Tutorial aid: Ethics and CSR for global companies


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Discussion on CSR and ethical issues for international companies

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Tutorial aid: Ethics and CSR for global companies

  1. 1. Report K: The organisation’s CSR and ethical behaviour Contemporary Business
  2. 2. Business Ethics
  3. 3. Noam Chomsky: American linguist, philosopher, political activist, author & lecturer “One of the elementary of moral principles is that of universality, that is, if something's right for me, it's right for you; if it's wrong for you, it's wrong for me. Any moral code that is even worth looking at has that at its core somehow.”
  4. 4. Example: Enron • Enron Fraud – In just 15 years, Enron grew from nowhere to be America's seventh largest company, employing 21,000 staff in more than 40 countries. – But the firm's success turned out to have involved an elaborate scam. – Enron lied about its profits and stands accused of a range of shady dealings, including concealing debts so they didn't show up in the company's accounts.
  5. 5. Example Pfizer • Pfizer Fraud – Pfizer had the largest fine ever (of $2.3bn) levied on a corporation for improper sales tactics. – It comes after the firm was found to have illegally promoted four drugs for uses for which they had not been approved by medical regulators. – Pfizer's 3,000 sales representatives were told to promote the drug Bextra in areas of medicine where the use of the drug had not been studied.
  6. 6. Example: Walmart • Walmart Dispute • GMB's dispute with Asda over the company's refusal to allow it to negotiate nationally for its staff at all Asda depots. • Asda - whose owner, US supermarket giant Wal- Mart, has long resisted union rights in its home operations - says that local collective bargaining takes place at nine of its 24 UK depots. • The two sides also disagree about profit-related bonus pay
  7. 7. Amazon generated sales of more than £3.3bn in the UK in 2011, but paid no corporation tax. (Guardian). Example: Amazon, Starbucks and Google Starbucks' UK sales in 2011 were £400m but much of its earnings are paid as royalties to another part of the company. Google's UK unit paid £6m to the Treasury in 2011 on UK turnover of £395m (Telegraph)
  8. 8. Example: Barclays • In June 2012 Barclays Bank fined by US Dept of Justice and UK FSA for ‘rigging’ the ‘London Interbank Offered Rate’ (Libor) • The Libor is a means of arranging the lending rates between banks • Barclays lied to make the bank look healthier than it was and to increase their profits
  9. 9. Ethical Erosion • Ethical erosion has been delineated into five distinct stages: 1. What’s illegal 2. What’s legal but unethical, 3. Ethical but against company policy, 4. Not against policy but not in the client’s best interests, and finally 5. What’s not really contrary to the client’s best interests but isn’t really going to benefit them either.
  10. 10. Ethical Erosion Where do these companies fit into the Five Stages?
  11. 11. Corporate Social Responsibility
  12. 12. Economist, Milton Friedman says: “The social responsibility of business is to increase its profits.” “What does it mean to say that "business" has responsibilities? Only people can have responsibilities.” “…in a free society there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."
  13. 13. Definition: “Specifically, we see CSR as the voluntary actions that business can take, over and above compliance with minimum legal requirements, to address both its own competitive interests and the interests of wider society.” Source: www.csr.gov.uk
  14. 14. Some of the most common ways in which CSR is demonstrated: • Specialist ‘adopted’ projects • Corporate charitable donations • Voluntary schemes for staff • Staff fundraising activities • Changes to organisational operations
  15. 15. The four components of CSR: • Economic • Legal • Ethical • Discretionary
  16. 16. Source: Revisiting Carroll’s CSR Pyramid – The Copenhagen Centre
  17. 17. Sustainable Business The Triple Bottom Line:
  18. 18. John Elkington (1994) suggests reporting frameworks should be expanded to include the ‘Triple Bottom Line’: Sustainability issue Broad considerations Ecological sustainability Planet • Renewable v. non-renewable energy sources • Carbon and water footprints • Responsible exploitation of natural resources, replenishment of natural resources • Impact of man-made materials, pollution, long- term well-being of the natural environment Social sustainability People • Social equity - community relationships and the well-being of individuals and the community (local / global) • Ethics - ethical treatment of all stakeholders including channel members and supply chains Financial sustainability Profit • Long-term economic stability, sustainable and fair financial reward for all stakeholders • Profit for business to continue to reinvest • Longer-term ROI, full cost accounting
  19. 19. 1: Employees
  20. 20. In most developed economies, employees are protected by: • Employment Legislation – Hours and terms of employment, resolution of disputes, minimum pay rates. • Equality Legislation – Equality of opportunity based on gender, age, disability and gender orientation. Freedom from bullying and harassment in the work place. • Health and Safety Legislation – Protection against accidents, hazardous substances and unsafe working conditions.
