ETHICS AND CORPORATE SOCIAL RESPONSIBILITY IN A GLOBAL CONTEXT Chapter 6

Ethics and corporate social responsibility in a global context Learning objectives Explain how conflict affects business and give examples of how business can contribute to conflict prevention and management. Identify and assess the challenges faced by companies in selling their products and services to the poor. Outline and evaluate the ways in which corruption affects the economy and business.

Ethics and corporate social responsibility in a global context TOPICS The global context of business activity Operating in conflict zones Role of business in poverty alleviation Corruption: From business as usual to economic malaise

THE GLOBAL CONTEXT OF BUSINESS ACTIVITY Ethics and corporate social responsibility in a global context THE GLOBAL CONTEXT OF BUSINESS ACTIVITY Globalisation of economic activity Globalisation of culture Globalisation of politics Ethical issues: Corruption, Labour standards Product safety Imposing foreign values Workspace practices Management across national borders Human rights issues Global ethical standards WTO, UN

Ethics and corporate social responsibility in a global context OPERATING IN CONFLICT ZONES

Ethics and corporate social responsibility in a global context OPERATING IN CONFLICT ZONES Business risk and costs: Security costs Material losses Impact on share prices Litigation costs What can businesses do? Mediation (venue, funding) Upholding of sanctions Peacekeeping (facilitate relationships and information)

Ethics and corporate social responsibility in a global context ROLE OF BUSINESS IN POVERTY ALLEVATION The nature of poverty: Poverty has physical, material and psychological dimensions. The state has been ineffective in helping the poor. The poor depend on friends and informal networks. Families suffer under the tension of poverty. Social network and support are unravelling.

Ethics and corporate social responsibility in a global context ROLE OF BUSINESS IN POVERTY ALLEVATION

ROLE OF BUSINESS IN POVERTY ALLEVATION Ethics and corporate social responsibility in a global context ROLE OF BUSINESS IN POVERTY ALLEVATION Helping the poor through business The poor represent a large pool of potential customers and offer a good market to test and develop products. It benefits companies but also helps the poor access to services and reduce their cost of living. Distribution and adaptation of product and service is key. E.g. Shampoo, tea and medicine can be sold in s ingle-servings rather than in mega-packs However, selling to the poor is not the same as responsible business

Ethics and corporate social responsibility in a global context CORRUPTION: FROM BUSINESS AS USUAL TO ECONOMIC MALAISE

CORRUPTION: FROM BUSINESS AS USUAL TO ECONOMIC MALAISE Ethics and corporate social responsibility in a global context CORRUPTION: FROM BUSINESS AS USUAL TO ECONOMIC MALAISE Factors that influence corruption across countries: Regulatory power of state Economic development Education and human capital The less power the public sector has, the fewer opportunities for corruption Low income countries tend to have greater levels of corruption Low human capital (poor education) tend to lead to corruption with countries

CORRUPTION: FROM BUSINESS AS USUAL TO ECONOMIC MALAISE Ethics and corporate social responsibility in a global context CORRUPTION: FROM BUSINESS AS USUAL TO ECONOMIC MALAISE Factors that influence corruption across countries: Public sector wages Culture and social norms Expectations on corruption Low wages is associated with corruption as bureaucrats seek to top-up their wages Exchanging gifts are in many countries seen as a part of the business relationship The fewer the people that are believed to be corrupt the less corruption tend to take place

Ethics and corporate social responsibility in a global context CORRUPTION: FROM BUSINESS AS USUAL TO ECONOMIC MALAISE But is corruption really so bad? Corrupt governments may be more efficient that non- corrupt once Corruption may improve allocation efficiency. Corruption may speed up the slow process of government bureaucracy. Corruption has less adverse effects when it is centralized as opposed to decentralized.

Ethics and corporate social responsibility in a global context CORRUPTION: FROM BUSINESS AS USUAL TO ECONOMIC MALAISE Fighting corruption The fight against corruption has intensified since the 1990s Voluntary initiatives: The Global Compact The international Chamber of Commerce Rules against Extortion and Bribery The Extractive Industry Transparency Initiative A number of regulatory measure has been taken: US Foreign Corrupt Practicse Act (1977) EU Convention on Corruption (1997) OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transaction (1999)

Ethics and corporate social responsibility in a global context CORRUPTION: FROM BUSINESS AS USUAL TO ECONOMIC MALAISE Fighting corruption US foreign Corrupt Practices Act (FCPA), enacted in 1977, which prohibits US companies from providing anything of value to foreign officials for obtaining or retaining business. EU Convention on Corruption, adopted in 1997, which consdiers bribes to be paid inside and outside the European Union Criminal and in this way provides for the prosecution of civil servants from the EU and its members states.

Ethics and corporate social responsibility in a global context CORRUPTION: FROM BUSINESS AS USUAL TO ECONOMIC MALAISE Fighting corruption OECD Convention on Combating Bribery of Foreign Public Officials in International Transactions from 1999 requires participating countries to introduce and enforce laws that make it a crime for domestic companies to ‘offer, promise, or give any undue pecuniary advantage, whether directly or through intermediaries, to any foreign public official’ to gain advantage or business relations The Global Compact, a voluntary initiative set fourth by the United Nations,. Invites companies to ‘work against corruption in all its form, including extortion and bribery’ through the development of policies and concrete programmes.

Ethics and corporate social responsibility in a global context SUMMARY The poor are increasingly seen as a promising market segment. Corruption distort competition and functioning of the free markets by giving and invisible advantage to companies that are ready to pay a bribe. Few industries gain from violent conflict. Zones of conflict are normally a source of risk and additional expenses for companies.