Globalization & Ethical

Challenges
CHAPTER 11
Prepared by:
Mam Bhang F. Moreno, MABA
The students should:

 be able to Identify the important moral challenges of

globalization.
 Ethics is an everyday occurrence in one’s personal life
as well as in corporate world. Business ethics examines
ethical principles and moral or ethical problems that arise in a
business world. Due to globalization of markets and
production processes, an ever increasing number of
marketers and business organizations have to deal with
ethical issues in cross cultural setting.
The corporate leaders and senior managers working with
every global organization are facing various dilemmas and
concerns spamming various disciples like marketing, finance,
human resource production, etc.
Phenomenon called Globalization
Globalization is a phenomenon that has led to
the integration of regional economies, societies and
cultures through communication, transport and trade.
It is closely linked with economic globalization that
stands for the integration of national economies into
the international economy through trade, foreign direct
investment, capital flows, migration, the spread of
technology and military presence.
 Business Ethics and Need of Business Ethics
Business ethics(also corporate ethics) is a form of applied
ethics or professional ethics that examines ethical principles and
moral or ethical problems that arise in a business environment. It
applies to all aspects of business conduct and is relevant to the
conduct of individuals and entire organizations. It aims at inculcating
a sense of value orientation within company’s employee as to how to
conduct business responsibly.
Some organizations choose to recast the concept of business
ethics through other terms like integrity, social responsibility, customer
welfare, employee welfare, social value added, transparency and
disclosure in accounting and environmental protection.
Ethics is needed to business for several reasons:
It is a human trait that man desires to be ethical, not
only in his private life but also in his business affairs
Most people want to be part of an organization which
they can respect and be publicly proud because they
perceive its purpose and it to be honest and beneficial
to the society.
Most top managers would like to respond to this need
of their employees and they themselves feel an equal
need to be genuinely proud of the company, they are
directing.
Ethics create credibility with the public:
◦ A company perceived by the public to be ethically and
socially responsive will be honored and respected even
by those who have no intimate knowledge of its actual
working. There will be an instinctive prejudice in
favour of its products, since people believe that the
company offers value for money. Its public issue will
attract an immediate response. Ethics give
management credibility with employees.
Law cannot protect society, ethics can:
◦ Ethics is important because the government aw and lawyers
cannot do everything to protect society. Technology
develops faster than the government can regulate. People
in an industry often know the dangers in a particular
technology better than the regulatory agencies. Further,
government cannot always regulate all activities which are
harmful to society. Where law fails, ethics can succeed. An
ethically-oriented management takes measures to prevent
pollution and protection of worker’s health even before
being mandated by law.
 Components of ethical climate
Ethical criteria Focus of Ethical
Concern
Individual person Company Society
Egoism Self-interest Company Economy
interest efficiency
Benevolence Friendship Team interest Social
responsibility
Principle Morality Company Laws and
rules and professional
procedures codes
 Ethical Influence of Globalization on Stakeholders
Stakeholders Ethical Influence
Shareholders A shareholder’s perspective of business ethics
focuses on making decisions for the best interest of
the company’s investors. Ethical shareholders tend
to take greater responsibility for the profitability of
the company.

Employees Globalization provides better opportunities to the

employees. Ethical conduct enables them to
integrate their personal goals with goals of
organizations
Government Globalization enables collaborations among
governments across the globe. The government
can provide better services to citizens, check
corruption and enable transparency in processes.

Customers Globalization enables greater product variety to

customers. They get cheaper products but learn to use
them responsibly.

