ETHICAL ISSUES

IN
INTERNATIONAL
BUSINESS

KANIKA SEHGAL (010)

AARTI NEGI (053)

INTRODUCTION
ETHICS

Standards for right conduct or morality.

ETHICAL BEHAVIOUR

Personal behaviour that should be

in conformity with the rules or standards
for right conduct or morality.

INTRODUCTION (CONTD.)

The nature of the ethical code of corporate behaviour

is based on three value premises
Human Dignity
The Minnesota Principles
Philosophy of Co-existence

NORMATIVE AND RELATIVE ETHICS

NORMATIVE ETHICS
Managers/companies should implement their home
country norms.
Based on Kantian normativism i.e. there are
universal standards of human behaviour.
Significant in matters such as civil rights, justice,
fairness, equality of citizens, and employees.

NORMATIVE AND RELATIVE ETHICS

(CONTD.)

RELATIVE ETHICS
Managers / companies should follow the ethical norms
prevalent in the host country.
Believes in While being in Rome, do as the Romans do.
Often refuted.

MNCs combine both normativism and relativism.

ETHICAL ISSUES IN IB

EMPLOYMENT PRACTICES
When the work conditions in a host nation are
clearly inferior to those in a multinationals home
nation, what standards should be applied?
Firms should establish minimal acceptable
standards that safeguard the basic rights and dignity
of employees.

ETHICAL ISSUES IN IB (CONTD.)

HUMAN RIGHTS
Basic human rights are taken for granted in the developed
world such as freedom of association, freedom of speech,
freedom of movement and so on.
These are still not respected in many nations and are found
violated.
If foreign trade and investment bring about improvement in
the living standards, human rights abuses would be
contained.

ETHICAL ISSUES IN IB (CONTD.)

INTERNATIONAL LABOR ISSUES

These can be linked with human rights, especially regarding
matters of forced labor and child labor.
Certain labor practices may be legal and commonplace in
the host country but do not necessarily represent fair and
equitable treatment of the workforce.
The issue facing an international company is: does it
maximize its competitive advantage by locating in a lowcost/low-regulation country and adopt local practices or
adopt higher standards and more ethical practices.

ETHICAL ISSUES IN IB (CONTD.)

SAFETY AND ENVIRONMENTAL ISSUES

When the environmental regulations in host nations are far
inferior to those in the home nation, ethical issues arise.
This might result in higher levels of pollution from the
operations of multinationals than would be allowed at home.
MNCs should abide by the local customs so long as they are
tolerable by its own standards.

ETHICAL ISSUES IN IB (CONTD.)

ISSUE OF CORRUPTION
Some economists suggest that the practice of giving bribes
might be the price that must be paid to do a greater good.
Others have argued that corruption reduces the returns on
business investment and leads to low economic growth.
An international manager has to draw a line b/w what is
ethical from the viewpoint of the local custom and what is
clearly unethical and then take a decision.

ETHICAL ISSUES IN IB (CONTD.)

ISSUE OF CONSUMERISM
In developed countries, a lot of consumer protection activities take
place.
But in developing countries, they are lacking.
MNCs should care for social responsibility wherever they operate.
They should apply home country norms in order to abide by ethical
norms.

ETHICAL ISSUES IN IB (CONTD.)

ISSUE OF TRANSFER PRICING

Transfer pricing lowers the tax burden of the firm as a whole
and smoothens the firms international cash management.
But it is unethical, as it brings about loss to the exchequer in
both the home country and the host country.
In many countries , there are strict rules restricting transfer
pricing.

CONCLUSION

International business ethics has taken on a new urgency with

the emergence of globalization.

Global corporations must recognize the need for a uniform

code of business ethics for protecting their citizens, their
national interests, and the global environment.

Meanwhile they need to develop and enforce their own codes

of ethics specifically directed at the issues related to a
multicultural, multinational business environment.