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Chapter
Copyright© 2007 Thomson Learning All rights reserved
4Managing Ethical and Social
Responsibility Challenges inMultinational Companies
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Learning Objectives
• Know the definitions of international business ethicsand social responsibility
• Understand some basic principles of ethical philosophyrelevant to business ethics
• Understand how social institutions and national culture
affect ethical decision making and management
• Know the definitions of international business ethicsand social responsibility
• Understand some basic principles of ethical philosophyrelevant 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 relativismand ethical universalism
• Identify the basic principles and consequences of theU.S. Foreign orrupt !ractices "ct
• Understand how international agreements affect
international business ethics
• Understand the implications of using ethical relativismand ethical universalism
• Identify the basic principles and consequences of theU.S. Foreign orrupt !ractices "ct
• 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
• $evelop skills in international decision making withethical consequences
• Understand the differences among economic# legal#and ethical analyses of business problems
• $evelop skills in international decision making withethical consequences
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International Business Ethics
• %thics deal with the &oughts' of life• "lthough economics dominate business decision(
making# business decisions also have consequencesfor people• International business ethics) unique ethical problems
faced by managers operating across nationalboundaries• *ore comple+ as different cultures do not agree on
what one &ought' to do
• %thics deal with the &oughts' of life• "lthough economics dominate business decision(
making# business decisions also have consequencesfor people• International business ethics) unique ethical problems
faced by managers operating across nationalboundaries• *ore comple+ as different cultures do not agree on
what one &ought' to do
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Corporate SocialResponsibility
• Idea that businesses have a responsibility to societybeyond making profits
• losely related to business ethics• *ust take into account the welfare of other
constituents in addition to stockholders
• Idea that businesses have a responsibility to societybeyond making profits
• losely related to business ethics• *ust take into account the welfare of other
constituents in addition to stockholders
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Exhibit 4.1 !reas o" Ethical an# SocialResponsibility Concerns "or the$ultinational Co%pany
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Exhibit 4.1 !reas o" Ethical an# SocialResponsibility Concerns "or the$ultinational Co%pany
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&ri%ary an# Secon#arySta'ehol#ers
• !rimary Stakeholders) directly linked to a company,ssurvival and include customers# suppliers# employees#
and shareholders• Secondary Stakeholders) less directly linked to the
company,s survival and include the media# trade
associations# and special(interest groups
• !rimary Stakeholders) directly linked to a company,ssurvival and include customers# suppliers# employees#
and shareholders• Secondary Stakeholders) less directly linked to the
company,s survival and include the media# trade
associations# and special(interest groups
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Ethical &hilosophy
• -wo ways to consider ethical decision making• -raditional ethical philosophy• ontemporary philosophy
• -wo ways to consider ethical decision making• -raditional ethical philosophy
• ontemporary philosophy
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Basic Syste%s o" EthicalReasoning
• -eleological ethical theory• *orality of an act or practice comes from its
consequences• Utilitarianism) what is good and moral comes from
acts that produce the greatest good for the greatest
number of people
• -eleological ethical theory• *orality of an act or practice comes from its
consequences• Utilitarianism) what is good and moral comes from
acts that produce the greatest good for the greatest
number of people
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(eontological Ethical )heory
• "ctions have a good or bad morality regardless of theoutcomes they produce
• "ctions have a good or bad morality regardless of theoutcomes they produce
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$oral Languages
• asic ways that people use to make ethical decisions and toe+plain their ethical choices
• Si+ basic ethical languages• /irtue and vice• Self(control•
*a+imi0ing human welfare• "voiding harm• 1ights2duties• Social contract
• asic ways that people use to make ethical decisions and toe+plain their ethical choices
• Si+ basic ethical languages• /irtue and vice• Self(control• *a+imi0ing human welfare• "voiding harm• 1ights2duties• Social contract
