4.1: Ethical Issues in International Business

Question 1

What does the term “ethics” refer to in the context of business?

Answer 1

Ethics refers to accepted principles of right or wrong that govern the conduct of a person, the members of a profession, or the actions of an organization.

In the context of business, ethics are the accepted principles of right or wrong governing the conduct of business people

Question 2

How has the technological environment, including the Internet and social media, influenced ethical considerations in international business?

Answer 2

Advances in the technological environment, such as the Internet and social media, allow more people to access information about ethical issues on a global basis.

Ethical mistakes and violations can quickly spread globally through platforms like YouTube, Twitter, and Facebook, making it essential for companies to consider ethical implications in their actions.

Question 3

What are some examples of ethical principles that are not necessarily codified into law but are considered unethical in the context of business?

Answer 3

Examples of ethical principles not necessarily codified into law include plagiarism, where an author should not plagiarize another’s work, and situations where one researcher claims their idea was “stolen” by a colleague for personal gain before the originator had the chance to publish or patent the idea.

While these actions may not be illegal, they are considered unethical.

Question 4

How do changes in the political, social-cultural, technological, economic, and competitive environments impact ethical considerations in international business?

Answer 4

Changes in these environments affect ethical considerations in international business.

Political changes result in new laws and regulations; social-cultural changes, such as immigration patterns, influence diverse perspectives on ethics.

The technological environment, with faster Internet and social media, accelerates the spread of ethical information.

Economic fluctuations and the influence of international organizations like the IMF also affect ethical decision-making.

In the competitive environment, global decisions may impact employees, customers, and host country governments.

Question 5

What is an ethical strategy in the context of international business?

Answer 5

An ethical strategy is a course of action that does not violate accepted principles of right or wrong governing the conduct of business people.

It involves making decisions and conducting business operations in a manner that aligns with ethical principles, considering the impact on various stakeholders and societal values.

Question 6

How has the Internet transformed the way ethical violations are publicized in the corporate world?

Answer 6

The Internet has made it possible for millions of people to know about a company’s ethical violations as soon as the information is made public.

Ethical mistakes can quickly be posted on platforms like YouTube, Twitter, and Facebook, spreading globally and becoming headline stories for news outlets.

Information about corporate ethical violations can be disseminated within minutes, leading to international repercussions for companies and executives.

Question 7

In the context of international business, what does the term “poor ethical decision making” refer to, and what are its causes?

Answer 7

Poor ethical decision making in international business refers to decisions that do not align with accepted ethical principles.

Causes of poor ethical decision making can include

cultural differences,

lack of awareness or understanding of ethical norms,

pressure to achieve business goals,

and sometimes a disregard for ethical considerations due to a focus on short-term profits or personal gain.

Question 8

What are some of the key factors discussed in the chapter that affect ethical considerations in international business decision making?

Answer 8

The key factors discussed in the chapter that affect ethical considerations in international business decision making include

changes in the political environment (laws and regulations),

social-cultural environment (influenced by immigration and urbanization),

technological environment (Internet and social media),

economic environment (currency fluctuations, international NGOs),

and competitive environment (global decision-making impacting stakeholders).

Question 9

Why do many of the ethical issues and dilemmas in international business arise, according to the text?

Answer 9

Many of the ethical issues and dilemmas in international business arise due to significant variations in political systems, law, economic development, and culture from culture to culture and nation to nation.

Rules and regulations established locally may be influenced by events and circumstances happening far away, leading to ethical challenges.

Question 10

How does the changing political environment impact ethics in international business?

Answer 10

The changing political environment can affect ethics in international business in various ways.

Political decisions and results, both nationally and internationally, can influence the ethical considerations in business operations.

Question 11

Provide an example from the text demonstrating the influence of politics on ethics during the COVID-19 pandemic.

Answer 11

During the COVID-19 pandemic, some Republican U.S. senators, after attending a classified briefing on the outbreak, sold millions of dollars in stocks they held in at-risk companies.

