International Management Ethics / Social Responsibility

International Management

Ethics / Social Responsibility

Ethics / Soc. Resp. Sites

•http://www.wto.org/english/tratop_e/devel_e/d1who_e.htm (WTO guidelines for developing countries)

•http://www.unctad.org/Templates/Page.asp?intItemID=3073&lang=1

(United Nations listing of least developed countries)

•www.transparency.de/ (European perspective)

•www.cceia.org/ (Carnegie Council on Ethics)

•www.globalethics.org (Ethical dilemnas)

•http://www.business-ethics.org/

•http://management.about.com/gi/dynamic/offsite.htm?zi=1/XJ&sdn=management&zu=http%3A%2F%2Fwww.islamist.org%2Fimages%2Fethicshm.pdf

•http://www.iit.edu/departments/csep/PublicWWW/codes/

http://www.wto.org/english/tratop_e/devel_e/d1who_e.htm

http://www.unctad.org/Templates/Page.asp?intItemID=3073&lang=1

http://www.unctad.org/Templates/Page.asp?intItemID=3073&lang=1

http://www.business-ethics.org/

http://management.about.com/gi/dynamic/offsite.htm?zi=1/XJ&sdn=management&zu=http%3A%2F%2Fwww.islamist.org%2Fimages%2Fethicshm.pdf



Ethics Around the World

Ethics -the study of morality and standards of conduct– Unethical Business Practices

Insider Trading ScandalsBribes“Mad” Syndrome

– mergers, acquisitions, divestitures

The Opaque IndexMeasures the effect of unclear legal systems

and regulations0 20 40 60 80 100

ChinaRussia

IndonesiaTurkey

South KoreaCzech Republic

RomaniaKenya

EcuadorThailand

GuatemalaIndia

PolandVenezuelaPakistan

ArgentinaBrazil

Taiwan

ColumbiaJapan

South AfricaEgypt

LithuaniaPeru

GreeceIsrael

UruguayHungary

ItalyMexico

Hong KongBritainChile

United StatesSingapore

0 20 40 60 80 100

Current Index?

http://www.doingbusiness.org/economyrankings/

Regulating Foreign Investment

Regulation of Acquisitions– MNC’s must obtain host government

clearance prior to establishing new operations or purchasing ongoing businessesPurpose: To control own

economies and gain independence from foreign companies

Examples of unethical conduct Parmelat – Falsifying records and documents to conceal

losses and to funnel money privately (up to $8 Billion) The Recruit company - allowed politicians and influential

business people to buy cut-rate stock Honda of America- settled a $6 million discrimination pay

back to 370 African American women EEOC filed sexual harassment lawsuit against Mitsubishi on

behalf of 300 women Enron…. Arthur Anderson…(sophisticated accounting

manipulation) Adelphia – Diverting corporate funds to private (family) use,

and using off-book financing of $3.5 Billion) Global Crossings – falsifying marketing and cost information Etc.. Etc..

Regulating Foreign Investment

Ethical concerns about the reciprocity of the relationship between the home country of the MNC and the host country

Regulation of Acquisitions– The U.S. regulates the acquisition of

domestic companies by foreign investors Other countries are following the U.S.’s lead

– EU regulations making it more difficult for non-European companies to do business in Europe

– Nonreciprocal trade partners Nations that sell (export) goods to other countries

but do not buy (import) from them

Reciprocity– Is their an ethical and social responsibility

to engage in reciprocal trade? Example: obligations to maintain an

import/export balance with trading partner?– retaliation?

• ongoing issue between Japan and the U.S.

Ethics and Social Responsibility Around the World

Ethics– Vital role of ethics in conduct of business

Sarbanes-Oxley Act (2002)– CEO and CFO required to approve and declare

accurate all financial statements provided to SEC for publication

– Ensure transparency of all disclosures– Make content appropriately accessible for audit and

verification

– MNCs face difficulty because of differing standards between countries where they operate


Political and business scandals– Japanese cabinet member forced to resign for receiving

over $2 million from Japanese corporations– Failure of banking system to take corrective action

regarding Japan’s recession– Concealing customer complaints– Failure to inform car owners about possible auto defects

and maintenance of two sets of customer complaint records

– Encouraging employees to mislead government inspectors

Ethical Problems and Concerns

Japan


Hostile work environment– Cultural expectations

Traditional role of females and female employees Sexual harassment may not be considered a moral issue

