Fundamentals of International Business - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  CHAPTER 6: Social Responsibility and NGOs Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Fundamentals of International Business Key Terms corporate social responsibility (CSR) business ethics ethical imperialism cultural relativism pollution resource depletion sweatshops corporate corruption dumping predatory dumping microcredit non-governmental organizations (NGOs) Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Fundamentals of International Business Chapter Objectives By the time you finish this chapter, you should be able to: Assess positive and negative effects of MNCs on the countries in which they operate, including the impact on the norms and practices of local and indigenous cultures Evaluate the ethical issues that arise for companies competing internationally in relation to the following groups: consumers, stakeholders, employees, the host country, and society as a whole Analyze the way in which international development agencies and NGOs promote economic progress in developing countries Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Fundamentals of International Business Chapter Objectives Compare Canada with other countries with respect to cultural theories and viewpoints, as they relate to ethics in international business Describe working conditions in various international markets Explain how globalization creates the need for standardization of products, services, and processes Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

What is Corporate Social Responsibility? The duty of a company’s management to work in the best interests of the society it relies on for its resources (human, material, and environmental), to advance the well-being of society, and to act as a good global citizen through its policies. Used under license from Shutterstock, Inc. Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Fundamentals of International Business CSR Video Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

What is Corporate Social Responsibility? Corporate social responsibility can take many forms, including: Making charitable donations Treating employees ethically Being environmentally friendly Ensuring safe working environments Sponsoring local sports teams Creating and promoting diverse (hiring people from different sexual, racial and ethical backgrounds) workplaces Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

What is Corporate Social Responsibility? Benefits of CSR Criticisms of CSR Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Fundamentals of International Business Thinking Question Should companies by socially responsible? Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

What is Corporate Social Responsibility? Stakeholder Analysis Used to determine which group’s interests are most important when a company is faced with an ethical dilemma Primary stakeholders directly affect the company and its profitability Secondary stakeholders have an impact on the company, but do not directly influence its success or contribute to profitability Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

What is Corporate Social Responsibility? Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Monster’s Inc Explains CSR Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Fundamentals of International Business Business Ethics Business ethics A set of rules or guidelines that management or individuals follow when making decisions facing their company. Used under license from Shutterstock, Inc. Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Fundamentals of International Business Business Ethics The guidelines used when making decisions include: Domestic and international laws The company’s code of ethics and corporate governance The personal values of the individual making the decision Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Fundamentals of International Business Business Ethics Decision makers can use the test of disclosure method to solve ethical dilemmas: “How would we feel if everyone knew about the decision we made?” If they are not concerned, they have likely made an ethical choice. If they are, they have probably not made the right decision. Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Fundamentals of International Business Business Ethics There are two methods of thinking about ethical issues in a global context: Ethical imperialism A view of culture based on the idea that there are certain universal truths or values that are standard across all cultures; if something is wrong in one country, it is wrong in all countries. Cultural relativism A view of culture based on the idea that a culture’s different values should be respected, as the ethics of one culture are not better than those of another. Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Fundamentals of International Business Business Ethics Ethical Imperialism Cultural Relativism One set of values for all cultures Values are dependent on the culture Right and wrong are the same in all cultures Right and wrong depend on local values A person’s ethics are not situational When in Rome, do as the Romans do Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Ethical Issues in International Business Ethical issues in international business arise in the following areas: Environmental issues Sweatshops Corporate corruption Dumping Poverty Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Ethical Issues in International Business Environmental issues Sustainable development—the ability to meet human consumption while maintaining the environment—is a critical issue for businesses Many companies have been responsible for pollution and resource depletion Companies and governments often resist environmental plans that will impede economic growth Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Fundamentals of International Business PB Oil Spill Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Ethical Issues in International Business Sweatshops Factories in underdeveloped and developing countries in which employees work in unsafe environments, are treated unfairly, and have no chance to address those conditions. Why do sweatshops exist? Global competitiveness, corporate greed, and consumer expectations of low prices. Companies that own factories in developing nations must ensure that workers are paid a living wage and are able to speak up against abuses. Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Fundamentals of International Business Nike’s Sweatshops https://www.youtube.com/watch?v=wzq31hpGZOI Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Ethical Issues in International Business? Corporate corruption The involvement in illegal activities, such as bribery and fraud, to further one’s business interests. Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

WorldCom biggest accounting fraud in Formerly known as WorldCom, now known as MCI, this U.S.-based telecommunications company was at one time the second-largest long distance phone company in the U.S. Today, it is perhaps best known for a massive accounting scandal that led to the company filing for bankruptcy protection in 2002. WorldCom executives effectively fudged the company's accounting numbers, inflating the company's assets by around $12 billion dollars. The swift bankruptcy that followed led to massive losses for investors. Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

BRE-X: Inside The $6 Billion Gold Fraud In 1993, a prospector named Michael de Guzman walked out of the jungles of Borneo with extraordinary news: he found gold. During that period, the market value of de Guzman's employer, Bre-X Minerals, went from nothing to $6 billion. The problem: there was no gold. Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Fundamentals of International Business Thinking Question Should you pay a bribe in a country where it is common practice if it will increase business? Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Ethical Issues in International Business Dumping Selling products in a foreign country below the cost of production or below the price in the home country. Predatory dumping An anti-competitive business practice in which foreign companies price their products below market value to increase sales and force domestic competition out of business, then raise their prices. Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Ethical Issues in International Business Poverty Over one-quarter of the world’s population lives in intense poverty—accompanied by hunger, lack of shelter and medical care, limited access to education, high rates of disease, etc. Used under license from Shutterstock, Inc. Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Ethical Issues in International Business Microcredit Microcredit—the granting of very small loans to spur entrepreneurship—is one way that poverty is being addressed Microcredit loans are mainly granted to women, who use the loans to start small businesses and their earnings to support their families Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Fundamentals of International Business Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Ethical Issues in International Business Photo: Used under license from Shutterstock, Inc. Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Non-Governmental Organizations (NGOs) Non-profit organizations with a service and development focus that are composed mostly of volunteers, and are predominantly funded through charitable contributions. NGOs may center on trade, education, youth, improving the environment, human rights, or other issues. Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Application Questions to consider On page 179 question #21+22 Chapter 6: SOCIAL RESPONSIBILITY AND NGOs Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.