1. Ethics and Social Responsibility
Chapter Three
Ethics and Social Responsibility
McGraw-Hill/Irwin
Copyright © 2012 by The McGraw-Hill Companies, Inc. All Rights Reserved.

2. Ethics and Social Responsibility
The specific objectives of this chapter are to
1. EXAMINE ethics in international management and some of the major ethical issues and problems confronting MNCs in selected countries.
2. 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.
3. EXPLAIN some of the initiatives to bring greater accountability to corporate conduct and limit the impacts of corruption around the world.

3. Ethics and Social Responsibility in International Management
Study of morality and standards of conduct.
Dilemmas arising from conflicts between ethical standards between countries most evident in employment practices
Inferring right vs. wrong in legal sense

4. Ethics and Social Responsibility in International Management
Corporate Social Responsibility (CSR)
Involves the voluntary actions of a firm to benefit society beyond requirements of law and direct interests of firm
Closely related to ethics
CSR concerns include working conditions in factories and service centers as well as environmental impacts of corporate activities

5. Ethics Theories and Philosophy
Kantian philosophical traditions
Individuals have responsibilities based on a core set of moral principles that go beyond those of narrow self-interest.
Aristotelian virtue ethics
Focus on core, individual behaviors and actions and how they express and form individual character.
Utilitarianism
Favors the greatest good for the greatest number of people under a given set of constraints.
Eastern philosophy
Views the individual as part of rather than separate from nature.

6. Human Rights Human rights issues challenge MNCs
Currently no universally adopted standards for what is acceptable behavior
A great deal of subjectivity and culturally biased viewpoints exist
Some basic rights: life, freedom from slavery or torture, freedom of opinion and expression, general ambiance of nondiscriminatory practices
Human rights violations still rampant globally
Tiananmen Square and apartheid
Women’s rights

7. Ethics and Social Responsibility Around the World: JAPAN
Equal opportunity issues
Refusal to hire women or promote them into management positions
Hostile work environment
Traditional role of females and female employees
Sexual harassment may not be considered a moral issue

8. Ethics and Social Responsibility Around the World: EUROPE
Equal employment opportunity
Glass ceiling pervasive throughout the world
France, Germany, Great Britain have seen increase in number of women in management, but tend to represent only lower levels

9. Labor, Employment and Business Practices
Difficult to establish a universal foundation of employment practices
Difficult dilemmas in deciding working conditions, expected consecutive work hours, and labor regulations
Offshoring due to differences in labor costs

10. Ethics and Social Responsibility Around the World: CHINA
Workers not well paid
Often forced to work 12 hours a day, 7 days a week
2010 factory worker suicides
Human rights violations
Use of child labor

11. Environmental Protection and Development
Countries approach the issue of conservation of natural resources differently
Poor countries are more focused on improving the welfare of their citizens rather than improving the environment
Environmental Kuznets Curve
Many companies violate laws and jeopardize the environment
2010 BP Gulf explosion

12. The Environmental Kuznets Curve

13. Globalization 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 easy
Levi Strauss in Bangladesh

14. Reconciling Ethical Differences across Cultures
Integrative Social Contracts Theory
Helps companies avoid relativism versus absolutism
Gives managers a framework to use when they face a gap between the moral and ethical values in the home country and in the host country
Corporate Social Responsibility
Sustainability
Development that meets humanity’s needs without harming future generations

15. Corporate 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, influence
NGOs have urged MNCs to be more responsive to range of social needs in developing countries
NGO activism has caused major changes in corporate behavior
NGOs have been active in promoting fair trade products

16. Corporate Social Responsibility and Sustainability
NGOs in U.S. and globally
Save the Children
Oxfam
CARE
World Wildlife Fund
Conservation International

17. Corporate Response to Social and Organizational Obligations
Agreements and codes of conduct committing MNCs to maintain certain standards
U.N. Global Compact
Codes help offset real or perceived concern that companies move jobs to avoid higher labor or environmental standards in their home markets
Contribute to raising of standard in developing world by exporting higher standard to local firms in these countries

18. Principles of the Global Compact
Human Rights
Labor
Environment
Anti-Corruption

19. Principles of the Global Compact

20. Corporate Governance Corporate governance
The system by which business corporations are directed and controlled.
Distribution of rights and responsibilities
Stakeholder management
Spells out rules and procedures
Makes decisions
Becoming more important after numerous scandals
Arthur Anderson, Enron, UnitedHealthcare

21. Corporate Governance
Many continental European countries are “insider” systems
Ownership more concentrated
Shares owned by holding companies, families or banks
Rules and regulations differ among countries and regions
U.K. and U.S. systems are “outsider” systems
Dispersed ownership of equity
Large number of outside investors

22. Corruption Corruption
Government corruption is a pervasive element in international business environment
Scandals in Russia, China, Pakistan, Lesotho, South Africa, Costa Rica, Egypt and elsewhere
Some evidence that discontinuing bribes does not reduce sales of the firm’s products or services in that country

23. Selected Countries Ranked in Transparency International Corruption Perception Index

24. Global Initiatives to Increase Accountability and Limit Corruption
Foreign Corrupt Practices Act
makes it illegal for U.S. companies and their managers to attempt to influence foreign officials through personal payments or political contributions
“Entertainment” expenses
“Consulting” fees
Organization of American States Inter-American Convention Against Corruption Foreign Corrupt Practices Act

25. Corruption and Foreign Corrupt Practices Act
Recent formal agreement by many industrialized nations to outlaw the practice of bribing foreign government officials
Organization for Economic Cooperation and Development
29 members plus several other countries have signed on
Fails to outlaw most payments to political party leaders
Does indicate growing support for anti-bribery initiatives

26. International Assistance
Governments and corporations are collaborating to provide assistance to communities and locales through global partnerships
Best “investments”
Controlling and preventing AIDS
Fighting malnutrition
Reducing subsidies and trade restrictions
Controlling malaria

27. Copenhagen Consensus Development Priorities

28. The U.N. Millennium Development Goals

29. Review and Discuss
What lessons can U.S. multi-nationals learn from the political and bribery scandals in recent years, such as those affecting contractors doing business in Iraq as well as large MNCs such as Siemens, and HP? Discuss two.
How do ethical practices differ in the United States, and in European countries such as France and Germany? What implications does your answer have for U.S. multinationals operating in Europe?
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.