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Chapter

Copyright© 2007 Thomson Learning All rights reserved

4Managing Ethical and Social

Responsibility Challenges inMultinational Companies

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Copyright© 2007 South-Western/Thomson Learning All rights reserved

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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7/53Copyright© 2007 South-Western/Thomson Learning All rights reserved

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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• 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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• -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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.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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)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

Documents

Cullen 4e PPT_CH04 (1)