1. Fundamentals of International Business

CHAPTER 6:
Social Responsibility and NGOs
Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.

2. Fundamentals of International Business
Key Terms
corporate social responsibility (CSR)
business ethics
ethical imperialism
cultural relativism
pollution
resource depletion
sweatshops
corporate corruption
dumping
predatory dumping
microcredit
non-governmental organizations (NGOs)
Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.

3. Fundamentals of International Business
Chapter Objectives
By the time you finish this chapter, you should be able to:
Assess positive and negative effects of MNCs on the countries in which they operate, including the impact on the norms and practices of local and indigenous cultures
Evaluate the ethical issues that arise for companies competing internationally in relation to the following groups: consumers, stakeholders, employees, the host country, and society as a whole
Analyze the way in which international development agencies and NGOs promote economic progress in developing countries
Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.

4. Fundamentals of International Business
Chapter Objectives
Compare Canada with other countries with respect to cultural theories and viewpoints, as they relate to ethics in international business
Describe working conditions in various international markets
Explain how globalization creates the need for standardization of products, services, and processes
Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.

5. What is Corporate Social Responsibility?
The duty of a company’s management to work in the best interests of the society it relies on for its resources (human, material, and environmental), to advance the welfare of society, and to act as a good global citizen through its policies.
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Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.

6. What is Corporate Social Responsibility?
Corporate social responsibility can take many forms, including:
Making charitable donations
Treating employees ethically
Being environmentally conscious
Ensuring safe working environments
Sponsoring local sports teams
Creating and promoting diverse workplaces
Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.

7. What is Corporate Social Responsibility?
Benefits of CSR
Can be used as a marketing tool
Dissuades governments from implementing regulations that could interfere with business
Helps companies attract and retain excellent employees
Criticisms of CSR
Costs money, detracts from profits
Uses employees’ time and energy
Can distract customers from problems a company creates
A company may act ethically in one country, but not in another
Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.

8. What is Corporate Social Responsibility?
Stakeholder Analysis
Used to determine which group’s interests are most important when a company is faced with an ethical dilemma
Primary stakeholders directly affect the company and its profitability
Secondary stakeholders have an impact on the company, but do not directly influence its success or contribute to profitability
Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.

9. What is Corporate Social Responsibility?
Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.

10. Fundamentals of International Business
Business Ethics
Business ethics
A set of rules or guidelines that management or individuals follow when making decisions facing their company.
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Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.

11. Fundamentals of International Business
Business Ethics
The guidelines used when making decisions
include:
Domestic and international laws
The company’s code of ethics and corporate governance
The personal values of the individual making the decision
Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.

12. Fundamentals of International Business
Business Ethics
Decision makers can use the test of disclosure method to solve ethical dilemmas:
“How would we feel if everyone knew about the decision we made?”
If they are not concerned, they have likely made an ethical choice. If they are, they have probably not made the right decision.
Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.

13. Fundamentals of International Business
Business Ethics
There are two methods of thinking about ethical
issues in a global context:
Ethical imperialism
A view of culture based on the idea that there are certain universal truths or values that are standard across all cultures; if something is wrong in one country, it is wrong in all countries.
Cultural relativism
A view of culture based on the idea that a culture’s different values should be respected, as the ethics of one culture are not better than those of another.
Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.

14. Fundamentals of International Business
Business Ethics
Ethical Imperialism
Cultural Relativism
One set of values for all cultures
Values are dependent on the culture
Right and wrong are the same in all cultures
Right and wrong depend on local values
A person’s ethics are not situational
When in Rome, do as the Romans do
Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.

15. Ethical Issues in International Business
Ethical issues in international business arise in
the following areas:
Environmental issues
Sweatshops
Corporate corruption
Dumping
Poverty
Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.

16. Ethical Issues in International Business
Environmental issues
Sustainable development—the ability to meet human consumption while maintaining the environment—is a critical issue for businesses
Many companies have been responsible for pollution and resource depletion
Companies and governments often resist environmental plans that will impede economic growth
Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.

17. Ethical Issues in International Business
Sweatshops
Factories in underdeveloped and developing countries in which employees work in unsafe environments, are treated unfairly, and have no chance to address those conditions.
Why do sweatshops exist?
Global competitiveness, corporate greed, and consumer expectations of low prices.
Companies that own factories in developing nations must ensure that workers are paid a living wage and are able to speak up against abuses.
Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.

18. Ethical Issues in International Business?
Corporate corruption
The involvement in illegal activities, such as bribery and fraud, to further one’s business interests.
Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.

19. Ethical Issues in International Business
Dumping
Selling products in a foreign country below the cost of production or below the price in the home country.
Predatory dumping
An anti-competitive business practice in which foreign companies price their products below market value to increase sales and force domestic competition out of business, then raise their prices.
Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.

20. Ethical Issues in International Business
Poverty
Over one-quarter of the world’s population lives in intense poverty—accompanied by hunger, lack of shelter and medical care, limited access to education, high rates of disease, etc.
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Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.

21. Ethical Issues in International Business
Microcredit
Microcredit—the granting of very small loans to spur entrepreneurship—is one way that poverty is being addressed
Microcredit loans are mainly granted to women, who use the loans to start small businesses and their earnings to support their families
Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.

22. Ethical Issues in International Business
Photo: Used under license from Shutterstock, Inc.
Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.

23. Non-Governmental Organizations (NGOs)
Non-profit organizations with a service and development focus that are composed mostly of volunteers, and are predominantly funded through charitable contributions.
NGOs may centre on trade, education, youth, improving the environment, human rights, or other issues.
Chapter 6:
SOCIAL RESPONSIBILITY AND NGOs
Fundamentals of International Business
Copyright © 2010 Thompson Educational Publishing, Inc.