PowerPoint slides by R. Dennis Middlemist, Professor of Management, Colorado State University

Ethics and Social Responsibility The specific objectives of this chapter are: EXAMINE some of the major ethical issues and problems confronting MNCs in selected countries. DISCUSS some of the pressures on and action being taken by selected industrialized countries and companies to be more socially responsive to world problems.

Ethics and Social Responsibility The specific objectives of this chapter are: EXPLAIN some of the initiatives to bring greater accountability to corporate conduct and limit the impacts of corruption around the world.

Ethics and Social Responsibility Around the World Study of morality and standards of conduct Vital role of ethics in conduct of business Sarbanes-Oxley Act (2002) CEO and CFO required to approve and declare accurate all financial statements provided to SEC for publication Ensure transparency of all disclosures Make content appropriately accessible for audit and verification MNCs face difficulty because of differing standards between countries where they operate

Ethics and Social Responsibility Around the World Ethical Problems and Concerns Japan Political and business scandals Japanese cabinet member forced to resign for receiving over $2 million from Japanese corporations Failure of banking system to take corrective action regarding Japan’s recession Concealing customer complaints Failure to inform car owners about possible auto defects and maintenance of two sets of customer complaint records Encouraging employees to mislead government inspectors

Ethics and Social Responsibility Around the World Ethical Problems and Concerns Japan Hostile work environment Cultural expectations Traditional role of females and female employees Sexual harassment may not be considered a moral issue Equal opportunity issues Refusal to hire women or promote them into management positions Mitsubishi sued by U.S. EEOC Social Responsibility/Lobbying

Ethics and Social Responsibility Around the World Ethical Problems and Concerns Europe Survey of 124 U.S., 72 French, and 70 German managers responding to five ethical vignettes In most cases, the U.S. managers’ responses were quite different from those of their European counterparts U.S. managers more concerned with ethical and legal questions French and German managers more concerned with maintaining a successful business posture Reasons for difference between countries Culture Personal values Incentives Legal restrictions

Ethics and Social Responsibility Around the World Ethical Problems and Concerns Europe Status of women managers in Europe France Proportion of women in the labor force trends Glass ceiling French law guarantees equal treatment and professional opportunities Enforcement is weak

Ethics and Social Responsibility Around the World Ethical Problems and Concerns Europe Status of women managers in Europe Germany Remaining differences between East and West Germany Proportion of females in higher positions Professional qualifications relate inversely to hierarchical position Lack of objective criteria for selection to higher positions Has mandated equal opportunity throughout the public sector

Ethics and Social Responsibility Around the World Ethical Problems and Concerns Europe Status of women managers in Europe Great Britain 45 percent of workforce is female Not well represented at higher levels Women creating associations for networking and lobbying Women’s Engineering Society The 300 Group Some companies becoming proactive in women’s work rights Discrimination lawsuits becoming more commonplace

Ethics and Social Responsibility Around the World Ethical Problems and Concerns China Ethical issues Workers not well paid (often work 12 hours a day, 7 days a week) Piracy of intellectual property, counterfeiting, and industrial spying Human rights violations Use of prisoner and child labor

Corporate Social Responsibility Corporate social responsibility (CSR) Actions of a firm to benefit society beyond the requirements of the law and the direct interests of the firm Pressure for greater attention to CSR Civil society Nongovernmental organizations (private, not-for-profits that focus on social, political and economic issues) CSR concerns Working conditions in factories and service centers Environmental impacts of corporate activities

Trust in Leaders 10 20 30 40 50 60 NGO leaders 52 Leaders at the U.N. 42 Spiritual/religious leaders 41 Leaders of Western Europe 36 Managers of the global economy 36 Managers of the national economy 35 Executives of MNCs 33 Leaders of the U.S.A. 27 10 20 30 40 50 60 Average Across All 15 Countries Surveyed Adapted from Figure 3-1: Trust in Leaders: Percentage Saying “A Lot” and “Some Trust”

Rise of Civil Society and NGOs Emergence of organized civil society and NGOs altered Business environment globally Role of MNC within global business environment NGOs in the U.S. and globally Save the Children Oxfam CARE World Wildlife Fund Conservation International

Rise of Civil Society and NGOs Corporations receiving heavy criticism Nike Levi’s Chiquita Major criticisms Exploitation of low-wage workers Environmental abuses Intolerable workplace standards Response to social obligations Agreements and codes of conduct Maintenance of standards in domestic and global operations Cooperation with NGOs regarding certain social issues

Response to Social Obligations Table 3-1 Principles of the Global Compact Human Rights Principle 1: Support and respect the protection of international human rights within their sphere of influence. Principle 2: Make sure their own corporations are not complicit in human rights abuses. Adapted from Table 3-1: Principles of the Global Compact

