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Module 3 Cultures, Ethics and Corporate Governance.pptx
- 1. Module 3 Cultures, Ethicsand Corporate Governance International Business Division School of International Business and Marketing UEH University
- 2. Learning Objectives 1. Tounderstand the social responsibility of corporations toward their various constituencies around the world, in particular their responsibilities toward human rights 2. To acknowledge the strategic role that ethics must play in global management and provide guidance to managers to maintain ethical behavior amid the varying standards and practices around the world 3. To recognize the importance of managing interdependence and include sustainability in their long-term plans
- 3. Business Ethics • Ethics:Ethics is the study of morality and standards of conduct. Ethics refers to the moral principles that govern how humans conduct themselves at work and outside. • Business ethics: Business ethics (also known as corporate ethics) is a form of applied ethics or professional ethics, that examines ethical principles and moral or ethical problems that can arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations. These ethics originate from individuals, organizational statements or from the legal system.
- 4. Ethical philosophies andtheir application • The utilitarian approach: Favours the greatest good for the greatest number of people under a given set of constraints. Decisions are ethical when the social benefits outweigh the costs of pursuing that action; that is, ethical decisions are those that result in the highest benefit for most people. • The right approach: the best ethical action as that which protects the rights of those affected by the action. • What are articles stated in the Universal Declaration of Human Rights? Are they legally binding in all UN member states?
- 5. Ethical philosophies andtheir application • The justice approach: ethical principles should be chosen by free and rational people and can be ensured by fairness in the society. Justice can be achieved by impartiality, which means people are ignorant of all personal characteristics of another • Nationality, gender, intelligence, social class • Legitimacy theory: the theory argues that a company can only continue to operate where that society believes that it is operating with a value system similar to the society’s own.
- 6. Pyramid of CorporateSocial Responsibility Economic Responsibilities: Be profitable The Foundation on which all other rest Legal Responsibilities: Obey the law Law is societies codification of right and wrong. Play by the rules of game Ethical Responsibilities: Be ethical Obligation to do what is right, just and fair. Avoid harm Philanthropic Responsibilities: Be a good corporate citizen Contribute resources to the community; improve quality of life Source: Carroll, AB 1991, ‘The Pyramid of Corporate Social Responsibility: Towards the Moral Management of Organizational Stakeholders’, Business Horizons, July-August, pp. 40-48.
- 7. Profit is MNC’s only goal MNCsshould anticipate and solve social needs The Social Responsibility of MNCs CSR Dilemma 6/8/2023 7
- 8. MNC Stakeholders Owners Customers Employees Unions Suppliers Distributors Strategic Allies Community Economy Government MNC Economy Employees Community Host Government Consumers Strategic Allies Suppliers Distributors Global interdependence/standardof living Global environment and ecology Sustainable resources Population’s standard of living Home country Society in General Host 6/8/2023 8
- 9. Benefits of CSR 1.Improved access to capital 2. Secured license to operate 3. Revenue increase and cost and risk reduction 4. Improved brand value and reputation with customer attraction and retention 5. Improved employee recruitment, motivation, and retention 6/8/2023 9
- 10.