Equal opportunity issues– Refusal to hire women or promote them into

management positions– Mitsubishi sued by U.S. EEOC

Social Responsibility/Lobbying


Japan


Survey of 124 U.S., 72 French, and 70 German managers responding to five ethical vignettes – In most cases, the U.S. managers’ responses were quite

different from those of their European counterparts U.S. managers more concerned with ethical and legal questions French and German managers more concerned with maintaining

a successful business posture

Reasons for difference between countries


Europe

Culture Personal valuesIncentives Legal restrictions


Status of women managers in Europe– France

Proportion of women in the labor force trendsGlass ceilingFrench law guarantees equal treatment and

professional opportunitiesEnforcement is weak


Europe

Status of women managers in Europe


Europe

Germany Remaining differences between East and West

Germany Proportion of females in higher positions Professional qualifications relate inversely to

hierarchical position Lack of objective criteria for selection to higher

positions

Has mandated equal opportunity throughout the public sector


Status of women managers in Europe


Europe

Great Britain 45 percent of workforce is female Not well represented at higher levels Women creating associations for networking and

lobbying Women’s Engineering Society The 300 Group

Some companies becoming proactive in women’s work rights

Discrimination lawsuits becoming more commonplace


Ethical issues– Workers not well paid (often work 12

hours a day, 7 days a week)– Piracy of intellectual property,

counterfeiting, and industrial spying Human rights violations

Use of prisoner and child labor


China


Corporate Social ResponsibilityCorporate social responsibility (CSR)

– Actions of a firm to benefit society beyond the requirements of the law and the direct interests of the firm

– Pressure for greater attention to CSR Civil society Nongovernmental organizations (private, not-for-profits that

focus on social, political and economic issues)

– CSR concerns Working conditions in factories and service centers Environmental impacts of corporate activities

Trust in Leaders(Percentage saying “A Lot,” or “some”

trust)

0 10 20 30 40 50 60

Average Across All 15 Countries Surveyed

NGO leaders

Leaders at the U.N.

Spiritual/religious leaders

Leaders of Western Europe

Managers of the global economy

Managers of the national economy

Executives of MNCs

Leaders of the U.S.A.

52

42

41

36

36

35

33

27

Adapted from Figure 3-1: Trust in Leaders: Percentage Saying “A Lot” and “Some Trust”

Rise of Civil Society and NGOs Emergence of organized civil society and

NGOs altered– Business environment globally– Role of MNC within global business environment

NGOs in the U.S. and globally– Save the Children– Oxfam– CARE– World Wildlife Fund– Conservation International

Rise of Civil Society and NGOsCorporations receiving heavy criticism

– Nike– Levi’s– Chiquita

Major criticisms– Exploitation of low-wage workers– Environmental abuses– Intolerable workplace standards

Response to social obligations– Agreements and codes of conduct– Maintenance of standards in domestic and global operations– Cooperation with NGOs regarding certain social issues

Response to Social Obligations

Human RightsPrinciple 1: Support and respect the protection of international human rights within their sphere of influence.

Principle 2: Make sure their own corporations are not complicit in human rights abuses.

Table 3-1Principles of the Global Compact

Adapted from Table 3-1: Principles of the Global Compact


LaborPrinciple 3: Freedom of association and the effective recognition of the right to collective bargaining.Principle 4: The elimination of all forms of forced and compulsory labor.Principle 5: The effective abolition of child labor.

Principle 6: The elimination of discrimination with respect to employment and occupation.




EnvironmentPrinciple 7: Support a precautionary approach to environmental challenges.Principle 8: Undertake initiatives to promote greater environmental responsibility.Principle 9: Encourage the development and diffusion of environmentally friendly technologies.Anti-CorruptionPrinciple 10: Business should work against all forms of corruption, including extortion and bribery.