Although not strictly illegal, these actions were perceived as unethical by journalists, bloggers, and the public.

President Trump suggested that the senators should be investigated, but he also described them as “honorable people,” highlighting the ethical dilemma surrounding their behavior.

Question 12

Why is it important for international managers to consider the intertwining of different environments, as mentioned in the text?

Answer 12

International managers must consider the intertwining of different environments because these factors (political, social-cultural, technological, economic, and competitive) are interconnected.

Changes in one environment can impact ethics and decision-making in international business.

Understanding these interconnections is crucial for making ethical decisions and navigating the complexities of international business operations.

Question 13

What international convention was adopted in 1997 to combat bribery of foreign public officials in international business transactions?

Answer 13

The Convention on Combating Bribery of Foreign Public Officials in International Business Transactions was adopted in 1997 by the trade and finance ministers from the member states of the OECD.

Question 14

What does the OECD Convention on Combating Bribery of Foreign Public Officials require member states to do regarding bribery of foreign public officials?

Answer 14

The convention obliges member states to make the bribery of foreign public officials a criminal offense.

However, it excludes facilitating payments made to expedite routine government action from its scope.

Question 15

How does the OECD encourage member states to implement regulations fitting the convention’s guidelines?

Answer 15

The OECD created a website listing each country’s progress in implementing local regulations fitting the convention.

This transparency helps encourage countries to comply with the convention’s guidelines.

Question 16

How does corruption impact business investment and economic growth, according to some economists mentioned in the text?

Answer 16

Corruption reduces the returns on business investment and can lead to low economic growth.

In countries where corruption is common, unproductive bureaucrats demanding side payments for granting business permissions may siphon off profits.

This reduces businesses’ incentive to invest, potentially hindering a country’s economic growth rate.

Question 17

What is the OECD?

Answer 17

The OECD, or Organisation for Economic Co-operation and Development, is an international organization founded in 1961.

It comprises 38 member countries and serves as a platform for governments to collaborate on economic policies, share expertise, and work together on various economic and social issues.

The OECD aims to promote economic growth, stability, and improved living standards among its member countries.

Question 18

Why has corruption in Quebec been a topic of criticism within Canada?

Answer 18

Corruption in Quebec has been a topic of criticism within Canada because Quebec agencies, departments, and ministries receive millions of dollars from the federal government in Ottawa, which is funded by taxpayers across the country.

Western provinces like Alberta and British Columbia object to their federal taxes being used to fund questionable activities in Quebec, leading to frustration and separatist movements in these regions.

Question 19

How did Maclean’s magazine contribute to the discussion of corruption in Quebec?

Answer 19

In 2005, Maclean’s magazine published critical articles about the sponsorship scandal in Quebec.

In 2010, the magazine published a cover story boldly labeling Quebec as “The Most Corrupt Province in Canada.”

The articles highlighted various scandals, including political financing, favoritism in the provincial daycare system, and corruption in the construction industry.

Question 20

What significant events involving Canadian mayors are mentioned in the text, and how did these events impact international perceptions?

Answer 20

Montreal Mayor Gerald Tremblay resigned in 2012 amid allegations of corruption in the Quebec construction industry.

Toronto Mayor Rob Ford, despite facing substance abuse allegations and investigations into Toronto gangs, remained in office with limited powers until he entered a rehabilitation program.

These events negatively impacted international perceptions and raised concerns among international business people dealing with Canada.

Question 21

Why should students of international business be concerned about political scandals and corruption being reported in the media in Canada and worldwide?

Answer 21

Students of international business should be concerned about these revelations because **Canada is an exporting nation, and its ability to be competitive exporters depends on the perceptions of international customers. **

Political scandals and corruption, played out daily in the international news, raise concerns among international business people dealing with Canada, potentially affecting the country’s reputation and global business relationships.

Question 22

What is the Corruption Perceptions Index, and who produces it?

