Download Managing Interdependence: Social Responsibility and Ethics

Ethics and Social Responsibility
Chapter 3, Part 1
1
Ethics and Social Responsibility
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Ethics
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Study of morality and standards of conduct
MNCs face difficulty because of differing
standards between countries where they
operate
The Nature of Ethical Decisions
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The hardest ethical decisions
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Do not involve "right" vs. "wrong"
Involve "right" vs. "right" (tradeoffs)
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Who would benefit from a decision?
Who would be hurt by it?
How should managers make ethical decisions
in international business? (1)
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Instrumental theories of ethics: what will be the longterm and short-term effects of this decision?
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Pragmatism: what decision will benefit the company and its
stakeholders?
Stakeholder analysis
These approaches may lead to the same decision or to different
decisions.
Stakeholder Analysis
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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
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Will be affected by the decision or
Will affect the outcome of the decision
An instrumental theory of ethics
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
How should managers make ethical decisions
in international business?
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Culture-based theories of ethics
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Ethnocentrism: base the decision on the values and practices of
the home country.
Ethical relativism: make the decision in accordance with host
country practices.
Moral universalism: there should be a code of corporate conduct
that is expected and acceptable in all countries
What ethical principles do managers use?
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Personal beliefs and values
Corporate code of conduct or management guidance
Laws of home country and host country
International law and international agreements
Several codes of conduct have been suggested by
various international organizations (UN, International
Labor Organization, International Chamber of
Commerce, etc.)
Ethics and Social Responsibility - Japan

Political and business scandals
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Japanese cabinet member forced to resign
for receiving over $2 million from
Japanese corporations
Failure of banking system to take
corrective action regarding Japan’s
recession
Ethics & Social Responsibility – Japan (2)

Political and business scandals (2)

Concealing customer complaints
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Failure to inform car owners about possible
auto defects and keeping two sets of customer
complaint records
Encouraging employees to mislead
government inspectors
Ethics & Social Responsibility – Japan (3)
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Hostile work environment
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Cultural expectations
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Equal opportunity issues
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Traditional role of females and female employees
Sexual harassment may not be considered a moral issue
Refusal to hire women or promote them into
management positions
Spending large sums of money to lobby
Congress
Corporate Governance

Rules and regulations differ among countries
and regions
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U.K. and U. S. systems are “outsider” systems
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Dispersed ownership of equity
Large number of outside investors
Many continental European countries are “insider”
systems
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Ownership more concentrates
Shares owned by holding companies, families or banks
Corporate Governance (2)
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Other effects on corporate governance
include
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Differences in legal systems
Responsiveness and accountability of
corporate managers to stakeholders
Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act prohibits U.
S. firms from paying bribes to foreign
governments. Both the company and its
employees are subject to criminal penalties
under this law. Under this law
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A small fee or gift given to a low-ranking
employee for performing normal duties ("grease
money") is not considered a bribe.
Foreign Corrupt Practices Act (2)
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A large amount of money or an expensive gift
paid to a high-ranking government employee is a
bribe.
A political contribution is a bribe if the purpose of
the contribution is to influence government
decisions that affect the firms business.
An agent fee is a bribe if the amount of money is
large and if the company knows, or should have
known, that a portion of the money will be used
as a bribe.
OECD Anti-Corruption Convention

The Anti-Corruption Convention of the Organization
for Economic Cooperation and Development (OECD)
has been ratified by 35 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.
OECD Anti-Corruption Convention (2)
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Who has signed?
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EU-15 and 6 new EU members
5 other European countries & Turkey
NAFTA countries
Japan & South Korea
Argentina, Brazil, Chile
Enforcement will be hard