International Business Competing in the Global Marketplace Global Edition Charles Hill 10e - Test Bank

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FALSE

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

TRUE

Many of the ethical issues in international business are rooted in the fact that political systems, law, economic development, and culture vary significantly from nation to nation. What is considered normal practice in one nation may be considered unethical in another.

FALSE

GM adopted the Sullivan principles. Sullivan argued that it was ethically justified for GM to operate in South Africa so long as two conditions were fulfilled. First, the company should not obey the apartheid laws in its own South African operations. Second, the company should do everything within its power to promote the abolition of apartheid laws.

TRUE

The tragedy of the commons occurs when a resource held in common by all, but owned by no one, is overused by individuals, resulting in its degradation. The phenomenon was first named by Garrett Hardin when describing a particular problem in sixteenth-century England.

FALSE

In the modern world, corporations can contribute to the global tragedy of the commons by moving production to locations where they are free to pump pollutants into the atmosphere or dump them in oceans or rivers, thereby harming these valuable global commons.

FALSE

There always have been and always will be corrupt government officials. International businesses can and have gained economic advantages by making payments to those officials.

TRUE

The Lockheed case was the impetus for the 1977 passage of the Foreign Corrupt Practices Act in the United States. The act outlawed the paying of bribes to foreign government officials to gain business.

FALSE

The Foreign Corrupt Practices Act was subsequently amended to allow for “facilitating payments.” Sometimes known as speed money or grease payments, facilitating payments are not payments to secure contracts that would not otherwise be secured and nor are they payments to obtain exclusive preferential treatment.

TRUE

Sometimes known as speed money or grease payments, facilitating payments are not payments to secure contracts that would not otherwise be secured and nor are they payments to obtain exclusive preferential treatment.

FALSE

Noblesse oblige is a French term that refers to honorable and benevolent behavior considered the responsibility of people of high (noble) birth.

TRUE

Noblesse oblige is a French term that refers to honorable and benevolent behavior considered the responsibility of people of high (noble) birth. In a business setting, it is taken to mean benevolent behavior that is the responsibility of successful enterprises.

TRUE

The concept of social responsibility refers to the idea that businesspeople should consider the social consequences of economic actions when making business decisions, and that there should be a presumption in favor of decisions that have both good economic and social consequences.

FALSE

The ethical obligations of a multinational corporation toward employment conditions, human rights, corruption, environmental pollution, and the use of power are not always clear-cut.

TRUE

Ethical dilemmas are situations in which none of the available alternatives seems ethically acceptable.

TRUE

Ethical dilemmas exist because many real-world decisions are complex, difficult to frame, and involve first-, second-, and third-order consequences that are hard to quantify. Doing the right thing, or even knowing what the right thing might be, is often far from easy.

FALSE

Societal business ethics are not divorced from personal ethics, which are the generally accepted principles of right and wrong governing the conduct of individuals.

TRUE

Our personal ethical code exerts a profound influence on the way we behave as businesspeople. An individual with a strong sense of personal ethics is less likely to behave in an unethical manner in a business setting.

TRUE

The term organization culture refers to the values and norms that are shared among employees of an organization.

TRUE

Leaders help to establish the culture of an organization, and they set the example that others follow. Other employees in a business often take their cue from business leaders, and if those leaders do not behave in an ethical manner, they might not either.

FALSE

Straw men approaches to business ethics are raised by business ethics scholars primarily to demonstrate that they offer inappropriate guidelines for ethical decision making in a multinational enterprise.

FALSE

Straw men approaches to business ethics can be characterized as the Friedman doctrine, cultural relativism, the righteous moralist, and the naive immoralist.

TRUE

The Nobel Prize-winning economist Milton Friedman wrote an article in 1970 that has since become a classic straw man that business ethics scholars outline only to then tear down. Friedman’s basic position is that the only social responsibility of business is to increase profits, so long as the company stays within the rules of law.

FALSE

Friedman’s basic position is that the only social responsibility of business is to increase profits, so long as the company stays within the rules of law. He explicitly rejects the idea that businesses should undertake social expenditures beyond those mandated by the law and required for the efficient running of a business.

TRUE

Friedman explicitly rejects the idea that businesses should undertake social expenditures beyond those mandated by the law and required for the efficient running of a business.

TRUE

Cultural relativism is the belief that ethics are nothing more than the reflection of a culture—all ethics are culturally determined—and that accordingly, a firm should adopt the ethics of the culture in which it is operating.

