business ethics in 21 st century lecture 5

8/7/2019 Business Ethics in 21 St Century Lecture 5

1/17


2/17

Prospects for Business 21 st century

y Growth prospects :

y 1) High GNP growth rates in the emerging , locomotiveeconomies of the 21 st century ---China 10 % ,India at 7

%y A high investment opportunity in the infrastructure of

power, telecom ,roads , ports, railways etc.

y Faster innovation , better products & services, due to

increasing global competition .y Rising global trade , rising export and investment

freedom .


3/17

Concerns about business Business is a source of worry too .

1)Ecological & environment degradation as brought out inthe Rio Summit 1992.

Fear of higher unemployment in the richer countries, dueto cheaper imports & shifting production bases .

Fear of being swamped by the MNCs in the developingcountries .Foreign & domestic business may furthercorrupt politicians & administrators

Excessive consumerism may widen inequalities & cause

alienation, anomie and emasculation of local cultures


4/17

Stake holdersy

A firm's stakeholders are the individuals, groups, or other organizationsthat are affected by and also affect the firm's decisions and actions.Depending on the specific firm, stakeholders may include

y Governmental agencies such as the Securities and Exchange

Commission, SEBI

y Social activist groups such as Greenpeace, NarmadaBachao Andolan

y Self-regulatory organizations such as the National Association of

Securities Dealers, EXIM , Mutual Fund Association of India (MFAI)

y Employees, shareholders, suppliers, distributors,

y The media and even the community in which the firm is located

among many others


5/17

Factors facilitating Globalization

y

Several factors responsible for promoting internationaltrade

y 1) Falling trade barriers: Liberalization of trade due to free tradeagreement,& facilitating roles played by intl orgs like WTO, InternationalMonetary fund (IMF) & World Bank .

y

2) Political Reforms have opened New Frontiers : Communist nationof Eastern Europe now open to do business around the world . Otherfactors like reunification of east & west Germany , enormous growth inglobal tourism, transport & communication which has added to worldtrade .

y 3) More developing nations join the bandwagon of Global Business :Several countries like Taiwan, Thailand, Malaysia, Singapore and Indonesia

have been growing rapidly in recent years. China, India, Brazil & Russiahave also emerged as successful global players.y 4) Emergence of New Technologies & business spanning continents :

New technologies & business based on them such as computer hardware &software, pharmaceuticals & communications that have world wideinvestments & markets have transformed world trade .Several BPOs andITES ( Information technology enabled services ) have widened

international business opportunities .


6/17

Doing Business in a Diverse Worldy Under the ethnocentric perspective , , the home countrys laws were

dominant but nowadays , companies have to adapt their business

practices to different environments & culturesy E g Companies like Citibank, Standard Chartered & firms like Bata

& Hindustan Lever have a number of Indian Managerial personnelmanaging not only their subsidiaries , but the parent organizations.

y Some companies get their managers from around the world to meeting

& workshops with a view to widen & deepen their understanding of theenvironment in which the company operates.

y Eg When Nestle & Unilever carry on business with India they facedifferent political systems : India has a vibrant democracy , Pakistan adictatorship, & Bangladesh has a fledgling & brittle democracy .

Though all these countries have a common culture , their diversities inreligious& linguistic affinities bring about a difference in the mannerthey live & consume things.

y Every country has a different socioeconomic & political environment ,legal framework , institutional set up , fiscal, monetary & commercialpolicies, production techniques ,nature of products and consumption

habits etc . Hence business strategy should be fine tuned accordingly.


7/17

Benefits of MNCs to the Host Nation

y

1) Better access to world wide markets :E g manufacturer likeNike & traders like Wal Mart provide access to very large markets .Henceyou get quality goods at low prices because of large-scale production &fierce world competition .

y 2) Best access to capital investment: MNCs headquartered indeveloped countries have access to large quantum of capital .Their stocks

are listed in international stock exchange Apart from their own capital theybring in large amounts from pension funds .

y 3)Transfer of Advanced Technology: MNCs due to their large presenceworldwide and heavy investments in technology and R&D transferredsuperior technology to poor & developing countries who cant afford thesame .

y 4) Encouragement of local supplier development : E g MNCs likeFord & Hyundai outsource their spare parts& components to small Indian

companies which flourish & provide employment to thousands of people.

y 5) New jobs for Labour : MNCs establish their manufacturing units inlow income countries like India & China and use cheap labour therebyreducing the price of the product . This also provides job opportunity formany .


