Managing Interdependence: Social Responsibility and Ethics The Social Responsibility of MNCs The “pros and cons” of MNCs “Come back multinationals.” The Economist, 11/26/88:73 Case examples: Tobacco, Levi Strauss and workers rights, South Africa International social responsibility Ethics Boyacigiller’s notes on business ethics/why problems occur/an analytical framework and how to create an ethical organization Codes of Conduct Examples: International codes of conduct for MNCs Specific cases: Questionable payments, Ethics in Europe See Economist article Managing Interdependence Subsidiaries in the U.S. Managing subsidary-host country interdependence Nafta Managing environmental interdependence

Carroll’s three dimensional model of social responsibility philosophy of responsiveness: reaction/defense/accomodation/proaction social responsibilities: ethical resp/economic/legal/discretionary social issues: environment/consumerism/discrimation/safety * can redefine these by stakeholders -Deresky, 1997:487

ETHICS What kind of ethical dilemmas do managers face? What is business ethics? Why do good people do bad things? How to decide if something is unethical How to create an ethical organization

ETHICS Ethics is the conception of right and wrong Business ethics is the application of general ethical ideas to business behavior. Business ethics is not a special set of ethical ideas different from ethics in general and applicable only to business From: Frederick, Post & Davis, Business 1992:53).

Why ethical problems occur in business Personal gain and self interest One won’t get caught Competitive pressures on profits Business goals vs. personal values The company, if benefiting will protect me It’s not “really” illegal or immoral. Cross-cultural contradictions Adapted from Gellerman, HBR, 1986 and Frederick, Post& Davis, 1992

3 Methods of Ethical Reasoning Utilitarian Rights Justice

An analytical approach to ethical problems Ask: –Utility: Do benefits exceed costs? –Rights: Are human rights respected? –Justice: Are benefits and costs fairlydistributed? Compare results –All yes: ethical –All no’s: unethical –If mixed then must assign priorities to utility, justice and rights---- From: Frederick, Post & Davis, 1992:p.91

Making ethics work in corporations 1. Top management commitment and involvement 2. Code of ethics 3. Ethics committees 4. Ethics, advisors, advocates and directors 5. Ethics hot lines 6. Ethics training programs 7. Ethics audits 8. Tie ethical behavior to performance evaluation

Code of Worldwide Business Conduct and Operating Principles: Caterpillar Business purpose Business ethics Human resources/human relationships Observance of local laws Ownership and investment Privacy of information about employees Disposal of wastes/Product quality and uniformity Competitive conduct/ Relationships with suppliers Corporate facilities/Sharing of technology Accounting records and financial reporting/Intercompany pricing Currency transactions Differing business practices Public responsibility/Relationships with public officials Disclosure of information/Inside information International information flow Free enterprise, worldwide Reporting code compliance

Is it possible to develop a universal code of ethics? Moral universalism/ethnocentrism/ethical relativism Define each of these Global corporate culture: – note Deresky views this as inevitable---in fact problematic

When judging whether an action is ethical Moral principle 2. Law 3. Custom and tradition In an ideal society the triangle would be equilateral Where law and custom do not adequately protect the consumer/employee is it enough to allow foreign customs to reign? It is not enough for business to beome a legal partner in destruction. Ethics requires more…We must see the law not as a ceiling but as a floor” (Tuleja, 1987:159). Tuleja, Beyond the Bottom Line.

The stateless corporation Global allegiance vs. nationalism

The stateless corporation Are we above governments? No. We answer to governments. We obey the laws in every country in which we operate, and we don’t make the laws. However, we do change relations between countries. We function as a lubricant for worldwide economic integration…We don’t create the process, but we push it. We make visible the invisible hand of global competition. Percy Barnevik, 1991.