Transcript document

International Management
Phatak, Bhagat, and Kashlak
McGraw-Hill/Irwin
International Management
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
Chapter 17
Ethics and Social Responsibility for
International Firms
McGraw-Hill/Irwin
International Management
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
17-3
Learning Objectives
Explain moral philosophies of relevance to business ethics.
Define business ethics, and describe the relationships among
host country laws, ethics and cultural relativism.
Identify several international accords that address business
ethics and ethical codes of conduct for international companies,
and list five prominent issues on which they provide guidance.
Discuss the issues of bribery and corruption, and their role in the
international business arena.
Explain how a company can effectively integrate ethics and
business conduct among its managers and employees.
17-4
Chapter Topics
Business Ethics and Corporate Social Responsibility Defined
Moral Philosophies of Relevance to Business Ethics
The Basic Moral Norms
Incorporating Corporate Social Responsibility and Ethics into
International Business Decisions
International Ethical Codes of Conduct for International
Companies
What Companies Can Do to Integrate Ethics and Business
Conduct
17-5
Drivers of Corporate Social Responsibility
From a utilitarian perspective, corporate social responsibility is
an instrument useful to help achieve its performance objectives
defined in terms of profitability, return on investment, or sales
volume
The positive duty suggests that businesses may be selfmotivated to have a positive impact regardless of social
pressures calling for social initiatives. When this positive duty
is prevalent, corporate social responsibility principles are a
component of the firm’s true identity, expressing values
considered by organizational as central, enduring, and distinctive
values to the firm
17-6
Drivers of Corporate Social Responsibility (contd.)
From a negative duty approach, businesses are compelled to
adopt social responsibility initiatives in order to conform to
stakeholder norms defining appropriate behavior. When
negative duty is prevalent, self-motivation is replaced by
corporate social responsibility initiatives that are a reaction to
what is expected from stakeholders
17-7
Moral Philosophy
The set of principles or rules that
people use to decide what is right
or wrong. Moral philosophies help
explain why a person believes that
a certain choice among alternatives
is ethically right or wrong.
17-8
Moral Philosophies of Relevance to Business
Ethics
Teleology: an action or behavior is acceptable or right if it
is responsible for producing the desired outcomes.
Two key teleological precepts that serve as guides for
managerial decision-making are
Egoism: it evaluates how right or acceptable a behavior is
depending upon its consequences on the person
Utilitarianism: it holds that actions should be judged by
their consequences; however, unlike egoists, utilitarians
claim that behaviors that are moral produce the greatest good
for the greatest number of people
17-9
Moral Philosophies of Relevance to Business
Ethics (contd.)
Deontology: an ethical theory holding that acting from a
sense of duty rather than concern for consequences is
the basis for establishing our moral obligation
The Theory of Justice: there are three fundamental
guidelines that the theory of justice provides to
managers in their decision-making:
Be equitable
Be fair
Be impartial
17-10
Moral Philosophies of Relevance to Business
Ethics (contd.)
Cultural Relativism: It asserts that words such as
“right,” “wrong,” “justice,” and “injustice” derive their
meaning and value from the attitudes of a given
culture. Thus, to a cultural relativist, ethical standards
are culture-specific, and one should not be surprised to
find that an act that is considered quite ethical in one
culture might be looked upon with disdain in another
17-11
Fig 17-1: Ethical and Legal Distinctions in International
Management
China
United States
A
Yes
Alcohol Consumption
Usury
Women Drivers
Alcohol Consumption
Usury
Women Drivers
Yes
Child Labor
Facilitating Payments
Legal
Legal
Prayer at Work
Child Labor
Facilitating Payments
No
Prayer at Work
No
No
B
No
Ethical
Ethical
Yes
Yes
Islamic Countries
Yes
Facilitating Payments
Prayer at Work
Child Labor
Legal
Alcohol Consumption
Usury
Women Drivers
No
No
Ethical
Yes
17-12
Fig. 17-2: A Decision Tree Incorporating Ethics in International Decision
Making
Does the International Business Decision (IBD)
create the greatest benefit for everyone affected?
No
(Teleology)
Are there overriding factors that justify
the suboptimization of the greatest
NO
benefits for everyone affected?
YES
Does the IBD respect the rights of all persons
affected?
(Deontology)
NO
Does the IBD respect the canons of justice?
(Theory of Justice)
NO
Are there overriding factors that justify
NO
the abrogation of a right?
YES
Are there overriding factors that justify
NO
the violation of a canon of justice?
YES
Does the IBD respect the cultural norms of
affected parties, both in home and host
countries?
(Cultural Relativism)
Accept the IBD
NO
Are there overriding factors that justify
NO
ignoring the cultural norms of the
affected parties?
