4-1 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved.

4-2 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Part One: Environmental Foundation International Management, 5th ed.

4-3 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. International Management, 5th ed. Hodgetts and Luthans Chapter Four Ethics and Social Responsibility

4-4 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved.  EXAMINE some of the major ethical issues and problems confronting MNCs in selected countries  EXPLAIN some of the ways that host countries are attempting to regulate foreign investments and why reciprocity is such an important trade issue  DISCUSS some of the action being taken by selected industrialized countries to be more socially responsive to world problems Objectives of the Chapter

4-5 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Ethics Around the World  Ethics  The study of morality and standards of conduct  Growing number of MNCs have prepared codes of ethics  Ethical behavior in one country is sometimes viewed as unethical behavior in other countries  Ethical Problems and Concerns in Japan  Political and Business Scandals  Forced resignations of politicians for assisting private corporations  Failure of banking system to take steps to end the recession  Relationship of politicians to organized crime  Business firms engaged in unethical and illegal practices

4-6 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Ethics Around the World (cont.)  Ethical Problems and Concerns in Japan (cont.)  Hostile Work Environment Issues  Sexual harassment  Equal Opportunity Issues  Gender discrimination  Creates problems for Japanese firms operating in the U.S  Social Responsibility Implication from Lobbying  Some Americans are concerned because Japan spends more money than other countries on lobbying in the U.S.  Ethical Problems and Concerns in Europe  Europeans differ from U.S. and Japan in some respects  French and German managers concerned about maintaining a successful business posture

4-7 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Ethics Around the World (cont.)  Status of Women Managers in Europe  Integration of women into the workforce is a critical goal  France  Although French women are making strides in the management ranks, they still are underrepresented in corporate management  French law guarantees equal treatment and equal professional opportunities  Enforcement of these laws is fairly weak  Germany  Women underrepresented in high-level management  Has introduced laws mandating equal opportunity  Laws have had a greater impact on employment in the public sector  Need for competent managers should increase the number of women in managerial jobs

4-8 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Ethics Around the World (cont.)  Status of Women Managers in Europe (cont.)  Great Britain  Women not well represented in high-level managerial positions  Women establishing associations to develop networking and increase lobbying power  Growing number of British companies proactively trying to recruit and promote women  Discrimination lawsuits becoming more common  Some companies trying to avoid potential litigation by attempting to create diversity in their workforces

4-9 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Ethics Around the World (cont.)  Ethical Problems and Concerns in China  Human rights violations trouble MNCs contemplating doing business in China  Piracy, Counterfeiting, and Industrial Spying Problems  U.S. taking hard line against Chinese piracy of intellectual property  Chinese government has closed down some factories and offered rewards for information about piracy  Opaque index  Measures the effect of unclear legal systems and regulations  China’s system is the most opaque  Chinese-sponsored spying on foreign MNCs has increased  Chinese partners in joint ventures may break the agreement and walk off with patents and/or capital

4-10 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Figure 4-1 The Opaque Index 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

4-11 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Ethics Around the World (cont.)  Ethical problems and Concerns in China (cont.)  Status of Women Managers in China  Women managers confront a “glass ceiling” due to:  Cultural stereotypes  Restricted opportunities  Discrimination that is both blatant and subtle

4-12 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. 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

4-13 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Regulating Foreign Investment (cont.)  Implications of Reciprocity  International meetings being held to discuss the ethical and social responsibility to engage in reciprocal trade  Concerns about countries with massive trade surpluses  U.S. has targeted relations with Japan, China, and Brazil  retaliation considered as a means to force reciprocity  EU disagrees with the use of sanctions

4-14 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Response to Social Obligations  Foreign Corrupt Practices Act (FCPA) Revisited  Makes it illegal for U.S. companies to attempt to influence foreign officials through personal payments or political contributions  Internal Revenue Service audits the expenses of MNCs to make sure that there are no deductions for illegal activities  Benefits of the FCPA outweigh its costs  Forced to conclude that bribery has not played a major role in foreign business conducted by U.S. companies  Bribery and corruption still exist, however

4-15 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Figure 4-2 The Corruption Index Finland Singapore Hong Kong United States Germany Japan Taiwan Italy South Africa South Korea Nigeria Brazil Mexico Argentina China Thailand Philippines India Russia Indonesia

4-16 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Response to Social Obligation (cont.)  Foreign Corrupt Practices Act Revisited (cont.)  More efforts to force compliance  FCPA violators now subject to Federal Sentencing Guidelines  Agreement recently signed by 29 members of the Organization for Economic Cooperation and Development (OECD)  Prohibits the practice of bribing foreign government officials  Does not outlaw payments to political party leaders  U.S. wants to expand the scope of the agreement

4-17 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved. Response to Social Obligation (cont.)  International Assistance  Governments of developed countries display social responsibility when providing assistance to underdeveloped countries  Assistance has taken the form of:  Gifts of food, machinery, and equipment  Forgiving foreign debts  MNCs do not provide foreign aid to countries  Some play philanthropic role in local communities  This strategy serves to protect the MNCs foreign investment