pgdbm ethics

1. Ethics in Global Business.
•Ethical Principles Governing Global Business
•Business Principles by US department of
Commerce
•Ethics in relation to adapting host countries
culture and norms
•Issues relating negotiators and gift giving

2. Introduction
• Although many firms engage in business abroad,
most of the ethical issues, which arises for
transnational corporation, or TNC.
• TNCs are firms having direct investment in
various forms in two or more countries.
• The owners and managers may be from home
country exclusively, or may include people of
many nationalities.
• The wealth and power gives rise to concern to
impact on local economies in both home and
host countries and the capacity of the
governments.

3. Developing an Ethical Framework.
• The charge against the transnational
corporations is that they develop double
standards- doing less in the under-developed
countries than what they would do in their
own.
• Moral failure lies in settling for much lower
standards than at home.
• Should MNCs be bound by home standards
or do “ In Rome as Romans Do”? Any answers
to this question?

4. WHAT TO DO IN ROME?
Answer lies between two extremes;
1.Conduct business in the same way the world over with
no double standards.
2.Do what is legally and morally accepted in any given
country where a TNC operates.
• Neither of the above propositions can be adopted
without exceptions:
 Morally Relevant? -Paying different wages in less
developed countries-vast difference in wages in the US
and India.
 Are Home Country Standards Universal?-(In US racial
and sexual discrimination-Japan has discrimination
against races and women- a Japanese manager can not
follow whilst working for Honda plant in Tennessee)

5. • The right of Affected People to Decide- People in the
host country have a right to decide. What is acceptable
to host country may not be morally right, but people
have a right to govern their own affairs. They cannot
be morally asked to adopt different standards.
• Required Conditions for Doing Business. “We do not
agree with the Romans, but find it necessary to do
things their way”. If Arabs have boycotted the
Israelites(began with Arab League in !945), many
American transnationals cooperated by avoiding
investment in Israel; while others refused to cooperate
with the boycott for ethical reasons. Another
argument-There is no other sway of doing business.
• TNCs abide by minimal rather than maximal duties of
coperations.

6. Fundamental International Rights
1. The right to freedom of physical movement.
2. The right of ownership to property
3. The right of freedom from torture
4. The right to fair trail
5. The right to nondiscriminatory treatment.
6. The right to fair trial.
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.
11. Sample Examples: Failure to provide safety
equipments, using coercive tactics, employing child
labor, bribing government officials.

7. NEGATIVE HARM PRINCIPLE
• While dealing abroad, corporations have an
obligation not to add substantially to
deprivation and suffering of people.
• Utilitarian injunction to produce the greatest
possible benefits to people creates a maximal
obligations of TNCs, but a concern with
consequences can take progressively a weaker
forms, including prevention of harms and
avoiding infliction of harm (a moral
obligation).

8. • The final means for determining the morally
acceptable standard for operating in less
developed countries with very different
conditions is to consider sympathetically how
people affected evaluate benefits and harms.
This is called rational empathy- considering
ourselves and our own culture at a level of
economic development relevantly similar to
that of the other country.
• Problems arises because we do not have
enough knowledge of other cultures.s

9. Bhopal Gas Tragedy
• The Gas Tragedy at the Union Carbide plant was
caused by the leaking of poisonous methyl iso-
cyanate(MIC) gas which killed three thousand five
hundred or more poor people in the early hours on
December 3, 1984. Hundreds of thousand of these
people lived in shanties around the plant.
• Shortly after midnight on the fateful day, Suman Dey,
an engineer on duty found that the temperature of
tank E610, which stored 40 tons of MIC had shot up to
the maximum limit. Though workers were trying to
find out the source of reported leak, high temperature
indicated normally refrigerated liquid was turning into
hot gas and may rupture the tank. Soon a vent shaft
gave away and the gas leaked.

