Download Chapter 15

Chapter 15
Managing Ethical and Social
Responsibility Challenges in
Multinational Companies
Copyright© 2004 Thomson Learning All rights reserved
Chapter Outline
• International business ethics and social responsibility
• Principles of business ethics
• Stakeholder analysis
• Is ethical behavior defined by an action itself or by
the consequences of the action?
• Moral languages (types of ethical reasoning)
Copyright© 2005 South-Western/Thomson Learning All rights reserved
Chapter Outline (2)
• Bribery
• Where and why it occurs
• Foreign Corrupt Practices Act
• OECD Anti-Corruption Convention
• Prescriptive ethics for multinational companies
• Moral languages for international business ethics
• International ethics standards
Copyright© 2005 South-Western/Thomson Learning All rights reserved
Chapter Outline (3)
• Guidelines for making ethical decisions
• Pitfalls in ethical relativism and ethical universalism
• A process for making ethical decisions
• Economic analysis
• Legal analysis
• Ethical analysis: organizational, cultural, personal
Copyright© 2005 South-Western/Thomson Learning All rights reserved
International Business Ethics
• Ethics deal with the “oughts” of life – what people and
companies should or should not do
• International business ethics: unique ethical problems
faced by managers operating across national
boundaries
• More complex as different cultures do not agree on
what one “ought” to do
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Social Responsibility
• 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
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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
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MNC Stakeholders
Home Country
Owners
Customers
Employees
Unions
Suppliers
Distributors
Strategic allies
Community
Economy
Government
MNC
Global Society
Population
Standard of living
Natural environment
Sustainable resources
Interdependence
Host Country
Co-owners
Customers
Employees
Unions
Suppliers
Distributors
Strategic allies
Community
Economy
Government
Table 15.1
• Lists important ethical issues related to some
stakeholders
• Customers
• Stockholders
• Employees
• Respect for host country laws, society, and
environment
• Global society in general
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Basic Systems of Ethical
Reasoning
• Teleological ethical theory
• Morality of an act or practice comes from its consequences
• Utilitarianism: what is good and moral comes from acts that
produce the greatest good for the greatest number of
people
• Deontological ethical theory
• Actions have a good or bad morality regardless of the
outcomes they produce
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Moral Languages (page 512)
• Basic ways that people use to make ethical decisions
and to explain their ethical choices
• Six basic ethical languages
• Virtue and vice
• Actions are either good (virtuous) or bad (vices)
• the consequences of an action are less important
than virtuous intent
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Moral Languages (2)
• Self-control: control of thoughts and actions
• Plato advocated controlling "appetites"
• Important idea in Buddhism and Hinduism
• Maximizing human welfare – the basic principle behind
utilitarianism (the greatest good for the greatest number)
• Avoiding harm – the action should not produce unpleasant
consequences for people or the environment. Actions are
ethical if they do no harm.
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Moral Languages (3)
• 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.
• 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.
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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
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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
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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
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Foreign Corrupt Practices Act
(FCPA)
• The purpose of the FCPA is to prevent U. S. companies or any
person representing a U. S. company, citizens, or permanent
residents from paying bribes or giving gifts to foreign
governments, government officials, political parties or their
officials, or agents representing any of these, for the purpose of
getting or keeping business in a foreign country.
• If you pay an agent or representative and know, or should
have known, that part of the money would be used as a
bribe, this violates the FCPA.
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FCPA Exceptions
• The following types of payments are acceptable under the
FCPA
• Payments made under duress to avoid injury or violence
• Payments made to a government employee to perform a
routine function, such as issuing a business license
• Expenses related to the promotion, demonstration, or
explanation of products and services
• Expenses required to perform a contract with a foreign
government
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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.
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OECD Anti-Corruption
Convention (2)
• Who has signed?
• EU-15 and 8 new EU members
• 5 other European countries & Turkey
• NAFTA countries
• Japan & South Korea
• Argentina, Brazil, Chile
• Enforcement will be hard
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Prescriptive Ethics for MNC's
• Suggested guidelines for the ethical behavior of
multinational companies
• Three moral languages
• Avoiding harm
• Rights/duties
• Social contract
• These three languages work irrespective of national
backgrounds
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International Ethics Guideline
Sources
• The United Nations Universal Declaration of Human
Rights
• The United Nations Code of Conduct on Transnational
Corporations
• The European Convention on Human Rights
• The International Chamber of Commerce Guidelines
for International Investment
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International Ethics Guideline
Sources
• The Organization for Economic Cooperation and
Development Guidelines for Multinational Enterprises
• The Helsinki Final Act
• The International Labor Office Tripartite Declarations of
Principles Concerning Multinational Enterprises and
Social Policy
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The Ethical Dilemma in
Multinational Management:
How Will You Decide?
• Ethical relativism vs. ethical universalism
• Ethical relativism: each society’s view of ethics must
be considered legitimate and ethical
• Can be used to justify child labor, etc.
• Ethical universalism: basic moral principles that
transcend cultural and national boundaries
• No agreement on what those principles should be
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Individual Ethical Decision
Making for the Multinational
Manager
• Forms of analysis
• Economic analysis: focuses on what is the best
decision for a company’s profits
• Legal analysis: focuses on meeting legal
requirements of host and parent countries
• Ethical analysis: focuses on ethical issues
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Exhibit 15.9: Decision Points of Ethical
Decision Making in Multinational
Management
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Exhibit 15.9: Decision Points of Ethical
Decision Making in Multinational
Management
Copyright© 2005 South-Western/Thomson Learning All rights reserved