- 11. Are ethics culturefree? • Criteria for judging ethical behaviour • Rights – but how decided and enforced? • What is shared (etic)? • hat is shared (etic)? • What is culture specific (emic)? • What is culture specific (emic)? • Utilitarianism – greatest good for greatest number
- 12. Ethical differences • Individualresponsibility and accountability • Consensual community based norms/standards • Universalism and legalistic orientation • Particularist orientation and informal social control • Insider/outsider ethic • Notions of reciprocity • Legal context • Roles of government, the media and stakeholders
- 13. Managing Subsidiary—Host-Country Interdependence 1. MNCslocally raise their needed capital, contributing to a rise in interest rates in host countries. 2. The majority of the stock of subsidiaries is owned by the parent company. Host-country people have little control over the operations within their borders. Common Criticism of MNC Subsidiary Activities 6/8/2023 13
- 14. Common Criticism ofMNC Subsidiary Activities Cont. 1. MNCs reserve the key managerial and technical positions for expatriates, instead of developing host-country personnel. 2. MNCs do not adapt technology to the conditions in host countries. 3. MNCs concentrate research and development activities at home, restricting technology transfer and know-how to host countries. 4. MNCs create a demand for luxury goods in host countries at the expense of consumer goods. 6/8/2023 14
- 15. Common Criticism ofMNC Subsidiary Activities Cont. 1. MNCs start foreign operations by purchasing existing firms, not by developing new facilities in host countries. 2. MNCs dominate major industrial sectors, contributing to inflation, by stimulating demand for scarce resources and earning excessively high profits and fees. 3. MNCs are not accountable to host nations but only respond to home- country governments; they are not concerned with host-country plans for development. 6/8/2023 15
- 16. MNEs: Corporate SocialResponsibility • Global CSR approach: Transcends national boundaries and societal differences, thereby manifesting a universal standard of corporate ethical behaviour • Local CSR approach: ‘Companies seek to behave in a socially desirable manner as defined by the local majority for each country where they have operations’ • Transnational CSR approach: ‘Balances a need to retain local identity with the acknowledgement of values that transcend individual communities’
- 17. Global approach Strong commitmentto head office Understanding of global stakeholder’s needs Big picture thinking Helicopter view Understanding of universal ethical standards Integrity and behavioural consistency Local approach Strong commitment to local subsidiary Understanding of local stakeholders needs Non-judgemental and open to different views Intercultural sensitivity and perspective taking skills Adaptability and behavioural flexibility Transnational Approach Competencies required for Global + Local CSR plus… Dual citizenship Global mindset Ability to balance contradictions and paradoxes Tolerance of uncertainty Multicultural identity Moral imagination Corporate Social Responsibility
- 18. General Guidelines forCode of Morality and Ethics in Individual Countries Moral Universalism • Addressing the need for a moral standard that is accepted by all cultures Ethnocentric Approach • Applying the morality used in home country— regardless of the host country’s system of ethics Ethical Relativism • Adopting the local moral code of whatever country in which a firm is operating 6/8/2023 18
- 19. Comparative Management inFocus: Doing Business in China The attraction of doing business in China: Cheap labor cost An expanding market A growing economy with growth in higher skilled jobs and services Continuing concerns Uncertain legal environment Protecting IP 6/8/2023 19
- 20. Policies to HelpMNCs to Confront Concerns About Ethical Behavior and Social Responsibility 1. Develop worldwide code of ethics. 2. Build ethical policies into strategy development. 3. Plan regular assessment of the company’s ethical posture. 4. If ethical problems cannot be resolved, withdraw from that market. 6/8/2023 20
- 21. Steps to anEthical Decision Consult the International Codes of Conduct for MNEs Consult the company’s code of ethics and established norms Consult the laws of both the home and the host countries Weigh shareholders rights Follow your own conscience and moral code. 6/8/2023 21
- 22. The Process forCompanies to Combat Corruption and to Minimize the Risk of Prosecution 1. Having a global compliance system which shows that employees have understood, and signed off on, the legal obligations regarding bribery and corruption in the countries where they do business 2. Making employees aware of the penalties and ramifications for lone actions, such as criminal sanctions 3. Having a system in place to investigate any foreign agents and overseas partners who will be negotiating contracts 4. Keeping an effective whistle-blowing system in place 6/8/2023 22
- 23. Managing Subsidiary—Host-Country Interdependence Requiremanagers to go beyond issues of CSR to deal with specific concerns of MNC and host- country relationship. MNCs must learn to accommodate the needs of other organizations and countries. 6/8/2023 23
- 24. 1. Do nointentional harm. This includes respect for the integrity of the ecosystem and consumer safety. 2. Produce more good than harm for the host country. 3. Contribute by their activity to the host country’s development. 4. Respect the human rights of their employees. Recommendations for MNCs Operating in and Doing Business in Asia 6/8/2023 24
- 25. 1. To theextent that local culture does not violate ethical norms, respect the local culture and work with and not against it. 2. Pay their fare share of taxes. 3. Cooperate with the local government in developing and enforcing just background institutions. Recommendations for MNCs Operating in and Doing Business in Asia 6/8/2023 25
Editor's Notes
- #7 [SO] In 1991, Archie B Carroll defined CSR in terms of Economic, Legal, Ethical and Philanthropic responsibilities and organised those in terms of a pyramid formation based on their priorities. As you can see in the presentation while economic responsibility is the foundation on which other responsibilities rest on, philanthropic responsibility contributes to the community and improve the quality of life in the society.
