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Chapter 10

IHRM Trends and Future Challenges

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Chapter Objectives

International business ethics and the role of IHRM

Mode of operation and IHRM

Ownership issues relating to IHRM requirements of organizations other than large MNEs, such as SMEs and NGOs including not-for-profit organizations)

Safety, security, and terrorism issues

The evolving field of IHRM

International business ethics and the role of IHRM

Mode of operation and IHRM

Ownership issues relating to IHRM requirements of organizations other than large MNEs, such as SMEs and NGOs including not-for-profit organizations)

Safety, security, and terrorism issues

The evolving field of IHRM

In this final chapter, we identify and analyze some observed trends and future directions regarding:

Introduction

In this course, we have explored the IHRM issues in a multinational context. To that end we have examined the HR functions and practices in the process of business internationalization and their implications.

We now turn our attention to some issues that have not been emphasized in the general IHRM literature but present challenges to IHRM, such as International business ethics Safety, security, and dealing with terrorism Contractual, off-shoring, and supply chain management

These topics distinguish the role of HRM in MNEs and fall in the framework of strategic HRM.

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A model of strategic HRM in multinational enterprises

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Figure10.1

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External Factors: International Business Ethics and HRM

When business is conducted across borders, the ethics program takes on added layers of complexity

Especially problematic when multinationals operate in the host countries that have: Different standards of business practice Economically impoverished Inadequate legal infrastructure Government corruption Human rights violations

Ethical questions arise not only in the context of different home- and host-country employment practices but also in the central operations and policies of MNEs.

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Three Main Responses to Ethics Questions

Ethical relativism No universal or international rights and wrongs, it all depends on a particular culture’s values and beliefs – “when in Rome, do as the Romans do’’.

Ethical absolutism “When in Rome, one should do what one would do at home, regardless of what the Romans do”. This view of ethics gives primacy to one’s own cultural values.

Ethical universalism There are fundamental principles of right and wrong which transcend cultural boundaries and multinationals must adhere to these fundamental principles or global values.

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Studies on Ethical Universalism

Recognize there is a distinction between cultural difference and morally wrong

Core values are more agreeable But value priority varies in different societies,

e.g.Individual freedom as most important in the U.S.Unity with family or community in AsiaFairness in Europe

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Universal Ethical Principles

Universal ethical principles can be seen in the agreements among nations who are signatories to:

The UN Declaration of Human Rights The OECD Guidelines for Multinational Enterprises The Caux Roundtable Principles of Business

They indicate the emergence of a trans-cultural corporate ethic and provide guidelines that have direct applicability to the central operations and policies of MNEs including the HRM activities of staffing, compensation, employee training, and occupational health and safety.

However, there are a wide range of situations where variations in business practice are permissible.

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The US Foreign Corrupt Practices Act (FCPA) Enacted in 1977, the US FCPA

Prohibits US-based firms and US nationals from making bribery payments to foreign government officials.

Payments to agents violate the Act if it is known that the agent will use those payments to bribe a government official.

Amended in 1988, to permit ‘facilitating’ payments but mandates record-keeping provisions to help ensure that illegal payments are not disguised as entertainment or business expenses.

The United States has lobbied other nation-states to enact uniform domestic government regulations, and has achieved some success.

Global Developments on the Criminalization of Bribery Bribery & corruption

Involving the payment of agents to do things that are inconsistent with the purpose of their position or office so as to obtain an unfair advantage

Can be distinguished from so-called “gifts”, “facilitating” or “grease” payments, as to motivate agents to complete a task they would routinely do in the normal course of their duties

The British Bribery Act (2010) The UN Declaration against Corruption and Bribery in

International Commercial Transactions (1996) OECD Convention on Combating Bribery of Foreign Public

Officials in International Business Transactions (1997), ratified by 38 nations as of 2009

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OCED Members’ Tax Treatment of Bribes

Members Denying Tax Deductibility

Members Allowing Tax Deductibility

Members Repealed Tax Deductibility

CanadaCzech RepublicFinlandGreeceHungaryIrelandItalyJapanSouth KoreaMexicoPolandTurkeyU.K.U.S

AustraliaLuxembourgNew ZealandSwedenSwitzerland

Austria, 1998Belgium, 1999Denmark, 1998France, 1997Germany, 1997Iceland, 1998Netherlands, 1997Norway, 1996Portugal, 1997

Source: OECD

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Is bribery a business necessity?

It is now generally agreed that bribery undermines equity, efficiency and integrity in the public service, undercuts public confidence in markets and aid programs, adds to the cost of products and may affect the safety and economic well-being of the general public.

Bribery and corruption top the list of the most frequent ethical problems encountered by international managers.

The World Bank estimates that about $80 billion annually goes to corrupt government officials.