Answer 22

The Corruption Perceptions Index is produced by Transparency International (TI), an organization founded by former executives of various NGOs such as the World Bank.

The index, launched in 1995, uses various indexes, surveys, and opinion lists to create a comparative numerical score and rank 170+ countries based on their perceived levels of corruption.

Question 23

What are some other publications by Transparency International related to corruption?

Answer 23

In addition to the Corruption Perceptions Index, Transparency International publishes an annual Global Corruption Report, a Global Corruption Barometer, and a Bribe Payers Index.

These publications provide valuable insights into corruption trends and perceptions globally.

Question 24

How does Canada rank on the Corruption Perceptions Index, and which countries are perceived as the most and least corrupt?

Answer 24

Canada ranks #9 on the Corruption Perceptions Index. The three most corrupt countries in 2013 were Somalia, North Korea, and Afghanistan.

The countries perceived as the least corrupt were Denmark and New Zealand (tied for first spot) and Finland (#3). Canada is tied for the 9th position with Australia.

The United States is ranked #19, and China is ranked #80.

Question 25

In the context of international business, why might multinational companies need to adjust as political situations change?

Answer 25

Multinational companies may need to adjust as political situations change due to international agreements like the CISG and national legislation like Bill S-21.

These changes can impact Canadian multinationals operating in host countries, raising questions about human rights and ethical business practices.

Question 26

What are some basic human rights that are not universally accepted in many nations, as mentioned in the text?

Answer 26

Basic human rights such as

freedom of association,

freedom of speech,

freedom of assembly,

freedom of movement,

freedom from political repression

are not universally accepted in many nations, including some where multinational companies operate.

Question 27

How was Canada involved in human rights issues in Afghanistan, as described in the text?

Answer 27

Canada was involved in human rights issues in Afghanistan through its participation in a coalition of countries operating in the region.

Corruption among Afghan officials posed challenges for Canadian aid efforts, including activities related to water management and energy production.

Despite efforts to assist the Afghan people, corruption hindered the effectiveness of Canadian aid initiatives.

Question 28

What were the main areas of focus for Canadian government assistance in Afghanistan, and how were these efforts impacted by corruption?

Answer 28

The Canadian government’s main focus in assisting the Afghan people was to rebuild water dams and schools in areas occupied by Canadian Forces.

Corruption, particularly in the areas of water management and energy production, made it challenging for Canadian aid efforts to yield significant results and improve the lives of the Afghan people.

Question 29

Why is it important for managers in multinational firms to be sensitive to cultural differences in ethical practices?

Answer 29

Managers in multinational firms need to be sensitive to cultural differences in ethical practices because what is considered normal in one culture may be deemed unethical in another.

**This includes practices related to gift-giving, interactions with law enforcement, adherence to moral principles,
treatment of women,
and issues like child labor. **

Understanding these cultural differences is crucial to choosing ethical actions, especially when variations across societies create the potential for ethical problems in international business settings.

Question 30

What are some common ethical issues in international business, as mentioned in the text?

Answer 30

In the international business setting, common ethical issues involve

exchanges of money,

employment practices,

human rights,

environmental regulations,

corruption,

and the moral obligations of multinational corporations.

These issues are intensified by fast-moving developments facilitated by the technological environment.

Question 31

Why is interpreting local cultural practices correctly important in ethical decision-making across cultural borders?

Answer 31

Interpreting local cultural practices correctly is crucial in ethical decision-making across cultural borders because expatriate managers may misinterpret these practices based on their home culture’s standards.

Failing to understand the practice’s meaning in the local culture can lead to misunderstandings and ethical challenges.

Considering the context and seeking input from local informants can be helpful in understanding cultural practices accurately.

Question 32

What ethical trap should individuals be aware of when dealing with cultural differences, as mentioned in the text?

Answer 32

Individuals should be aware of the ethical trap of cultural relativism, captured in the adage, “When in Rome, do as the Romans do.”