10. • It was normal for Bhopal plant people to
mistrust the instruments in the panel and
abandon caution to the wind.
• Moreover, three safety systems were
simultaneously out of order and refrigeration
unit for cooling the tanks in an emergency had
been shut down
• Founded by a private company in 1934 for the
manufacture of batteries, Union Carbide India
Limited, became a publicly owned corporation
in 1955 with the parent company holding
50.8% of the stock

11. • UCIL was the twenty first largest corporation,
autonomously staffed by Indian managers with
about $170 million in revenues, at the overall
direction of Union Carbide, located at Danbury,
Connecticut.
• UCIL entered the pesticide market in 1960, at the
urging of the Indian government, who also
insisted that UCIL build the plant at Bhopal, most
populous and impoverished state. This was
necessary for ‘Green Revolution’; to modernize
agriculture. Land was offered at a very low rental
which UCIL accepted and started the Agricultural
Product Division in 1968.

12. • At first Bhopal plant produced fertilizers and
pesticides using chemicals from other
countries, but the Indian government prodded
UCIL to manufacture finished products from
scratch to create more employment and stop
outgo of foreign exchange. This suited The
parent company, Union Carbide Corporation.
• This suited the parent company and UCIL
decided to manufacture its major pesticide
Sevin, using toxic ingredients , specially MIC.

13. • The objection by local officials to store such
hazardous chemicals was overruled by the
central government.
• Indian managers, faced with down turn of
demand and competition from other
manufacturers as well as high cost of investment
for the new plant,made the company lose money
and the plant was performing at 40% of its
capacity.
• Lack of profitability led to low levels of safety.
Although Sevin could be manufactured without
producing MIC in an intermediate step, for
reasons of cost.

14. • Bhopal plant was built with manual safety
system and not an automatic safety system at
the instance of the Indian government for
creating more employment.
• Cutbacks also resulted in job cuts which also
resulted in decline in maintenance. In fact, at the
time of the tragedy Union Carbide was trying to
sell the plant.
• Though much of the blame can be put on the
Indian government, Union Carbide at their West
Virginia, also produced MIC at institute, West
Virginia. The fact was that at Bhopal plant was
much lower than that at West Virginia.

15. QUESTIONS
• Is a PNC justified in adopting different
standards of safety in a host country?
• Is a HCN justified in allowing a PNC to dilute
their business norms?
• Was the government of India justified in
overruling local authorities over their concern
about storing of MIC in the city of Bhopal?
• Maximum good for the majority in India or in
the U.S. justified?
• m

16. APPLYING ETHICAL FRAMEWORK TO THE BHOPAL CASE
Determining the acceptable level of risk-
Deliberately exposure of any group to death
or injury is a failure of human duty?
• can a country with desperate need of food for
its growing population accept a ‘trade-off’
that creates a greater risk of an industrial
accident?
• Are risks increased by local conditions
acceptable to MNCs?

17. THE ROLE OF LOCAL CONDITIONS
• Can Western-style industrialization without
making a commensurate investment in
industrial infrastructure or rural development
be justified? Industrial development at the
cost of agriculture diving people from the land
to Bhopal.
• Was Union Carbide morally justified in
operating plant at Bhopal and exposing
workers/local population to the harm that
became a reality?

18. Weighing cost and benefits ratio
• Applying the rational empathy test-
 Lower safety standards at Bhopal to satisfy
Indian governments desire to become food-
wise sufficient.
 Creating jobs by not adopting automatic fail-
safe method.(Manually activated siren
warning system was sounded after 30
minutes)
 If the level of safety had to be increased then
the plant would uneconomical to operate-
causing job loss.

19. Practical Problems
Pharmaceutical Marketing Practices.
• Different instructions in promoting drugs in
the third world with more indications for their
use and fewer warnings in developed counties.
Example Lomotil- a life threatening drug in the
third country(WHO has declared Lomotil of no
value and dangerous for children. Another
example –chloromphenical [chloromycetin])
• Drug dumping- Selling abroad drugs that have
not been approved in the home country.

