1. Ethics and Social Responsibility
Chapter 3

2. Chapter Outline Theories of ethics The nature of ethical decisions
Pragmatism vs. social responsibility
Stakeholder analysis
Culture-based theories of ethics
Moral languages
What ethical principles do managers use?

3. Chapter Outline (2) Bribery and anti-corruption law
Where bribery occurs most often
The Foreign Corrupt Practices Act
The OECD Anti-Corruption Convention

4. Ethics Ethics Study of morality and standards of conduct
MNCs face difficulty because of differing standards between countries where they operate – different cultures do not agree on what managers or companies “should” do

5. The Nature of Ethical Decisions
The hardest ethical decisions
Do not involve "right" vs. "wrong"
Involve "right" vs. "right" (tradeoffs)
Who would benefit from a decision?
Who would be hurt by it?

6. Pragmatism
The idea that managers should make decisions that have the greatest benefit to the company and its shareholders.

7. Social Responsibility
The idea that businesses have a responsibility to society beyond making profits
Closely related to business ethics
Must take into account the welfare of other groups in addition to stockholders

8. Stakeholder Analysis
The stake of an individual or group includes its rights, obligations, incentives, and motivations
Decision makers should consider the stake of each individual or group that
Will be affected by the decision or
Will affect the outcome of the decision

9. MNC Stakeholders MNC Home Country Owners Customers Employees Unions
Suppliers
Distributors
Strategic allies
Community
Economy
Government
Host Country
Co-owners
Customers
Employees
Unions
Suppliers
Distributors
Strategic allies
Community
Economy
Government
MNC
Global Society
Population
Standard of living
Natural environment
Sustainable resources
Interdependence

10. Culture-based Theories of Ethics
Ethnocentrism: base the decision on the values and practices of the home country.
Ethical relativism: make the decision in accordance with host country practices.
Moral universalism: there should be a code of corporate conduct that is expected and acceptable in all countries

11. Moral Languages
Basic ideas that people use to make ethical decisions and to explain their ethical choices
1. Virtue and vice
Actions are either good (virtuous) or bad (vices)
the consequences of an action are less important than virtuous intent

12. Moral Languages (2) 2. Self-control: control of thoughts and actions
Plato advocated controlling "appetites"
Important idea in Buddhism and Hinduism
3. Maximizing human welfare – the basic principle behind utilitarianism (the greatest good for the greatest number)
4. Avoiding harm – the action should not produce unpleasant consequences for people or the environment. Actions are ethical if they do no harm.

13. Moral Languages (3) 5. Rights and duties of people or companies
Do not infringe on the rights of others.
Duties are things that one should or must do.
Laws and regulations often deal with rights and duties.
6. Social contract – explicit or implicit agreement in a society or a company about what is right
Western Europeans often believe that a country should ensure that all its residents get adequate health care.

14. Moral Languages (4)
Moral languages that are often useful in international business
Avoid harm
Rights and duties
Social contract
These 3 moral languages are acceptable in many countries.

15. What ethical principles do managers use?
Personal beliefs and values
Corporate code of conduct or management guidance
Laws of home country and host country
International law and international agreements
Several codes of conduct have been suggested by various international organizations (UN, International Labor Organization, International Chamber of Commerce, etc.)

16. Bribes are least expected in Finland Iceland New Zealand Denmark
Country Comparisons of Government Corruption (2006) Based on 160 Countries
Bribes are least expected in
Finland
Iceland
New Zealand
Denmark
Singapore
Sweden
Officials are most likely to demand bribes in
Haiti
Myanmar (Burma)
Iraq
Guinea
Sudan
Congo

17. Government Officials' Perceptions of Bribe Paying Behavior by Companies from 30 Countries
Least likely to pay bribes – firms from
Switzerland
Sweden
Australia
Austria
Canada
United States is tied for ninth.
Most likely to pay bribes – firms from
India
China
Russia
Turkey
Taiwan

18. Where Bribes are Paid
Bribes are more likely to be paid in less developed countries.
It may be hard to get or keep government business without bribery
Bribery may be culturally acceptable.
Low-level officials may demand payment for minor tasks.
Punishment is less likely.
Bribery is more common in certain industries
Construction
Weapons and defense contracts
Oil and gas

19. Foreign Corrupt Practices Act
The Foreign Corrupt Practices Act prohibits
U. S. firms from paying bribes to foreign governments. Both the company and its employees are subject to criminal penalties under this law. Under this law
A small fee or gift given to a low-ranking employee for performing normal duties ("grease money") is not considered a bribe.
A payment made under duress to avoid injury or violence is not a bribe.
A large amount of money or an expensive gift paid to a high-ranking government employee is a bribe.

20. Foreign Corrupt Practices Act (2)
Under the Foreign Corrupt Practices Act (continued)
A political contribution is a bribe if the purpose of the contribution is to influence government decisions that affect the firm’s business.
An agent fee is a bribe if the amount of money is large and if the company knows, or should have known, that a portion of the money will be used as a bribe.
If a company disguises a bribe as a consulting fee, entertainment expense, etc., the company has violated federal tax laws.

21. OECD Anti-Corruption Convention
The Anti-Corruption Convention of the Organization for Economic Cooperation and Development (OECD) has been ratified by 36 countries. These countries have agreed that:
If a firm bribes a foreign official, or condones such a bribe, both the firm and employees who were involved in the bribe will be subject to criminal penalties.
These countries will share information about bribery and corruption and will cooperate in prosecuting them.

22. OECD Anti-Corruption Convention (2)
Who has signed?
25 EU members, plus Norway & Turkey
NAFTA countries, plus Argentina, Brazil, Chile
Japan, South Korea, Australia
Enforcement will be hard