Response to Social Obligations Table 3-1 Principles of the Global Compact Labor Principle 3: Freedom of association and the effective recognition of the right to collective bargaining. Principle 4: The elimination of all forms of forced and compulsory labor. Principle 5: The effective abolition of child labor. Principle 6: The elimination of discrimination with respect to employment and occupation. Adapted from Table 3-1: Principles of the Global Compact

Response to Social Obligations Table 3-1 Principles of the Global Compact Environment Principle 7: Support a precautionary approach to environmental challenges. Principle 8: Undertake initiatives to promote greater environmental responsibility. Principle 9: Encourage the development and diffusion of environmentally friendly technologies. Anti-Corruption Principle 10: Business should work against all forms of corruption, including extortion and bribery. Adapted from Table 3-1: Principles of the Global Compact

Corporate Governance Stakeholders Board Managers shareholders Corporate Governance Structure Distribution of rights and responsibilities The system by which business corporations are directed and controlled Spells out the rules and procedures Setting objectives Means of attaining objectives Monitoring performance Making decisions

Corporate Governance Rules and regulations differ among countries and regions U.K. and U. S. systems are “outsider” systems Dispersed ownership of equity Large number of outside investors Many continental European countries are “insider” systems Ownership more concentrates Shares owned by holding companies, families or banks Other effects on corporate governance include Differences in legal systems Responsiveness and accountability of corporate managers to stakeholders

Corruption and Foreign Corrupt Practices Act Foreign Corrupt Practices Act (FCPA) Illegal for U.S. firms and their managers to attempt to influence foreign officials through personal payments of political contributions, including such tactics as “Entertainment” expenses “Consulting” fees Some evidence that discontinuing bribes does not reduce sales of the firm’s products or services in that country Some evidence that firms from other countries continue to win business through corrupt practices such as bribery Recent formal agreement by many industrialized nations to outlaw the practice of bribing foreign government officials

Corruption Index 20 40 60 80 100 120 140 Corruption Index Chile Italy 20 40 60 80 100 120 140 Corruption Index Chile Italy Brazil China India Japan Finland Taiwan Mexico Russia Nigeria Thailand Singapore Indonesia Hong Kong United States South Africa South Korea Philippines Adapted from Figure 3–2: Corruption Index: Ranking of Least Corrupt to Most

Corruption and Foreign Corrupt Practices Act Recent formal agreement by many industrialized nations to outlaw the practice of bribing foreign government officials Organization for Economic Cooperation and Development 29 members plus several other countries have signed on Fails to outlaw most payments to political party leaders. Does indicate growing support for anti-bribery initiatives

International Assistance Governments and corporations increase collaboration to provide assistance to communities and locales through global partnerships Best “investments” Controlling and preventing AIDS Fighting malnutrition Reducing subsidies and trade restrictions Controlling malaria

International Assistance Table 3-2 Copenhagen Consensus Development Priorities Project rating Challenge Opportunity Very good Diseases Control of HIV/AIDS Malnutrition Providing micro nutrients Subsidies and trade Trade liberalization Diseases Control of malaria Malnutrition Development of new agricultural technologies Sanitation and water Small-scale water technology for livelihoods Sanitation and water community-managed water supply and sanitation Good Adapted from: Table 3.2: Copenhagen Consensus Development Priorities

International Assistance Table 3-2 Copenhagen Consensus Development Priorities Project rating Challenge Opportunity Good Sanitation and water Research on water productivity in food production Government Lowering the cost of starting a new business Migration Lowering barriers to migration for skilled workers Malnutrition Improving infant and child nutrition Malnutrition Reducing the prevalence of low birth rate Fair Adapted from: Table 3.2: Copenhagen Consensus Development Priorities

International Assistance Table 3-2 Copenhagen Consensus Development Priorities Project rating Challenge Opportunity Fair Diseases Scaled-up basic health services Migration Guest-worker programs for the unskilled Climate “Optimal” carbon tax Climate The Kyoto protocol Climate Value-at-risk carbon tax Bad Source: Copenhagen Consensus Note: Some of the proposals were not ranked Adapted from: Table 3.2: Copenhagen Consensus Development Priorities

Millennium Development Goals Table 3-3 The U.N. Millennium Development Goals Goal 1: Eradicate extreme poverty and hunger. Goal 2: Achieve universal primary education. Goal 3: Promote gender equality and empower women. Goal 4: Reduce child mortality. Goal 5: Improve maternal health. Goal 6: Combat HIV/AIDS, malaria, and other diseases. Goal 7: Ensure environmental sustainability. Goal 8: Develop a Global Partnership for Development. Source: www.unmillenniumproject.org Adapted from: Table 3-3: The U.N. Millennium Development Goals