Suppliers Globalization enables supplier’s better connectivity with

their customers. Ethical suppliers supply higher quality
products and seek long term profitability.
Competitors All the competing companies get
wider market. They can also
engage in collaborations in
mutually beneficial areas.
Society Due to increasing connectivity
caused by globalization, civil
society is better aware of the
problems of the populace and can
rapidly take up issues with the
pertinent authorities.
Ethical Influence of globalization on International
Functional
AREAS Areas: ISSUES
International Globalization has presented complex challenge
Human for international HRM. Due to cultural
Resource differences, the commitment between
Management employer and employees has become fuzzier.
A significant challenge for management is to
maintain objectivity in hiring, promotion and
compensation. Child labor has emerged as a
complicated issue. Other important issues
include discrimination, fraud, and sexual
harassment.
International The primary goal of management is wealth
Financial maximization for the shareholders. There is little
Management direct support that ethical behavior leads to
shareholder’s wealth maximization. Indirect
studies have also not found any substantial
relationship between corporate financial
performance and social responsibility. But for long
term sustainability, organizations should engage in
ethical practices. Fairness in trading practices,
trading conditions financial contracting, tax
payments and financial practices need to be
followed.
International In international marketing, the needs and wants
Marketing of various groups vary, which leads to ethical
conflicts. Most ethical issues are related to
marketing polices, communications, pricing
approaches and distribution practices. The
specific ethical issues are prudence of targeting
vulnerable sections for consumption of
redundant or dangerous products/services,
transparency about source labor, fair treatment
and fair pay to employees, product or service
transparency, appropriate product labelling,
truthful and honest advertising, fair pricing and
distribution forthrightness in selling
Production This area of business ethics deals with the duties of a
company to ensure that products and production
processes do not cause harm. Defective, addictive
and inherently dangerous products and services (e..
Tobacco, alcohol, weapons, motor vehicles, chemical
manufacturing, bungee jumping) are not ethical
practices in production. The company should also
maintain a harmonious relationship with the
environment. It is important to deal with ethical issues
caused by new technologies like genetically modified
food, mobile phone radiation, health etc. Certain other
ethical issues are used to animals and disadvantaged
groups as test objects.
ICT The internet, private exchanges, global satellite
linkages, RFID and other forms of new
technology hold great promise in terms of
allowing global supply chains to operate more
efficiently and provide faster response to
demand. However, these new technologies
also present some cultural and ethical
challenges to firms operating in the global
environment. There may be varying views
among countries on goals, decision-making
approaches, information sharing and trust and
many other cultural differences.
Ethical Practices in Global Corporations
A global corporation must not only understand the
values, laws, culture and ethical standards of its own
country but should also be very sensitive to other countries
where its subsidiaries are operating.
Ethical Practices in Global Corporation
CORPORATION AREA ETHICAL INITIATIVE
Walmart Environment Adopted energy
conservation measures.
Launched lighting efficiency
program. Started program
for recycling of materials.
Coca cola Philanthropy Launched program calles “education
on wheels”. Started American Indian
College Education Fund
Health HIV/AIDS awareness campaigns in
Africa
Nike Marketing Relationship marketing with
stakeholders
Social Adopted ethical code of conduct
responsibility
Marketing Adopted ethical code of conduct
Human Created ethics office headed by ethics
resources director
Texas Environment Launched program for
instruments zero wastage of resource.
Adopted recycling of
materials

Infosys Corporate Strictly compliance with

Technologies Social the laws of all countries.
Responsibility High degree of disclosure
and transparency.
Management trustee for
shareholders not for
owners.
Sony Corporate Created commitees for
Corporation governance compensation and audit.
Created office of
independent directors.
Launched equity
compensation plans.
Code of Based on respect for
ethics human rights. Stresses
integrity and fairness in
business. Focuses on
ethical personal conduct.
Communication Launched internal hotline
system. Education of
employees about code of
ethics.
Crisis Adopted a 3 tier crisis
Management handling mechanism
system
Anti social Adopted mechanism for
elements anti-money laundering
exclusion
What makes the ethics and values in business special
relevant and topical in the present day context in the
world is the fact that we are on the threshold of
environmental changes of far reaching consequences.
Business ethics present pertinent solutions to the
concerns and dilemmas faced by global organizations.
Ethical leadership is essential for the long term
survival and success of any organization. In the era of
globalization, business ethics considerably influence
shareholders, employees, customers, suppliers,
competitors, government and civil society.
Organizations should focus on the ethical issues
faced by them in various functional areas like
marketing, finance, human resources, production, ICT
etc. The commendable work done by global
corporations in inculcating an practicing business
ethics underscores the importance of value based
leadership in international business scenario.
 Thank you.
God bless us all.