8/17

Benefits of MNCs to the Host Nation (cont)

y 6)Advanced training for labour : MNCs offer extensive training oftheir labour force.

y 7)Better access to Managerial Talent : Many MNCs recruit theirfuture managers from IIMs & IITs & train them not only for India butto work in their offices abroad.

y 8) New Products for Consumers : They are the ones who benefit a lot. They are able to enjoy all amenities which their counterparts enjoy inother countries . They get latest products at affordable prices .

y 9) Low- cost products and /or better products: Due to increase inefficiency, MNC;s can produce goods on a large scale , get materialsfrom cheaper sources thereby bringing down the price .

y 10) Exports contribution to the Host nation: Exports contribute

favorably & hence bring revenue to the poorer nations . For eg Hyundai& Nokia export thousands of cars & mobiles & bring in considerableamount of foreign exchange to the country .


9/17

Disadvantages of MNCs to the host country

y Loss of National sovereignty as the host nation cannot control what anMNC does in other nations .

y Political Interests of MNCs may mirror the political interest of theirrespective home nations. For e g an American MNC may serve the interestof America while operating in India.

y The host nation may lose control over its own economy

y Negative impact on the hosts balance of payments because of heavyimports of spares & components .

y Exploitation of the hosts irreplenishable natural sources

y Exploitation of labor of the host when the country needs it

y Indulgence in Harmful environmental acts.


10/17

Ethicsy In response to the growing world trade & increasing inf luence of

MNCs several attempts have been made to establish internationalcodes for ethical business practices.

y The various initiatives taken were :

y 1) International Labor organization (ILO)----For better laborpractices ---(1970)

y 2) UN Comission on Transnational Corporations(UNCTC)---creation of a new economic order & creation of code of conduct fortransnational enterprise (1974)

y 3) Organization for Economic Co-operation &Development(OECD)---prohibiting bribing of foreign officials (1977)

y 4) Caux Round Table (CRT) /Social AccountabilityInternational(SAI) / the Global Reporting Initiative ( GRI) /---(1985 )

y Among these the CRT had a widespread acceptance by the globalbusiness community & its contribution to the evolution of businessethics on a wider horizon .


11/17


12/17

Caux Round Table : Principles for International Ethical

Business (cont)

y 3)Employeesy Work conditions to be fair & improve consistently

y Health & Dignity of the worker to be bone in mind

y No discrimination on any ground

y Update the skills & knowledge of employees

y 4)Owners/Investorsy Fair & competitive return on capital by efficient management

y Conserve, protect and increase owners assets.

y Respect their complaints for solutions

y

5)Suppliersy Pricing to be fair

y No coercion or litigation

y Long term stability


13/17

Key Global Issues for Business

y The CRT affirms primary purpose of the corporation is tomanage its business and has a responsibility towards thecommunity it serves & depends upon .The issues that needto be examined in the context of the fundamental social,

economic, political & technological changes taking placethroughout and which have to be given precedence are :

y 1) The employment dilemmay 2) Sustainable practices & values

y 3) Trust, honesty and transparency

y 4) Collaboration and partnerships for action


14/17

Employment Dilemma

y Business has a responsibility to provide working conditionsthat respect each employees health & dignity & to providejobs & compensation that improve the living conditions ofworkers & their families .

y Global business leaders & their counterparts ingovernments must draw from past successes to developpolicies that promote job creation ,review regulatory

constraints that inhibit job creation & consider new risksharing between business & government .


15/17

Sustainable practices & Valuesy Apart from business the long term considerations involving

the effects of business on its environment has to beconsidered .Business should define its role in areas such as

:y Resource management

y Technology transfer

y Human exploitation

y

Employee developmenty Illicit substances & their abuse

y The family

y Encouragement of sound values in society


16/17

Trust, Honesty & Transparency

Organization as well as professionals have a duty to the

society to be trust worthy, honest & transparent in theirdealings. Global business should not participate in orcondone bribery, money laundering or other corruptpractices but should co operate with others to eliminatethem.


17/17

Collaborations & Partnerships for action

y CRT believes that solutions to complex global issues

require the co-operative efforts of business,government and other institutions because workingalone these powerful players are likely to fail .Workingtogether they can apply local models to international

situations & find multifaceted solutions to complexproblems .

business ethics in 21 st century lecture 5

Documents