chapter€¦ · corporate social responsibility •idea that businesses have a responsibility to...

Chapter

Copyright© 2007 Thomson Learning All rights reserved

Managing Ethical and Social

Responsibility Challenges in

Multinational Companies

Copyright© 2007 South-Western/Thomson Learning All rights reserved

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


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


Exhibit 4.1: Areas of Ethical and Social Responsibility Concerns for the Multinational Company


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


Ethical Philosophy

• Two ways to consider ethical decision making

• Traditional ethical philosophy

• Contemporary philosophy


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


Deontological Ethical Theory

• Actions have a good or bad morality regardless of the

outcomes they produce


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



• 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



• 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


Toward Transnational Ethics

• Ethical convergence: growing pressure to follow the

same rules in managing ethical behavior and social

responsibility


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


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


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


Exhibit 4.8: A Code of Conduct for the Multinational Company


“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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