Chapter 15 Managing Ethical and Social Responsibility Challenges in Multinational Companies Copyright© 2004 Thomson Learning All rights reserved Learning Objectives •• Know Know the the definitions definitions ofof international international business business ethics ethics and and social social responsibility responsibility •• Understand Understand some some basic basic principles principles ofof ethical ethical philosophy philosophy relevant relevant toto business business ethics ethics •• Understand Understand how how social social institutions institutions and and national national culture culture affect affect ethical ethical decision decision making making and and management management Copyright© 2005 South-Western/Thomson Learning All rights reserved Learning Objectives •• Understand Understand the the implications implications ofof using using ethical ethical relativism relativism and and ethical ethical universalism universalism •• Identify Identify the the basic basic principles principles and and consequences consequences ofof the the U.S U.S Foreign Foreign Corrupt Corrupt Practices PracticesAct Act •• Understand Understand how how international international agreements agreements affect affect international international business business ethics ethics Copyright© 2005 South-Western/Thomson Learning All rights reserved Learning Objectives •• Understand Understand the the differences differences among among economic, economic, legal, legal, and and ethical ethical analyses analyses ofof business business problems problems •• Develop Develop skills skills inin international international decision decision making making with with ethical ethical consequences consequences Copyright© 2005 South-Western/Thomson Learning All rights reserved International Business Ethics •• •• Ethics Ethics deal deal with with the the “oughts” “oughts” ofof life life International International business business ethics: ethics: unique unique ethical ethical problems problems faced faced by by managers managers operating operating across across national national boundaries boundaries •• More More complex complex as as different different cultures cultures do not not agree agree on on what what one one “ought” “ought” toto do Copyright© 2005 South-Western/Thomson Learning All rights reserved Social Responsibility •• Idea Idea that that businesses businesses have have aa responsibility responsibility toto society society beyond beyond making making profits profits •• Closely Closely related related toto business business ethics ethics •• Must Must take take into into account account the the welfare welfare ofof other other constituents constituents inin addition addition toto stockholders stockholders Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 15.1: Areas of Ethical and Social Responsibility Concerns for the Multinational Company Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 15.1: Areas of Ethical and Social Responsibility Concerns for the Multinational Company Copyright© 2005 South-Western/Thomson Learning All rights reserved Ethical Philosophy •• Two Two ways ways toto consider consider ethical ethical decision decision making making •• Traditional Traditional ethical ethical philosophy philosophy Contemporary Contemporary philosophy philosophy Copyrightâ 2005 South-Western/Thomson Learning All rights reserved Basic Systems of Ethical Reasoning •• Teleological Teleological ethical ethical theory theory •• Morality Morality ofof an an act act or or practice practice comes comes from from its its consequences consequences •• Utilitarianism: Utilitarianism: what what isis good good and and moral moral comes comes from from acts acts that that produce produce the the greatest greatest good good for for the the greatest greatest number number ofof people people Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 15.8: A Code of Conduct for the Multinational Company Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 15.8: A Code of Conduct for the Multinational Company Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 15.8: A Code of Conduct for the Multinational Company Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 15.8: A Code of Conduct for the Multinational Company Copyright© 2005 South-Western/Thomson Learning All rights reserved Two Basic Rationales for the Code of Conduct for the Multinational •• Basic Basic deontological deontological principles principles dealing dealing with with human human rights rights •• History History ofof experiences experiences inin international international business business interactions interactions •• However, However, despite despite the the existence existence ofof extensive extensive agreements, agreements, multinationals multinationals may may not not always always follow follow ethical ethical principles principles Copyright© 2005 South-Western/Thomson Learning All rights reserved Why Multinationals Might Not Follow Ethical Principles •• •• •• •• Governments Governments make make agreements agreements The The agreements agreements have have only only voluntary voluntary compliance compliance Not Not all all governments governments subscribe subscribe toto the the agreements agreements Each Each agreement agreement isis an an incomplete incomplete moral moral guide guide toto the the company company Copyright© 2005 South-Western/Thomson Learning All rights reserved “Best Practices” Steps •• •• •• •• Leading Leading by by example example Making Making ethics ethics part part ofof the the corporate corporate culture culture Involving Involving employees employees atat all all levels levels Setting Setting and and monitoring monitoring goals goals Copyright© 2005 South-Western/Thomson Learning All rights reserved “Best Practices” Steps •• •• •• Effective Effective integration integration inin business business processes processes Open Open discussion discussion ofof ethics ethics and and other other ethical ethical issues issues Governments Governments make make agreements agreements Copyright© 2005 South-Western/Thomson Learning All rights reserved The Ethical Dilemma in Multinational Management: How Will You Decide? •• Ethical Ethical relativism relativism vs vs Ethical Ethical universalism universalism •• Ethical Ethical relativism: relativism: each each society’s society’s view view ofof ethics ethics must must be be considered considered legitimate legitimate and and ethical ethical •• Ethical Ethical universalism: universalism: basic basic moral moral principles principles that that transcend transcend cultural cultural and and national national boundaries boundaries •• Difficulty Difficulty inin following following either either ethical ethical relativism relativism or or universalism universalism Copyright© 2005 South-Western/Thomson Learning All rights reserved Convenient Relativism •• Companies Companies have have aa higher higher responsibility responsibility than than ethical ethical relativism relativism •• However, However, some some companies companies use use the the logic logic ofof ethical ethical relativism relativism toto behave behave any any way way they they please please •• Use Use the the excuse excuse ofof differences differences inin cultures cultures Copyright© 2005 South-Western/Thomson Learning All rights reserved Individual Ethical Decision Making for the Multinational Manager •• Forms Forms ofof analyses analyses •• Economic Economic analysis: analysis: focuses focuses on on what what isis the the best best decision decision for for aa company’s company’s profits profits •• Legal Legal analysis: analysis: focuses focuses on on only only meeting meeting legal legal requirements requirements ofof host host and and parent parent countries countries •• Ethical Ethical analysis: analysis: goes goes beyond beyond focusing focusing on on profit profit goals goals and and legal legal regulations regulations Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 15.9: Decision Points of Ethical Decision Making in Multinational Management Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 15.9: Decision Points of Ethical Decision Making in Multinational Management Copyright© 2005 South-Western/Thomson Learning All rights reserved Individual Ethical Decision Making •• Purely Purely ethical ethical issues issues must must be be weighed weighed against against economic economic and and legal legal analyses analyses •• However, However, multinational multinational managers managers are are guests guests inin other other nations nations •• Ethical Ethical decision decision making making must must go go beyond beyond legal legal constraints constraints Copyright© 2005 South-Western/Thomson Learning All rights reserved Individual Ethical Decision Making •• There There isis no no single single accepted accepted ethical ethical theory theory that that managers managers can can use use •• There There are are generally generally accepted accepted theories theories that that can can be be used used as as guides, guides, however however •• Such Such ethical ethical analyses analyses can can help help raise raise managers’ managers’ awareness awareness ofof ethical ethical issues issues Copyright© 2005 South-Western/Thomson Learning All rights reserved ... ethics: ethics: unique unique ethical ethical problems problems faced faced by by managers managers operating operating across across national national boundaries boundaries •• More More complex complex... and Cultural Effects on Business Ethics Issues and Management Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 15.3: Comparison of Key Ethical Issues Identified by Senior... national culture culture affect affect ethical ethical decision decision making making and and management management Copyrightâ 2005 South-Western/Thomson Learning All rights reserved Learning Objectives