Reject the IBD
17-13
Table 17-1: Prominent International Accords
Accord
Year
The United Nations Universal Declaration of Human Rights
UDHR
1948
The European Convention on Human Rights
ECHR
1950
The Helsinki Final Act
Helsinki
1975
The OECD Guidelines for Multinational Enterprises
OECD
1976
The International Labor Office Tripartite Declaration of
Principles of Multinational Enterprises and Social Policy
ILO
1977
The United Nations Code of Conduct on Transnational
Corporations
TNC Code
17-14
Table 17-2: Employment Practices and Policies
(selected)
Policy
Organization
MNCs should not contravene the manpower policies of host nations
ILO
MNCs should respect the right of employees to join trade unions and to
bargain collectively
ILO; OECD;
UDHR
MNCs should develop nondiscriminatory employment policies and
promote equal job opportunities
ILO; OECD;
UDHR
MNCs should provide equal pay for equal work
ILO; UDHR
MNCs should give advance notice of changes in operations, especially
plant closings, and mitigate the adverse effects of these changes
ILO; OECD
MNCs should, minimally, pay basic living wages to employees
ILO; UDHR
MNCs operations should benefit lower-income groups of the host nation
ILO
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Table 17-3: Consumer Protection
Policy
Organization
MNCs should respect host-country laws and policies regarding the
protection of consumers
OECD; TNC
Code
MNCs should safeguard the health and safety of consumers by various
disclosures, safe packaging, proper labeling, and accurate advertising
TNC Code
17-16
Table 17-4:Environmental Protection
Policy
Organization
MNCs should respect host-country laws, goals, and priorities
concerning protection of the environment
OECD; TNC
Code;
Helsinki
MNCs should preserve ecological balance, protect the environment,
adopt preventive measures to avoid environmental harm, and
rehabilitate environments damaged by operations
OECD; TNC
Code;
Helsinki
MNCs should disclose likely environmental harms and minimize risks
of accidents that could cause environmental damage
OECD; TNC
Code
MNCs should promote the development of international environmental
standards
TNC Code;
Helsinki
MNCs should control specific operations that contribute to pollution of
air, water, and soils
Helsinki
MNCs should develop and use technology that can monitor, protect,
and enhance the environment
OECD;
Helsinki
17-17
Table 17-5: Political Payments and Involvement
Policy
MNCs should not pay bribes or make improper payments to public
officials
Organization
OECD; TNC
Code
MNCs should avoid improper or illegal involvement or interference in the OECD; TNC
internal politics of host countries
Code
MNCs should not interfere in intergovernmental relations
TNC Code
17-18
Table 17-6:Basic Human Rights and Fundamental
Freedoms
Policy
Organization
MNCs should respect the rights of all persons to life, liberty, security of
person, and privacy
UDHR; ECHR;
Helsinki; ILO;
TNC Code
MNCs should respect the rights of all persons to equal protection of the
law, work, choice of job, just and favorable working conditions, and
protection against unemployment and discrimination
UDHR; Helsinki;
ILO; TNC Code
MNCs should respect all persons’ freedom of thought, conscience,
religion, opinion and expression, communication, peaceful assembly and
association, and movement and residence within each state
UDHR; ECHR;
Helsinki; ILO;
TNC Code
MNCs should promote a standard of living to support the health and wellbeing of workers and their families
UDHR; Helsinki;
ILO; TNC Code
MNCs should promote special care and assistance to motherhood and
childhood
UDHR; Helsinki;
ILO; TNC Code
17-19
Ex. 17-1: Least Corrupt Countries Worldwide
9.7
9.7
9.6
9.5
9.5
9.5
9.4
10 = Least
9.4
Corrupt
9.3
9.3
9.2
9.1
Finland
Denmark
New Zealand
Iceland
Singapore
17-20
Ex. 17-2: Corruption in Western and Eastern
Europe
9.7
10
9
8
7
6
6
5.2
10=Least
Corrupt
5
4
3
2.1
2
1
0
Finland
Italy
Slovenia
Moldova
17-21
Ex. 17-3: Corruption in North, Central, and South
America
9
9
8
7.7
7.5
7
6
5
4.5
10=Least
Corrupt
4
3.6
3
2.5
2
1.7
1
0
Canada
USA
Mexico
Costa Rica
Nicaragua
Chile
Paraguay
17-22
Ex. 17-4: Corruption in Middle East and Asia
10
9.3
9
8
7.3
7
6
10=Least
Corrupt
5
4
3.4
3
2
1.2
1
0
Israel
Egypt
Singapore
Bangladesh
17-23
Ex. 17-5: Corruption in Northern and Southern
Africa
7
6.4
6
4.8
5
4
3.4
10=Least
Corrupt
3
2
1.6
1
0
Tunisia
Egypt
Botswana
Nigeria
17-24
Ex. 17-6: Worst Bribe Payer Countries
4.5
4.1
4
3.8
3.9
3.5
3.5
3.2
3
2.5
10=Least
Corrupt
2
1.5
1
0.5
0
Russia
China
Taiwan
South Korea
Italy
17-25
Table 17-7: Factors Responsible for Bribes
Home Country Factors
Host Country Factors
Competitors are giving bribes to obtain business
Host government has control over business
activities, permits and licenses. Government
officials are required to conduct normal business
functions
There is constant pressure for higher levels of
performance by top management and
shareholders
Government officials are poorly paid and use
bribes to supplement salary
This is an accepted practice in the host country.
Cannot expect to get any business without
conforming
Bureaucratic delays can be costly for business
(e.g., clear products through customs on time to
meet delivery schedules)
Tax laws of the country encourage bribery (e.g.,
some bribes can be written off as a business
expense in Germany but not in the U.S.)
Political pressures exists from to make
contributions to political parties or favorite
political organizations or causes
17-26
What Companies Can Do to Integrate Ethics and
Business Conduct
1.
2.
3.
4.
5.
6.
7.
The top management must be committed to the company’s
ethics program
A written company code that clearly communicates
management’s expectations must be developed
Provide an organizational identity to the ethics program
A formal program must be in place to implement the ethics
code
The line managers, not consultants, do training in ethics
Strict enforcement of codes is essential
Actions speak louder than words
17-27
Key Terms and Concepts
Ethics
Corporate social responsibility
Positive duty
Negative duty
Teleology
Egoism
Utilitarianism
Deontology
Theory of justice
Cultural relativism
Moral norms
Social costs of bribery