2Ethics and Social Responsibility The specific objectives of this chapter are to1. EXAMINE ethics in international management and some of the major ethical issues and problems confronting MNCs in selected countries.2. DISCUSS some of the pressures on and action being taken by selected industrialized countries and companies to be more socially and environmentally responsive to world problems.3. EXPLAIN some of the initiatives to bring greater accountability to corporate conduct and limit the impacts of corruption around the world.
3Ethics and Social Responsibility in International Management Study of morality and standards of conduct.Dilemmas arising from conflicts between ethical standards between countries most evident in employment practicesInferring right vs. wrong in legal sense
4Ethics and Social Responsibility in International Management Corporate Social Responsibility (CSR)Involves the voluntary actions of a firm to benefit society beyond requirements of law and direct interests of firmClosely related to ethicsCSR concerns include working conditions in factories and service centers as well as environmental impacts of corporate activities
5Ethics Theories and Philosophy Kantian philosophical traditionsIndividuals have responsibilities based on a core set of moral principles that go beyond those of narrow self-interest.Aristotelian virtue ethicsFocus on core, individual behaviors and actions and how they express and form individual character.UtilitarianismFavors the greatest good for the greatest number of people under a given set of constraints.Eastern philosophyViews the individual as part of rather than separate from nature.
6Human Rights Human rights issues challenge MNCs Currently no universally adopted standards for what is acceptable behaviorA great deal of subjectivity and culturally biased viewpoints existSome basic rights: life, freedom from slavery or torture, freedom of opinion and expression, general ambiance of nondiscriminatory practicesHuman rights violations still rampant globallyTiananmen Square and apartheidWomen’s rights
7Ethics and Social Responsibility Around the World: JAPAN Equal opportunity issuesRefusal to hire women or promote them into management positionsHostile work environmentTraditional role of females and female employeesSexual harassment may not be considered a moral issue
8Ethics and Social Responsibility Around the World: EUROPE Equal employment opportunityGlass ceiling pervasive throughout the worldFrance, Germany, Great Britain have seen increase in number of women in management, but tend to represent only lower levels
9Labor, Employment and Business Practices Difficult to establish a universal foundation of employment practicesDifficult dilemmas in deciding working conditions, expected consecutive work hours, and labor regulationsOffshoring due to differences in labor costs
10Ethics and Social Responsibility Around the World: CHINA Workers not well paidOften forced to work 12 hours a day, 7 days a week2010 factory worker suicidesHuman rights violationsUse of child labor
11Environmental Protection and Development Countries approach the issue of conservation of natural resources differentlyPoor countries are more focused on improving the welfare of their citizens rather than improving the environmentEnvironmental Kuznets CurveMany companies violate laws and jeopardize the environment2010 BP Gulf explosion
13Globalization and Ethical Obligations of MNCs Should the MNC adopt the regulations in the country of origin or those in the country of operation?“Doing the right thing” is not always easyLevi Strauss in Bangladesh
14Reconciling Ethical Differences across Cultures Integrative Social Contracts TheoryHelps companies avoid relativism versus absolutismGives managers a framework to use when they face a gap between the moral and ethical values in the home country and in the host countryCorporate Social ResponsibilitySustainabilityDevelopment that meets humanity’s needs without harming future generations
15Corporate Social Responsibility and Sustainability Nongovernmental organization (NGO)Private, not-for-profit organization that seeks to serve society’s interests by focusing on social, political, and economic issues such as poverty, social justice, education, health and the environment.NGOs have grown in number, power, influenceNGOs have urged MNCs to be more responsive to range of social needs in developing countriesNGO activism has caused major changes in corporate behaviorNGOs have been active in promoting fair trade products
16Corporate Social Responsibility and Sustainability NGOs in U.S. and globallySave the ChildrenOxfamCAREWorld Wildlife FundConservation International
17Corporate Response to Social and Organizational Obligations Agreements and codes of conduct committing MNCs to maintain certain standardsU.N. Global CompactCodes help offset real or perceived concern that companies move jobs to avoid higher labor or environmental standards in their home marketsContribute to raising of standard in developing world by exporting higher standard to local firms in these countries
18Principles of the Global Compact Human RightsLaborEnvironmentAnti-Corruption
20Corporate Governance Corporate governance The system by which business corporations are directed and controlled.Distribution of rights and responsibilitiesStakeholder managementSpells out rules and proceduresMakes decisionsBecoming more important after numerous scandalsArthur Anderson, Enron, UnitedHealthcare
21Corporate GovernanceMany continental European countries are “insider” systemsOwnership more concentratedShares owned by holding companies, families or banksRules and regulations differ among countries and regionsU.K. and U.S. systems are “outsider” systemsDispersed ownership of equityLarge number of outside investors
22Corruption Corruption Government corruption is a pervasive element in international business environmentScandals in Russia, China, Pakistan, Lesotho, South Africa, Costa Rica, Egypt and elsewhereSome evidence that discontinuing bribes does not reduce sales of the firm’s products or services in that country
23Selected Countries Ranked in Transparency International Corruption Perception Index
24Global Initiatives to Increase Accountability and Limit Corruption Foreign Corrupt Practices Actmakes it illegal for U.S. companies and their managers to attempt to influence foreign officials through personal payments or political contributions“Entertainment” expenses“Consulting” feesOrganization of American States Inter-American Convention Against Corruption Foreign Corrupt Practices Act
25Corruption and Foreign Corrupt Practices Act Recent formal agreement by many industrialized nations to outlaw the practice of bribing foreign government officialsOrganization for Economic Cooperation and Development29 members plus several other countries have signed onFails to outlaw most payments to political party leadersDoes indicate growing support for anti-bribery initiatives
26International Assistance Governments and corporations are collaborating to provide assistance to communities and locales through global partnershipsBest “investments”Controlling and preventing AIDSFighting malnutritionReducing subsidies and trade restrictionsControlling malaria
29Review and DiscussWhat lessons can U.S. multi-nationals learn from the political and bribery scandals in recent years, such as those affecting contractors doing business in Iraq as well as large MNCs such as Siemens, and HP? Discuss two.How do ethical practices differ in the United States, and in European countries such as France and Germany? What implications does your answer have for U.S. multinationals operating in Europe?Why are MNCs getting involved in corporate social responsibility? Are they displaying a sense of social responsibility, or is this merely a matter of good business? Defend your answer.