Corporate Governance


Structure


Structure

Distribution of rights and

responsibilities

Distribution of rights and

responsibilities

Stakeholders• Board• Managers• shareholders

Stakeholders• Board• Managers• shareholders

Spells out the rules and

procedures

Spells out the rules and

procedures

Making decisions

Making decisions

• Setting objectives• Means of attaining

objectives• Monitoring performance

• Setting objectives• Means of attaining

objectives• Monitoring performance

The system by which business corporations are directed and controlled

Corporate Governance Rules and regulations differ among countries

and regions– U.K. and U. S. systems are “outsider” systems

Dispersed ownership of equity Large number of outside investors

– Many continental European countries are “insider” systems Ownership more concentrates Shares owned by holding companies, families or banks

Other effects on corporate governance include– Differences in legal systems– Responsiveness and accountability of corporate managers to

stakeholders

Corruption and Foreign Corrupt Practices

ActForeign Corrupt Practices Act (FCPA)

– Illegal for U.S. firms and their managers to attempt to influence foreign officials through personal payments of political contributions, including such tactics as “Entertainment” expenses “Consulting” fees

– Some evidence that discontinuing bribes does not reduce sales of the firm’s products or services in that country

– Some evidence that firms from other countries continue to win business through corrupt practices such as bribery

– Recent formal agreement by many industrialized nations to outlaw the practice of bribing foreign government officials

Co

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Ind

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Corruption Index

Adapted from Figure 3–2: Corruption Index: Ranking of Least Corrupt to Most

020406080

100120140

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Sin

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Kon

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Sta

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Chi

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Taiw

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Afr

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Bra

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TPI-Corruption Index

http://www.transparency.org/news_room/in_focus/2008/cpi2008/cpi_2008_table

Corruption and Foreign Corrupt Practices Act(s)

Recent formal agreement by many industrialized nations to outlaw the practice of bribing foreign government officials– Organization for Economic Cooperation and

Development– 29 members plus several other countries have

signed on– Fails to outlaw most payments to political party

leaders.– Does indicate growing support for anti-bribery

initiatives

International Assistance

Governments and corporations increase collaboration to provide assistance to communities and locales through global partnerships

Best “investments”– Controlling and preventing AIDS– Fighting malnutrition– Reducing subsidies and trade restrictions– Controlling malaria

International AssistanceInternational Assistance

Project rating Challenge Opportunity

Very good

Table 3-2Copenhagen Consensus Development Priorities

1 Diseases Control of HIV/AIDS2 Malnutrition Providing micro

nutrients3 Subsidies and trade Trade liberalization4 Diseases Control of malaria5 Malnutrition Development of new

agricultural technologies6 Sanitation and water Small-scale water

technology for livelihoods7 Sanitation and water community-managed

water supply and sanitation

Adapted from: Table 3.2: Copenhagen Consensus Development Priorities

Good

Ethics From a Global Perspective

Universality of ethical guidelines / principles– Background (shapes the foreground)– Procedural knowledge (communication)

E.g., reciprocity, fairnessSocialization processes

– Attitudes– Theories (believe systems) = Major

principles = institutional rules = actions

Principles for Universal Morality

1. Ethical Egoism2. Utilitarianism3. Natural Rights Theory4. Social Contract Theory5. Kantian Duty Ethics6. Discourse Ethics

What are some facets?

SocialEconomic

– Formal and informal economiesEnvironmental Institutional

– Policy and capacity issues

Differences Economic System

– Market vs. command Free-Market (voluntary)

– Tradition-based society– Lockean Rights (Life, liberty, property)– Smith’s (competition advances welfare,

government intervention does not.)– Say’s law: All resources used, demand will always

expand to absorb available supply– Social Darwinism: Economic competition produces

human progress (survival of fittest)– Naturalistic fallacy: Assumption that naturally is

best– Alienation (depriving working class of full potential)

Government RoleEconomic substructure

– Materials and social controlsSocial Superstructure

– Ideologies, governmentForces of production

– Resource controlsRelations of productions

– Social controls (organization of workers)

Philosophical

Possibility of “Universality?”

1. Respect for core human values• Determines the absolute moral threshold

for business activities• http://www.hrweb.org/legal/undocs.html#UDHR

2. Respect for local traditions3. Recognizing that context influences the

determination of what is “right” or “wrong”

4. Communication• Do more than “post” codes of conduct

http://www.hrweb.org/legal/undocs.html#UDHR

Documents

International Management Ethics / Social Responsibility