IBL Chapter 2

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The Ethics of International Business

4 Ethical Schools of Thought

1) UTILITARIANISM
2) RIGHTS AND DUTIES
3) VIRTUE
4) ETHICS OF CARE

UTILITARIANISM

teleological in nature, meaning it looks to the consequences of a decision to determine whether it is ethical. benefit-cost analysis

Adam Smith

Adam Smith

wealth of nations, a theory of moral sentiments

Wealth of Nations

egoism: individuals should be allowed to make decisions off their own narrow self-interest

A Theory of Moral Sentiments

rational self-interest incorporates many altruistic factors, which is not flush with economic free market theory

Benefit-cost analysis

attempts to monetize the ethical determination by placing dollar values on costs and benefits of certain actions. Broad analysis of effects on all stakeholders

Ford Pinto case

cost-benefit analysis determined that a massive recall of cars that burst into flame when involved in rear-end accidents would cost more than settling a ton of wrongful death lawsuits, so they let it be

dominant considerations

Some things, like human life and well-being, are ________ though, in that they outweigh other factors of the equation

incommensurability

can't be measured

distributive justice

second stage of utilitarianism analysis; examines the distributions of benefits and costs. Certain concerns such as human rights would take priority over the results of a purely utilitarian analysis

RIGHTS AND DUTIES

People all have inalienable rights such as individual autonomy and equality, and the pursuit of personal interests

Kant's categorical imperatives

Universal Declaration of Human Rights

adopted by the UN in 1948, statement of basic rights every human inherently possesses

Declaration on the Right to Development

every human has a basic right to development

Conflict of relative development

compare laws in a foreign developing country to the laws that existed in the home country's matching stage of development when determining ethics

Conflict of cultural tradition

unethical practice in a home country is ethical in a foreign country a company does business in

VIRTUE

Looks at whether actor is motivated by virtue or vice

Vice

destrutive to human relationships and includes selfishness, deceptiveness, and unfairness

Virtue

acquired moral traits that allow a person to act according to reason

ETHICS OF CARE

Focuses on connections through relationships, and the care that we give to each relationship. Emphasizes that some stakeholders are worth more to an actor than others

Example: local community is more valuable to company than a foreign developing country

Myth of the Amoral Businessman

If a company acts purely to earn profits, it will behave ethically because in a society where information spreads so quickly, it's easy to become unpopular and lose business by acting boorishly

Problem of subordinate responsibility

traditional view is that those who knowingly partake in unethical actions are the only persons accountable. Therefore, the excuse of ignorance may absolve individuals of moral responsibility

Foreign Corrupt Practices Act (FCPA)

Prohibits any individual, firm, officer, director, employee, or agent of a firm from offering corrupt payments to a foreign official for the purpose of obtaining or retaining business with, or directing business to, any person.

FCPA controversies

Controversial because it puts Americans at a competitive disadvantage since other nations do business through bribery all the time, thus forcing American business out of the competition

Corruption hinders a country's development and shackles their economies. Hence the FCPA

Lamb v. Phillip Morris

FCPA does not grant a private right of action. Stands for the proposition that there is no private cause of action bestowed by this statute

U.S. v. Liebo

NAPCO, US weapons dealer, in touch with Niger and bought someone a plane ticket for a foreign official's honeymoon. Convicted for violating the bribery provisions of the FCPA, Liebo appealed on the grounds that there was insufficient evidence to show the airline tickets were given to "obtain or retain business," and he argues that there was no evidence that the airplane tickets were given "corruptly." Appellate court held that jury was allowed to infer from the circumstances that the gift was given corruptly and that the amount of the bribe is not material

third-party payments

The practice of making a payment to a third party (joint venture partners or agents, usually) while knowing that all or a portion of the payment will go directly or indirectly to a foreign official.

corruption

hinders a country's development and shackles their economy

Permissible payments under the FCPA

Explicit exception to the FCPA for payments to expedite performance of routine governmental action (obtaining permits or licences, processing visas and work orders, providing police protection, etc)

Affirmative defenses under the FCPA

A person charged with violations of the FCPA's antibribery provisions may assert that the payment was lawful under the written laws of the foreign country or that the money was spent as part of demonstrating a product or performing a contractual obligation

Defendant is required to show that the payment fit these requirements since it is an affirmative defense; burden of proof does not rest with plaintiff.

Sanctions against bribery under the FCPA

Criminal and civil penalties for violation of the FCPA's antibribery provisions.

Criminal includes up to five years in jail for the individual and up to a 2 million dollar fine for a business entity. Civil includes the right of the Attorney

General or the SEC to bring a civil action of up to $10,000 against any firm or person acting on behalf of the firm.

Also, indictment alone can lead to the suspension of the right to do business with the government.

5 Tests of the FCPA

1) Who (Issuers, domestic concerns, or foreign nationals or businesses)

2) Corrupt Intent (The offer or promise of a corrupt payment can violate the FCPA on its own)

3) Payment

4) Recipient (Has to be a foreign official)

5) Business Purpose Test (Was payment made for purpose of obtaining or retaining business?)

Kant's categorical imperatives

absolute moral duties or laws

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