  21. 21. Company policies and ‘value statements’
  22. 22. Example: Employee Focus Johnson and Johnson
  23. 23. CSR guidelines: A set of employment principles originally developed in 1977 by the Rev Leon Sullivan who was a civil rights activist and a director of General Motors. As a major employer in South Africa, Sullivan was concerned that US industry should make a stand against the apartheid regime. After the fall of apartheid, his Principles, with the support of the UN, were reformed in 1999 as the Global Sullivan Principles, as a means of increasing corporate support for social justice and human rights at an international level.
  24. 24. CSR guidelines: 1. Support for human rights for our employees and their communities. 2. Promote equal opportunity and fair treatment for all our employees. 3. Respect our employees’ voluntary freedom of association. 4. Pay salaries which enable employees to meet basic needs and improve their economic opportunities. 5. Provide a safe and healthy workplace; and promote sustainable development. 6. Promote fair competition, and not offer or accept bribes. 7. Work with governments and communities improve the quality of life. 8. Promote these principles with our business partners. www.thesullivanfoundation.org
  25. 25. Ford Motor Company, 2009 • Ford apologised and paid compensation to ethnic minority employees who were ‘photoshopped’ out of corporate brochures for overseas markets
  26. 26. Fair employment issues: • Fair pay – above minimum wage • Unfair dismissal disputes • Work-life balance policies • ‘Glass ceiling’: – Proportion of female / ethnic minorities in positions of responsibility (Board level?) • Best practice HRM – Training, career progression, pensions and benefits
  27. 27. 2: Customers
  28. 28. Ralph Nader: Father of ‘Consumerism’ • In 1965 Ralph Nader published ‘Unsafe at Any Speed’ • This was a forceful critique of the US car industry • Car design was unsafe • Companies put profit before safety • It changed car design and ideas of customer service http://nader.org/
  29. 29. In most economies, ‘customer service’ is subject to voluntary ‘Codes of Practice’. ‘Codes of Practice’ are usually formulated by sector-specific trade associations. ‘Codes of Practice’ may also form the basis of legislation and regulation.
  30. 30. Value Statement: Customer Focus Home Depot
  31. 31. Mitsubishi 2005 • Mitsubishi Motors sue seven former executives for $12 million • Executives – including three presidents – had covered up manufacturing defects for 20 years • Also faced charges by safety authorities Mitsuo Hashimoto, Osamu Masuko, and Yoshikazu Nakamura offer apologies for problems at Mitsubishi.
