Transcript Chapter 15

Chapter 15
Managing Ethical and Social
Responsibility Challenges in
Multinational Companies
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Learning Objectives
• Know the definitions of international business ethics
and social responsibility
• Understand some basic principles of ethical philosophy
relevant to business ethics
• Understand how social institutions and national culture
affect ethical decision making and management
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Learning Objectives
• Understand the implications of using ethical relativism
and ethical universalism
• Identify the basic principles and consequences of the
U.S. Foreign Corrupt Practices Act
• Understand how international agreements affect
international business ethics
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Learning Objectives
• Understand the differences among economic, legal,
and ethical analyses of business problems
• Develop skills in international decision making with
ethical consequences
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International Business Ethics
• Ethics deal with the “oughts” of life
• 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 constituents
in addition to stockholders
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Exhibit 15.1: Areas of Ethical and
Social Responsibility Concerns for the
Multinational Company
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Exhibit 15.1: Areas of Ethical and
Social Responsibility Concerns for the
Multinational Company
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Ethical Philosophy
• Two ways to consider ethical decision making
• Traditional ethical philosophy
• Contemporary philosophy
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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
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Deontological Ethical Theory
• Actions have a good or bad morality regardless of the
outcomes they produce
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Moral Languages
• Basic ways that people use to make ethical decisions
and to explain their ethical choices
• Six basic ethical languages
• Virtue and vice
• Self-control
• Maximizing human welfare
• Avoiding harm
• Rights/duties
• Social contract
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National Differences in
Business Ethics and Social
Responsibility
• National culture and social institutions affect ethical
behavior and social responsibility
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Messner and Rosenfeld
• Argue that specific national culture and social
institutions affect ethics
• National cultures: high achievement, high
individualism, high universalism, high materialism
are all related to higher deviance
• Social institutions: high industrialization, capitalist
systems, lower family breakdown and highly
accessible educational systems should all
encourage deviance
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Exhibit 15.2: A Model of Institutional
and Cultural Effects on Business
Ethics Issues and Management
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Exhibit 15.3: Comparison of Key
Ethical Issues Identified by Senior U.S.
and EU Managers
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Exhibit 15.4: Management of Key
Ethical Issues in U.S. and European
Companies
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Exhibit 15.5: National Differences in
Beliefs Regarding Ethical Codes
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Questionable Payments and
U.S. Foreign Practices Act
• Questionable payments
• Bribes or gifts to expedite government actions or to
gain advantage in business deals
• In many countries, people routinely offer gifts of
bribes.
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Exhibit 15.6: Bribe Payers Index
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U.S. Foreign Corrupt Practices
Act (FCPA)
• Forbids illegal payments or gifts to officials of foreign
governments for the sake of getting or retaining
business
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Exhibit 15.7: Excerpts from the Foreign
Corrupt Practices Act and Fines
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Exhibit 15.7: Excerpts from the Foreign
Corrupt Practices Act and Fines
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Exhibit 15.7: Excerpts from the Foreign
Corrupt Practices Act and Fines
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Exhibit 15.7: Excerpts from the Foreign
Corrupt Practices Act and Fines
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U.S. Foreign Corrupt Practices
Act (FCPA)
• Does not prohibit some forms of payments that may
occur in international business
• Payments made under duress to avoid injury or
violence are acceptable
• Tricky component is the reason-to-know component
• Firms are liable for bribes even if bribes are made
by agents of company
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Ethics Gap
• More coercive and normative pressure for U.S.
businesses to follow ethical standards
• Recent evidence suggests that FCPA has not
necessarily caused U.S. business to fall behind.
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Toward Transnational Ethics
• Ethical convergence: growing pressure to follow the
same rules in managing ethical behavior and social
responsibility
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Four Basic Reasons for
Ethical Convergence
1. The growth of international trade and trading blocks
2. Increased pressures to imitate business practices
3. Varied cultural background employees require common
standards
4. An increasing number of business watchdogs
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Prescriptive Ethics
• Suggested guidelines for the ethical behavior of
multinational companies
• Three moral languages
• Avoiding harm
• Rights/duties
• Social contract
• 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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Exhibit 15.8: A Code of Conduct for the
Multinational Company
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Exhibit 15.8: A Code of Conduct for the
Multinational Company
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Exhibit 15.8: A Code of Conduct for the
Multinational Company
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Exhibit 15.8: A Code of Conduct for the
Multinational Company
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Exhibit 15.8: A Code of Conduct for the
Multinational Company
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Exhibit 15.8: A Code of Conduct for the
Multinational Company
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Exhibit 15.8: A Code of Conduct for the
Multinational Company
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Two Basic Rationales for the
Code of Conduct for the
Multinational
• Basic deontological principles dealing with human
rights
• History of experiences in international business
interactions
• However, despite the existence of extensive
agreements, multinationals may not always follow
ethical principles.
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Why Multinationals Might Not
Follow Ethical Principles
•
•
•
•
Governments make agreements
The agreements have only voluntary compliance
Not all governments subscribe to the agreements
Each agreement is an incomplete moral guide to the
company
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“Best Practices” Steps
•
•
•
•
Leading by example
Making ethics part of the corporate culture
Involving employees at all levels
Setting and monitoring goals
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“Best Practices” Steps
• Effective integration in business processes
• Open discussion of ethics and other ethical issues
• Governments make agreements
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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
• Ethical universalism: basic moral principles that
transcend cultural and national boundaries
• Difficulty in following either ethical relativism or
universalism
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Convenient Relativism
• Companies have a higher responsibility than ethical
relativism
• However, some companies use the logic of ethical
relativism to behave any way they please
• Use the excuse of differences in cultures
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Individual Ethical Decision
Making for the Multinational
Manager
• Forms of analyses
• Economic analysis: focuses on what is the best
decision for a company’s profits
• Legal analysis: focuses on only meeting legal
requirements of host and parent countries
• Ethical analysis: goes beyond focusing on profit
goals and legal regulations
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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
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Individual Ethical Decision
Making
• Purely ethical issues must be weighed against
economic and legal analyses.
• However, multinational managers are guests in other
nations.
• Ethical decision making must go beyond legal
constraints.
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Individual Ethical Decision
Making
• There is no single accepted ethical theory that
managers can use.
• There are generally accepted theories that can be
used as guides, however.
• Such ethical analyses can help raise managers’
awareness of ethical issues.
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