© 2008 Pearson Prentice Hall 2-1 Chapter 2: Managing Interdependence: Social Responsibility and Ethics PowerPoint by Hettie A. Richardson Louisiana State University

© 2008 Pearson Prentice Hall 2-2 Opening Profile: The Enron Case Illustrates how questionable actions by a company can be harmful to both stakeholders and the company itself—even if the actions are profitable in the short-term Enron is a symbol of an “era of management practice” (James Post), but is it the end of the era?

© 2008 Pearson Prentice Hall 2-3 The Social Responsibility of MNCs Corporate social responsibility (CSR) Profit is MNCs’ only goal MNCs should anticipate and solve social needs

© 2008 Pearson Prentice Hall 2-4 Global Consensus or Regional Variation? Global corporate culture Example of regional variation: The US focuses on following basic business obligations, Europe focuses on serving broader social aims

© 2008 Pearson Prentice Hall 2-5 Three Approaches to International Morality and Ethics Moral universalism Ethnocentrism Ethical relativism

© 2008 Pearson Prentice Hall 2-6 MNCs and Human Rights The Sweatshop Code of Conduct The Electronic Industry Code of Conduct (EICC) Social Accountability 8000 (SA8000)

© 2008 Pearson Prentice Hall 2-7 Comparative Management in Focus: Doing Business in China The attraction of doing business in China: Cheap labor rates A large market A growing economy

© 2008 Pearson Prentice Hall 2-8 Comparative Management in Focus: Doing Business in China The human rights challenge: Potentially rampant violations of workers’ rights Repression of free-speech Difficulty monitoring/correcting violations

© 2008 Pearson Prentice Hall 2-9 Comparative Management in Focus: Doing Business in China Examples of recent human rights issues in China: Nike Governmental crackdown on “propaganda” Google, Microsoft, Yahoo

© 2008 Pearson Prentice Hall 2-10 International Business Ethics The business conduct or morals of MNCs in their relationships with individuals and entities Ethics vary based on the cultural value system in each country or society

© 2008 Pearson Prentice Hall 2-11 Global Corruption Barometer Business/ Private Sector Asia3.3 Africa3.1 Western Europe3.3 Central & Eastern Europe3.7 Latin America & Caribbean3.5 USA3.2

© 2008 Pearson Prentice Hall 2-12 Is it bribery? Questionable Payments Paying mail carriers in Mexico to prevent them from “losing” mail Paying $100 to get a computer picked up from a rainy dock Gift-giving to bond social ties

© 2008 Pearson Prentice Hall 2-13 Legal Approaches to Bribery Foreign Corrupt Practices Act (FCPA) Organization for Economic Co-operation and Development convention on bribery

© 2008 Pearson Prentice Hall 2-14 Three Tests of Ethical Corporate Actions Is it legal? Does it work in the long run? Can it be talked about?

© 2008 Pearson Prentice Hall 2-15 What is the “right” decision? Consult home/host country laws Consult International Codes of Conduct for MNCs Consult the company’s code of conduct

© 2008 Pearson Prentice Hall 2-16 What is the “right” decision? Consult your superiors Fall back on your own moral code of ethics

© 2008 Pearson Prentice Hall 2-17 Management Focus: A CEO Speaks Out Richards Rhoades of Architectural Stone Emphasizes respect for cultural differences, while not violating personal ethical standards Business black and white Moral black and white

© 2008 Pearson Prentice Hall 2-18 Foreign Subsidiaries in the US Foreign direct investment (FDI) in the US is often greater than US investment outward Example: Japanese companies in the US

© 2008 Pearson Prentice Hall 2-19 Managing Subsidiary—Host-Country Interdependence Requires managers to go beyond issues of CSR to deal with specific concerns of the MNC—host-country relationship MNCs must learn to accommodate the needs of other organizations and countries

© 2008 Pearson Prentice Hall 2-20 MNC Benefits & Costs to Host Countries BenefitsCosts Access to outside capitalCompetition for capital Foreign-exchange earnings Increased interest rates Access to technologyInappropriate technology Infrastructure development Development investment exceeds benefits Creation of new jobsLimited skill development Local management development Few managerial jobs for locals

© 2008 Pearson Prentice Hall 2-21 The Risks of Interdependence for MNCs Nationalism Protectionism Example: Japan’s tariffs Governmentalism Example: Britain’s privatized telephone system

© 2008 Pearson Prentice Hall 2-22 Issues in Managing Environmental Interdependence The dumping of 8000 drums of toxic waste in Koko, Nigeria. The export of US pesticides Industrial ecology