MBA 713 - Chapter 05

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MBA 713 - Chapter 05

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  • This chapter starts out by examining the nature of ethics and social responsibility in international business. We then discuss ethics in cross-cultural and international contexts. Next, we describe how firms attempt to manage ethical behavior across borders. Social responsibility in cross-cultural and international contexts is then introduced and discussed. Finally, we conclude with a summary of some of the major laws that attempt to regulate international ethics and social responsibility.
  • This chapter’s learning objectives include the following:Describing the nature of ethics. Discussing ethics in cross-cultural and international contexts. Identifying the key elements in managing ethical behavior across borders. Discussing social responsibility in cross-cultural and international contexts.
  • Additional learning objectives include:Identifying and summarizing the basic areas of social responsibility.Discussing how organizations manage social responsibility across borders.Identifying and summarizing the key regulations governing international ethics and social responsibility.
  • This chapter asserts that ethics is an individual concept, rather than an organizational one. Therefore, the discussion of ethics focuses on individuals in organizations, as opposed to the organization itself. On the other hand, the relationship between an organization and its environment revolves around the concept of social responsibility.
  • This chapter defines ethics as an individual’s personal beliefs about whether a decision, behavior, or action is right or wrong. Hence, what constitutes ethical behavior varies from one person to another. An individual’s ethics are determined by interactions with parents, adults, and peers; everyday occurrences;religious training;and personal values.Although ethics is defined in the context of an individual’s belief, the concept of ethical behavior usually refers to behavior that conforms to generally accepted social norms. A society generally adopts formal laws that reflect the prevailing ethical standards—the social norms—of its members. Unethical behavior refers to behavior that does not conform to generally accepted social norms.
  • Members of one culture may view a behavior as unethical, whereas members of another culture may find that same behavior to be acceptable. Even so, we can still make some general observations about ethics and ethical behavior.Individuals have their own personal beliefs about ethical and unethical behavior. Nevertheless, people from the same cultural contexts are likely to hold similar beliefs as to what constitutes ethical and unethical behavior. Circumstances may cause individuals to rationalize behaviors or deviate from their own belief systems. Ethical values are strongly affected by national cultures and customs. In turn, those values affect how those individuals define ethical versus unethical behavior.
  • In order to Describe the Nature of Ethics, this section explores the difference between beliefs and norms, as well as the effects of circumstances and cultures on ethical beliefs and values. The next section will cover Ethics in Cross-Cultural and International Contexts.
  • Ethical behaviors in cross-cultural and international contexts can be characterized in several ways: how an organization treats its employees, how employees treat the organization, and how the organization and its employees treat other economic agents.
  • One important area of cross-cultural and international ethics is the treatment of employees by the organization. In practice, the areas most susceptible to ethical variation include hiring and firing practices, wages and working conditions, and employee privacy and respect. Managers in an international organization face a number of clear challenges with regard to these matters. They must deal with country-specific ethical issues regarding the treatment of employees, but they must contend with international issues, as well.
  • Numerous ethical issues also relate to how employees treat the organization. The central ethical issues in this relationship include conflicts of interest, secrecy and confidentiality, and honesty. A conflict of interest occurs when a decision potentially benefits the individual to the possible detriment of the organization. Ethical perceptions of the importance of such conflicts of interest vary from culture to culture. Divulging company secrets is viewed as unethical in some countries, but not in others. Employees who work for businesses in highly competitive industries—electronics, software, and fashion apparel, for example—might be tempted to sell information about company plans to competitors.A third area of concern is honesty in general. Relatively common problems in this area include such things as using a business telephone to make personal long distance calls and padding expense accounts. In some business cultures, such actions are viewed as unethical; in others, employees may develop a sense of entitlement.
  • The third major perspective for viewing ethics involves the relationship between the firm and its employees with other economic agents. The primary agents of interest include customers, competitors, stockholders, suppliers, dealers, and labor unions. The following behaviors between the organization and these agents may involve ethical ambiguity: advertising and promotions, financial disclosures, ordering and purchasing, shipping and solicitations, bargaining and negotiation, and other business relationships. Differences in business practices across countries create additional ethical complexities for firms and their employees in this area.