While it’s important to understand and respect local cultural practices, blindly conforming to them without critical ethical analysis can lead to compromising universal ethical principles.

It’s crucial to strike a balance between respecting local customs and adhering to ethical standards.

Question 33

What is “fake news,” and how did it become a significant issue in the fall of 2016, particularly in the context of the American presidential election?

Answer 33

“Fake news” refers to information sourced from opinion sites lacking research and journalistic integrity.

It became a significant issue leading up to the American presidential election in 2016 when false stories and misleading information, often disseminated through social media sites like Facebook, YouTube, and Instagram, began affecting voter opinion.

The overwhelming volume of such content made it challenging to distinguish real stories from those lacking credibility.

Question 34

How has the growing popularity of social media affected how employees connect with one another and their work environments, as mentioned in the text?

Answer 34

The growing popularity of social media has changed how employees from large corporate organizations connect with each other and their work environments.

Employees use social media platforms to share comments, photos, and videos of their work environments.

This practice promotes understanding among colleagues globally, helping to reduce ignorance about the welfare of employees working in different parts of the company, its subsidiaries, and outsourcing partners.

Question 35

What were “The Panama Papers,” and how did they reveal issues related to offshore tax havens in Canada?

Answer 35

“The Panama Papers” refer to the details of offshore investments and financial activities that were exposed when the records of a Panamanian law firm, Mossack Fonseca, became public in April 2016.

The documents revealed how wealthy Canadians had successfully hidden investments in offshore tax havens.

The leaked information highlighted the extent of offshore wealth and tax avoidance, raising concerns about tax evasion and financial transparency.

Question 36

How much offshore tax haven investments did Canadians declare around the world, according to Statistics Canada, and why was this amount contested by organizations like the International Consortium of Investigative Journalists?

Answer 36

According to Statistics Canada, Canadians declared $199 billion in offshore tax haven investments around the world.

However, organizations like the International Consortium of Investigative Journalists and the German newspaper Süddeutsche Zeitung argued that this amount represented only a small fraction of the Canadian offshore wealth that goes undeclared.

The discrepancy between declared and undeclared offshore wealth raised concerns about the accuracy of tax declarations and potential tax evasion.

Question 37

What impact did “The Panama Papers” have on wealthy citizens and governments, as mentioned in the text?

Answer 37

“The Panama Papers” revealed how billions of tax dollars had been avoided by wealthy citizens through offshore tax havens.

This revelation led to public scrutiny and criticism of wealthy individuals and corporations for not paying taxes, highlighting issues of financial transparency, tax avoidance, and ethical responsibilities.

Question 38

Why do many citizens have a natural inclination to avoid paying taxes, and what impact does tax avoidance have on government services like education?

Answer 38

Many citizens tend to avoid paying taxes, often due to objections to how the government allocates tax dollars, particularly when spending contradicts personal beliefs.

However, tax dollars collected from citizens are essential for funding government services such as education.

When governments lack sufficient tax revenue, they may have to cut costs, leading to reductions in education funding, including teacher numbers, facilities, technology, and other essential resources for students’ education.

Question 39

How have leading American IT companies, such as Apple and Google, been criticized for tax avoidance, and what impact does this criticism have on government funding for education?

Answer 39

Leading American IT companies like Apple and Google have faced criticism for tax avoidance strategies, including **outsourcing, offshoring, and listing income under foreign subsidiaries. **

These companies have been accused of avoiding millions in taxes, depriving the government of funds that could be used for education.

Despite producing products and services benefiting students’ studies, their tax avoidance practices hinder the government’s ability to fund education adequately.

Question 40

What specific strategies did Apple employ to avoid paying taxes in America between 2009 and 2012, as mentioned in the text?

Answer 40

Between 2009 and 2012, Apple avoided paying taxes on at least $74 billion of profits in America by setting up subsidiaries in Ireland.

These subsidiaries had no purpose other than to ensure the profits were shielded from tax in the United States.

