Transcript Managing Interdependence: Social Responsibility and Ethics

Ethics and Social Responsibility
Chapter 3
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Chapter Outline
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Theories of ethics
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The nature of ethical decisions
Pragmatism vs. social responsibility
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Stakeholder analysis
Culture-based theories of ethics
Moral languages
What ethical principles do managers use?
Chapter Outline (2)
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Bribery and anti-corruption law
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Where bribery occurs most often
The Foreign Corrupt Practices Act
The OECD Anti-Corruption Convention
Ethics
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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 – different cultures do not agree on
what managers or companies “should” do
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?
Pragmatism
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The idea that managers should make
decisions that have the greatest benefit to
the company and its shareholders.
Social Responsibility
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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
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
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
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
Moral Languages
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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.
Moral Languages (4)
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Moral languages that are often useful in
international business
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Avoid harm
Rights and duties
Social contract
These 3 moral languages are acceptable
in many 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.)
Country Comparisons of Government Corruption (2006)
Based on 160 Countries
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Bribes are least
expected in
 Finland
 Iceland
 New Zealand
 Denmark
 Singapore
 Sweden
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Officials are most
likely to demand
bribes in
 Haiti
 Myanmar (Burma)
 Iraq
 Guinea
 Sudan
 Congo
Government Officials' Perceptions of Bribe Paying
Behavior by Companies from 30 Countries
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Least likely to pay
bribes – firms from
 Switzerland
 Sweden
 Australia
 Austria
 Canada
United States is tied for
ninth.
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Most likely to pay bribes
– firms from
 India
 China
 Russia
 Turkey
 Taiwan
Where Bribes are Paid
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Bribes are more likely to be paid in less developed
countries.
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It may be hard to get or keep government business without
bribery
Bribery may be culturally acceptable.
Low-level officials may demand payment for minor tasks.
Punishment is less likely.
Bribery is more common in certain industries
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Construction
Weapons and defense contracts
Oil and gas
Foreign Corrupt Practices Act
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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.
A payment made under duress to avoid injury or violence is
not a bribe.
A large amount of money or an expensive gift paid to a highranking government employee is a bribe.
Foreign Corrupt Practices Act (2)
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Under the Foreign Corrupt Practices Act (continued)
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A political contribution is a bribe if the purpose of the
contribution is to influence government decisions that affect
the firm’s 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.
If a company disguises a bribe as a consulting fee,
entertainment expense, etc., the company has violated
federal tax laws.
OECD Anti-Corruption Convention
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The Anti-Corruption Convention of the Organization for
Economic Cooperation and Development (OECD) has
been ratified by 36 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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25 EU members, plus Norway & Turkey
NAFTA countries, plus Argentina, Brazil,
Chile
Japan, South Korea, Australia
Enforcement will be hard