  • This section examined Ethics in Cross-Cultural and International Contexts. The discussion focused on how an organization treats its employees; how employees treat the organization; and employees, the organization, and other economic agents. The next section will cover Managing Ethical Behavior Across Borders.
  • Many businesses try to manage the ethical behavior of their managers and employees by clearly establishing that they expect them to engage in ethical behaviors. They also try to minimize ambiguity about what constitutes ethical versus unethical behavior. The most common ways of doing this are through the use of guidelines or codes of ethics, training in ethics, organizational practices, and corporate culture.
  • Many large multinationals have written guidelines that detail how employees are to treat suppliers, customers, competitors, and other constituents. Others have developed formal codes of ethics—written statements of the values and ethical standards that guide the firms’ actions. However, the mere existence of a code of ethics does not ensure ethical behavior. It must be backed up by organizational practices and the company’s corporate culture. A multinational firm must decide whether to establish a uniform code of ethics for all of its global units or tailor a code for each unit according to its local context. If a firm acquires a new foreign subsidiary, it must also decide whether to impose its corporate code on that subsidiary or allow it to retain the code it has already been following.
  • Again, one decision for international firms is whether to make ethics training globally consistent or tailored to local contexts. Regardless of which approach they use, most multinationals provide expatriates with some localized ethics training to better prepare them for their foreign assignments.
  • Organizational practices and the corporate culture also contribute to the management of ethical behavior. If the top leaders behave in an ethical manner and violations of ethical standards are addressed promptly and appropriately, then everyone in the organization will understand that the firm requires ethical behavior. However, if top leaders appear to exempt themselves from ethical standards or choose to ignore or trivialize unethical behaviors, then the opposite message is being sent—that it’s okay to do something unethical, if you can get away with it.
  • This section reviewed Managing Ethical Behavior Across Borders. It focused on guidelines and codes of ethics, ethics training, and organizational practices and corporate culture. The next section will cover Social Responsibility in Cross-Cultural and International Contexts.
  • The relationship between an organization and its environment often involves ethical dilemmas and decisions by individuals within the organization. These situations are generally referred to within the context of social responsibility.
  • Social responsibility (sometimes called corporate social responsibility, or CSR) is the set of obligations an organization undertakes to protect and enhance the society in which it functions. The complexities for managers in an international business are clear. They must balance the ideal of a global stance on social responsibility against conditions that may compel differential approaches in the various markets where the firm does business.
  • This section focused on global and local perspectives to examine Social Responsibility in Cross-Cultural and International Contexts. The next section will cover the various Areas of Social Responsibility.
  • Organizations may exercise social responsibility toward their stakeholders, the natural environment, and general social welfare. Some organizations accept responsibilities in all three areas and strive diligently to meet each of them. Others emphasize only one or two areas of social responsibility. A few acknowledge no social responsibility at all.
  • Organizational stakeholders are people and organizations that are directly affected by the practices of an organization and that have a stake in its performance. Most companies that strive to be responsible to their stakeholders concentrate first and foremost on three main groups: customers, employees, and investors. Organizations that are responsible to their customers strive to treat them fairly and honestly. They pledge to charge fair prices, honor product warranties, meet delivery commitments, and stand behind the quality of the products they sell. Organizations that are socially responsible in their dealings with employees treat their workers fairly, make them a part of the team, and respect their dignity and basic human needs. Organizations that practice social responsibility toward investors must follow proper accounting procedures, provide appropriate information about the firm’s financial performance, and manage the organization to protect the rights and investments of shareholders.
  • A second critical area of social responsibility relates to the natural environment. Not long ago, many organizations indiscriminately dumped sewage, by-products, and trash into streams and rivers, into the air, and on vacant land. Now, laws regulate the disposal of waste materials. In many instances, companies themselves have become more socially responsible in their release of pollutants and general treatment of the environment. However, much remains to be done. Companies need to develop economically feasible ways to reduce acid rain and global warming; avoid depleting the ozone layer; and create alternative disposal methods for sewage, hazardous waste, and ordinary garbage.