FALSE

At its extreme, cultural relativism suggests that if a culture supports slavery, it is OK to use slave labor in a country.

FALSE

A righteous moralist claims that a multinational’s home-country standards of ethics are the appropriate ones for companies to follow in foreign countries.

FALSE

A righteous moralist claims that a multinational’s home-country standards of ethics are the appropriate ones for companies to follow in foreign countries. This approach is typically associated with managers from developed nations.

FALSE

Utilitarian approaches to ethics hold that the moral worth of actions or practices is determined by their consequences. A naive immoralist asserts that if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either.

TRUE

In contrast to the straw men approaches to ethics, most moral philosophers see value in utilitarian and Kantian approaches to business ethics.

TRUE

Utilitarian approaches to ethics hold that the moral worth of actions or practices is determined by their consequences. An action is judged desirable if it leads to the best possible balance of good consequences over bad consequences.

FALSE

The problem with utilitarianism is that the philosophy omits the consideration of justice. The action that produces the greatest good for the greatest number of people may result in the unjustified treatment of a minority.

FALSE

Developed in the twentieth century, rights theories recognize that human beings have fundamental rights and privileges that transcend national boundaries and cultures. Rights establish a minimum level of morally acceptable behavior.

FALSE

Rawls accepts that inequalities can be just if the system that produces inequalities is to the advantage of everyone. More precisely, he formulates what he calls the difference principle, which is that inequalities are justified if they benefit the position of the least-advantaged person.

TRUE

Businesses can give potential employees psychological tests to try to discern their ethical predisposition, and they can check with prior employees regarding someone’s reputation (e.g., by asking for letters of reference and talking to people who have worked with the prospective employee). The latter is common and does influence the hiring process.

TRUE

Building an organization culture that places a high value on ethical behavior requires incentive and reward systems, including promotions that reward people who engage in ethical behavior and sanction those who do not.

FALSE

Internal stakeholders are individuals or groups who work for or own the business. External stakeholders are all other individuals and groups that have some claim on the firm. Typically, this group comprises customers, suppliers, lenders, governments, unions, local communities, and the general public.

FALSE

Managers need to establish moral intent, to be able to think through ethical problems. This means the business must resolve to place moral concerns ahead of other concerns in cases where either the fundamental rights of stakeholders or key moral principles have been violated.

TRUE

It is important to recognize that employees in an international business may need significant moral courage. Moral courage enables managers to walk away from a decision that is profitable but unethical.

TRUE

Companies can strengthen the moral courage of employees by committing themselves to not retaliate against employees who exercise moral courage, say no to superiors, or otherwise complain about unethical actions.

TRUE

Not only should businesses strive to identify and hire people with a strong sense of personal ethics, but it also is in the best interest of prospective employees to find out as much as they can about the ethical climate in an organization.

FALSE

To foster ethical behavior, businesses need to build an organization that values ethical behavior. To do this, many companies now draft a code of ethics, which is a formal statement of the ethical priorities a business adheres to.

TRUE

To make sure that a business behaves in an ethical manner, a number of firms now have ethics officers. These individuals are responsible for making sure that all employees are trained to be ethically aware, that ethical considerations enter the business decision-making process, and that the company’s code of ethics if followed.

GM adopted what came to be called the Sullivan principles, named after Leon Sullivan, a black Baptist minister and a member of GM’s board of directors. Sullivan argued that it was ethically justified for GM to operate in South Africa so long as certain conditions were fulfilled.

Many developed nations have substantial regulations governing the emission of pollutants, the dumping of toxic chemicals, the use of toxic materials in the workplace, and so on. Those regulations are often lacking in developing nations, and according to critics, the result can be higher levels of pollution from the operations of multinationals than would be allowed at home.

The tragedy of the commons occurs when a resource held in common by all, but owned by no one, is overused by individuals, resulting in its degradation.

In the modern world, corporations can contribute to the global tragedy of the commons by moving production to locations where they are free to pump pollutants into the atmosphere or dump them in oceans or rivers, thereby harming these valuable global commons.

The Lockheed case was the impetus for the 1977 passage of the Foreign Corrupt Practices Act in the United States. The act outlawed the paying of bribes to foreign government officials to gain business.

Sometimes known as speed money or grease payments, facilitating payments are payments to ensure receiving the standard treatment that a business ought to receive from a foreign government, but might not due to the obstruction of a foreign official.

The Convention on Combating Bribery of Foreign Public Officials in International Business Transactions excludes facilitating payments made to expedite routine government action from the convention.

