8 BUSINESS ETHICS AND STAKEHOLDER MANAGEMENT IN THE GLOBAL ENVIRONMENT

8 BUSINESS ETHICS AND STAKEHOLDER

MANAGEMENT IN THE GLOBAL ENVIRONMENT

8.1 The Connected Global Economy and Globalization Ethical Insight 8.1

8.2 Managing and Working in a “Flat World”: Professional Competencies and Ethical Issues Ethical Insight 8.2

8.3 Societal Issues and Globalization: The Dark Side

8.4 Multinational Enterprises as Stakeholders

8.5 Triple Bottom Line, Social Entrepreneurship, and Microfinancing

8.6 MNEs: Stakeholder Values, Guidelines, and Codes for Managing Ethically 8.7 Cross-Cultural Ethical Decision Making and Negotiation Methods

Chapter Summary

Questions

Exercises

Real-Time Ethical Dilemmas

Cases 21. Google in China: Still “Doing No Evil”? 22. Sweatshops: Not Only a Global Issue 23. The U.S. Industrial Food System

Notes

OPENING CASE

The new global economy is no longer comprised of separate economies per country or region; instead, it has become a complex grid of interconnected networks of resources. Advances in technology have made it possible for “money, goods, data, and people to cross borders in huge volumes and at unprecedented speed. Since 1990, trade flows have grown 1.5 times faster than global GDP. Cross-border capital flows have expanded at three times the rate of GDP growth.”1 Consider that now “only one in ten US dollars in circulation today is a physical note

Weiss, Joseph W.. <i>Business Ethics : A Stakeholder and Issues Management Approach</i>, Berrett-Koehler Publishers, Incorporated, 2014. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/apus/detail.action?docID=1565988. Created from apus on 2019-06-30 14:39:06.

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– the kind you can hold in your hand or put in your wallet. The other nine are virtual. Estimates by Cisco Systems suggest that in 2009, global data flows expanded by nearly 50 percent. In China alone, more than 150 million new people connected to the Internet in 2009, giving that country a digital population almost as large as the world’s biggest socialnetworking site, Facebook.” Emerging markets—like Brazil, China, and India—are strongly impacted by this new global grid. “The explosion of mobile networks is giving billions of people their first real entry point into the global economy, helping them become more informed consumers, connecting them with jobs, and providing much better access to credit and finance.”2

Consider also the impact globalization has on the business community. A growing global information grid directs companies toward new innovations and connections to the Internet. John Deere tractors, for example, are equipped with GPS guidance systems “to apply fertilizers to cropland precisely. TomTom has created systems of ‘smart’ traffic lights that improve traffic flows. Nortura, Norway’s largest food supplier, uses radio-frequency identification (RFID) technology to trace chickens from the farm to the store shelf.”3 Borders have been blurred with the increase in connectivity, and companies can operate in multiple countries. Decisions made and actions taken can now affect a much broader base of stakeholders. New cultural challenges and growth opportunities are facing globalized businesses.

If you are a new or an experienced hire in a global company, or in a firm facing these challenges, you may have “your work cut out for you.” You may also want to “globalize” your own thinking and skills—if you haven’t already—and gain awareness of the wider ethical impacts of your work, your company, and your stakeholders—in international settings. Your ethics may be challenged as well in the old but newly developing world.

8.1 The Connected Global Economy and Globalization The global environment consists of a dynamic set of relationships among financial markets, cultures, politics, laws, technologies, government policies, and numerous stakeholders and stakeholder interests. The new “flat world” consists of hypercompetition from different regional players across the globe. This global environment also involves individual citizens, families, and communities that are—and many that are not—served by multinational enterprises (MNEs). This chapter presents different dimensions of globalization that affect new and experienced managers and professionals, and people in every nation. Ethical Insight 8.1 defines and describes globalization in this broader context.

Ethical Insight 8.1

What Do We Mean by Globalization?

“The Earth’s current population of some 6.5 billion is expected to rise to 8.0 billion by 2030, an average increase of 60 million annually. More than 97 percent of this growth will take place

Weiss, Joseph W.. <i>Business Ethics : A Stakeholder and Issues Management Approach</i>, Berrett-Koehler Publishers, Incorporated, 2014. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/apus/detail.action?docID=1565988. Created from apus on 2019-06-30 14:39:06.

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in developing countries. The output of the global economy will rise from $35 trillion in 2005 to $72 trillion in 2030. Though the incomes of developing countries will still be less than one- quarter of those in rich countries in 2030, they will continue to converge with those of wealthy countries. Developing countries’ share in global output will increase from about one-fifth of the global economy to nearly one-third.” As this new “global middle class” emerges, many are left behind. Inequalities are faced, in particular, by unskilled workers. “While developing countries are closing the income gap with rich countries, as many as two-thirds—more than 80 percent of the developing world outside China—may experience a worsening of within- country inequality.”