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*ational (i""erences inBusiness Ethics an# Social
Responsibility• 3ational culture and social institutions affect ethical
behavior and social responsibility• 3ational culture and social institutions affect ethical
behavior and social responsibility
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Exhibit 4.+ ! $o#el o" Institutional an#Cultural E""ects on Business EthicsIssues an# $anage%ent
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$essner an# Rosen"el#!no%ie )heory
• "rgue that specific national culture and socialinstitutions affect ethics
• 3ational cultures) high achievement# highindividualism# high universalism# high materialismare all related to higher deviance
• Social institutions) high industriali0ation# capitalistsystems# lower family breakdown and highlyaccessible educational systems should all
encourage deviance
• "rgue that specific national culture and socialinstitutions affect ethics
• 3ational cultures) high achievement# highindividualism# high universalism# high materialismare all related to higher deviance
• Social institutions) high industriali0ation# capitalistsystems# lower family breakdown and highlyaccessible educational systems should allencourage deviance
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Exhibit 4., Co%parison o" -ey EthicalIssues I#enti"ie# by Senior .S. an# E$anagers
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Exhibit 4.4 *ational (i""erencesRegar#ing Ethical Co#es
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/uestionable &ay%ents
• 4uestionable payments• ribes or gifts to e+pedite government actions or to
gain advantage in business deals• In many countries# people routinely offer gifts of bribe
• 4uestionable payments• ribes or gifts to e+pedite government actions or to
gain advantage in business deals• In many countries# people routinely offer gifts of bribes
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/uestionable &ay%ents
• orruption and bribery can have devastating effects onsocieties
• ompanies routinely use poorer(quality products ormaterials to cover for the bribe# thus resulting in inferioproducts
• orruption can also result in collusion among firms#resulting in even higher prices
• orruption and bribery can have devastating effects onsocieties
• ompanies routinely use poorer(quality products ormaterials to cover for the bribe# thus resulting in inferioproducts
• orruption can also result in collusion among firms#resulting in even higher prices
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/uestionable &ay%ents
• -o understand the level of corruption in countries#multinational companies can rely on the orruption
!erception Inde+ 5 !I6• !I developed by -ransparency International# gives an
idea of the levels of perception of corruption within
countries
• -o understand the level of corruption in countries#multinational companies can rely on the orruption
!erception Inde+ 5 !I6• !I developed by -ransparency International# gives an
idea of the levels of perception of corruption within
countries
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Exhibit 4.0 )he C&I "orSelecte# Countries
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Exhibit 4. Bribe &ayers In#ex
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.S. 2oreign Corrupt &ractices!ct 32C&!
• Forbids illegal payments or gifts to officials of foreigngovernments for the sake of getting or retaining
business
• Forbids illegal payments or gifts to officials of foreigngovernments for the sake of getting or retaining
business
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Exhibit 4.5 Excerpts "ro% the 2oreignCorrupt &ractices !ct an# 2ines
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Exhibit 4.5 Excerpts "ro% the 2oreignCorrupt &ractices !ct an# 2ines
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Exhibit 4.5 Excerpts "ro% the 2oreignCorrupt &ractices !ct an# 2ines
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Exhibit 4.5 Excerpts "ro% the 2oreignCorrupt &ractices !ct an# 2ines
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.S. 2oreign Corrupt &ractices!ct 32C&!
• $oes not prohibit some forms of payments that mayoccur in international business
• !ayments made under duress to avoid in7ury orviolence are acceptable
• -ricky component is the reason(to(know component
• Firms are liable for bribes even if bribes are madeby agents of company
• $oes not prohibit some forms of payments that mayoccur in international business
• !ayments made under duress to avoid in7ury orviolence are acceptable
• -ricky component is the reason(to(know component
• Firms are liable for bribes even if bribes are madeby agents of company
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Ethics 6ap
• *ore coercive and normative pressure for U.S.businesses to follow ethical standards
• 1ecent evidence suggests that F !" has notnecessarily caused U.S. business to fall behind.
• *ore coercive and normative pressure for U.S.businesses to follow ethical standards
• 1ecent evidence suggests that F !" has notnecessarily caused U.S. business to fall behind.