  • Some people believe that in addition to treating their stakeholders and the environment responsibly, business organizations also should promote the general welfare of society. Examples include making contributions to charities, philanthropic organizations, and not-for-profit foundations and associations; supporting museums,symphonies, and public radio and television; and taking a role in improving public health and education. Some people also believe that organizations should act even more broadly to correct the political and/or social inequities that exist in the world.
  • This section discussed the following Areas of Social Responsibility: organizational stakeholders, the natural environment, and general social welfare. The next section will cover Managing Social Responsibilities Across Borders.
  • As with attempts to manage ethical conduct, businesses usually make some effort to actively address corporate social responsibility (CSR).As we will discuss, firms generally adopt one of four approaches to social responsibility—obstructionist, defensive, accommodative, and proactive. The basic approach that a firm adopts shapes how it manages the issues associated with compliance, the informal dimensions of social responsibility, and the evaluation of their efforts and outcomes.
  • The four stances an organization can take regarding corporate social responsibility (CSR) fall along a continuum ranging from the lowest to the highest degree of socially responsible practices.Organizations that take an obstructionist stance to social responsibility usually do as little as possible to address social or environmental problems. When they cross the ethical or legal line that separates acceptable from unacceptable practices, their typical response is to deny or avoid accepting responsibility for their actions.With the defensive stance, an organization will do everything that is required of it legally but nothing more. In such firms, managers insist that their job is to generate profits. Firms that take this position will generally admit to mistakes when they are identified and then take appropriate corrective actions.A firm that adopts an accommodative stance meets its legal and ethical requirements but may also go beyond these requirements in selected cases. Such firms voluntarily agree to participate in social programs, but solicitors must convince the organization that the programs are worthy of their support.The highest degree of social responsibility that a firm can exhibit is the proactive stance. Firms that adopt this approach take to heart the arguments in favor of social responsibility. They view themselves as citizens in a society and proactively seek opportunities to contribute. These categories are not discrete. They merely define stages along a continuum, so organizations do not always fit neatly into one category.
  • The demands for social responsibility placed on contemporary organizations grow stronger every day. Organizations should view social responsibility as a challenge that requires careful planning, decision making, and evaluation. The formal dimensions used to implement a firm’s social responsibility include the following:Legal compliance is the extent to which the organization conforms to regional, national, and international laws. Managing legal compliance is generally assigned to the appropriate functional managers. The legal department is also likely to contribute to this effort by providing general oversight and answering queries from managers.Ethical compliance is the extent to which the members of the organization follow basic ethical (and legal) standards of behavior. Organizations have increased their efforts in this area—providing training in ethics and developing guidelines and codes of conduct. Many organizations also establish formal ethics committees to review proposals for new projects, evaluate new hiring strategies, assess new environmental protection plans, or serve as a peer review panels.Philanthropic giving is the awarding of funds or gifts to charities or other social programs. Giving across national boundaries is becoming more common. In this age of cutbacks, however, many corporations have had to limit their charitable gifts over the past several years, as they continue to trim their own budgets.
  • In addition to formal dimensions for managing social responsibility, there are also informal ones. Leadership, organization culture, and corporate response to whistle-blowing help to shape and define people’s perceptions of the organization’s stance on social responsibility.Leadership practices and organization culture can go a long way toward defining the social responsibility stance an organization and its members will adopt. For example, if a company’s leaders value environmental protection, its commitment must be explicit, and should be reflected in its corporate mission statement. Whistle-blowing is the disclosure by an employee of illegal or unethical conduct on the part of others within the organization. How an organization responds to this practice often indicates its stance toward social responsibility. Whistle-blowers have been fired for their efforts. Many organizations, however, welcome the contributions of whistle-blowers.
  • Any organization that is serious about social responsibility must ensure that its efforts are producing the desired benefits. Essentially, this requires applying the concept of control to social responsibility. An organization should also evaluate how it responds to instances of questionable legal or ethical conduct. The results of that evaluation can help diagnose any problems it might be having in meeting its social responsibilities.Many organizations choose to conduct formal evaluations of their social responsibility efforts. A corporate social audit is a formal, thorough analysis of the effectiveness of the firm’s social performance. It requires the organization to define all its social goals, analyze the resources it devotes to each goal, determine how well it is achieving the various goals, and make recommendations about which areas need additional attention.
