PowerPoint slides by R. Dennis Middlemist, Professor of Management, Colorado State University

PowerPoint slides by R. Dennis Middlemist, Professor of Management, Colorado State University

Ethics and Social ResponsibilityThe specific objectives of this chapter are:1. EXAMINE some of the major ethical issues

and problems confronting MNCs in selected countries.

2. DISCUSS some of the pressures on and action being taken by selected industrialized countries and companies to be more socially responsive to world problems.

Ethics and Social ResponsibilityThe specific objectives of this chapter are:3. EXPLAIN some of the initiatives to bring greater

accountability to corporate conduct and limit the impacts of corruption around the world.

Ethics and Social Responsibility Around the World

• Ethics– Study of morality and standards of conduct– 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 trends• Glass ceiling• French law guarantees equal treatment and

professional opportunities• Enforcement 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 Responsibility

• Corporate 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

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 NGOs• Corporations 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 Act

• Foreign 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

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Corruption Index

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

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Corruption and Foreign Corrupt Practices Act

• 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


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



Good


8 Sanitation and water Research on water productivity in food production

9 Government Lowering the cost of starting a new business

10 Migration Lowering barriers to migration for skilled workers

11 Malnutrition Improving infant and child nutrition

12 Malnutrition Reducing the prevalence of low birth rate

Fair




Fair


13 Diseases Scaled-up basic health services

14 Migration Guest-worker programs for the unskilled

15 Climate “Optimal” carbon tax16 Climate The Kyoto protocol17 Climate Value-at-risk carbon tax

Bad


Source: Copenhagen ConsensusNote: Some of the proposals were not ranked

Millennium Development Goals

Table 3-3The U.N. Millennium Development Goals

Goal 1: Eradicate extreme poverty and hunger.Goal 2: Achieve universal primary education.Goal 3: Promote gender equality and empower women.Goal 4: Reduce child mortality.Goal 5: Improve maternal health.Goal 6: Combat HIV/AIDS, malaria, and other diseases.Goal 7: Ensure environmental sustainability.Goal 8: Develop a Global Partnership for Development.

Adapted from: Table 3-3: The U.N. Millennium Development Goals

Source: www.unmillenniumproject.org

Documents

PowerPoint slides by R. Dennis Middlemist, Professor of Management, Colorado State University