module 15 managing ethics and social responsibility 1233275128266011 1

8/3/2019 Module 15 Managing Ethics and Social Responsibility 1233275128266011 1

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Ethics and SocialResponsibility

K. Praveen Parboteeah


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Objectives

What is ethics and social responsibility?

How does national culture and socialinstitutions affect ethics?

Bribery and Foreign Corrupt Practices Act

What can be done about it? When in Rome, do as the Romans?

Universal values

Ethics in Japan


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Tobaccos Industry Ethics

Few developing countries require health

warning on cigarette packages comparedto 95% of developed nations Should tobacco company put warnings? Should

they advertise in LDC?

Cigarette consumption and production isincreasing at an alarming rate in LDC Targeted at young people and women

Cigarettes in LDC contain more tar andharmful chemicals

Should tobacco be cultivated?


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Tobaccos Industry Position

Tobacco cultivation in LDC grants higher

returns than alternative crops More than 100 million people depend on

tobacco for survival

People in LDC have been cultivating andsmoking tobacco for centuries

Dilemma:

What weight should be given to humanfreedom (freedom of farmers and smokers)versus weight of human welfare?


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Introduction

Multinational managers face

complex ethical issues all the time With an understanding of key

ethical problems in multinational

management, managers can makemore informed ethical judgments


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Ethics & Multinational Ethics

Ethics - the rules and values that

determine what goals and actionspeople follow when dealing withother human beings

Business ethics: all businessdecisions with ethical consequences

The unique ethical problems facedby managers conducting businessoperations across nationalboundaries


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Social Responsibility

The responsibility businesses have

to society beyond making profits

Often reflects the ethical valuesand decisions of the topmanagement team

Ethics and social responsibility- noteasily distinguished in practice


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Research Evidence

Cullen, Parboteeah & Hoegl (2004)

shows that specificcultural/institutional variables areassociated with justification of

unethical behaviors Universalism, Pecuniary Materialism

lead to more unethical behavior

Industrialization, Family Weakness andEducation


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Is American Capitalism Moral?

Marxist Critic

Exploitation of workers

Alienation of human beings

Protects the vested interest of few

Non-Marxist Critic

False needs and overproduction wasteful nature of the system

The Military-Industrial complex

Inequalities inherent in the system


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In Defense of Capitalism

Great emphasis on the importance and

value of human freedom Political freedom is only possible with

economic freedom

Enormous stride in the ability to producegoods and services very efficient

Redistribution of wealth

Although Bill Gates has become the richest manin around 15-20 years, large number of otherpeople have benefited from the Microsoft wealth

No system is perfect


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Approaches to Deal With InternationalEthical Dilemmas

When in Rome do as the Romans do?

Only guide is what is legal andappropriate in that country

Justification:

In some instances, laws and regulations maybe stricter (e.g., Europe have stricterenvironmental laws)

If things are sufficiently different, then it is(maybe) necessary to apply differentstandards (e.g., US companies complied withArab firms not to post women and Jews forfear of losing lucrative contracts)


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Is the adage wholly justified?

No because a country permits bribery,unsafe working conditions, and violationof human rights does not mean that thesepractices are acceptable

Key issues Questionable payments/Bribery

Employment

Environmental issues

Product safety


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Bribery

Making a payment to a foreign official for

the purpose of influencing any act ordecisions of such foreign official in his in hisofficial capacity or of inducing such foreignofficial to do or omit to do any act in

violation of the lawful duty of such official A bribe is made with the intention to corrupt

Classic case of Lockheed Corporation paidJapanese officials $25million to win an

aircraft contract


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Whats wrong with bribery?

Systematic and widespread

corruption inhibits the developmentof fair and efficient markets

Does not provide open market access to

all competitors/individuals Is not an efficient allocation of resources

higher prices

Results in poverty andunderdevelopment

Violation of duty or trust by an

official


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Foreign Corrupt Practices Act

Forbids U.S. companies to make or offer

payments or gifts to foreign governmentofficials to get or retain business

Reason to know" provision

Exceptions: Grease payments facilitating payments to expedite

routine governmental action

Reasonable expenditures to entertain a foreign official inthe course of doing business

Any laws that permits or requires payments in thecountry even if it is bribe

payments made under duress to avoid injury orviolence are acceptable


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Key Issues

Some evidence that discontinuing bribesdoes not reduce sales of the firmsproducts or services in that country

Some evidence that firms from other

countries continue to win businessthrough corrupt practices such as bribery

Recent formal agreement by many

industrialized nations to outlaw thepractice of bribing foreign governmentofficials


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Criticisms of Multinationals

Multinationals operate in LDC to seekcheap labor, available resources, taxshelters and relief and new markets

Unfair competition of MNCS

Can borrow at great rates from local lendersand do not carry fair share of socialdevelopment

Increase in tax rate

MNCs and impoverishment of LDCs Take away scarce resource from locals


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Other Criticisms of MNCs

Majority of stock owned by parentcompany

MNCs reserve key managerial andtechnical positions for expatriates

MNCs concentrate R&D activities athome limiting transfer oftechnology

Rise in demand for luxury goods atexpense of essential goods


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What can be done? Apply UniversalCodes

Countries and companies should

abide by suggested guidelines forethical behaviors

There is pressure now across the

world for ethical convergence


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DeGeorges 7 principles

Multinationals (MNCs) should do no harm

MNCs should produce more good than bad for thehost country

MNCs should contribute by their activities to the hostcountrys development

MNCs should respect the right of their employees MNCs should pay their fair share of taxes

To the extent that the local culture does not violatemoral norms, MNCs should respect these norms

MNCs should cooperate with the local governmentsin the development and enforcement of backgroundinstitutions


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Best Practices for Enforcement of Codeof Ethics

Lead by example international

executives should also adhere to the codeof ethics

Make ethics part of the corporate culture

Involve employees at all levels

Set and monitor goals

Effective integration in business processes

Open forum to discuss ethical issues


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Ethics in Japan

Japanese cabinet member forced toresign for receiving over $2 million fromJapanese corporations

Failure of banking system to takecorrective action regarding Japans

recession Concealing customer complaints

Failure to inform car owners aboutpossible auto defects and maintenance of

two sets of customer complaint records


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Ethics in Japan

Hostile work environment

Cultural expectations Traditional role of females and female

employees

Sexual harassment may not be

considered a moral issue Equal opportunity issues

Refusal to hire women or promotethem into management positions

Mitsubishi sued by U.S. EEOC


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Conclusions

Multinational managers face ethical

challenges magnified by theinternational context

Need to understand home ethical

codes and impact on ethics offoreign culture/social institutions

module 15 managing ethics and social responsibility 1233275128266011 1

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