©2004 Prentice Hall5-1 Chapter 5: Ethics and Social Responsibility in International Business International Business, 4 th Edition Griffin & Pustay

©2004 Prentice Hall5-2 Chapter Objectives_1  Describe the nature of ethics  Discuss ethics in cross-cultural and international contexts  Identify the key elements in managing ethical behavior across borders  Discuss social responsibility in cross- cultural and international contexts

©2004 Prentice Hall5-3 Chapter Objectives_2  Identify and summarize the basic areas of social responsibility  Discuss how organizations manage social responsibility across borders  Identify and summarize the key regulations governing international ethics and social responsibility

©2004 Prentice Hall5-4 Exporting Jobs or Abusing People?  “Made in USA” – American Samoa and SaipanUSASaipan  NAFTA – low wages in Mexico NAFTAMexico  Walmart & More WalmartMore  South African minersminers  Canada and drug pricesdrug

©2004 Prentice Hall5-5 Ethical Behavior Ethical behavior usually refers to behavior that conforms to generally accepted social norms.

©2004 Prentice Hall5-6 Ethical Generalizations  Individuals have their own personal belief systems  People from the same cultural context will tend to hold similar beliefs  Behaviors can be rationalized  Circumstances affect adherence to belief systems  National culture is intertwined with ethics

©2004 Prentice Hall5-7 Figure 5.1 Ethics in a Cross-Cultural Context Cultural Context Behavior of Organization Toward Employees Behavior of Employees Toward Organization Behavior of Employees and Organization Toward Other Economic Agents

©2004 Prentice Hall5-8 Spectrum of Effects Free TradeNo Trade Jobs migrate Low wages Poor conditions Fewer jobs in developing countries Higher prices Fewer products Trade with Social Responsibility How?Code of Ethics

©2004 Prentice Hall5-9 Guidelines and Codes of Ethics  Written statements of the values and ethical standards that guide the firm’s actions  Examples –Johnson & Johnson-- IBEIJohnsonIBEI –General Mills-- LillyMillsLilly

©2004 Prentice Hall5-10 What do you do… when the country in which you are doing business does not have a code of ethics compatible with your own? Gao Feng in China Case.

©2004 Prentice Hall5-11 Acceptability of Bribery  Acceptable –Russia –China –Taiwan –South Korea  Unacceptable –Australia –Sweden –Switzerland –Austria The U.S., Japan, and Italy fell between the two extremes.

©2004 Prentice Hall5-12 Areas of Social Responsibility  Organizational stakeholders  Natural environment  General social welfare

©2004 Prentice Hall5-13 Corporate Excellence  L.L. Bean  Toyota  Lands’ End  Dell Computer  DaimlerChrysler  BP

©2004 Prentice Hall5-14 A joint venture between Anglo- American and the Zambian government seeks to mine copper while minimizing harm to the environment

©2004 Prentice Hall5-15 Map 5.1 Social Responsibility Hot Spots

©2004 Prentice Hall5-16 Figure 5.3 Approaches to Social Responsibility Least Responsible Most Responsible Obstructionist Defensive Accommodative Proactive

©2004 Prentice Hall5-17 Obstructionist Stance  Do as little as possible to address social or environmental problems  Deny or avoid responsibility  Examples –Astra –Nestle –Danone

©2004 Prentice Hall5-18 Defensive Stance  Do what is required legally, but nothing more  Corporate responsibility is to generate profits  Example –Philip Morris

©2004 Prentice Hall5-19 Accommodative Stance  Meet ethical and legal requirements and more  Agree to participate in social programs  Match contributions by employees  Respond to requests from non-profits  No proactive behavior to seek such opportunities

©2004 Prentice Hall5-20 Proactive Stance  Strong support of social responsibility  Viewed as citizens of society  Seek opportunities to contribute  Examples –McDonald’s –The Body Shop –Ben & Jerry’s

©2004 Prentice Hall5-21 Managing Social Responsibility Planning Decision Making Consideration Evaluation

©2004 Prentice Hall5-22 Implementing Social Responsibility  Legal Compliance  Ethical Compliance  Philanthropic Giving

©2004 Prentice Hall5-23 Informal Dimensions of Social Responsibility  Leadership  Organizational culture  Whistle-blowing

©2004 Prentice Hall5-24 Corporate Social Audit  Tool for the evaluation of social responsibility effectiveness  Formal and thorough analysis  Conducted by task force

©2004 Prentice Hall5-25 Steps in Corporate Social Audit Define social goals Analyze resources devoted to each goal Determine degree of achievement for each goal Make recommendations

©2004 Prentice Hall5-26 Regulating International Ethics and Social Responsibility  Foreign Corrupt Practices Act (FCPA)  Alien Tort Claims Act  Anti-Bribery Convention of the Organization for Economic Cooperation and Development  International Labor Organization (ILO)