  • This section reviewed Managing Social Responsibilities Across Borders. It reviewed the approaches to social responsibility and managing compliance. It also covered the informal dimensions of social responsibility and the evaluation of social responsibility.The next section will focus on Difficulties of Managing CSR Across Borders.
  • Multinational corporations are continually attempting to find a balance between the roles and behaviors expected by their home governments and those expected by the host governments in the countries in which they operate. This is particularly complex in the case of corporate social responsibility (CSR), because corporations play very different roles in the political process of individual countries. Indeed, companies are often criticized both for too much and not enough involvement in local politics.
  • A model developed by two Dutch CSR experts, Rob van Tulder and Alex van der Zwart suggests there are three main actors in the policy formulation process: the state, which passes and enforces laws; the market, which utilizes inputs and allocates outputs to members of the society; and civil society, which includes churches, charitable organizations, labor unions, NGOs (nongovernmental organizations), and so on. The interplay among these three actors establishes public policy and the norms of social interaction, including accepted business behaviors. As is the case with culture, however, these social norms vary from country to country.
  • The model created by van Tulder and van der Zwartcharacterizes behaviors in three regions of the world.Anglo-Saxon countries view the state, the market, and civil society as separate, competitive, and antagonistic. When the government must contract with the private sector to purchase goods or services, such contracting should be done through an open and competitive bidding process. When business and government fail to maintain sufficient separation, Anglo-Saxons deem that failure as corruption.Many Asian countries rely on close cooperation between the private sector and the government. Leaders view this cooperation as the linchpin of their successful development strategies—the so-called Asian Way.In the European Union, the three actors have cooperative ways of working with one another. Large employer associations bargain with umbrella labor organizations under the watchful supervision of the government; therefore, workers have a well-defined role in the governance of large businesses. In general, the public policy process is based upon creating consensus among the three actors. Cooperation, not competition, is the hallmark of this approach.
  • This section focused on the following topics as they relate to Difficulties of Managing CSR Across Borders: policy formulation and behaviors in three regions of the world.The section that follows will focus on Regulating International Ethics and Social Responsibility.
  • Not surprisingly, there have been many attempts to mandate and regulate ethical and socially responsible behavior by businesses. A detailed analysis of the myriad laws and regulations is beyond the scope of this discussion. However, the following slide presents a few of the more important and representative regulations.
  • The Foreign Corrupt Practices Act (FCPA) was passed by the United States Congress in 1977. It prohibits U.S. firms (or their employees and agents) from bribing any foreign government official to influence his or her actions to gain or retain business. In 2010, the British government passed the Bribery Act. Like the FCPA, it applies to transactions involving government officials. Unlike the FCPA, the Bribery Act also applies to transactions between two businesses, and it outlaws facilitation payments.The Alien Tort Claims Act was passed in the United States in 1789, but it has emerged as a potentially significant law affecting U.S. multinational corporations. Under some recent interpretations of this law, U.S. multinationals may be responsible for human rights abuses by foreign governments, if the companies benefited from those abuses.The Anti-Bribery Convention of the Organization for Economic Cooperation and Development was ratified by Canada in 2000; it has since been ratified by 37 other countries. Its centerpiece mandates jail time for those convicted of paying bribes.The International Labor Organization (ILO) conducts systematic inspections of working conditions in factories in developing countries. This independent inspection mechanism helps allay concerns from consumer activist groups. Factory owners are also finding that regular ILO inspections promote new business relationships with multinational corporations.
  • This section examined a variety of laws and regulations as they pertain to Regulating International Ethics and Social Responsibility. The presentation will close with a review of this chapter’s learning objectives.