This strategy allowed Apple to avoid paying taxes on a significant portion of its profits.

Question 41

According to Kon Leong’s article in the Harvard Business Review, what are some ways large enterprises use employee data, and how can this data benefit HR management?

Answer 41

Large enterprises gather employee data, including messaging and social media posts, initially for litigation evidence, business records preservation, and responding to regulatory demands.

This data can also be utilized to visualize employee interactions, map domain expertise, replay past events, and track employee sentiment.

Such insights help managers effectively manage HR issues, especially in an increasingly competitive and technologically advanced environment.

Question 42

What significant event involving Amazon and a senior vice-president, Tim Bray, was reported by the CBC and other media outlets in May 2020?

Answer 42

In May 2020, a senior vice-president at Amazon, Tim Bray, publicly announced his resignation.

He cited the firing of activist employees as the reason for his departure.

Specifically, Bray resigned in protest and support of Amazon warehouse employees who had blown the whistle on COVID-19 work conditions in the warehouse.

Question 43

What was the role of Amazon Employees for Climate Justice (AECJ) in the context of the Amazon whistle-blowing incident mentioned in the text?

Answer 43

Amazon Employees for Climate Justice (AECJ) was an employee labor group that collaborated with the Amazon warehouse employees who blew the whistle on COVID-19 work conditions.

The AECJ supported the whistle-blowers, which Amazon senior executives viewed as “grandstanding” by the warehouse employees and “mission creep” by the AECJ.

The leaders of the protest, including the whistle-blowing employees, were subsequently fired by Amazon.

Question 44

How did Tim Bray’s resignation impact Amazon, and what ethical concerns did it raise about employment practices within the company?

Answer 44

Tim Bray’s resignation as a senior vice-president at Amazon drew significant attention and scrutiny.

His departure highlighted concerns about the treatment of whistle-blowers and the company’s handling of employee activism.

This event raised ethical questions about how Amazon handled internal dissent, employee rights, and the company’s overall approach to employment practices.

Question 45

What ethical considerations must companies address when outsourcing operations, as mentioned in the text?

Answer 45

When companies outsource operations, they face several ethical considerations.

**They need to investigate how the outsourcing providers achieve lower costs, including assessing the quality of materials, labor conditions, benefits, safety standards, and adherence to regulatory processes. **

Ethical concerns arise if the outsourcing practices compromise safety standards, environmental considerations, or violate rules and regulations in both the home country and abroad.

Question 46

How do outsourcing and offshoring become ethical issues, and under what conditions do they violate ethical expectations?

Answer 46

**Outsourcing and offshoring become ethical issues when the activities are contrary to the ethical expectations of citizens in the home country and violate the rules and regulations governing enterprises both domestically and internationally. **

Ethical concerns arise when outsourcing practices compromise ethical standards, including labor conditions, environmental regulations, and adherence to safety standards, thus violating the expectations of the citizens and regulations in the home country.

Question 47

Provide an example of a situation where outsourcing practices led to ethical concerns, as mentioned in the text.

Answer 47

In January 2017, the University of California (UC) faced accusations of outsourcing its IT jobs.

The UC was criticized for firing its IT staff and replacing them with foreign workers, which raised concerns among students studying to become software engineers.

The outsourcing actions were seen as undermining the university’s ability to educate its students and were viewed as greedy and exploitative, especially considering that the university was funded by taxpayers’ money.

Question 48

Why did the outsourcing practices of the University of California receive criticism, and what message did these practices convey to the students and the public?

Answer 48

The outsourcing practices of the University of California received criticism because they involved firing domestic IT staff and replacing them with foreign workers, sending a message that foreign workers were considered better employees than those trained in the state.

This move was seen as undermining the university’s confidence in its own ability to educate its students and was viewed as greedy and exploitative, given that the university was publicly funded.

Question 49

What ethical dilemmas arise for multinational companies in nations with weaker environmental regulations compared to their home countries?

