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Chapter
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Managing Ethical and Social
Responsibility Challenges in
Multinational Companies
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International Business Ethics
• Ethics deal with the “oughts” of life
• Although economics dominate business decision-making, business decisions also have consequences for people
• International business ethics: unique ethical problems faced by managers operating across national boundaries
• More complex as different cultures do not agree on what one “ought” to do
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Corporate Social Responsibility
• Idea that businesses have a responsibility to society
beyond making profits
• Closely related to business ethics
• Must take into account the welfare of other constituents
in addition to stockholders
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Exhibit 4.1: Areas of Ethical and Social Responsibility Concerns for the Multinational Company
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Exhibit 4.1: Areas of Ethical and Social Responsibility Concerns for the Multinational Company
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Primary and Secondary Stakeholders
• Primary Stakeholders: directly linked to a company’s
survival and include customers, suppliers, employees,
and shareholders
• Secondary Stakeholders: less directly linked to the
company’s survival and include the media, trade
associations, and special-interest groups
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Ethical Philosophy
• Two ways to consider ethical decision making
• Traditional ethical philosophy
• Contemporary philosophy
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Basic Systems of Ethical Reasoning
• Teleological ethical theory
• Morality of an act or practice comes from its
consequences
• Utilitarianism: what is good and moral comes from
acts that produce the greatest good for the greatest
number of people
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Deontological Ethical Theory
• Actions have a good or bad morality regardless of the
outcomes they produce
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Questionable Payments
• Questionable payments
• Bribes or gifts to expedite government actions or to
gain advantage in business deals
• In many countries, people routinely offer gifts of bribes
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Questionable Payments
• Corruption and bribery can have devastating effects on
societies
• Companies routinely use poorer-quality products or
materials to cover for the bribe, thus resulting in inferior
products
• Corruption can also result in collusion among firms,
resulting in even higher prices
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Questionable Payments
• To understand the level of corruption in countries,
multinational companies can rely on the Corruption
Perception Index (CPI)
• CPI developed by Transparency International, gives an
idea of the levels of perception of corruption within
countries
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Toward Transnational Ethics
• Ethical convergence: growing pressure to follow the
same rules in managing ethical behavior and social
responsibility
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Four Basic Reasons for Ethical Convergence
1. The growth of international trade and trading blocks
2. Increased pressures to imitate business practices
3. Varied cultural background employees require
common standards
4. An increasing number of business watchdogs
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International Ethics Guideline Sources
• The United Nations Universal Declaration of Human
Rights
• The United Nations Code of Conduct on Transnational
Corporations
• The European Convention on Human Rights
• The International Chamber of Commerce Guidelines
for International Investment
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International Ethics Guideline Sources
• The Organization for Economic Cooperation and
Development Guidelines for Multinational Enterprises
• The Helsinki Final Act
• The International Labor Office Tripartite Declarations of
Principles Concerning Multinational Enterprises and
Social Policy
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Exhibit 4.8: A Code of Conduct for the Multinational Company
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Exhibit 4.8: A Code of Conduct for the Multinational Company
Copyright© 2007 South-Western/Thomson Learning All rights reserved
Exhibit 4.8: A Code of Conduct for the Multinational Company
Copyright© 2007 South-Western/Thomson Learning All rights reserved
Exhibit 4.8: A Code of Conduct for the Multinational Company
Copyright© 2007 South-Western/Thomson Learning All rights reserved
Exhibit 4.8: A Code of Conduct for the Multinational Company
Copyright© 2007 South-Western/Thomson Learning All rights reserved
Exhibit 4.8: A Code of Conduct for the Multinational Company
Copyright© 2007 South-Western/Thomson Learning All rights reserved
Exhibit 4.8: A Code of Conduct for the Multinational Company
Copyright© 2007 South-Western/Thomson Learning All rights reserved
“Best Practices” Steps
• Leading by example
• Making ethics part of the corporate culture
• Involving employees at all levels
• Setting and monitoring goals
• Effective integration in business processes
• Open discussion of ethics and other ethical issues
• Governments make agreements
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