  • This concludes the PowerPoint presentation on Chapter 5, “Ethics and Social Responsibility in International Business.” During this presentation, we have accomplished the following learning objectives: Described the nature of ethics. Discussed ethics in cross-cultural and international contexts. Identified the key elements in managing ethical behavior across borders. Discussed social responsibility in cross-cultural and international contexts.Identified and summarized the basic areas of social responsibility.Discussed how organizations manage social responsibility across borders.Identified and summarized the key regulations governing international ethics and social responsibility.For more information about these topics, refer to Chapter 5 in International Business.
  • MBA 713 - Chapter 05

    1. 1. Chapter 5 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 1 Ethics and Social Responsibility in International Business
    2. 2. Learning Objectives • Describe the nature of ethics • Discuss ethics in international and cross- cultural contexts • Identify the key elements in managing ethical behavior across borders • Discuss social responsibility in cross- cultural and international contexts Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 2
    3. 3. Learning Objectives • Identify and summarize the basic areas of social responsibility • Learn how organizations manage social responsibility across borders • Identify and summarize key regulations governing international ethics and social responsibility Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 3
    4. 4. The Nature of Ethics Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 4
    5. 5. Ethics and Behavior Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 5 Norms Beliefs
    6. 6. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 6 General Observations • Personal Beliefs • Cultural Contexts • Circumstances • Ethical Values
    7. 7. Summary of Discussion Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 7
    8. 8. Ethics in Cross-Cultural and International Contexts Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 8
    9. 9. How an Organization Treats Its Employees Hiring Practices Career Development Compensation and Benefits Workers’ Rights and Dignity Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 9
    10. 10. How Employees Treat the Organization Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 10 • Conflict of Interest • Confidentiality • Honesty
    11. 11. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 11 Customers Stockholders Dealers Competitors Suppliers Labor Unions Employees, the Organization, and Other Economic Agents
    12. 12. Summary of Discussion Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 12
    13. 13. Managing Ethical Behavior Across Borders Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 13
    14. 14. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 14 Guidelines and Codes Written Guidelines Codes of Ethics Corporate Cultures Organizational Practices
    15. 15. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 15 •Global Focus •Local Focus Ethics Training
    16. 16. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 16 Corporate Culture Organizational Practices Standards Behaviors
    17. 17. Summary of Discussion Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 17
    18. 18. Social Responsibility in Cross-Cultural and International Contexts Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 18
    19. 19. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 19 Social Responsibility Global Stance vs. Local Markets
    20. 20. Summary of Discussion Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 20
    21. 21. Areas of Social Responsibility Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 21
    22. 22. Organizational Stakeholders Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 22 •Customers •Employees •Investors
    23. 23. The Natural Environment Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 23 Disposal of Waste Materials Government Regulations Corporate Efforts
    24. 24. General Social Welfare Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 24 Making Charitable Contributions Supporting the Arts and Museums Funding Public Health and Education Confronting Political and Social Issues
    25. 25. Summary of Discussion Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 25
    26. 26. Managing Social Responsibilities Across Borders Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 26
    27. 27. Social Responsibility Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 27 Least Responsible Most Responsible Obstructionist Stance Defensive Stance Accommodative Stance Proactive Stance
    28. 28. Managing Compliance Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 28 • Legal • Ethical • Philanthropic
    29. 29. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 29 Informal Dimensions • Leadership • Corporate Culture • Whistle-Blowing
    30. 30. Corporate Social Audit • Specific Social Goals • Resources Devoted to Goals • Assessment of Goal Achievement • Recommended Courses of Action Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 30 Evaluating CSR Efforts
    31. 31. Summary of Discussion Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 31
    32. 32. Difficulties of Managing CSR Across Borders Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 32
    33. 33. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 33 CSR Policy Formation •The State •The Market •Civil Society
    34. 34. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 34 • Anglo Saxon • Asian Way • European Behaviors in Three Regions of the World
    35. 35. Summary of Discussion Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 35
    36. 36. Regulating International Ethics and Social Responsibility Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 36
    37. 37. International Regulations • The Foreign Corrupt Practices Act • The Bribery Act • The Alien Tort Claims Act • The Anti-Bribery Convention of the Organization for Economic Cooperation and Development • The International Labor Organization Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 37
    38. 38. Summary of Discussion Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 38
    39. 39. Chapter 5 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 39 Ethics and Social Responsibility in International Business
    40. 40. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 5 - 40 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

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