Chapter Managing Ethical and Social Responsibility Challenges in Multinational Companies © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 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 © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 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 © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 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 © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part International Business Ethics •• •• •• •• Ethics Ethics deal deal with with the the “oughts” “oughts” ofof life life Although Although business business decision decision making making isis dominated dominated by by economics, economics, they they also also have have consequences consequences for for people people 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 International International business business ethics ethics isis concerned concerned with with ethical ethical dilemmas dilemmas inin international international contexts contexts © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part International Business Ethics •• 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 •• Ethical Ethical dilemmas dilemmas seldom seldom have have clear/unambiguous clear/unambiguous answers answers •• MNCs MNCs often often have have power power and and assets assets that that are are equal equal toto foreign foreign governments, governments, raising raising more more ethical ethical concerns concerns over over the the use use ofof such such power power © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Corporate Social Responsibility •• Idea Idea that that businesses businesses have have aa responsibility responsibility toto society society beyond beyond making making profits profits •• Concerned Concerned with with ethical ethical consequences consequences ofof company company policies policies and and procedures procedures •• Must Must take take into into account account the the welfare welfare ofof other other constituents constituents inin addition addition toto stockholders stockholders © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Exhibit 4.1a: Areas of Ethical and Social Responsibility Concerns for the Multinational Company © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Exhibit 4.1b: Areas of Ethical and Social Responsibility Concerns for the Multinational Company © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Primary and Secondary Stakeholders •• Primary Primary Stakeholders: Stakeholders: directly directly linked linked toto aa company’s company’s survival survival and and include include customers, customers, suppliers, suppliers, employees, employees, and and shareholders shareholders •• Secondary Secondary Stakeholders: Stakeholders: less less directly directly linked linked toto the the company’s company’s survival survival and and include include the the media, media, trade trade associations, associations, and and special-interest special-interest groups groups © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Toward Transnational Ethics •• Ethical Ethical convergence: convergence: growing growing pressure pressure toto follow follow the the same same rules rules inin managing managing ethical ethical behavior behavior and and social social responsibility responsibility •• Globalization Globalization dramatically dramatically increases increases contact contact among among people people from from different different ethical ethical and and cultural cultural systems systems © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Four Basic Reasons for Ethical Convergence 1.1.The The growth growth ofof international international trade trade and and trading trading blocks blocks 2.2.Interaction Interaction between between trading trading partners partners increases increases pressures pressures toto imitate imitate business business practices practices 3.3.Varied Varied cultural cultural background background employees employees require require common common standards standards 4.4.An An increasing increasing number number ofof business business watchdogs watchdogs © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Prescriptive Ethics •• •• •• •• •• Suggested Suggested guidelines guidelines for for the the ethical ethical behavior behavior ofof MNCs MNCs Three Three moral moral languages languages should should guide guide MNCs MNCs •• Avoiding Avoiding harm harm •• Rights Rights and and duties duties •• Social Social contract contract These These three three are are the the easiest easiest toto specify specify inin written written codes codes Also Also most most appropriate appropriate inin heterogeneous heterogeneous cultures cultures And And work work irrespective irrespective ofof national national backgrounds backgrounds © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part International Ethics Guideline Sources •• The The United United Nations Nations Universal Universal Declaration Declaration ofof Human Human Rights Rights •• The The United United Nations Nations Code Code ofof Conduct Conduct on onTransnational Transnational Corporations Corporations •• The The European European Convention Convention on on Human Human Rights Rights •• The The International International Chamber Chamber ofof Commerce Commerce Guidelines Guidelines for for International International Investment Investment © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part International Ethics Guideline Sources •• The The Organization Organization for for Economic Economic Cooperation Cooperation and and Development Development Guidelines Guidelines for for Multinational Multinational Enterprises Enterprises •• The The Helsinki Helsinki Final FinalAct Act •• The The International International Labor Labor Office OfficeTripartite Tripartite Declarations Declarations ofof Principles Principles Concerning Concerning Multinational Multinational Enterprises Enterprises and and Social Social Policy Policy © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Exhibit 4.7: A Code of Conduct for the Multinational Company (sample) © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part •• •• 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 Codes Codes may may not not be be easily easily enforceable enforceable Safe Safe guides guides toto ethical ethical management management inin foreign foreign countries countries © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 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 © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 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, or or convenient convenient relativism relativism •• Similarly, Similarly, moral moral universalism universalism can can lead lead toto problems problems ofof cultural cultural imperialism imperialism © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 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 © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Exhibit 4.8: Decision Points of Ethical Decision Making in Multinational Management © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Exhibit 4.8 (continued): Decision Points of Ethical Decision Making in Multinational Management © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 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 •• May May begin begin analysis analysis atat different different points points •• 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 © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 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 toto resolve resolve all all ethical ethical dilemmas dilemmas •• Generally Generally accepted accepted philosophical philosophical theories theories 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 •• Helps Helps clarify clarify reasons reasons behind behind ethical ethical choices choices © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Conclusion •• •• •• •• •• •• Chapter Chapter provides provides background background on on business business ethics ethics Multinational Multinational managers managers face face ethical ethical dilemmas dilemmas similar similar toto their their domestic domestic counterparts counterparts Challenges Challenges are are magnified magnified by by the the complexity complexity ofof working working across across different different countries countries and and cultures cultures National National contexts contexts influence influence ethics ethics inin organizations organizations Decision Decision models models sensitizes sensitizes awareness awareness ofof ethics ethics issues issues Despite Despite some some convergence, convergence, ethical ethical differences differences exist exist © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part ... ethics: ethics: unique unique ethical ethical problems problems faced faced by by managers managers operating operating across across national national boundaries boundaries International International... Index Index developed developed by by Transparency Transparency International, International, estimates estimates extent extent ofof bribes bribes accepted accepted by by public public officials officials... national culture culture affect affect ethical ethical decision decision making making and and management management © 2011 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated,