright: clesio, stock.xchng 7
Corporate Expansion No matter where you go in the world, certain businesses will always have a presence. Multi-national or trans-national corporations (MNCs or TNCs) businesses with a headquarters in one country but with business operations in a number of others. 8
Corporate Expansion Characteristics: Expanding revenue Lowering costs Sourcing raw materials Controlling key supplies Control of processing Global economies of scale Controlling supplies may be one reason for global expansion. Copyright: rsvstks, stock.xchng 9
Corporate Domination Key Issues: Damage to the environment? Exploitation of labor? Monopoly power Economic degradation Non-renewable resources Damage to cultures Shell and Nike s activities have come under severe criticism in some quarters. Copyright: Homsel, stock.xchng 10
Other Issues: There are plenty of people who believe that globalization is a negative development, protests at the G8 summits, pollution, poverty and concern over GM crops are just some of the issues. Copyright: stock.xchng Accountability of Global businesses? Increased gap between rich and poor fuels potential terrorist reaction Ethical responsibility of business? Efforts to remove trade barriers 11
Ethical Issues in Global Business Marketing and safety practices - Nestle: Baby Killers; Union Carbide: Bhopal Sweatshop and labor abuse - Wal-Mart s Kathy Lee collection (20 hrs/day @ $0.20/hr) Corruption and bribery - Lockheed: bribes to Middle East ($22 mil) and Japan ($12.5 mil) 12
Bribes vs. Grease Payments Definitions Grease Payments Money given for the purpose of getting minor officials to do what they are supposed to be doing. Bribes Relatively large amounts of money given far the purpose of influencing officials to make decisions or take actions that they otherwise might not take. Examples Money given to minor officials (clerks, attendants, customs inspectors) for the purpose of expediting a project Money given, often to highranking officials. Purpose is often to get these persons to purchase goods or services from the bribing firm. 13
Arguments For and Against Bribery A necessary tool For Accepted practice Form of commission, tax, or compensation Against Wrong/illegal Compromise personal beliefs Promotes government corruption Benefits recipient only Creates dependence on corruption Deceives stockholders 14
Improving Global Business Ethics Fundamental International Rights 1. The right to physical movement 2. The right to ownership of property 3. The right to freedom from torture 4. The right to a fair trial 5. The right to nondiscrimination 6. The right to physical security 7. The right to freedom of speech and association 8. The right to minimal education 9. The right to political participation 10.The right to subsistence 15
Trends Against Bribery Foreign Corrupt Practices Act (US) Corruption of Foreign Public Officials Act (Canada) Transparency International - Corruption Perception Index 16
Improving Global Business Ethics Seven Moral Guidelines for MNCs Inflict no intentional or direct harm Produce more good than bad for the host country Contribute to host country s development Respect the human rights of their employees Pay their fair share of taxes Respect local cultural beliefs that do not violate moral norms Cooperate with the government to develop and enforce background institutions 17
Implication of Globalization and Ethics An economic phenomenon? - Integration A social phenomenon? People to people A cultural phenomenon? Universal Ethics Critical for prosperity 18