Session 7 International business: Moral and ethical issues and globalisation LEARNING OBJECTIVES Identify and understand the nature and history of globalisation Identify the legal and moral responsibilities of multinational corporations (MNCs) Identify the key institutions that influence the operation of MNCs including the International Monetary Fund (IMF), the World Bank and the World Trade Organization (WTO) LEARNING OBJECTIVES Understand the operation of these global institutions and identify the moral criticisms that have been made regarding their operation and impact. Understand and examine the nature of MNCs, their operation within the global politico-economic system, the moral issues involved and the criticisms that have been made regarding their operation and impact. 1
GLOBALISATION The social, cultural, political and economic aspects of an increasingly interconnected world in which distance, communication, technology, culture and ideas have become universal instead of localised. 4 FACTORS LEADING TO GLOBALISATION The advent of the International Monetary Fund (IMF), the World Bank and the World Trade Organization. The collapse of communism. Technological improvements. 5 GLOBAL INSTITUTIONS Ancient Roman and Chinese empires European imperialism More recently: IMF World Bank WTO GATT 6 2
THE WTO...is a global international organisation dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world s trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters and importers conduct their business (WTO website) CLAIMED BENEFITS Raising the general standard of living around the world by lifting people out of poverty. Developing new industries within developing countries. Making goods and services available to all by opening up markets around the world. 8 CRITICISMS Undemocratic Lacking transparency Based upon a capitalist ideology Benefits western countries and MNCs at the expense of developing nations 9 3
DEMOCRACY Institutions governing international trade are not subject to the democratic process. SAPs imposed on developing countries restrict a national government s discretionary power and its ability to implement policies of its own formulation. 10 EQUALITY Restrictions placed upon developing nations as a condition of their membership of the WTO disadvantage them. Such restrictions are not necessarily imposed on more powerful nations; many of whom have protective barriers in place. 11 HOMOGENISATION OF WORLD CULTURE Exposure to western culture is reducing difference and the capacity of other cultures to maintain their values. Should Americanisation of the globe be a condition of participation in the global market? If another country dominated the world s political and economic forces, would we accept their cultural values? 12 4
DISTRIBUTIVE JUSTICE Most of the world s resources are consumed by developed nations. Most of these resources are sourced from developing nations. Some of the world s comparatively resource-rich countries have some of the poorest inhabitants. 13 MULTINATIONAL CORPORATIONS Many MNCs have greater economic power than that of the host country in which they operate. MNCs reduce costs by sourcing finance, labour and materials in cost-efficient markets. MNCs then sell their products in the most lucrative marketplaces. 14 MNCS RELATIONSHIPS WITH HOST COUNTRIES Benefits: capital technology expertise skills and knowledge Drawbacks: MNCs are in a position of power in host country. Power can be abused or misused. 15 5
CORRUPTION AND CULTURAL RELATIVISM Cultural differences can lead to misunderstandings. Ethical differences Which ethical values should the MNCs adopt? the host country? the MNC s country? Cultural relativism 16 CULTURAL RELATIVISM Argues that morality differs in different cultures and it is not the right of a visitor or guest in a country to impose his or her own values on the host. Such arguments lead to a position of moral neutrality. LEGISLATION IN HOST COUNTRIES Many countries in which MNCs operate have no standards regarding: working conditions wages minimum age 18 6
CHILD LABOUR AND SWEATSHOPS Lack of legislation means there is little restriction on sweatshops and child labour. MNCs may set guidelines when awarding contracts. If guidelines are not enforced, they are no more than moral smokescreens. 19 HARMFUL PRODUCTS Countries such as the US, Australia and the UK have strict guidelines regarding product safety. Where countries have no such guidelines, unsafe products are sometimes dumped by companies wishing to reduce their losses. Inherently safe products may be rendered harmful by local conditions, or by the manner in which they are marketed. 20 HUMAN RIGHTS Cultural relativism allows MNCs to ignore human rights abuses: Racial discrimination Sexual discrimination Safe working conditions Fair wages Union representation Political enfranchisement 21 7
MNCS AND GLOBAL CORPORATE RESPONSIBILITY Corporations are expected to behave as corporate citizens in developing countries. MNCs are exposed to consumer backlashes when they are seen to have transgressed. Calls for a global corporate responsibility regime. 22 GLOBAL CORPORATE RESPONSIBILITY Corporations are expected to behave as corporate citizens in developed countries. Where there is little, or nothing, in the way of legislation or political will to enforce good behaviour in developing countries, corporations are under no legal obligation to pursue responsibility issues. However, MNCs are increasingly exposed to scrutiny, protest and consumer boycotts where they transgress accepted norms in developed nations. GLOBAL CORPORATE RESPONSIBILITY UN Global Compact The Caux Round Table The Caux Round Table Principles for Business 24 8
GLOBAL CORPORATE RESPONSIBILITY Transparency International Corruption Perception Index OECD Convention on Combating Bribery of Foreign Public Officials Others 25 MNCS AND MORAL MANAGEMENT Cultural differences Environmental damage Obligations to the local community Well-being of local employees Reparation for past wrongs 26 DILEMMAS FOR MNCS Is the MNC justified in paying a worker less in the host country than the rate he/she would be paid in the MNC s home country? Is a company morally obliged to follow the safety guidelines of its home country when the standards in the host country are lower? 27 9
THE SOCIAL CONTRACT PERSPECTIVE Social contract theory proposes that social relationships are to a large extent negotiated and that the wants, needs and moral values of the parties can be recognised and negotiated within the terms of their relationship. Integrative social contract theory provides an approach to resolving the moral issues that arise from the operation of MNCs within diverse cultures and moral contexts. 28 THE SOCIAL CONTRACT PERSPECTIVE The socially negotiated values of each community have an essential legitimacy. There are universal values that must be maintained universally. Corporations should negotiate through conflicting values locally and arrive at a balanced approach to which both parties agree. INTEGRATIVE SOCIAL CONTRACT PROGRAMS Impact assessments Stakeholder engagement Social performance plans Social performance reviews Local content plans Social investment plans 30 10