The concept of social responsibility refers to the idea that businesspeople should consider the social consequences of economic actions when making business decisions, and that there should be a presumption in favor of decisions that have both good economic and social consequences.

Noblesse oblige is a French term that refers to honorable and benevolent behavior considered the responsibility of people of high (noble) birth. In a business setting, it is taken to mean benevolent behavior that is the responsibility of successful enterprises.

Noblesse oblige is a French term that refers to honorable and benevolent behavior considered the responsibility of people of high (noble) birth. In a business setting, it is taken to mean benevolent behavior that is the responsibility of successful enterprises.

Ethical dilemmas are situations in which none of the available alternatives seems ethically acceptable.

Home-country managers working abroad in multinational firms (expatriate managers) may experience more than the usual degree of pressure to violate their personal ethics. They are away from their ordinary social context and supporting culture, and they are psychologically and geographically distant from the parent company.

The term organization culture refers to the values and norms that are shared among employees of an organization.

Friedman’s basic position is that the only social responsibility of business is to increase profits, so long as the company stays within the rules of law. He explicitly rejects the idea that businesses should undertake social expenditures beyond those mandated by the law and required for the efficient running of a business.

Friedman explicitly rejects the idea that businesses should undertake social expenditures beyond those mandated by the law and required for the efficient running of a business.

Cultural relativism is the belief that ethics are nothing more than the reflection of a culture—all ethics are culturally determined—and that accordingly, a firm should adopt the ethics of the culture in which it is operating.

Cultural relativism is the belief that ethics are nothing more than the reflection of a culture—all ethics are culturally determined—and that accordingly, a firm should adopt the ethics of the culture in which it is operating.

Cultural relativism is the belief that ethics are nothing more than the reflection of a culture—all ethics are culturally determined—and that accordingly, a firm should adopt the ethics of the culture in which it is operating.

Cultural relativism does not stand up to a closer look. At its extreme, cultural relativism suggests that if a culture supports slavery, it is OK to use slave labor in a country.

A righteous moralist claims that a multinational’s home-country standards of ethics are the appropriate ones for companies to follow in foreign countries. This approach is typically associated with managers from developed nations.

A naive immoralist asserts that if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either.

A naive immoralist asserts that if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either. The classic example to illustrate the approach is known as the drug lord problem.

Utilitarian approaches to ethics hold that the moral worth of actions or practices is determined by their consequences. An action is judged desirable if it leads to the best possible balance of good consequences over bad consequences.

The best decisions, from a utilitarian perspective, are those that produce the greatest good for the greatest number of people.

As a philosophy for business ethics, utilitarianism focuses attention on the need to weigh carefully all of the social benefits and costs of a business action and to pursue only those actions where the benefits outweigh the costs. The best decisions, from a utilitarian perspective, are those that produce the greatest good for the greatest number of people.

Kantian ethics hold that people should be treated as ends and never purely as means to the ends of others.

Developed in the twentieth century, rights theories recognize that human beings have fundamental rights and privileges that transcend national boundaries and cultures.

Kantian ethics are based on the philosophy of Immanuel Kant (1724-1804). Kantian ethics hold that people should be treated as ends and never purely as means to the ends of others. People are not instruments, like a machine.

Article 23 of the United Nations Universal Declaration of Human Rights states: Everyone has the right to form and to join trade unions for the protection of his interests.

Echoing Kantian ethics, Article 1 of the United Nations Universal Declaration of Human Rights states: All human beings are born free and equal in dignity and rights. They are endowed with reason and conscience and should act towards one another in a spirit of brotherhood.

The notion that there are fundamental rights that transcend national borders and cultures was the underlying motivation for the United Nations Universal Declaration of Human Rights, which has been ratified by almost every country on the planet and lays down basic principles that should always be adhered to irrespective of the culture in which one is doing business.

A just distribution is one that is considered fair and equitable. Rawls argues that all economic goods and services should be distributed equally except when an unequal distribution would work to everyone’s advantage.

According to Rawls, valid principles of justice are those with which all persons would agree if they could freely and impartially consider the situation. One such principle is that each person be permitted the maximum amount of basic liberty compatible with a similar liberty for others.

John Rawls formulated what he called the difference principle, which is that inequalities are justified if they benefit the position of the least-advantaged person.

John Rawls formulated what he called the difference principle, which is that inequalities are justified if they benefit the position of the least-advantaged person.

External stakeholders are all other individuals and groups that have some claim on the firm. Typically, this group comprises customers, suppliers, lenders, governments, unions, local communities, and the general public.

