Transcript Managing Interdependence: Social Responsibility and Ethics

Ethics and Social Responsibility
Chapter 3
1
Chapter Outline

Theories and principles of ethics




Moral languages
Cultural theories of ethics
International legal jurisdiction and ethics
Bribery and corporate customers



Corporate tax law
The Sarbanes - Oxley Act
Gift-giving in an international context: custom or
bribe?
Chapter Outline (2)

Laws and treaties that attempt to prevent
corruption




Foreign Corrupt Practices Act
OECD Anti-Bribery Convention
Inter-American Convention against Corruption
A process for making ethical decisions
Chapter Outline (3)


Social responsibility and environmental
sustainability
 Stakeholder analysis
 Non-governmental organizations and
major issues
 Voluntary Social Responsibility standards
Managing employee behavior
Ethics


Ethics is the study of morality and
standards of conduct
Different cultures have different standards
of conduct and different expectations about
what managers should do
Moral Languages
Basic ideas that people use to make ethical
decisions and to explain their ethical choices
1. Virtue and vice
 Actions are either good (virtuous) or bad
(vices)
 the consequences of an action are less
important than virtuous intent

Moral Languages (2)
2. Self-control: control of thoughts and actions
 Plato advocated controlling "appetites"
 Important idea in Buddhism and Hinduism
3. Maximizing human welfare – the basic
principle behind utilitarianism (the greatest
good for the greatest number)
4. Avoiding harm – the action should not
produce unpleasant consequences for people
or the environment. Actions are ethical if they
do no harm.
Moral Languages (3)
5. 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.
6. 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.
Culture-based Theories of Ethics



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
International Legal Jurisdiction
and Ethics


A company and its employees are
subject to home country laws.
A company and its employees are
subject to host country laws.
Commercial Bribes

Bribery example: Company A sells goods or services
to Company B. An employee of company A gives
money or a gift to an employee of company B in
order to make a sale.
Commercial Bribes (2)

In the United States, it is a violation of federal tax
law to disguise any bribe as a legitimate business
expense, such as a consulting fee or entertainment
expense.
 For U. S. companies, this law applies to bribing
employees of other companies, government
employees, political parties, or politicians in any
country.
 Any company that does business in the United
States is subject to the same law.
Commercial Bribes (3)

The Sarbanes – Oxley Act requires publicly
held companies to maintain adequate
financial controls. Companies have been
prosecuted under this law for not having
financial controls that prevent bribes in the
U.S. and in foreign countries.
Ethical Dilemma
Gift Giving in Japan


In Japan, it is customary for businesses to give gifts
to employees of business customers, suppliers, and
other business partners twice a year.
Appropriate gifts depend on the amount of business
done and the length of the business relationship.
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
 Bribing a high-ranking government official is a
violation of this law.
 Companies cannot get around this law by giving the
bribe to a political party or party official, or to an
agent
 Both fines and prison terms can be imposed for
violations
Foreign Corrupt Practices Act (2)

Exemptions in the Foreign Corrupt Practices
Act: A company will not be prosecuted for


A small fee or gift given to a low-ranking
employee for performing normal duties ("grease
money")
A payment made under duress to avoid injury
or violence
OECD Anti-Corruption Convention

The Anti-Corruption Convention of the Organization for
Economic Cooperation and Development (OECD) has
been ratified by 37 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)


Does not ban bribes given through
political parties or party officials
Who has signed?




25 EU members, plus Norway
Israel and Turkey
NAFTA countries, plus Argentina, Brazil,
Chile
Japan, South Korea, Australia
Inter-American Convention
Against Corruption



Originated by the Organization of American
States (OAS) and monitored by them
Ratified by 20 countries in the Americas and
the Caribbean
Similar to the OECD Anti-Corruption
Convention
A Process
for Making Ethical Decisions
A Process
for Making Ethical Decisions (2)
Social Responsibility




The 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
Environmental sustainability means providing
goods and services that meets humanity’s
needs without harming future generations.
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
Competitors are not considered to be
stakeholders.
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
Non-Governmental Organizations
and Issues

A non-governmental organization (NGO) is a
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, worker’s rights,
education, health, and the environment.
Voluntary Social Responsibility
Standards



United Nations Global Compact
SA-8000 Standards from Social Accountability
International – focuses on worker’s rights.
Companies are encouraged to require factories that
make goods for them to have SA8000 certification.
ISO 14000 Environmental Responsibility Standard of
the International Standards Organization. Companies
that meet these standards can be certified
SA 8000 Standards






No child labor
No forced labor
Healthy and safe workplace
Freedom of association and the right to
collective bargaining
No discrimination
No coercion, corporal punishment, or abusive
discipline
SA8000 Standards (2)



Work week limited to 48 hours. No more than 12
hours of overtime. Working hours comply with host
country laws.
Compensation meets basic needs of workers and
their families, and complies with host country laws.
Adequate management systems to enforce these
requirements
http://www.sa-intl.org/
Managing Employee Behavior

Corporate codes of ethics and social
responsibility



5-30
Should the same code apply in all
countries where the firm operates?
Ethics and social responsibility training
Organizational practices and leadership
that create an ethically conscious
corporate culture
Making Codes of Ethics
and Social Responsibility Work
A code is most likely to work if all of the
following are true:




5-31
It is clear and straightforward.
It addresses problems of conduct that are relevant to
the business environment.
It is adhered to when problems arise.
It addresses elements of the national culture that are
relevant to business operations.