OHT 7.1

Wall and Rees: International Business, 2nd edition © Pearson Education Limited 2004

International ethical and ecological environment

OHT 7.2

Wall and Rees: International Business, 2nd edition © Pearson Education Limited 2004

Social Contract Theory (1)

• Thomas Hobbes suggested that human beings tacitly agree to laws and regulations on their behaviour so that they can both live in harmony and achieve their own ends

OHT 7.3

Wall and Rees: International Business, 2nd edition © Pearson Education Limited 2004

Social Contract Theory (2)

• Donaldson and Dunfee (1999) take this approach further in their ‘Integrated Social Contract Theory’. Basic moral minima (‘hypernorms’) include:– Not causing gratuitous harm– Honouring contracts– Respecting human rights– Treating people and organisations fairly

OHT 7.4

Wall and Rees: International Business, 2nd edition © Pearson Education Limited 2004

Integrated Social Contract Theory

• Hypernorms – moral minima• Consistent norms – whilst consistent with

hypernorms and legitimate norms, reflect culturally specific values

• Moral-free space – consistent with hypernorms but clash with one or more legitimate norms

• Illegitimate norms – inconsistent with hypernorms

OHT 7.5

Wall and Rees: International Business, 2nd edition © Pearson Education Limited 2004

Global norms in the Integrated Social Contract Theory (ISCT)

OHT 7.6

Wall and Rees: International Business, 2nd edition © Pearson Education Limited 2004

International Business and Ethics

Enderle (1995) identified four approaches• Foreign country type – conforms to host country

norm• Empire type – applies domestic norms to host

country• Interconnection type – hybrid approach where

norms applied are based on pragmatism (what works for the MNE)

• Global type – reflects norms deemed appropriate for ‘global citizenry’; not related to MNE interests

OHT 7.7

Wall and Rees: International Business, 2nd edition © Pearson Education Limited 2004

International Ethical Agreements

• OECD Guidelines for MNEs (1976)• International Labour Office (ILO) Tripartite

Declaration of Principles concerning MNEs and Social Policy (1977)

• UNCTAD Code on Restrictive Business Practices (1980)

• UN Code of Conduct for Transnational Corporations (1983)

• Multilateral Agreement on Investment (MAI): still unresolved

OHT 7.8

Wall and Rees: International Business, 2nd edition © Pearson Education Limited 2004

Impact of environmental damage (MSC > MCP) on price and output