Rank Country Territory

CPI Score 2010

Rank Country Territory

CPI Score 2010

1 Denmark 9.3 11 Iceland 8.5

New Zealand 9.3 Luxemburg 8.5

Singapore 9.3 13 Hong Kong 8.4

4 Finland 9.2 14 Ireland 8.0

Sweden 9.2 15 Austria 7.9

6 Canada 8.9 Germany 7.9

7 Netherlands 8.8 17 Barbados 7.8

8 Australia 8.7 Japan 7.8

Switzerland 8.7 19 Qatar 7.7

10 Norway 8.6 20 United Kingdom 7.6

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Transparency International Corruption Perceptions Index 2010

Table10.1

The index measures the perceived levels of public sector corruption in 178 countries around the world.10 = very clean; 0 = highly corrupt.

Ethics-related Challenges to MNEs and the HR Functions

Business ethics stand out as both a domestic and an international issue of concern

More complex in the international arena and require MNEs’ self-regulation and ethical leadership Off-shoring activities Supply chain management Contracting and sub-contracting Joint ventures, strategic alliances The relentless low-cost strategy for competitive advantage A worldwide discussion of the economic, social, political, and

environmental consequences of global business

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The Role of HR in Operationalizing Corporate Ethics and CSR Programs

HR is well positioned to make an important contribution to creating, implementing and sustaining ethical organizational behavior and CSR programs within a strategic HR paradigm.

HR has a special role to play in the formulation, communication, monitoring, and enforcing corporate codes of conduct both within and across borders.

Responsibility for ethical leadership should cut across all functions and managerial levels, including line and senior managers.

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Non-government Organizations (NGOs) Globalization has increased the scale and

importance of NGOs Prominent examples of NGOs:

■ The Red Cross ■ Fred Hollows Foundation ■ The Red Crescent ■ World Vision■ Oxfam ■ Care International ■ Transparency International ■ Médecins Sans Frontieres■ The Wikimedia Foundation

The impact and influence of NGOs will continue to be of importance to the activities of MNEs

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NGOs and IHRM

NGOs are as active internationally as for-profit firms, yet receive less attention, e.g.

The Red Cross Greenpeace International groups BARC (Bangladesh Rural Advancement Committee)

These organizations are diverse and share similar management and HR concerns

Often operate in high risk areas of the globe Anti-globalization rallies and protest Global terrorism Natural disasters and humanitarian crisis

Broadening our focus of IHRM is important.

Challenges in an Uncertain World

Safety, security and counterterrorism Legal compliance and training related to safety in the workplace

Natural disaster protocols

Emergency and disaster preparedness

Workplace violence policy

Industrial theft and sabotage protocols

In-house security

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Five Areas of Corporate Risk Assessment

In-facility emergency and disaster preparedness

In-facility security Industrial espionage Cyber-terrorism Out-of-facility fire and

travel risks

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Human Costs Built Into an iPad

Source: The New York Times, January 25, 2012, An explosion at a Foxconn factory in Chengdu, China, killed four people and injured 18. It built iPads. Charles Duhigg and David Barboza,

Terrorism and Risk Management

External Environment

Low Risk Firms High Risk Firms

Low Risk No need to invest as heavily in security system and protocols

Security strategies focusing on hardening individual sites

High Risk Security strategies that disperse activities across the region and build redundant infrastructures, so that value chain activities in the high risk region can be provided by out of region units

Must invest much more in quite elaborate risk management strategies

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The Evolving Field of IHRM

HR has been identified as one of the five business functions that will have most influence on global business in the future.

Recruiting, developing, and competition for talented employees are often cited as a major concern by MNEs.

IHRM issues will remain high on the “problem list” of senior managers of MNEs.

IHRM philosophies, strategies, policies, practices and capabilities of an MNE, industry or nation remain as a rich area for future research.

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Summary and Concluding Remarks

International business ethics and the role of IHRM Mode of operations, IHRM activities that are required such as

training and monitoring for contractual, supply chain and project operations

NGOs and IHRM challenges that are specific to these organizations but have remained relatively under-identifies

Complex assessment and planning activities related to safety, security, and counter-terrorist efforts

Research issues in IHRM, and developments that are endeavoring to assist in understanding the intricacies and interrelationships between the IHRM function and IHRM activities, firm internationalization, strategic directions and goals.

The ongoing process of discovery, a mapping of the IHRM complexities, the challenges, and the difficult choices

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Vocabulary

Ethics, workplace safety, child labor

external factors, organizational factors

ethical relativism, absolutism & universalism

bribery ‘gifts’, ‘facilitating’, & ‘grease’

payments US Foreign Corrupt Practices

Act Transparency International,

Corruption Perceptions Index

NGOs disaster protocols, risk

management, ‘critical incidents’

workplace violence, industrial theft

in-house security, in-facility security

industrial espionage, cyber-terrorism

terrorist threats: micro & macro levels

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Discussion Questions

1. What is your view of internationally criminalize foreign bribery?

2. Identify a number of HRM problems that typically rise with expatriate assignments. In what ways might the core ethical values and guidelines identified in this chapter apply to them?

3. Outline and discuss the strategic role of IHRM in managing risks and corporate social responsibility.