20. • Problems of pricing
• Free Samples and
Bribery
IS THERE A DOUBLE
STANDARD?

21. BRIBERY
• Offer or make any payment to a foreign
official for the purpose of influencing a
foreign official to act in your favour.
• What is wrong with Bribery?
 Immorality of demanding or accepting a bribe.
 Although government officials bear chief
responsibility for economic consequences of
bribery, MNCs cannot be held blameless.

22. CAUX ROUND TABLE PRINCIPLES
• Founded in 1986 by Frederik Philips and Oliver
Giscard d’Estaing(Vice-Chairman of INSEAD) to
reduce trade tension.
• Concerned with development of constructive
economic and social relationship between the
participants’ countries, at the urging of
Ryuzaburo Kaku, Chairman of Canon Inc. it
focused on the importance of global
corporate responsibility in reducing social and
economic threats to world peace.

23. Introduction
• CRT believes that world business community should
play an important role in improving economic and
social conditions.
• It aims to express a world standard of business
behaviour. The process involves identifying shared
values, reconciling different values in order to develop
an acceptable business behaviour.
• The General principles in Section 2 seek to clarify the
spirit of kyosei and “human dignity” while the specific
Stakeholder Principles in Section 3 are concerned with
their practical applications.
• Business behaviour can affect relationships amongst
nations and prosperity and well being of all.

24. Section 2
• Principle 1.: The responsibilities of businesses
are beyond shareholders and should be more
towards stakeholders.
• Principle 2.: The economic and social impact
of business- Business developed in foreign
countries to produce or sell should contribute
to social advancement of those countries by
creating productive employment and helping
to raise the purchasing power of their citizens
• Business Behaviour- Beyond the letter of law
and toward the spirit of trusts.

25. • Principle 4.: Respect for Rules-Both international
and domestic to promote equitable treatment of
all participants….avoid adverse consequences
even if it is legal.
• Principle 5.:Support for multilateral trade
systems of GATT/World Trade Organizations and
similar international agreements
• Principle 6.: Improve environment, promote
sustainable development, avoid wasteful usage
of natural resources.
• Principle 7.: Avoidance of Illicit Operations- Not t
to condone bribery, money laundering, or other
corrupt practices.(drug trafficking, terrorist
activities,or other organized crime)

26. SECTION 3; STAKEHOLDERS PRINCIPLES
Customers
• Treat all customers with dignity, even if they donot
purchase our product directly from us by providing
them with highest quality products and service
consistent with their requirements.
• Treat all customers fairly in all business transactions
and provide remedies for their dissatisfaction
• Make every effort to ensure health and sfety of our
customers and the quality of their environment.
• Offer human dignity in products offered, marketing
and advertising and respect the integrity of the culture
of our customers.

27. Employees:
We believe in dignity of every employee and
are responsible to:
• Provide jobs and compensation to improve
workers’ living conditions
• Provide working conditions that respect each
employee’s health and dignity
• Be honest in communication
• Negotiate in good faith
• Avoid discriminatory practice
• Protect employees from avoidable injuries.

28. Owners/investors
• Honouring trust of the investors by providing
 Professional and diligent management
 Conserve, protect and increase owwer’s/investors’
assets
 respect their requests and suggestions
Suppliers:
 Based on mutual respect
 Seek fairness and truthfulness in all activities
 Avoid unnecessary litigations
 Share information with suppliers in return of value,
quality, competitiveness and reliability.
 Pay on time.

29. Competitors
• Foster open market for trade and investment
• Promote competitive behaviour
• Refrain from seeking and participating in questionable
payments to secure competitive advantage
• Refuse to acquire commercial information by
dishonest means.
Communities:
• Respect human rights
• Raise standard of health
• Stimulate sustainable development
• Support peace, security, diversity and social
integration
• Respect local culture
• Be good corporate citizen.