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INTERNATIONAL

MANAGEMENT

Chapter 3

Ethics & International Management

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Ethics & International Management

Ethics ???Ethics ??? Study of decision making within a Study of decision making within a

framework of a system of framework of a system of moral moral standardsstandards. .

Study of Study of moralitymorality and and standards of conductstandards of conduct..

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Managerial Ethics-IssuesManagerial Ethics-Issues

1. Can there be one fixed moral framework that can provide standards to guide managers every time they face ethical decisions?

2. If a single set of standard is to guide managerial behavior, which is the right set among the conflicting definitions of good and bad behavior?

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Ethical IssuesEthical Issues

Ethical Dilemmas (ED) Ethical Lapses (EL) Managers facing ethical issues fall into two

broad categories-ED and EL.

The issue has two conflicting but arguably valid sides.

Ethical Dilemmas

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Ethical DilemmaEthical Dilemma

• Permitting or not tobacco companies to advertise.

Not Allowing to advertise

Restricts their freedom

of speech

Obstructs their ability to do business

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Ethical LapseEthical Lapse• Occurs when a manager makes an unethical decision• Unresolved interpretations of ethical issues lead to-

ethical dilemmas.• Ethical lapse is associated with cases of unethical

behavior.

• Desire of a tobacco company to advertise is an ethical dilemma.

• Decision of a top manager to earn profit from inside information is an act of ethical lapse.

Example

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Ethical management practices• Must be a proactive stance • Must be pursued with diligence• Must be pursued with persistence

> For achieving the aim, the need is to recognize various ethical pressures on managers lead to ethical dilemmas

Approaches to Ethical Management

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Ethical Pressure on ManagersEthical Pressure on Managers

Organizational Goals

Competition

Fear Personal

Goals Ethical Pressure

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Organization Goals Target sale

Pressure Adopting less ethical course of action

Benefit

Better short-term performance

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Ethical organization recognizeEthical organization recognize

1. Managers should ask ethical questions while taking decisions.

2. Decision making should consider factors beyond immediate goals.

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Personal Goals Compensation & Promotion

Pressure Unethical behavior (overstate a products benefit to increase the sales volume)

Pressure (Other employees work as his own)

Pressure (Other employees to lower their performance)

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Competition Market Success

Pressure Unethical Practices

(To announce product well before they exist)

Benefit

To beat the competitorsDangerDanger• Mislead customers• Cause financial damages to firms • Late or no arrival of products

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Fear To loose job

Pressure Unethical decisions

(Using of sub-standard material on the instruction of boss)

Cheating Customers

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MNCs Marketing Practices –Issues of Ethical Nature

• Selling products in LDC, less in demand in Home countries- (Tobacco)

• Selling prohibited products in LDC markets-(DDT)• Selling products likely to be misused-(Milk Power)• Restrictive trade policies of the governments • Dumping • Counterfeiting-violating patent & copyright• Grey marketing

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Pressures of Stakeholders on Pressures of Stakeholders on MNCsMNCs

• To meet demands of consumers of their products

• To meet expectations of shareholders about ROI

• To effectively handle various risks

• To do effective financial management

• To avail all legally permissible tax benefits

• To compete effectively in the markets

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Code of EthicsCode of Ethics

• Need to respect laws & regulations of the host countries

• Do nothing to compromise with the health & safety of consumers

• Should not exploit the weakness in legislation in host countries

• Be proactive & assist the government in preventing marketing of unsafe products

• Should not misuse the close relationship developed by firm & government.

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Resolving Ethical Dilemmas Normative Framework

(Study of proper thought & conduct)

How people should behave?

A decision is judged to be ethical on the basis of its perceived outcomes

Decision is based on whether it is right.

Greatest good for greatest number of people

(Retrenching some employees to make the company cost-effective)

Established through

understanding

Utilitarianism Formalism

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Utilitarianism Formalism

Forward looking in perspective

(Decisions are made

looking into future)

Backward looking in perspective

(Decisions are based on historically formulated principles)

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Problems

> Question of justice (How far it is justifiable to prosecute a minority in the interest of majority?)

> Question of subjective benefits( People could be persuaded to believe that they enjoy more benefit from a decision then is actually the reality).

Utilitarianism Formalism> Bureaucratic practice (Rules for decision and

actions)

> Ignore individualism

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Business Executive’s Action

Utilitarianism Formalism

• Looks it from the side of being right or wrong

• Based on Executive's conscience.

• Looks it from the side of being good or bad.

• Based on Executive’s needs, wants and desire.

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Ethical Analysis of Management Decisions

Moral Standard of BehaviorMoral Standard of Behavior

Cultural experiences

Ethical belief systems

Social Instructions

Content of Managerial Dilemma

Financial Legal

Organizational Social Personal

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• Employee drug testing of a company

• Low productivity and low quality

• < 20 percent of the workforce uses drugs & alcohol

• Other 80 percent also have to undergo test

• Whether to go for drug test or not?

Issue

Problem

Information

Requirement

Managerial Dilemma

Situation Analysis

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Content of Managerial Dilemma

• Financial benefits & costs in solving the drug problem

• Any legislation, which permits or prevents the type of drug testing proposal

• Positive

• Negative

Better working environment

Improved efficiency in production

More job security

Low morale as a result of the action

Financial

Legal

Organizational

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Content of Managerial Dilemma

• Possibility of loosing the jobs of the managers if something goes wrong Social

Approach: Utilitarian as the action is judged in the light of its outcome

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Judge the behavior of allJudge the behavior of allTends to beTends to be

=> Subjective=> Subjective

=> Imprecise=> Imprecise

=> Varies between individuals => Varies between individuals and and situationssituations

Influenced by Ethical systems of belief Influenced by Ethical systems of belief

Moral Standards of BehaviorMoral Standards of Behavior

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Guiding principles of Decision Making)

Eternal Law

Distributive justice

Personal liberty

Religious teachings reveal moral standards which one should adhere

Equitable distribution of benefits

Greater freedom of choice, promoting social productivity

Ethical Systems of BeliefEthical Systems of Belief

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Global Managers-Confrontation?

• Different national cultures• Different belief systems• Belief system of home country

incompatible with host country• Which approach is more useful to deal

ethical issues?• Issues => Corporate Bribery

=> Pollution Issues

Utilitarian approach is useful to deal ethical issues