3Ethics, Social Responsibility, and Sustainability Chapter 3Ethics, Social Responsibility, and Sustainability
4Ethics, Social Responsibility, and Sustainability The specific objectives of this chapter are toEXAMINE ethics in international management and some of the major ethical issues and problems confronting MNCs.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.EXPLAIN some of the initiatives to bring greater accountability to corporate conduct and limit the impacts of corruption around the world.
5Ethics, Social Responsibility, and Sustainability in International Management Study of morality and standards of conduct.Dilemmas arising from conflicts between ethical standards of a country and business ethics are most evident in employment and business practices, recognition of human rights, including women in the workplace, and corruptionInferring right vs. wrong in legal sense
6Ethics, and Social Responsibility, and Sustainability in International Management Corporate Social Responsibility (CSR)Involves the actions of a firm to benefit society beyond requirements of the law and the direct interests of the firmClosely related to ethicsCSR concerns include working conditions in factories and service centers as well as environmental impacts of corporate activities
7Ethics Theories and Philosophy Kantian philosophical traditionsIndividuals (and organizations) 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.
8Human Rights Human rights issues challenge MNCs Currently no universally adopted standards of what constitutes 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 globallyChina (Tiananmen Square) and RussiaWomen’s rights
9Equal opportunity issues Ethics, Social Responsibility, and Sustainability Around the World: JAPANEqual opportunity issuesGender-gap hiring: refusal to hire women for more than low-level jobsGlass ceiling: lack of promotion to management positionsSexual harassment: hostile work environment
10Equal employment opportunity Ethics, Social Responsibility, and Sustainability Around the World: EUROPEEqual employment opportunityGlass ceiling pervasive throughout the worldFrance, Germany, and Great Britain have seen an increase in the number of women in management, but the increases tend to be only at lower levels
11Labor, Employment, and Business Practices Difficult to establish a universal foundation of employment practicesDifficult dilemmas in deciding working conditions, expected consecutive work hours, and labor regulationsFrequent offshoring due to differences in labor costs
12Human rights violations Ethics, Social Responsibility, and Sustainability Around the World: CHINAWorkers not well paidOften forced to work 12 hours a day, 7 days a week2010: Foxconn factory worker suicides2012: Over 43% of Foxconn workers had seen or been part of a workplace accident.Human rights violationsUse of child labor
13Environmental 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 of Mexico oil rig explosion
15Globalization 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
16Reconciling 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
17Corporate 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, and influenceNGOs have urged MNCs to be more responsive to a range of social needs in developing countriesNGO activism has caused major changes in corporate behaviorNGOs have been active in promoting fair trade products
18Corporate Social Responsibility and Sustainability Examples of NGOs in the U.S. and globallySave the ChildrenOxfamCAREAmnesty InternationalWorld Wildlife FundConservation International
19Corporate 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 standards in developing world by “exporting” higher standard to local firms in these countries
20Principles of the Global Compact Human RightsLaborEnvironmentAnticorruption
22Corporate 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, Lehman Brothers
23Corporate 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
24Corruption Corruption Government corruption is a pervasive element in international business environmentScandals in Russia, China, Brazil, 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
25Transparency International Corruption Perceptions Index Ratings
26Global 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, Transparent Agents Against Contracting Entities
27Corruption 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 member nations; now 34Fails to outlaw most payments to political party leadersDoes indicate growing support for anti-bribery initiatives
28International 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
31Review and DiscussHow might different ethical philosophies influence how managers make decisions when it comes to offshoring of jobs?What lessons can U.S. multinationals learn from the political and bribery scandals in recent years, such as those affecting contractors doing business in Iraq (Halliburton) as well as large MNCs such as Siemens, HP, and others? Discuss two.In recent years, rules have tightened such that those who work for the U.S. government in trade negotiations are now restricted from working for lobbyists for foreign firms. Is this a good idea? Why or why not?
32Review and DiscussWhat are some strategies for overcoming the impact of counterfeiting? Which strategies work best for discretionary (for instance, movies) versus nondiscretionary (pharmaceutical) goods?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.