Ethics and Social Responsibility in International Business

1
Chapter 5

• Ethics and Social Responsibility in International
  Business

2
Chapter Objectives

• Describe the nature of ethics
• Discuss ethics in cross-cultural and
  international contexts
• Identify the key elements in managing ethical
  behavior across borders
• Discuss social responsibility in cross-cultural
  and international contexts

3
Chapter Objectives

• Identify and summarize the basic areas of social
  responsibility
• Discuss how organizations manage social
  responsibility across borders
• Identify and summarize the key regulations
  governing international ethics and social
  responsibility

4
Exporting Jobs or Abusing People?

• Fruit Juice sold to Minute Maid, Tropicana,
  Nestle
• Soccer balls produced by 8 yr olds in Mexico
• Nike Asian child labor and unsafe conditions
• Ethical dilemmas
• Balance responsibility to stockholders against
  that to society

5
What is Ethics?

• An individuals personal beliefs about whether a
  decision, behavior, or action is right or wrong
• Ethical behavior viewed from a societal
  perspective what does society consider ethical?

6
Ethical Behavior - Generalizations

• Different to different people
• Usually similar beliefs within a culture
• May depend on context
• Vast differences among cultures
• e.g. bribes
• 2002 survey Russia, China, Taiwan, South Korea
  vs. Australia, Sweden, Switzerland, Austria,
  Canada

7
Three Elements of Ethics

• (1) How does the organization treat employees?
• (2) How do employees treat the organization?
• (3) How do the organization and employees treat
  other economic agents?

8
How does the organization treat employees?

• Hiring and firing
• Solely on ability and performance?
• Wages and working conditions
• Employee privacy
• Opportunities for development

9
How do employees treat the organization?

• Conflicts of interest
• Gift giving and receiving
• Secrecy and confidentiality
• Laws restricting disclosing sensitive info to
  rivals
• Ethics of using this sensitive info
• General honesty

10
Employee and Org. treatment of other economic
agents

• Bribery
• Pricing
• Financial disclosure
• Advertising practices

11
Company ethics how to influence employees

• Code of ethics
• Detailed how employees treat suppliers,
  customers, competitors, others
• MNCs must decide whether to establish an
  overarching code for all units around the globe
  or tailor the code to each local culture
• MNCs will often be held to the home country or to
  international standards
• Current efforts to establish international ethics
  standards (through International Organization for
  Standardization ISO)

12
Company Ethics (cont.)

• Ethics training
• Cannot anticipate all potential ethical dilemmas
  and put in a code
• UPS managers continuously receive ethics
  training, are directly responsible for training
  other employees
• Code of conduct, ethics training manuals have
  been translated into 29 languages

13
Company Ethics (cont.)

• Organizational practice and corporate culture
• How does top management act?
• How does the organization respond to whistle
  blowers?

14
Social Responsibility

• Broader than ethics responsibility to protect
  and enhance society
• Areas of social responsibility
• Organizational stakeholders directly affected
  by practices and have a stake in perf.
• Customers
• Employees
• Investors
• Environment
• General social welfare

15
Map 5.1 Social Responsibility Hot Spots
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Figure 5.3 Approaches to Social Responsibility
Most Responsible
Least Responsible
Obstructionist Defensive Accommodative
Proactive
17
Obstructionist Stance

• Do as little as possible to address social or
  environmental problems
• Hide Questionable Behavior
• Deny or avoid responsibility
• Examples
• Astra
• Nestle and Danone

18
Defensive Stance

• Do what is required legally, but nothing more
• Corporate responsibility is to generate profits
• Example
• Philip Morris

19
Accommodative Stance

• Meet ethical and legal requirements and more
• Agree to participate in social programs
• Match contributions by employees
• Respond to requests from non-profits
• No proactive behavior to seek such opportunities

20
Proactive Stance

• Strong support of social responsibility
• View themselves as stewards and look for ways to
  contribute
• Examples
• McDonalds
• Merck

21
Implementing Social Responsibility

• Legal Compliance
• Appropriate functional managers
• Ethical Compliance
• Philanthropic Giving

22
Informal Dimensions of Social Responsibility

• Leadership
• Create organizational culture
• Example Johnson Johnson
• Whistle-blowing
• Does the organization take it seriously?
• Do they punish whistle blowers?
• Affected by culture e.g. Japan

23
Corporate Social Audit

• Tool for the evaluation of social responsibility
  effectiveness
• Formal and thorough analysis
• Define goals, analyze resources devoted to goals,
  evaluate effectiveness, make recom.
• Conducted by task force

24
Regulating International Ethics and Social
Responsibility

• Foreign Corrupt Practices Act (1977)
• Alien Tort Claims Act (1789)
• U.S. MNCs resp. for human rights abuses of
  foreign govts.
• Unocal citizens of Burma suing over the use of
  forced labor
• Anti-Bribery Convention of the Organization for
  Economic Cooperation and Development (OECD)
• Elim. Bribery in intl. bus.
• International Labor Organization (ILO)
• Monitors working conds. in developing countries