Prentice Hall, 2002 Chapter 13 Daniels 1 Chapter Thirteen Ethical and Socially Responsible Behavior

Prentice Hall, 2002 Chapter 13 Daniels 2 Chapter Objectives  To appreciate why ethical and socially responsible behavior is important for individuals and companies operating internationally  To realize that there are different norms internationally in what people conceive to be ethical and socially responsible behavior  To see that national environments may dictate that companies take different ethical and socially responsible actions  To understand some of the major areas of disagreement on what ethical and socially responsible behavior should be internationally  To conceive approaches companies can take to avoid criticism about their ethical and socially responsible behavior

Prentice Hall, 2002 Chapter 13 Daniels 3 Introduction  The concepts of ethical and socially responsible behavior are closely related  Ethical behavior: conforms to acceptable moral standards of conduct  Socially responsible behavior: more proactive rather than reactive to current social pressures

Prentice Hall, 2002 Chapter 13 Daniels 4 Why Study Ethical and Socially Responsible Behavior?  Both individuals and companies need to consider what is ethical and socially responsible behavior  From an individual standpoint, the concept of what is ethical or socially responsible may differ from other individuals

Prentice Hall, 2002 Chapter 13 Daniels 5 Why Study Ethical and Socially Responsible Behavior?  In an ethical and socially responsible situation, there are four alternatives that may be taken: Go along with the majority Try to persuade others to your viewpoint Leave the situation and surroundings Reach a compromise

Prentice Hall, 2002 Chapter 13 Daniels 6 Why Study Ethical and Socially Responsible Behavior?  We base our individual beliefs about what is right and wrong on: Our family and religious teachings The laws and social pressures of the societies in which we live Our observations and experiences Our economic circumstances

Prentice Hall, 2002 Chapter 13 Daniels 7 Why Study Ethical and Socially Responsible Behavior?  Companies have two possible objectives from ethical and socially responsible behavior: To create competitive advantages To avoid negative consequences by being perceived as irresponsible

Prentice Hall, 2002 Chapter 13 Daniels 8 International Differences  The perspectives of ethics and social responsibility can vary substantially from country to country

Prentice Hall, 2002 Chapter 13 Daniels 9 International Differences  Although individuals within any society have different values from others, there are norms that link people within a given society and differentiate their norms from those in other societies Relativism Affirms that ethical truths are relative to the groups holding them Normativism Holds that there are universal standards of behavior that individuals and companies should uphold  In actuality, most companies and their managers follow combinations of relativism and normativism

Prentice Hall, 2002 Chapter 13 Daniels 10 International Differences  Some people argue that the legal justification for ethical behavior is the only important one By this standard, a company or individual can do anything that is legal Of course, not every company or individual adheres to every aspect of the law Individuals sometimes consider some other factors when deciding whether or not to adhere to a law: o They consider the degree to which they break a law o They consider whether the end justifies the means

Prentice Hall, 2002 Chapter 13 Daniels 11 International Differences  Companies from industrialized countries own most foreign investments  One difference in reality concerns the environment  Some ethicists argue that managers should make decisions based on the greatest good for the greatest number of people

Prentice Hall, 2002 Chapter 13 Daniels 12 Some Ethical and Social Issues  Managers must deal with hundreds of ethical issues internationally  However, people often disagree about what is ethical  Arenas that can bring about dilemmas include: Labor issues Pollution of the environment Consumer protection

Prentice Hall, 2002 Chapter 13 Daniels 13 Some Ethical and Social Issues Bribery The Foreign Corrupt Practices Act (FCPA) Transactions with related entities Using intermediaries Transfer price: a price on goods and services sold by one member of a corporate family to another Arm’s length price: the prices that unrelated companies would charge each other

Prentice Hall, 2002 Chapter 13 Daniels 14 Some Positive Alternatives  Companies may gain advantages from their behaviors by: Picking complementary projects Moving to rural areas Local involvement High versus low profile Avoiding locations or not

Prentice Hall, 2002 Chapter 13 Daniels 15 Some Positive Alternatives  Many multilateral agreements exist that can help companies make ethical and socially responsible decisions These agreements deal mainly with: Employment practices Consumer protection Environmental protection Political activity Human rights in the workplace