MGCR 382 Chapter Notes - Chapter 5: Foreign Corrupt Practices Act, Alien Tort Statute, Civil Society

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MGCR383 Chapter 5 Notes: Ethics and Social Responsibility
The Nature of Ethics and Social Responsibility in International Business
Ethics an individual’s personal beliefs about whether a decision, behaviour, or action is right or wrong
Ethical behaviour refers to behaviour that conforms to generally accepted social norms
Unethical behavioiur behaviour that does not conform to generally accepted social norms
Factors determining ethics:
Perceptions of the behaviour of parents and other adults they deal with as a child
Everyday occurrences that force participants to make moral choices
Religious beliefs
Individuals have their own personal belief system about what constitutes ethical and unethical behaviour
People from the same cultural contexts are likely to hold similar but not necessarily identical beliefs as to
what constitutes ethical and unethical behaviour
Individuals may be able to rationalize behaviours based on circumstances
Individuals may deviate from their own belief systems based on circumstances
Ethical values are strongly affected by national cultures and customs
Values things a person feels to be important
Ethics in Cross-Cultural and International Contexts
How an Organization Treats Its Employees
At one extreme, an organization can strive to hire the best people, to provide ample opportunity for skills and
career development, to provide appropriate compensation and benefits, and to generally respect the personal rights
and dignity of each employee. At the other extreme, a firm can hire using prejudicial or preferential criteria, can
intentionally limit development opportunities, can provide the minimum compensation allowable, and can treat
employees callously and with little regard to personal dignity
Areas most susceptible to ethical variation include hiring and firing practices, wages and working conditions, and
employee privacy and respect. In some countries, guidelines suggest that hiring and firing decisions should be
based solely on the individual’s ability to perform the job. In other countries, it is perfectly legitimate to give
preferential treatment to individuals based on gender, ethnicity, age, or other non-work-related factors
Managers in international organization must deal with country-specific ethical issues regarding its treatment of
employees, but must also be prepared to contend with international comparisons as well
How Employees Treat the Organization
Ethical issues 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
In high-context, collectivist, and power-respecting cultures, gift exchanges are an important part of doing business
How Employees and the Organization Treat Other Economic Agents
Agents of interest include customers, competitors, stockholders, suppliers, dealers, and labour unions. Behaviours
subject to ethical ambiguity include advertising and promotions, financial disclosures, ordering and purchasing,
shipping and solicitations, bargaining and negotiation, and other business relationships
Managing Ethical Behaviour Across Borders
Guidelines and Codes of Ethics
Codes of ethics written statements of the values and ethical standards that guide the firms’ actions. The mere
existence of a code of ethics does not ensure ethical behaviour. It must be backed up by organizational practices
and the company’s corporate culture
A MNC must decide whether to establish one overarching code for all of its global units or tailor each one to the
local context. Similarly, if a firm acquires a new foreign subsidiary, it must decide whether to impose its corporate
code on it or allow it to retain the one it was following. In order for a code to have value, it must be clear and
straightforward, must address the major elements of ethical conduct relevant to its environment and business
operations, and must be adhered to when problems arise
Ethics Training
Some MNCs address ethical issues proactively, by offering employees training in how to cope with ethical
One decision for international firms is whether to make ethics training globally consistent or tailored to local
contexts. Most MNCs provide expatriates with localized ethics training to better prepare them for their foreign
Organizational Practices and the Corporate Culture
If top leaders in a firm behave in an ethical manner and violations of ethical standards are promptly and
appropriately addressed, then everyone in the organization will understand that the firm expects them to behave in
an ethical manner
Social Responsibility in Cross-Cultural and International Contexts
Social responsibility (CSR) set of obligations an organization undertakes to protect and enhance the society in which it
Areas of Social Responsibility
Organizational stakeholders those 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 on
three main groups: customers, employees, and investors. They then select other stakeholders that are particularly relevant
or important to the organization and then attempt to address their needs
Organizations that are responsible to their customers strive to treat them fairly and honestly. They pledge to
charge fair prices, to honour product warranties, to meet delivery commitments, and to stand behind the quality of
the products they sell
Organizations that are socially responsible to employees treat their workers fairly, make them a part of the team,
and respect their dignity and basic human needs
To maintain a socially responsible stance toward investors, managers should follow proper accounting
procedures, provide appropriate information to shareholders about the financial performance of the firm, and
manage the organization to protect shareholder rights and investments
The Natural Environment
Companies need to develop economically feasible ways to reduce acid rain and global warming; to avoid
depleting the ozone layer; and to create alternative methods of handling sewage, hazardous wastes, and ordinary
General Social Welfare
Contributions to charities, philanthropic organizations, and not-for-profit foundations and associations; supporting
the arts; and taking a role in improving public health and education
Managing Social Responsibility Across Borders
Approaches to Social Responsibility
Obstructionist stance 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, their typical response is to deny or
avoid accepting responsibility for their actions
Defensive stance the organization will do everything that is required of it legally but nothing more. This
approach is often adopted by companies that are unsympathetic to the concept of social responsibility. Managers
that take a defensive stance insist that their job is to generate profits. Firms that take this position are less likely to
cover up wrongdoing and will generally admit to mistakes when they are identified and then take appropriate
corrective actions
Accommodative stance meets its legal and ethical requirements but will also go beyond these requirements in
selected cases. Such firms voluntarily agree to participate in social programs, but solicitors have to convince the
organization that the programs are worthy of their support
Proactive stance firms that adopt this approach take to heart the arguments in favour of social responsibility.
They view themselves as citizens in a society and proactively seek opportunities to contribute
Managing Compliance
Legal compliance the extent to which the organization conforms to regional, national, and international laws.
The task of managing legal compliance is generally assigned to the appropriate functional managers
Ethical compliance the extent to which the members of the organization follow basic ethical standards of
behaviour. Many organizations also establish formal ethics committees, which may be asked to review proposals
for new projects, help evaluate new hiring strategies, or assess new environmental protection plans
Philanthropic giving awarding of funds or gifts to charities or other social programs
Informal Dimensions of Social Responsibility
Organization leadership and culture leadership practices and organization culture can go a long way toward
defining the social responsibility stance an organization and its member will adopt
Whistle-blowing the disclosure by an employee of an 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
o Many organizations welcome the contributions of whistle-blowers. A person who observes questionable
behaviour typically first reports the incident to his or her boss. If nothing is done, the whistle-blower may
then inform higher-level managers or an ethics committee. Eventually, the person may have to go to a
regulatory agency or even the media to be heard
o Attitudes toward whistle-blowing are affected by culture
Evaluating Social Responsibility
Corporate social audit formal and thorough analysis of the effectiveness of the firm’s social performance. The
audit is usually undertaken by a task force of high-level managers from within the firm. It requires that the
organization clearly define all of 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
Many organizations now require current and new employees to read their guidelines or code of ethics and then
sign a statement agreeing to abide by it
Difficulties of Managing CSR Across Borders
Main actors in the policy formulation process:
The state, which passes and enforces laws
The market, which through the process of competition and the pricing mechanism utilizes inputs and allocates
outputs to members of the society
Civil society, which includes churches, charitable organizations, the Boy Scouts, labour unions, NGOs. Civil
society manifests the cultural values of the citizens of the country
Anglo-Saxon Approach
View the state, the market, and civil society as separate, competitive, and antagonistic. Thus, 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. Similarly, when Americans look at the relationship
between civil society and government, members of the former are labeled “special interest groups”
Asian Approach