Managing Interdependence Social Responsibility and Ethics

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• Chapter 2
• Managing Interdependence Social Responsibility
  and Ethics

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ADMINISTRIVIA
CRITERIA FOR AREA CULTURE STUDY
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Social Responsibility
The two extreme opinions related to social
responsibility Domestic firms
The only responsibility of a business is to make
a profit
Business should anticipate and try to solve
problems in society
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Social Responsibility of Multinational
Corporations

• Economic development
• Cultural issues
• Legal issues

Social Responsibility Integrated
Approach Organizations agree what should
constitute moral and ethical behaviour Emerging
because of the development of a global corporate
culture Provide a basis of judgment regarding
decisions and situations Moral Universalism Unlik
ely to become a reality Ethnocentric Relativism
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Human Rights

• What constitutes human rights?
• Perceptions of people
• Priorities of people
• Canada may say wages, education, freedom
• Other countries may say safety and shelter

Codes of Conduct

• SA 8000s Proposed Global Standards
• Do not use child or forced labour
• Provide a safe working environment
• Respect workers rights to unionize
• Do not regularly require more than 48-hour work
  weeks
• Pay wages sufficient to meet workers basic needs

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Codes of Conduct

• SA 8000s Proposed Global Standards
• Do not use child or forced labour
• Provide a safe working environment
• Respect workers rights to unionize
• Do not regularly require more than 48-hour work
  weeks
• Pay wages sufficient to meet workers basic needs

Ethics in Global Management

• The term international business ethics refers to
  the business conduct or morals of MNCs in their
  relationships with individuals and entities
• Based on
• cultural value system
• generally accepted ways of doing business in each
  country or society
• Globalization has multiplied the ethical problems
  facing organizations
• Business ethics have not yet globalized
• Difficult to reconcile consistent and acceptable
  behaviour around the world

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Ethics in Global Management

• Approaching ethical dilemmas varies among MNCs
• Canadian approach is based upon general rules
• Japan and Europe make decisions on shared values,
  social ties, and perception of their obligation
• Questionable Payments
• Payments in question are political payments,
  extortion, bribes, sales commissions, or grease
  money payments to expedite routine
  transactions
• Also called tokens of appreciation, la
  mordida, bastarella, and pot-de-vin
• The Foreign Corrupt Practices Act
• The Foreign Corrupt Practices Act (FCPA), enacted
  in 1977, prohibits U.S. companies from making
  illegal payments or other gifts or political
  contributions to foreign

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Three Tests of Ethical Corporate Actions

• Is it legal?
• Does it work (in the long run)?
• Can it be talked about?
• Ethical Behaviour and Social Responsibility
  Guidelines Developed by MNCs
• Develop worldwide codes of ethics
• Consider ethical issues in strategy development
• Consider withdrawal from the problem market
• Making the Right Decision
• How is a manager operating abroad to know what is
  the right decision ?
• Consult the laws of both the home and the host
  countries
• Consult the companys code of ethics
• Use your own moral code of ethics
• Follow your own conscience

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Criticisms of MNC Subsidiary Activities (contd.)

• MNCs usually reserve the key managerial and
  technical positions for expatriates. As a
  result, they do not contribute to the development
  of host-country personnel.
• MNCs do not adapt their technology to the
  conditions that exist in host countries.
• MNCs concentrate their RD activities at home,
  restricting the transfer of modern technology and
  know-how to host countries.
• MNCs give rise to the demand for luxury goods in
  host countries at the expense of essential
  consumer goods.
• MNCs start their foreign operations by purchasing
  existing firms rather than developing new
  productive facilities in host countries.
• MNCs are not accountable to their host nations
  but only respond to home-country governments

Comparative Management in Focus NAFTA Brought
together three largely different
economies Promised that it would create millions
of jobs Promised that it would curb illegal
immigration Promised that it would raise living
standards
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Comparative Management in Focus

• NAFTA United States
• Overall has enjoyed a growth in exports
• Companies have moved to Mexico for cheaper labor
• Increased unemployment in many areas

• NAFTA Mexico
• Promised to close wage gaps and lower illegal
  immigration
• Gap in wages has increased
• Companies are moving to China for lower wages

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Comparative Management in Focus

• NAFTA Canada
• Has had mixed results
• Businesses are more export-oriented
• Created 500,000 new jobs last year
• We went from a Canadian company with a 30 million
  population market to a 300 million market. -
  John Scarsella President and CEO Durham Furniture

Ethnocentric vs. Relativism

• Ethnocentric
• Company applies the morality used in its home
  country regardless of the host countrys system
  of ethics

• Relativism
• Company adopts the local moral code in whatever
  country it is operating companies run into
  value conflicts with this approach