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)o7ar# )ransnational Ethics
• %thical convergence) growing pressure to follow thesame rules in managing ethical behavior and social
responsibility
• %thical convergence) growing pressure to follow thesame rules in managing ethical behavior and social
responsibility
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2our Basic Reasons "orEthical Convergence
8. -he growth of international trade and trading blocks9. Increased pressures to imitate business practices
:. /aried cultural background employees requirecommon standards
;. "n increasing number of business watchdogs
8. -he growth of international trade and trading blocks9. Increased pressures to imitate business practices
:. /aried cultural background employees requirecommon standards
;. "n increasing number of business watchdogs
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&rescriptive Ethics
• Suggested guidelines for the ethical behavior ofmultinational companies
• -hree moral languages• "voiding harm• 1ights2duties• Social contract
• -hree languages work irrespective of nationalbackgrounds
• Suggested guidelines for the ethical behavior ofmultinational companies
• -hree moral languages• "voiding harm• 1ights2duties
• Social contract• -hree languages work irrespective of national
backgrounds
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International Ethics 6ui#elineSources
• -he United 3ations Universal $eclaration of
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International Ethics 6ui#elineSources
• -he >rgani0ation for %conomic ooperation and$evelopment =uidelines for *ultinational %nterprises
• -he ffice -ripartite $eclarations of
!rinciples oncerning *ultinational %nterprises and
Social !olicy
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Exhibit 4.8 ! Co#e o" Con#uct "or the$ultinational Co%pany
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Exhibit 4.8 ! Co#e o" Con#uct "or the$ultinational Co%pany
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Exhibit 4.8 ! Co#e o" Con#uct "or the$ultinational Co%pany
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Exhibit 4.8 ! Co#e o" Con#uct "or the$ultinational Co%pany
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Exhibit 4.8 ! Co#e o" Con#uct "or the$ultinational Co%pany
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Exhibit 4.8 ! Co#e o" Con#uct "or the$ultinational Co%pany
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Exhibit 4.8 ! Co#e o" Con#uct "or the$ultinational Co%pany
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)7o Basic Rationales "or theCo#e o" Con#uct "or the
$ultinational• asic deontological principles dealing with human
rights
•
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9hy $ultinationals $ight *ot2ollo7 Ethical &rinciples
• =overnments make agreements• -he agreements have only voluntary compliance
• 3ot all governments subscribe to the agreements• %ach agreement is an incomplete moral guide to the
company
• =overnments make agreements• -he agreements have only voluntary compliance
• 3ot all governments subscribe to the agreements• %ach agreement is an incomplete moral guide to the
company
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:Best &ractices; Steps
• ?eading by e+ample• *aking ethics part of the corporate culture
• Involving employees at all levels• Setting and monitoring goals• %ffective integration in business processes• >pen discussion of ethics and other ethical issues• =overnments make agreements
• ?eading by e+ample• *aking ethics part of the corporate culture
• Involving employees at all levels• Setting and monitoring goals• %ffective integration in business processes• >pen discussion of ethics and other ethical issues• =overnments make agreements
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)he Ethical (ile%%a in$ultinational $anage%ent
• %thical relativism vs. %thical universalism
• %thical relativism) each society,s view of ethics must
be considered legitimate and ethical• %thical universalism) basic moral principles that
transcend cultural and national boundaries
• $ifficulty in following either ethical relativism oruniversalism
• %thical relativism vs. %thical universalism• %thical relativism) each society,s view of ethics must
be considered legitimate and ethical• %thical universalism) basic moral principles that
transcend cultural and national boundaries
• $ifficulty in following either ethical relativism oruniversalism
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Convenient Relativis%
• ompanies have a higher responsibility than ethicalrelativism
•
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In#ivi#ual Ethical (ecision$a'ing "or the $ultinational
$anager • Forms of analyses
• %conomic analysis) focuses on what is the best
decision for a company,s profits• ?egal analysis) focuses on only meeting legal
requirements of host and parent countries
• %thical analysis) goes beyond focusing on profitgoals and legal regulations
• Forms of analyses• %conomic analysis) focuses on what is the best
decision for a company,s profits• ?egal analysis) focuses on only meeting legal
requirements of host and parent countries
• %thical analysis) goes beyond focusing on profitgoals and legal regulations
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Exhibit 4.? (ecision &oints o" Ethical(ecision $a'ing in $ultinational$anage%ent
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Exhibit 4.? (ecision &oints o" Ethical(ecision $a'ing in $ultinational$anage%ent
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In#ivi#ual Ethical (ecision$a'ing
• !urely ethical issues must be weighed againsteconomic and legal analyses.
•
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In#ivi#ual Ethical (ecision$a'ing
• -here is no single accepted ethical theory thatmanagers can use.
• -here are generally accepted theories that can beused as guides# however.
• Such ethical analyses can help raise managers,
awareness of ethical issues.
• -here is no single accepted ethical theory thatmanagers can use.
• -here are generally accepted theories that can beused as guides# however.• Such ethical analyses can help raise managers,
awareness of ethical issues.
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Conclusion
• *ultinational managers face ethical dilemmas similarto their domestic counterparts
• hapter provides background on business ethics• hallenges are magnified by the comple+ity of working
across different countries and cultures
• *ultinational managers face ethical dilemmas similarto their domestic counterparts
• hapter provides background on business ethics• hallenges are magnified by the comple+ity of working
across different countries and cultures
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