What do we mean by globalization? Globalization is about an increasingly interconnected and interdependent world; it is about international trade, investment, and finance that have been growing far faster than national incomes. It is about technologies that have already transformed our abilities to communicate in ways that would have been unimaginable a few years ago. It is about our global environment, communicable diseases, crime, violence, and terrorism. It is about new opportunities for workers in all countries to develop their potential and to support their families through jobs created by greater economic integration.

But globalization is also about international financial crises, about workers in developed countries who fear losing their jobs to lower-cost countries with limited labor rights. And it is about workers in developing countries who worry about decisions affecting their lives that are made in far-away head offices of international corporations. Globalization is therefore about risks as well as opportunities. We must deal with these risks at the national level by managing adjustment processes and by strengthening social, structural, and financial systems. And at the global level, we must establish a stronger international financial architecture and work to fight deadly diseases, to turn back environmental degradation, and to use communications to give voice to the voiceless.

We cannot turn back globalization. Our challenge is to make globalization an instrument of opportunity and inclusion—not of fear and insecurity. Globalization must work for all. There are more challenges ahead, and bigger ones. As we go forward, the voices of the poor must be our guide.

Time is short. We must be the first generation to think both as nationals of our countries and as global citizens in an ever-shrinking and more connected planet. Unless we hit hard at poverty, we will not have a stable and peaceful world, shaped by the decisions we make, and the courage and leadership we show today.

Sources: Wolfensohn, J. D. (April 2, 2001). The challenges of globalization: The role of the World Bank. WorldBank.org. http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:20025027~pagePK:34370~piPK:42770~theSitePK:4607,00.html accessed January 8, 2014; Wolfensohn, J. D. (February 16, 2004). Financing the Monterrey Consensus—Remarks at the conference: Making globalization work for all. WorldBank.org. http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:20169719~pagePK:34370~piPK:42770~theSitePK:4607,00.html accessed January 8, 2014; World Bank. (2007). Global economic prospects: Overview and global outlook. http://www- wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2007/09/18/000020439_20070918154547/Rendered/PDF/381380REPLACEM1nomic1Prospects12007.pdf accessed February 28, 2012.

We begin by identifying the forces underlying the globalization process in general, and then

Weiss, Joseph W.. <i>Business Ethics : A Stakeholder and Issues Management Approach</i>, Berrett-Koehler Publishers, Incorporated, 2014. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/apus/detail.action?docID=1565988. Created from apus on 2019-06-30 14:39:06.

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present ethical issues which companies in the global environment face. Business and ethical competencies that managers and professionals need to compete when doing business internationally are presented. We then discuss the societal “dark side” of ethical issues and globalization, followed by a presentation of MNEs as stakeholders and their host-country relationships. We conclude by identifying negotiation methods for making ethical decisions, taking cross-cultural contexts into consideration.

Globalization and the Forces of Change Because globalization involves the integration of technology, markets, politics, cultures, labor, production, and commerce, it encompasses the processes and results of this integration. The economic benefits of globalization are both large and measurable. Globalization “expands trade flows and allows consumers to enjoy a range of goods and services vastly larger than that produced by their domestic economy. International financial flows enhance the efficiency with which capital and know-how are allocated.”4 The global economy has been estimated at $33 trillion. Although globalization has facilitated economic growth over several decades, this process is also vulnerable to forces in the environment, as discussed in this chapter. The most recent threats to economic stability and growth are the national bankruptcies and debt crises across the globe (like Greece, Italy, and the United States), subprime lending crisis, out-of- control investment practices, dysfunctional governmental regulation, rising oil and energy prices, environmental catastrophes (like the 2011 earthquake in Japan), and global terrorism, all of which continue to generate costs to businesses and the public. Nevertheless, technological emerging markets and innovation continue to support the globalization process. Some of the forces fueling this include the following:

• The end of communism and the rise of the so-called EMEs (emerging market economies) in Asia, Latin America, Europe, Russia, Africa, and the Middle East. Both of these developments have added to the growth of the global economy, as discussed in the opening case. Although this growth is cyclical, countries in these regions show continuing strength in their economic development.5 As noted above, the rise of EMEs means greater business competition. An Ernst & Young report noted the increasing global power of emerging markets as one of the six global trends shaping the business world. “Rapid population growth, sustained economic development and a growing middle class are making many companies look at emerging markets in a whole new way. Many companies that had previously posed no competitive threat to MNEs now do so. Working to serve customers of limited means, the emerging market leaders often produce innovative designs that reduce manufacturing costs and sometimes disrupt entire industries. A case in point: India’s Tata Motors’ US$2,900 Nano, priced at less than half the cost of any other car of the market worldwide.”6

• Global corporations invested more in emerging markets than the core economies of the United States, Europe, and Japan for the first time, according to the United Nations Conference on Trade and Development (UNCTAD) in their 2013 World Investment

Weiss, Joseph W.. <i>Business Ethics : A Stakeholder and Issues Management Approach</i>, Berrett-Koehler Publishers, Incorporated, 2014. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/apus/detail.action?docID=1565988. Created from apus on 2019-06-30 14:39:06.

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