- #8 Corporate social responsibility concerns the benefits versus harm wrought by MNCs, especially in less developed countries (LDCs). Issues of social responsibility tend to center on poverty and lack of equal opportunity, the environment, consumer concerns, and employee safety and welfare. The question is, how much should MNCs concern themselves with the social and economic effects of their decisions? At one extreme, the answer to this question is that MNCs are only responsible for earning profits. At the other extreme is the notion that MNCs should anticipate and solve social needs. Of course, firms can take a stance anywhere between these two extremes.
- #9 International CSR is more complex than domestic CSR because there are additional stakeholders in the firm’s activities. Managers must weigh the rights of domestic stakeholders versus those of host country stakeholders. Most decisions will involve a trade-off between the rights of various stakeholders—at least in the short-term.
- #11 Exhibit 2-7 provides a system for examining, measuring, and managing the drivers of corporate sustainability. Essential to success is the commitment of top leadership and the recognition of sustainability as a process that will benefit the company—i.e., that it is a good business idea. Key to understanding the role of corporate sustainability is the relationship between managers’ decisions, their impact on the society and its environment, and financial performance
- #12 [SO] Throughout history, philosophers have been arguing over the proper criteria for judging ethical behaviour. And these philosophical positions inevitably reflect underlying cultural assumptions. So we need to find ways of utilising different cultural assumptions in order to become truly global citizens and create a common ethical basis for conducting business in the global context. And the questions we need to think about are: • What are the greatest good for all? • And how do we decide what are right and who decides how they are enforced? • What is shared and What is culture specific? Cultural anthropology helps us understand similarities and differences in how responsible leadership is perceived around the globe.
- #13 [SO] Ethical differences can be found in cultural views on concepts such as: Individual responsibility and accountability Consensual community based norms/standards Universalism and legalistic orientation Particularist orientation and informal social control Insider/outsider ethic Notions of reciprocity Legal context Roles of government, the media and stakeholders Let’s look at some examples of specific cultural contexts.
- #18 [SO] There are three approaches to CSR: Global approach: Where headquarters demands for global consistency prevail over local concerns. This rests on the universal standard assumption that the norms and values of particular society are the same. The benefits are the establishment of clear rules of behaviour, increased leadership trust, a culture of responsibility and global consistency in managerial decision making and behaviour. The disadvantages are cultural arrogance “how things are done in headquarters rules”. Some managers may use these to legitimise actions that are detrimental to the interests of local stakeholders. Local approach: Organisations implement a local approach to behave in a socially desirable manner for each country they conduct operations in. The benefit is a greater response to local needs and concerns. However, it can promote a naïve form of ethical relativism meaning that there is little understanding of the broader ethical considerations. Transnational approach strives to balance the need for global consistency and the need for local responsiveness. The challenge is it is often difficult to balance global and local needs – a need to identify and understand both local and global realities. This approach takes a broad view of ethics taking into account cultural similarities and differences.
- #19 Moral universalism suggests the need for a moral standard that is accepted by all cultures. With the ethnocentric approach, a company applies the morality used in the home country—regardless of the host country’s system of ethics. With ethical relativism, the company adopts the local moral code of the country in which it is operating. Whereas some argue moral that universalism is preferable to the other two approaches, it can be insensitive to the needs and values of the host country. Ethical relativism, on the other hand can result in conflicts between home and host country values.
- #20 As discussed in Chapter 1, China is very attractive to foreign manufacturers and other firms. It’s now the world’s third largest manufacturer after the US and Japan. Growth in higher-skilled jobs is occurring as well.
- #21 Questionable behavior can be a “slippery slope.” What starts with a small bribe or cover-up—a matter of personal ethics– can, over time, and in the aggregate of many people covering up, result in a situation of a truly negligent, and perhaps criminal, stance toward social responsibility.
- #24 When considering the management of global interdependence, it is necessary to highlight not only US subsidiaries in foreign countries, but also foreign subsidiaries in the US. Because FDI in the US is increasing, Americans are becoming more sensitive to what they perceive as a lack of control over their own country’s business. In Japan, CSR traditionally means taking care of employees. In the US, it often means sharing responsibility for the community. One reason for this difference is that US companies get tax deductions for corporate philanthropy, whereas Japanese companies do not. To date, many Japanese firms in the US have not been active in US philanthropy. Sadahei Kusumoto, CEO of Minolta Corporation, believes that, in the long run, failure to play an active role in the community will brand Japanese (or other) companies as irresponsible outsiders and hurt their prospects for the future. Kusumoto recognizes interdependence in globalization and acts accordingly. The goal of managing interdependence is to create cooperation, rather than confrontation. The goal is not to create the dependence of an organization or country on another.