Internal stakeholders include all employees, the board of directors, and stockholders. External stakeholders are all other individuals and groups that have some claim on the firm. Typically, this group comprises customers, suppliers, lenders, governments, unions, local communities, and the general public.

Stakeholder analysis involves a certain amount of what has been called moral imagination. This means standing in the shoes of a stakeholder and asking how a proposed decision might impact that stakeholder.

Moral intent implies that a business must resolve to place moral concerns ahead of other concerns in cases where either the fundamental rights of stakeholders or key moral principles have been violated.

It is important to recognize that employees in an international business may need significant moral courage. Moral courage enables managers to walk away from a decision that is profitable but unethical.

Many companies explicitly articulate values that emphasize ethical behavior by drafting a code of ethics, which is a formal statement of the ethical priorities a business adheres to.

Business ethics are the accepted principles of right or wrong governing the conduct of businesspeople. An ethical strategy is a strategy, or course of action, that does not violate these accepted principles.

Many of the ethical issues and dilemmas in international business are rooted in the fact that political systems, law, economic development, and culture vary significantly from nation to nation. Therefore, what might be considered a normal business practice in one country may constitute unethical behavior in another country. Managers in a multinational company need to be sensitive to these differences and choose the ethical action in those circumstances where variation across societies creates the potential for ethical problems. In the international business setting, the most common ethical issues involve employment practices, human rights, environmental regulations, corruption, and the moral obligation of multinational corporations.

During the 1980s, many American companies doing business in South Africa realized that following the Sullivan principles of not obeying apartheid laws and trying to promote their abolition was not a sufficiently ethical strategy. Consequently, many companies divested their holdings in the nation. At the same time, the U.S. government and other nations imposed economic sanctions on the country. Together, these actions helped bring about democratic elections in the nation in 1994, and an end to white minority rule.

This question is designed to stimulate classroom discussion or the personal opinion of the student. Issues that might emerge include whether there is any danger that amoral management might move production to a developing nation precisely because costly pollution controls are not required, the notion that the environment is public good that no one owns, but that anyone can despoil, human-induced global warming, and legality of various actions.

In 1997, the OECD adopted the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. The convention obliges member states to make the bribery of foreign public officials a criminal offense. The convention excludes facilitating payments made to expedite routine government action from the convention.

This question is designed to allow the students to explore the idea of bribery as possibly resulting in a positive rather than a negative outcome. Some economists have suggested that corruption might in fact improve efficiency and help growth. Others however, argue that corruption simply reduces the returns on business investment and leads to low economic growth.

The concept of social responsibility refers to the idea that businesspeople should consider the social consequences of economic actions when making business decisions, and that there should be a presumption in favor of decisions that have both good economic and social consequences. In a business setting, social responsibility means that benevolent behavior is the responsibility of successful enterprises.

Ethical dilemmas are situations in which none of the available alternatives seems ethically acceptable. Ethical dilemmas exist because many real-world decisions are complex, difficult to frame, and involve first-, second-, and third-order consequences that are hard to quantify. To deal with these situations, managers need a moral compass to guide them through the dilemma to find an acceptable solution.

The causes that contribute to unethical behavior in businesses are very complex. However, a few generalizations can be made. Unethical behavior is rooted in poor personal ethics, societal culture, the psychological and geographical distances of a foreign subsidiary from the home office, a failure to incorporate ethical issues into strategic and operational decision making, a dysfunctional culture, and failure of leaders to act in an ethical manner.

Expatriate managers may experience more than the usual degree of pressure to violate their personal ethics. They are away from their ordinary social context and supporting culture, and they are psychologically and geographically distant from the parent company. They may be based in a culture that does not place the same value on ethical norms important in the manager’s home country, and they may be surrounded by local employees who have less rigorous ethical standards. The parent company may pressure expatriate managers to meet unrealistic goals that can only be fulfilled by acting unethically. For example, to meet centrally mandated performance goals, expatriate managers might give bribes to win contracts. Local managers might encourage the expatriate to adopt such behavior. Due to its geographical distance, the parent company may be unable to see how expatriate managers are meeting goals, or may choose not to see how they are doing so, allowing such behavior to flourish and persist.

In 1970, Milton Friedman suggested that the only social responsibility of business is to increase profits, so long as the company stays within the rules of law. He explicitly rejects the idea that business should undertake social expenditures beyond those mandated by the law and required for the efficient running of a business. Friedman does state that businesses should behave in an ethical manner and not engage in deception and fraud, however, most economists believe that his approach to ethics does not hold up well. For example, even though child labor may not be against the law in a particular country, it is still unethical to use child labor.

