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Chapter 5

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Management Core
MGCR 382
Nicholas Matziorinis

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  Values Generalizations  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 dilemmas  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 assignments 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 functions 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 garbage 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
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