Business Ethics and Corporate Social Responsibility - An International Perspective

Lisa Smirnova

Lisa Consulting

Overview

  • In a diverse world, there are few consistent guidelines to help companies or managers.
  • Ethics and Social Responsibility
  • Dealing with ethical issues
  • Ethics across cultures
  • Social Responsibility
  • Ethics and CSR programs
  • Implications for managers

Ethics

  • Concerned with what is right or wrong
  • Reflects established customs, morals and fundamental human relationships that may vary throughout the world
  • The term ‘business ethics’ is concerned with the personal behavior of individuals who are responsible for decisions that affect the welfare of others with whom they do business

Business Ethics

The moral principles and standards that guide behavior in the world of business

(Ferrell and Fraedrich 1991, p5.)

  • Brady (1990)
  • Managerial decisions affect people’s lives and well-being
  • Managers should distribute organizational resources fairly
  • Managers create rules and policies
  • Managerial decision-making tests ones personal values

Teaching Ethics

Mahoney (1990) Ethics should be incorporated into business school teaching programs - not as a separate subject.

McDonald and Zepp (1989) Ethical awareness programs

Ethical Rationalizations

  • It isn’t really illegal or immoral.
  • This is in the organization's best interest.
  • It will never be found out.
  • The organization will overlook it because it helps the company.

Whistleblowing

When an individual reports alleged organizational misconduct to the public

Exposes organizational wrongdoing to preserve ethical standards

Ethics Across Cultures

  • Danger of over-generalizing
  • Approaches to bribery and corruption
  • Inter-personal relationships as ethical issues
  • Home country versus host country influence
  • Effect of the FCPA on US companies

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

Ethical Concerns in Japan

  • Political and Business Scandals
  • Changing Social Climate
  • Prejudice and Discrimination
  • Social responsibility Implications from Lobbying
  • Status of women managers

Ethical Concerns in Europe

The Status of Women Managers

  • France
  • women are underrepresented in the corporate management
  • glass ceiling
  • enforcement of equal opportunity is weak
  • Germany
  • has introduced laws that mandate equal opportunity positions throughout the public sector
  • legislation hard to enforce
  • Examples of unethical conduct

    • 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

    Great Britain

    women are still not well represented at the highest levels of most organizations

    • legislation is weak
    • women’s associations are being established to increase political power
    • British companies are proactively trying to recruit and promote more women

    Ethical Concerns in China

    • Piracy, Industrial Spying, and Counterfeit Problems
    • Chinese backed industrial spying has increased against u.s. businesses
    • illegal production of counterfeit cd-roms, music -cd’s, and video-cd’s
    • patent violations

    Ethical Concerns in China

    Women managers

    • Cultural stereotypes, restricted opportunities, and discrimination limit women managers in China

    Code of Ethics

    A description of an organization's value system, ethical principles and specific ethical rules that it tries to apply to encourage ethical business behavior.

    Techniques for Raising Ethical Standards - McDonald and Zepp 1989

    • ethical awareness programs
    • developing an appreciation of individual differences
    • group seminars
    • establishing an ethical committee and ombundsman
    • reassessing performance and reward schemes so that ethical behavior is rewarded and unethical behavior is not.
    • fostering an ethical corporate culture

    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

    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.

    Social Responsibility

    Should corporate actions benefit society or merely not harm society?

    Social responsibility is the interaction between the business pursuing its own interests and the social environment in which it exists

    Response to Social Obligations

    Foreign Corrupt Practices Act (1977)

    • makes it illegal to influence foreign officials through personal payment or campaign contributions
      • International Assistance

        • Provides assistance such as food, machinery, and equipment to underdeveloped countries helps to stimulate economies

    Why Multinations Do Not Always Follow Ethical Rules?

    • Governments make agreements
    • Compliance voluntary
    • Not all governments subscribe
    • Each guide is an incomplete moral guide

    Foreign Corrupt Practices Act

    • Forbids U.S. companies to make or offer payments or gifts to foreign government officials to get or retain business
    • “Reason to know" provision
    • FCPA does not prohibit some forms of payments that may occur in international business
    • Payments made under duress to avoid injury or violence are acceptable

    The perspectives of Social Responsibility

    Economic responsibility

    • The responsibility of business is to make a profit ‘within the rules of the game’.
    • Organizations cannot be moral agents - only individuals can serve as moral agents. Otherwise they violate their commitment to shareholders
    • Public responsibility
    • Business can act in a way that is consistent with society’s view of responsible behavior as well as with established laws and policy

    The perspectives of Social Responsibility - 2

    Social responsiveness

    MNE Issues

    Stakeholder Affected Ethical/Social Responsibility Issue Example Problem For the MNC
    Customer Product safety Should an MNC delete safety features to make a product more affordable for people in a poorer nation?
    Shareholders Fair return on investment If a product is banned because it is unsafe in one country, should it be sold in country where it is not banned to maintain profit margins?
    Employees Child Labor Should an MNC use child labor if it is legal in the country of their location?
    Host country Following local laws Should an MNC follow local laws that violate home country laws against discrimination? Is an MNC obligated to control its hazardous waste to a degree higher than local laws require?

    Ethical Implications for Tomorrow’s Managers

    Ethical Implications for Tomorrow’s Managers - 2

    Determine the links between departments and issues impacting the company and make them known to employees

    Integrate ethical decision making into the performance appraisal process

    Publicize executive priorities and efforts related to ethical issues

    Implications for Managers

  • Control of ethical behavior
  • Increasing public awareness
  • Ethical Audits
  • Balancing the different perspectives around the world
  • Flexibility in international management