The cultural relativism approach is the belief that ethics are nothing more than the reflection of a culture and accordingly, a firm should adopt the ethics of the culture in which it is operating. This approach is often summarized by the maxim “When in Rome do as the Romans.” Cultural relativism does not stand up well to business ethics because it suggests that if a culture allows slavery, then it is acceptable for a firm to use slaves as well. Cultural relativism implicitly rejects the idea that universal notions of morality transcend different cultures, however, some universal notions of morality are found across cultures.

The naive immoralist asserts that if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either. This approach has been criticized with the argument that simply accepting an action as being ethically justified just because everyone is doing it is not sufficient. Moreover, the multinational company does have the ability to change the prevailing practice in the country.

The utilitarian approach to business ethics was developed in the 18^th and 19^th centuries by philosophers such as David Hume, Jeremy Bentham, and John Stuart Mill. The utilitarian approach to ethics holds that the moral worth of actions or practices is determined by their consequences. An action is judged to be desirable if it leads to the best possible balance of good consequences over bad consequences. The best decisions are those that produce the greatest good for the greatest number of people.

This approach has certain limitations. One serious drawback of the utilitarian approach is that it is difficult to measure the benefits, costs, and risks of a course of action. A second problem is that the philosophy omits the consideration of justice.

The veil of ignorance was developed by John Rawls as part of his approach to justice theories. According to Rawls, valid principles of justice are those with which all persons would agree if they could freely and impartially consider the situation. Impartiality is guaranteed by the veil of ignorance. Under the veil of ignorance, everyone is imagined to be ignorant of all of his/her particular characteristics. Under these conditions everyone would agree that (1) each person be permitted the maximum amount of basic liberty compatible with a similar liberty for others, and (2) once basic liberty is assured, inequality in basic social goods is to be allowed only if such inequalities benefit everyone.

An international business and its managers can take several steps to make sure ethical issues are considered in business decisions. Some of these are: (1) favor hiring and promoting people with a well-grounded sense of personal ethics; (2) build an organizational culture that places a high value on ethical behavior; (3) make sure that leaders within the business not only articulate the rhetoric of ethical behavior, but also act in a manner that is consistent with that rhetoric; (4) put decision-making processes in place that require people to consider the ethical dimension of business decisions; and (5) develop moral courage.

A code of ethics is a formal statement of the ethical priorities a business adheres to. Often, the code of ethics draws heavily upon documents such as the UN Universal Declaration of Human Rights, which itself is grounded in Kantian and rights-based theories of moral philosophy.

Some experts on ethics have recommended a five-step process to think through ethical problems. In step 1, businesspeople should identify which stakeholders a decision would affect and in what ways. Stakeholder analysis involves a certain amount of moral imagination. Step 2 involves judging the ethics of the proposed strategic decision, given the information gained in step 1. Managers need to determine whether a proposed decision would violate the fundamental rights of any stakeholders. Step 3 requires managers to establish moral intent. This means the business must resolve to place moral concerns ahead of other concerns in cases where either the fundamental rights of stakeholders or key moral principles have been violated. Step 4 requires the company to engage in ethical behavior. Step 5 requires the business to audit its decisions, reviewing them to make sure they were consistent with ethical principles, such as those stated in the company’s code of ethics.

To make sure that a business behaves in an ethical manner, a number of firms now have ethics officers. These individuals are responsible for making sure that all employees are trained to be ethically aware, that ethical considerations enter the business decision-making process, and that the company’s code of ethics is followed. Ethics officers may also be responsible for auditing decisions to make sure they are consistent with this code. In many businesses, ethics officers act as an internal ombudsperson with responsibility for handling confidential inquiries from employees, investigating complaints from employees or others, reporting findings, and making recommendations for change.

Companies can strengthen the moral courage of employees by committing themselves to not retaliate against employees who exercise moral courage, say no to superiors, or otherwise complain about unethical actions. Companies can also set up ethics hotlines, which allow employees to anonymously register a complaint with a corporate ethics officer.

All stakeholders are in an exchange relationship with the company. Each stakeholder group supplies the organization with important resources (or contributions), and in exchange each expects its interests to be satisfied (by inducements. Stakeholder analysis involves a certain amount of what has been called moral imagination. This means standing in the shoes of a stakeholder and asking how a proposed decision might impact that stakeholder.