Answer 49

Multinational companies face ethical dilemmas when operating in countries with lax environmental regulations, balancing economic interests with the responsibility to uphold environmental standards

Question 50

Can you provide an example illustrating the ethical challenges related to weak environmental regulations in a developing nation?

Answer 50

In Sri Lanka, protests ensued against a glove manufacturer, Venigros Private Limited, accused of polluting water in Rathupaswala.

The conflict escalated, resulting in clashes with law enforcement and tragic casualties, highlighting the ethical dilemma faced by multinationals.

Question 51

How do protests in developed nations, such as the truckers’ protests in California, reflect concerns about environmental regulations?

Answer 51

Protests, like the truckers’ demonstrations in California, reflect concerns about new air pollution regulations affecting their operations.

These protests emphasize the ethical debate surrounding adherence to environmental standards and the impact on business practices.

Question 52

What ethical considerations should multinational companies take into account regarding pollution in developing nations?

Answer 52

Multinational companies should consider ethical implications when operating in developing nations, ensuring they do not exploit lax regulations to pollute.

Upholding common standards, even in countries with weaker regulations, is crucial to ethical business practices.

Question 53

What is the concept of the tragedy of the commons?

Answer 53

The tragedy of the commons occurs when a resource, owned by no one but available to everyone, is overused and degraded due to individuals’ self-interest, leading to detrimental consequences for all.

Question 54

How can corporations contribute to the tragedy of the commons in the modern world?

Answer 54

Corporations can contribute to the tragedy of the commons by relocating production to areas where lax environmental regulations allow them to release pollutants into the atmosphere, oceans, or rivers.

This overuse harms valuable global commons, raising ethical concerns despite potential legality.

Question 55

Describe the legal battle involving Asarco, a U.S.-based subsidiary of Grupo Mexico, and the residents of Hayden and Winkelman in Arizona.

Answer 55

Asarco argued in court that residents living near their copper-mining operations had no claim against the company for pollution-related harm, asserting that it was evident pollution would occur in the region and residents were willingly exposing themselves to the risk.

Question 56

Can corporations have a “right to pollute” and what ethical considerations arise from this?

Answer 56

While historical documents or legal loopholes might suggest corporations have a “right to pollute,” this raises ethical questions about societal responsibility and the impact on public goods such as air and water, which everyone depends on.

Question 57

What role do multinational corporations play in addressing or contributing to global issues like apartheid or pollution?

Answer 57

Multinational corporations have significant power and can either contribute to global issues like pollution and apartheid by their business practices or help resolve them by acting ethically, investing responsibly, and withdrawing from unethical regimes.

Question 58

How did multinational companies influence the end of apartheid in South Africa?

Answer 58

By pulling out of South Africa and imposing economic sanctions, multinational companies put pressure on the government, contributing to the dismantling of the apartheid system.

Question 59

Is it ethical for multinationals to operate in repressive regimes?

Answer 59

While investment by multinationals can be a force for progress, it’s debated whether it’s ethical to do business in repressive regimes.

Extreme cases, like apartheid South Africa or Myanmar with severe human rights abuses, are generally seen as unjustifiable for ethical business operations.

Question 60

How should multinational corporations wield their power in foreign countries?

Answer 60

Multinational corporations should use their power ethically to enhance social welfare, not just seek profit.

Responsible use of power includes making social investments and respecting human rights, as opposed to exploiting resources or supporting repressive regimes.

Question 61

What is the ethical debate surrounding News Corporation’s operations in China?

Answer 61

News Corporation sought to expand operations in China, leading to criticism that the company might be using its media influence unethically to gain favor and access to Chinese markets.

Question 62

What are examples of “social investments” made by companies like BP, and what ethical obligations do they fulfill?

Answer 62

Social investments refer to initiatives by companies to improve local communities where they operate, beyond what’s economically required.

An example is BP’s construction of desalination plants in Algeria, reflecting a moral obligation to use their power constructively.