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Politics, Law, and Business Ethics

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Roles of History and Culture

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Political Ideologies

Totalitarianism

Pluralism

Anarchism

Both private and public groups need to balance each others power

Every aspect of peoples lives must be controlled to preserve order

Only individuals and private groups can preserve personal liberties

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Totalitarianism
Leaders govern without peoples support Government controls much of peoples lives Leaders do not tolerate opposing viewpoints

Imposed authority

Lack of constitutional guarantees

Restricted participation

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Forms of Totalitarianism
Theocratic totalitarianism
(totalitarian religious leadership)

Secular totalitarianism
(military and bureaucratic leadership)

Communist totalitarianism

Tribal totalitarianism
Right-wing totalitarianism
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Business in Totalitarian Nations

Risk Factors
Arbitrary nature of business can mean that laws are vague or do not exist Bureaucrats may interpret laws however they wish

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Democracy

Freedom of expression Periodic elections Full civil, property rights Minority rights Nonpolitical bureaucracies

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Types of Political Risk

Conflict and violence

Terrorism and kidnapping

Property seizure Policy changes Local content requirements
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Conflict and Violence

Arises from:
Peoples resentment toward government Territorial disputes between nations Ethnic, racial, or religious disputes

Reduces ability to:

Obtain materials and equipment Manufacture and distribute products Protect employees lives and firms assets

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Terrorism and Kidnapping

Security checklist for managers on business abroad:

Fly nonstop when possible and avoid unsecured

areas of airports

During your stay, vary your routines and means

of transportation

Keep a low profile and refrain from loud, flashy

behavior

Give friendly but cautious answers to personal

questions

Know local emergency procedures before trouble

strikes

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Property Seizure
Confiscation
Forced transfer of assets from a company to the government without compensation

Expropriation
Forced transfer of assets from a company to the government with compensation

Nationalization
Forced asset transfer to the government of an entire industry

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Policies and Laws

Local content requirements:

Policy changes restrict:

Foreign ownership
Investment levels

Business activities

Specify the portion of a good or service to be supplied by local firms

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Managing Political Risk I

Partnerships

Adaptation
Incorporate risk into business strategies

Localization

Development assistance Insurance

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Managing Political Risk II

Current employees with relevant information

Information gathering
Gather data to better predict and manage risk

Agencies specializing in political-risk services

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Managing Political Risk III

Lobbying
Influencing local lawmakers

Influence local politics

Present firms views on political matters

Corruption
Foreign Corrupt Practices Act

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Common Law
Tradition
Nations legal history

Precedent
Past cases before the courts

Usage
How laws are applied
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Civil Law
Dates to Roman times in the fifth century B.C.

Rules and statutes constitute a legal code

Defines all obligations, responsibilities, and privileges

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Theocratic Law
Legal tradition based on religious teachings
Islamic law Jewish law Hindu law

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Global Legal Issues I

Intellectual property
- Result of intellectual talent and abilities - Piracy/counterfeits a serious problem
Patent
Excludes all but the inventor from making, using, or selling the invention (WTO = 20 years)

Trademark
Words or symbols that distinguish a product and its manufacturer ("Coca-Cola")

Copyright
Freedom of creator to publish or dispose of original works as they choose ("Happy Birthday to You")
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Business Software Piracy

Source: Based on the Seventh Annual BSA and IDC Global Software Piracy Study (Washington, D.C.; Business Software Alliance, May 2010), Table 3, pp. 14 15, (www.bsa.org/globalstudy).

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Global Legal Issues II

Standardization - Interpreting and applying laws uniformly Product safety and liability - Responsibility for damage, injury, or death Taxation - Income, sales, consumption, and VAT Antitrust (antimonopoly) laws - Prevent market sharing, price fixing, and
unfair advantage

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Ethics and Social Responsibility

PHILOSOPHIES
Friedman View Cultural Relativism

Righteous Moralism

Utilitarianism

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Social Responsibility Issues

Go beyond legal obligations to balance commitments to investors, customers, communities, and other companies

Fight to eliminate bribery and corruption Improve labor conditions and guard human rights Practice fair trade to help the disadvantaged Protect the environment and conserve resources

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International Relations
Favorable international political relations foster:
Stable business environments Improved business communications Efficient distribution systems Expanded opportunities Diminished risk levels Prompt and equitable dispute resolution
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