International Management Ethics / Social Responsibility

Ethics / Soc. Resp. Sites (WTO guidelines for developing countries) (United Nations listing of least developed countries) (European perspective) (Carnegie Council on Ethics) (Ethical dilemnas) anagement&zu=http%3A%2F%2Fwww.islamist.org%2Fimages%2Fet hicshm.pdfhttp://management.about.com/gi/dynamic/offsite.htm?zi=1/XJ&sdn=m anagement&zu=http%3A%2F%2Fwww.islamist.org%2Fimages%2Fet hicshm.pdf

Ethics Around the World Ethics -the study of morality and standards of conduct –Unethical Business Practices  Insider Trading Scandals  Bribes  “Mad” Syndrome –mergers, acquisitions, divestitures

The Opaque Index Measures the effect of unclear legal systems and regulations China Russia Indonesia Turkey South Korea Czech Republic Romania Kenya Ecuador Thailand Guatemala India Poland Venezuela Pakistan Argentina Brazil Taiwan Columbia Japan South Africa Egypt Lithuania Peru Greece Israel Uruguay Hungary Italy Mexico Hong Kong Britain Chile United States Singapore Current Index?

Regulating Foreign Investment  Regulation of Acquisitions –MNC’s must obtain host government clearance prior to establishing new operations or purchasing ongoing businesses  Purpose: To control own economies and gain independence from foreign companies

Examples of unethical conduct  Parmelat – Falsifying records and documents to conceal losses and to funnel money privately (up to $8 Billion)  The Recruit company - allowed politicians and influential business people to buy cut-rate stock  Honda of America- settled a $6 million discrimination pay back to 370 African American women  EEOC filed sexual harassment lawsuit against Mitsubishi on behalf of 300 women  Enron…. Arthur Anderson…(sophisticated accounting manipulation)  Adelphia – Diverting corporate funds to private (family) use, and using off-book financing of $3.5 Billion)  Global Crossings – falsifying marketing and cost information  Etc..

Regulating Foreign Investment  Ethical concerns about the reciprocity of the relationship between the home country of the MNC and the host country  Regulation of Acquisitions –The U.S. regulates the acquisition of domestic companies by foreign investors  Other countries are following the U.S.’s lead –EU regulations making it more difficult for non-European companies to do business in Europe –Nonreciprocal trade partners  Nations that sell (export) goods to other countries but do not buy (import) from them

 Reciprocity –Is their an ethical and social responsibility to engage in reciprocal trade?  Example: obligations to maintain an import/export balance with trading partner? –retaliation? ongoing issue between Japan and the U.S.

Ethics and Social Responsibility Around the World  Ethics –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  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 Ethical Problems and Concerns Japan

Ethics and Social Responsibility Around the World  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 Ethical Problems and Concerns Japan

Ethics and Social Responsibility Around the World  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 Ethical Problems and Concerns Europe CulturePersonal values IncentivesLegal restrictions

Ethics and Social Responsibility Around the World  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 Ethical Problems and Concerns Europe

 Status of women managers in Europe Ethical Problems and Concerns 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

 Status of women managers in Europe Ethical Problems and Concerns 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 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 Ethical Problems and Concerns China Ethics and Social Responsibility Around the World

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 (Percentage saying “A Lot,” or “some” trust) Average Across All 15 Countries Surveyed NGO leaders Leaders at the U.N. Spiritual/religious leaders Leaders of Western Europe Managers of the global economy Managers of the national economy Executives of MNCs Leaders of the U.S.A 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 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. Table 3-1 Principles of the Global Compact Adapted from Table 3-1: Principles of the Global Compact

Response to Social Obligations 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. Table 3-1 Principles of the Global Compact Adapted from Table 3-1: Principles of the Global Compact

Response to Social Obligations 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. Table 3-1 Principles of the Global Compact Adapted from Table 3-1: Principles of the Global Compact

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

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

Corruption and Foreign Corrupt Practices Act(s)  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 Project ratingChallengeOpportunity Very good Table 3-2 Copenhagen Consensus Development Priorities 1DiseasesControl of HIV/AIDS 2MalnutritionProviding micro nutrients 3Subsidies and tradeTrade liberalization 4DiseasesControl of malaria 5MalnutritionDevelopment of new agricultural technologies 6Sanitation and waterSmall-scale water technology for livelihoods 7Sanitation and watercommunity-managed water supply and sanitation Adapted from: Table 3.2: Copenhagen Consensus Development Priorities Good

Ethics From a Global Perspective  Universality of ethical guidelines / principles –Background (shapes the foreground) –Procedural knowledge (communication)  E.g., reciprocity, fairness  Socialization processes –Attitudes –Theories (believe systems) = Major principles = institutional rules = actions

Principles for Universal Morality 1. Ethical Egoism 2. Utilitarianism 3. Natural Rights Theory 4. Social Contract Theory 5. Kantian Duty Ethics 6. Discourse Ethics

What are some facets?  Social  Economic –Formal and informal economies  Environmental  Institutional –Policy and capacity issues

Differences  Economic System –Market vs. command  Free-Market (voluntary) –Tradition-based society –Lockean Rights (Life, liberty, property) –Smith’s (competition advances welfare, government intervention does not.) –Say’s law: All resources used, demand will always expand to absorb available supply –Social Darwinism: Economic competition produces human progress (survival of fittest) –Naturalistic fallacy: Assumption that naturally is best –Alienation (depriving working class of full potential)

Government Role  Economic substructure –Materials and social controls  Social Superstructure –Ideologies, government  Forces of production –Resource controls  Relations of productions –Social controls (organization of workers)

Philosophical

Possibility of “Universality?” 1. Respect for core human values Determines the absolute moral threshold for business activities 2. Respect for local traditions 3. Recognizing that context influences the determination of what is “right” or “wrong” 4. Communication Do more than “post” codes of conduct