in Ethics the International Arena
1. Objectives a. To discuss how ethics applies to international issues b. To understand ethical issues as nonmarket issues c. Focus: Sweatshops 2. Purpose of Business Ethics a. Positive ( predictive) i. You care because you care if it is going to affect your business ii. You dont care if it is ethical or not what you do, but you care of how the
reaction of others affects you
iii. Anticipated the actions of others whose motivations may stem from moral
concerns
iv. Understand and anticipate how others may evaluate your actions b. Normative ( Prescriptives0 i. Provide guidance for managerial decisions and policies ii. Given a set of moral principles, what should an ethical manager do? iii. Determine what the appropriate measures are to be taken c. This is different from the law i. Suppose something is legal, should you do it anyway? ii. Is there a moral issue involved 3. Cultural Variation a. Two extremes: cultural relativism and cultural imperialism b. Cultural imperialism: always holding others to your countrys standards c. Cultural relativism: whatever standards a culture adopts are legitimate i. It permits behaviors that seem to be contrary to basic human rights ii. It is important to draw a line to say what is absolutely immoral d. We mostly operate in the middle ground when things are not obvious i. Conflict of relative development ( text p. 752)
ii. Conflict of cultural tradition (text p 752) iii. Donaldsons 3 general principles ( text p 753) e. People can also disagree on what is moral 4. Special Issues in Developing Countries a. Weak Economic Institutions i. Poor economy leads to excess supply of labor ii. Lack of robust markets iii. You could hire workers at really low wages but this might affect how people
see your business.
b. Weak Political institutions i. Nondemocratic and or oppressive government ii. Noncompetitive interest group environment iii. Dysfunctional Governments iv. Corrupt Governments v. You have to decide if you are participating in bribery c. Difficult living conditions i. Limited education ii. Poverty iii. Weak or nonexistent rights iv. Decide what is your companys obligation to help in this problem v. What is the moral obligation towards this issues vi. This is the heart of the debate of the sweatshops 5. International ethics and nonmarket threats a. US firms dong business in developing nations must consider the ethical
implications of their actions for two reasons
i. Nonmarket activity from activist may hurt sales, lead to government
regulations
ii. If consumers view the corporation as unethical, the companys band may
be tarnished
b. Large companies such as Nike, Levis Strauss, Google are particularly
vulnerable to interest groups in particular
c. What appear to be selfless corporate actions may simply be smart business
tactics
6. at Ethics Work: The Case of Levi Strauss a. 1992: very ethical corporation b. Global sourcing standards in 1992 i. No child and prison labor c. When problems arose, tried to find solutions that were mutually beneficial i. Child labor violations in Bangladesh and Turkey d. Short terms costs vs. long term gains e. International standards as brand protection and public relations 7. Sweatshops as a Nonmarket Issue a. Activists have raised the following concerns about factories in developing
nations
i. Working conditions 1. Health and safety ii. Abusive Practices 1. Corporal punishment iii. Hours worked per week iv. Workers rights to organize into unions v. Wage levels and justice 1. Shoes selling for $100 made by workers earning less than $ 1/hr. vi. Child labor vii. Forced Labor 8. The Other Side of the Issue
a. Working conditions should be humane b. But, in terms of wages, sweatshops are better than the alternative of no job c. If wages are artificially increased, jobs will more to other countries. 9. Nike and Its Initial Response to a Nonmarket Threat a. Nike is not a manufacturer, it is a marketer b. Nike outsources the production of its shoes and apparel c. Nike first criticized on sweatshops issue in early 1990s d. Initial reactions i. It is not our problem ii. Had no PR division in place e. Mistake: underestimating a well-organized opposition (unions and activists) 10. Nikes more Effective Response a. Nikes Goals i. Preserve its Reputation and brand image ii. Keep costs to a minimum iii. Avoid regulations b. Solution: Self-Regulation i. Fair Labor Association created in 1991 ii. Monitors plants overseas iii. Symbolic ( if not concrete) way to demonstrate concern and avoid stricter
regulations or higher wages
iv. Many college students were the ones that opposed to its labor behavior v. This is the association that was critiqued in the article since it is not doing
much
11. Evolution of the Issue a. One claim from industry consultant: public relations exercise, because thats
what our customers want
b. MIT Study: Conditions had stagnated or deteriorated at 78% of Nike supplier
factories between 1998 and 2005
c. Self-regulation has largely moved the issue of wages to the periphery, though
working conditions have improved.
d. Firms, however, can no longer ignore the sweatshops issue ( as Nike initially
tried to do)
12. Lessons a. A firm that cares only about profits must still take into account ethics, especially
in an international setting, to head off activists and other who could tarnish the firms brand and hurt profits
b. A firm may also take actions on purely ethical grounds, though there is little
evidence that they do (and dispute about whether they ought to).
c. There are no easy answers on sweatshops, but apparel firms can no longer
ignore the issue.