SOCIAL RESPONSIBILITY CHANGES MULTINATIONAL COMPANIES CHAPTER 4 MANAGING ETHICAL AND SOCIAL RESPONSIBILITY CHANGES IN MULTINATIONAL COMPANIES

INTRODUCTION Multinational managers face complex ethical issues With an understanding of key ethical problems in multinational management, managers can make more informed ethical judgments

BUSINESS ETHICS Ethics - the rules and values that determine what goals and actions people follow when dealing with other human beings Business ethics: all business decisions with ethical consequences

INTERNATIONAL BUSINESS ETHICS The unique ethical problems faced by managers conducting business operations across national boundaries

SOCIAL RESPONSIBILITY The responsibility businesses have to society beyond making profits Often reflects the ethical values and decisions of the top management team Ethics and social responsibility- not easily distinguished in practice

Excepts from Exhibit 4.1 show examples of ethical/social responsibility issues faced by MNCs

ETHICAL PHILOSOPHY

TRADITIONAL VIEWS Two basic systems of ethical reasoning Deontological Teleological

DEONTOLOGICAL THEORIES Actions have a good or bad morality regardless of the outcomes they produce

TELEOLOCIAL Morality from the consequences of an act utilitarianism

MORAL LANGUAGES Basic ways that people use to make ethical decisions and explain ethical choices a contemporary view

SIX BASIC ETHICAL LANGUAGES Virtue and vice Self control Maximize human welfare Avoiding harm Rights/duties Social contract

NATIONAL DIFFERENCES National culture and social institutions affect ethical behavior/social responsibility

EX 4.3 ETHICAL ISSUES IDENTIFIED BY SENIOR U.S. AND EUROPEAN MANAGERS

EX 4.4 THE MANAGEMENT OF KEY ETHICAL ISSUES

EX 4.5 BELIEFS REGARDING ETHICAL CODES

FOREIGN CORRUPT PRACTICES ACT Forbids U.S. companies to make or offer payments or gifts to foreign government officials to get or retain business “Reason to know" provision See Exhibit 4.7

FCPA does not prohibit some forms of payments that may occur in international business payments made under duress to avoid injury or violence are acceptable

EFFECTS OF THE “ETHICS GAP” FCPA and proliferation of ethical codes in US are creating and ethics gap FCPA blocked some gains in export market share and FDI Pressure on other countries to follow US rules

TOWARD TRANSNATIONAL ETHICS

ETHICAL CONVERGENCE In spite of wide differences in cultures and social institutions, growing pressures for multinationals to follow same rules

PRESSURES FOR ETHICAL CONVERGENCE Growth of international trade creates pressures for uniformity Increased cross national imitation Mixed cultural background employees

PRESCRIPTIVE ETHICS FOR THE MULTINATIONAL Donaldson suggests guides based on the moral languages of avoiding harm, right/duties, and the social contract specified in contracts and international laws

INTERNATIONAL CODES OF CONDUCT For moral language to work, there must be codes of conduct Current codes exist based on codes from international governing bodies (UN, ILO) and international agreements (Exhibit 4.8)

MULTINATIONALS DO NOT ALWAYS FOLLOW ETHICAL AGREEMENTS Governments make agreements Compliance voluntary Not all governments subscribe Each guide is an incomplete moral guide

HOW SHOULD THE MANAGER DECIDE?

ETHICAL RELATIVISM VS ETHICAL UNIVERSALISM Ethical relativism - each society's view of ethics considered legitimate and ethical Ethical universalism - basic moral principles transcend cultural/national boundaries

PRACTICAL PROBLEMS OF FOLLOWING EITHER Convenient relativism - companies use ethical relativism to behave any way they please Cultural imperialism with ethical universalism

BALANCING THE NEEDS OF THE COMPANY WITH ETHICAL CONSEQUENCES Managers must weigh and balance the economic, legal, and ethical consequences of their decisions

FORMS OF ANALYSES Economic Legal Ethical

CONCLUSIONS Multinational managers face ethical challenges magnified by the international context Need to understand home ethical codes and impact on ethics of foreign culture/social institutions