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Managing Interdependence Social Responsibility and Ethics


Business ethics have not yet globalized ... business ethics refers to the business ... FDI in the US is in many cases far more than US investment outward ... – PowerPoint PPT presentation

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Title: Managing Interdependence Social Responsibility and Ethics

  • Chapter 2
  • Managing Interdependence Social Responsibility
    and Ethics

(No Transcript)
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
Social Responsibility of Multinational
  • More complex than domestic firms due to the
    complex issues related to global business
  • Economic development
  • Cultural issues
  • Additional stakeholders
  • Legal issues

Social Responsibility Integrated Approach
  • Organizations agree what should constitute moral
    and ethical behavior
  • Emerging because of the development of a global
    corporate culture
  • Result of socioeconomic interdependence

Social Responsibility Integrated Approach
  • Provide a basis of judgment regarding decisions
    and situations
  • Moral Universalism
  • Unlikely to become a reality
  • Ethnocentric
  • Relativism

Human Rights
  • What constitutes human rights?
  • Perceptions of people
  • Priorities of people
  • US 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 labor
  • Provide a safe working environment
  • Respect workers rights to unionize
  • Do not regularly require more than 48-hour work
  • Pay wages sufficient to meet workers basic needs

Ethics in Global Management
  • Globalization has multiplied the ethical problems
    facing organizations
  • Business ethics have not yet globalized
  • Difficult to reconcile consistent and acceptable
    behavior around the world

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 the cultural value system
  • Based on generally accepted ways of doing
    business in each country or society

Ethics in Global Management
  • Approaching ethical dilemmas varies among MNCs
  • American approach is based upon general rules
  • Japan and Europe make decisions on shared values,
    social ties, and perception of their obligation

Questionable payments
  • This is a specific ethical issue for managers in
    the international arena
  • Payments in question are political payments,
    extortion, bribes, sales commissions, or grease
    money payments to expedite routine
  • Also called tokens of appreciation, la
    mordida, bastarella, and pot-de-vin

The Foreign Corrupt Practices Act
  • The Foreign Corrupt Practices Act (FCPA), enacted
  • 1977, prohibits U.S. companies from making
  • payments or other gifts or political
    contributions to foreign
  • government officials for the purposes of
    influencing them
  • in business transactions.

The 2006 Transparency International Corruption
Perceptions Index
Three Tests of Ethical Corporate Actions
  • Is it legal?
  • Does it work (in the long run)?
  • Can it be talked about?

Ethical Behavior and Social Responsibility
Guidelines Developed by MNCs
  • Develop worldwide codes of ethics
  • Consider ethical issues in strategy development
  • Given major, unsolvable, ethical problems,
    consider withdrawal from the problem market
  • Develop periodic ethical impact statements

Making the Right Decision
  • How is a manager operating abroad to know what is
    the right decision when faced with questionable
    or unfamiliar circumstances of doing business?
    Here is a suggested sequence
  • Consult the laws of both the home and the host
  • Consult the International Codes of Conduct for
    MNEs (as shown in text Exhibit 2-2)
  • Consult the companys code of ethics
  • Consult your superiors
  • Use your own moral code of ethics
  • Follow your own conscience

Managing Interdependence
  • Because multinational firms represent global
  • interdependency managers must recognize that what
  • they do has long-term implications for the
  • socioeconomic interdependence of nations

Foreign Subsidiaries in the US
  • Number of foreign subsidiaries in the US has
    grown dramatically
  • FDI in the US is in many cases far more than US
    investment outward
  • One different aspect of management in the US is
    corporate social responsibility

Host-Country Interdependence
  • International managers must go beyond general
    issues of social responsibility and deal with
    specific concerns of the MNC subsidiary
  • Focus should be interdependence rather than
  • Focus should be cooperation rather than

Criticisms of MNC Subsidiary Activities
  • MNCs raise their needed capital locally,
    contributing to a rise in interest rates in host
  • The majority (sometimes even 100 percent) of the
    stock of most subsidiaries is owned by the parent
  • Consequently, host-country people do not have
    much control over the operations of corporations
    within their borders.

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.

Criticisms of MNC Subsidiary Activities (contd.)
  • 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 dominate major industrial sectors, thus
    contributing to inflation by stimulating demand
    for scarce resources and earning excessively high
    profits and fees.
  • MNCs are not accountable to their host nations
    but only respond to home-country governments
    they are not concerned with host-country plans
    for development.

Recommendations for MNCs Operating in Developing
Countries(Suggested by De George)
  • -Do no international harm. This includes respect
    for the integrity of the ecosystem and consumer
  • -Produce more good than harm for the host
  • -Contribute by their activity to the host
    countrys development.
  • -Respect the human rights of their employees.
  • -To the extent that local culture does not
    violate ethical norms, MNCs should respect the
    local culture and work with and not against it.
  • -Pay their fair share of taxes.
  • -Cooperate with the local government in
    developing and enforcing just background
    (infrastructure) institutions (i.e. laws,
    governmental regulations, unions, consumer
    groups) which serve as a means of social control.

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

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
  • Gap in wages has increased
  • Companies are moving to China for lower wages

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. We do
    not treat the boarder as a boarder.
  • - John Scarsella President and CEO Durham

Managing Environmental Interdependence
  • Now that mankind is in the process of completing
    the colonization of the planet, learning to
    manage it intelligently is an urgent imperative.
    People must accept responsibility for the
    stewardship of the earth. The word stewardship
    implies, of course, management for the sake of
    someone elseAs we enter the global phase of
    human evolution, it becomes obvious that each
    person has two countries, his or her own and
    the planet earth. Ward and Dubois

Managing Environmental Interdependence
  • Handling exporting of hazardous waste
  • Exporting pesticides
  • Looking for alternative raw materials
  • Developing new methods of recycling
  • Expanding the use of byproducts

Socioeconomic Interdependence
  • The world is linked through
  • Securities markets
  • Communication Networks
  • Subsidiaries

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

A Moral Philosophy Model of Cross-Cultural
Societal Ethics
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