Lecture 11 Ethics Panasonic Dispatch Workers rising Moving away from lifetime employment exploiting workers part time workers are The higher the risk the more money the companies save Costco says they may workers more but that s because they want less turnover because it s expensive to train new people They have the lowest employee theft Minimum Wage Debate pQ wN profit p price Q quantity w wages N of workers Saying if you raise wages you ll have to fire workers but since there s a correlation between higher wages and higher productivity profits will actually go up Mays Business School 24 students were caught cheating by using the clickers of other students on a test Ironically this was in a business class A few people spoiled the reputation of this community for everybody purchased stake in the California electricity market started causing blackouts and making people beg and may inordinate amounts of money for electricity Enron Introduction The purpose of business is to make profits But profit maximization is subject to constraints Financial constraints legal constraints ethical constraints Legal constraint does not equal ethical constraint Rational decision based on cost benefit analysis is not always an ethical decision Ethical Issues in International Business MAny of the ethical dilemmas in international business are rooted in the fact that political systems law economic development and culture vary significantly from nation to nation Sweatshop allegations Western multinationals continue to face sweatshop allegations in developing countries Any business or factory that regularly violates both health or safety regulations and wage or child labor laws Nike Case By 2001 over 90 of Nike s shoes were manufactured in China Indonesia Vietnam and Thailand Local employees worked for pennies a day under poor working conditions The Nike product has become synonymous with slave wages forced overtime and arbitrary abuse Phil Knight 1998 Similar allegations surfaced about Apple etc EMployment Practices When work conditions in a host nation are clearly inferior to those in a multinational s home nation what standards should be applied Globalization and the market principle Supporters of globalization FRee competitive and open international market will lead to a more efficient and optimal distribution of economic goods and services Globalization reduces poverty in the developing host countries What are the responsibilities of international business to their employees in host countries Similar to tje responsibilities to employees in their home countries Fair wages that ensures reasonable standard of living in host countries This example highlights how market principles don t always work if leeft purely to market forces Human Rights Enviornmental Pollution Questions of human rights can arise in the international business because basic human ights are still not respected in many nations Again what we take for granted in developed nations are by nomeans universally accepted Freedom of speech Freedom of association Treatment of women What is the responsibility of a foreign multnational when operating na country where basic human rights are not respected Examples Exxon IBM and Xerox diversted their business in South Africa Ethical issues arise when enviornemnetal regulations in host nations are far inferior to those in home nation Developing nations often lack environmental regulations The result can be higher levels of pollution from the operations of multinationals than would be allowed at home Environmental questions take on added importance because some parts of the enviornment are a public good that no one owns but anyone can despoil The Tragedy of the Commons occurs when a resource held in common by all but owned by no one is overused by individuals resulting in its degradation 1 N Problem Moral Obligations and moral obligations In some notable cases multinational corporations acto out o social respionsibility Social responsibility businesspeople must consider the social consequences of economic actions when making business decisions Example BP in Algeria Clea water project There was no economic reason nor benefit for BP to make the Philsophical Approaches to Ethics Friedman Doctrine social effort that it did The Friendman Doctrine is similar to the milimaist appreoach to ethics It states that the only social responsibility of business is to increase profits so long as the company stays within the rules of law Friedman was an economist He s saying there is no place for ethics in economics and as long as youre behaving within the confines of law that s the only thing you re responsible for There is NO ethics Cultural Relitavism Ethics are culturally dtermined Believes that ethics are nothing more than the reflection of a culture A firm should adopt the ethics of the culture in which it operates When in Rome do as the romans Ex If a culture supports slavery it is okay to support slave labor Expatriates or workers on business trips may be tempted to violate their personal ethics Utilitarian Approach to Ethics Moral worth of actions or practice is determined by their consequences Best decisions produce the greatest food for the greatest number of Use cost benefit analysis people It is committed to the maximization of good and minimizaition of harm One problem with utilitarianism is in measuring the benefits costs and risks of action Kantian Ethics Example Cheating Sweatshops People should be treated as ends and never purely as means to the ends of others PEople are not instruments like a machine People have dignity and need to be respected Employing people in weatships making them work long hours for low pay in poor conditions is a violation of ethics The notion that people should be respected and reated with dignituy Education of Business LEaders HBS confronts mass resistance from existing faculty when ethics education