  32. 32. International Standards Organisation Certification ISO 10002:2004 Quality Management: Customer Satisfaction Guidelines for Organisations (www.iso.org) ‘ISO 10002:2004 provides guidance on the process of complaints handling related to products within an organization, including planning, design, operation, maintenance and improvement. The complaints-handling process described is suitable for use as one of the processes of an overall quality management system.’ - ISO
  33. 33. Customer Service issues: • Proper, recognisable policies and procedures for handling customer complaints • Full participation in trade / sector customer service programmes • Going beyond legal requirements • Anticipating customers needs and safety in product and service design, pricing, and fulfilment • Rapid and flexible approach to handling problems when they occur
  34. 34. 3: Supply Chain
  35. 35. • Naomi Klein’s 1999 book ‘No Logo’ highlights unethical behaviour and contractors’ labour practices of famous brands. http://www.naomiklein.org/main
  36. 36. ILO Declaration on Fundamental Principles and Rights at Work • Adopted in 1998 – expresses commitment of governments, employers' and workers' • Covers four principles: 1. Freedom of association and rights of collective bargaining 2. Elimination of forced labour 3. Abolition of child labour 4. Elimination of discrimination http://www.ilo.org/global /lang--en/index.htm
  37. 37. Other international CSR guidelines: SA800 certification developed by the international human rights organisation Social Accountability International. (www.sa-intl.org) The United Nations Global Compact (UNGC) framework and mechanism designed to encourage businesses to adopt CSR policies (www.unglobalcompact.org)
  38. 38. International Standards Organisation Guidance ISO 26000:2010 - provides guidance on how businesses and organizations can operate in a socially responsible way. This means acting in an ethical and transparent way that contributes to the health and welfare of society (www.iso.org) ‘ISO 26000:2010 provides guidance and helps organizations translate principles into effective actions and share best practice globally. The standard was launched in 2010 following five years of negotiations between governments, NGOs, industry, consumer groups and labour organizations around the world, which means it represents an international consensus.’ - ISO
  39. 39. A roll of shame: Women making shirts for Wal-Mart in Bangladesh work an 87 hour week at 9¢/hr with no maternity leave. Women workers in Riese Maglierra, Italy, are told to arrange marriages to fit in with their shifts. In the year 2000, CEO Millard Drexler was paid $39 million, while workers in Cambodia earned 21¢/hr. Michael Jordan was paid $20 million/year and Tiger Woods $50,000/day to promote Nike, while a typical factory worker earned $1.25/day.
  40. 40. http://www.unilever.com/sustainable-living/betterlivelihoods/
  41. 41. http://www.thebodyshop.co.uk/values/EthicalTrade.aspx
  42. 42. Supply Chain issues: • Taking responsibility for the source of the materials, products components and services • Putting humanitarian principles before ‘lowest cost’ sourcing • Understanding that customers expect and will pay for fairly sourced products • Going beyond the workplace to help build better communities
  43. 43. Conflict diamonds Conflict diamonds are diamonds that originate from areas controlled by forces or factions opposed to legitimate and internationally recognized governments, and are used to fund military action in opposition to those governments, or in contravention of the decisions of the Security Council. - UNICEF
  44. 44. This seventeen-year- old lost both hands to rebels’ machetes. Waterloo camp, Sierra Leone, 1998. UNICEF / HQ96-0566 / Giacomo Pirozzi
  45. 45. The Kimberley Process Certification Scheme (KPCS) • Adopted by the UN in 2000. the Kimberley Process is a joint governments, industry and civil society initiative to stem the flow of conflict diamonds – rough diamonds used by rebel movements to finance wars against legitimate governments. • KP members now account for 99.8% of the global production of rough diamonds http://www.kimberleyprocess.com
  46. 46. and now its not just diamonds…
  47. 47. Coltan? • Coltan is a rare mineral used in mobiles, laptops and other electronic devices • A boom in demand has pushed prices to $400/k • Proceeds from illegal mining is being used to fund rebel forces in the Congo, and drug cartels in Colombia • Some manufacturers are claiming to reject coltan from central Africa
  48. 48. Tantalum-Niobium International Study Center (TIC) • At this time the TIC is attempting to gather international support for a certification scheme similar to the Kimberley process for coltan • US and Canadian legislation is in place to encourage the use of ‘clean’ coltan • Unfortunately the world’s largest producer of electronic equipment (China) has not subscribed to the scheme and continues to accept imports of ‘conflict coltan’. http://tanb.org/