1. International Business: The New Realities by Cavusgil, Knight and Riesenberger Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

2. Learning Objectives 1.Ethics in international business 2.Corporate social responsibility 3.The role of sustainability in international operations 4.Corporate governance and its implications for managers 5.A framework for making ethical decisions 5-2 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

3. Inappropriate Corporate Conduct Abroad Examples: Firms may: ▪ Falsify or misrepresent contracts or official documents ▪ Offer or accept bribes, kickbacks, or inappropriate gifts ▪ Tolerate sweatshop conditions or abuse employees ▪ Use false advertising or other deceptive marketing ▪ Engage in deceptive or discriminatory pricing ▪ Deceive or abuse intermediaries in the channel ▪ Undertake activities that harm the natural environment Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 5-3

4. Inappropriate Conduct (cont.) Ethics are moral principles and values that govern the behavior of people, firms, and governments. Corruption is the abuse of power to achieve illegitimate personal gain. More than 30 percent of MNEs believe corruption is a major or severe concern in their global activities. Bribery is common and can take the form of grease payments, small inducements intended to expedite decisions and transactions or gain favors. 5-4 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

5. Corruption Perceptions Index 5-5 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

6. Organizing Framework 5-6 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

7. Intellectual Property Intellectual property refers to ideas or works created by individuals or firms and includes a variety of proprietary, intangible assets, such as: discoveries and inventions; artistic, musical, and literary works; and words, phrases, symbols, and designs. Intellectual property rights are the legal claim through which proprietary assets are protected from unauthorized use by other parties via trademarks, copyrights, and patents. 5-7 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

8. Estimated Losses from Copyright Piracy (Millions of US $) and Piracy Levels (%) in Given Countries 5-8 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Losses: Illegal copying or pirating of movies, music, software, and books Level: the proportion of pirated items sold as a percentage of total items sold SOURCE: International Intellectual Property Alliance (IIPA) www.iipa.com, Data Estimates for 2008 or 2009

9. The Value of Ethical Behavior Ethical behavior is simply the right thing to do. It is often prescribed within laws and regulations. Ethical behavior is demanded by customers, governments, and the news media. Unethical firms risk attracting unwanted attention. Ethical behavior is good business, leading to enhanced corporate image and selling prospects. Firms with strong reputations have an advantage when hiring and motivating employees, partnering, and dealing with foreign governments. 5-9 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

10. Variation in Ethical Standards Ethical standards vary from country to country. Relativism is the belief that ethical truths are not absolute but, rather, differ from group to group. This perspective is summarized by the phrase, “When in Rome, do as the Romans do.” Normativism is the belief that ethical behavioral standards are universal and that firms and individuals should seek to uphold them consistently around the world. 5-10 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

11. An Ethical Dilemma Imagine you are a manager and, during a visit to a factory owned by an affiliate in Colombia, you discover the use of child labor in the plant. You are told that without the children’s income, their families might go hungry. If the children are dismissed from the plant, they will likely turn to other income sources, including prostitution and street crime. What should you do? Make a fuss about the immorality of child labor or look the other way? 5-11 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

12. Corporate Social Responsibility Corporate social responsibility: Manner of operating a business that meets or exceeds the ethical, legal, commercial, and public expectations of customers, shareholders, employees, and communities A strong CSR can: Help recruit and retain good employees Help differentiate the firm and enhance its brands Help cut costs, such as minimizing packaging, recycling, economizing on energy usage, and reducing waste in operations Help the firm avoid increased taxation, regulation, or other legal actions by local government authorities 5-12 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

13. The Pyramid of Ethical Behavior 5-13 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

14. Sustainability Sustainability: Meeting humanity’s needs without harming future generations The sustainable firm pursues three types of interests: 1.Economic interests refer to the firm’s economic impact on the localities where it does business, such as job creation, wages, and public works. 2.Social interests refer to how the firm performs relative to social justice, such as avoiding the use of child labor, sweatshops, and providing employee benefits. 3.Environmental interests refer to the extent of the firm’s impact on and harm to the natural environment. 5-14 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

15. Example: Nike 5-15 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

16. Example: Coca-Cola 5-16 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

17. A Sampling of MNE Accomplishments 5-17 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

18. Corporate Governance Corporate Governance: The system of procedures and processes by which corporations are managed, directed, and controlled. It provides the means through which firms undertake ethical behaviors, CSR, and sustainability. Implementing appropriate conduct is challenging for MNEs, especially when operating in many countries. A complicating factor is the use of third-party suppliers and contractors, some of which may behave badly. Most firms incorporate ethics and CSR into their mission, planning, strategy, and everyday operations. 5-18 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

19. Embracing CSR and Sustainability Develop closer relationships with foreign stakeholders to understand their needs and jointly develop solutions Build capabilities to enhance the firm’s contribution to the local community and global environment Ensure diverse voices by creating organizations that employ managers and workers from around the world Develop global CSR standards and objectives that are communicated and implemented across the firm worldwide Train managers in global CSR principles and integrate these into managerial responsibilities 5-19 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

20. A Global Consensus Various resources are available to assist managers, including: -The United Nations “Global Compact” and “Declaration against Corruption and Bribery in International Commercial Transactions” -The Global Reporting Initiative -International Chamber of Commerce “Rules of Conduct to Combat Extortion and Bribery” -The Organization for Economic Co-operation and Development (OECD) anti-bribery agreement 5-20 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

21. Ethical Standards for Corporate Governance 5-21 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

22. 5-22 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.