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8/3/2019 Module 15 Managing Ethics and Social Responsibility 1233275128266011 1
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Ethics and SocialResponsibility
K. Praveen Parboteeah
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Objectives
What is ethics and social responsibility?
How does national culture and socialinstitutions affect ethics?
Bribery and Foreign Corrupt Practices Act
What can be done about it? When in Rome, do as the Romans?
Universal values
Ethics in Japan
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Tobaccos Industry Ethics
Few developing countries require health
warning on cigarette packages comparedto 95% of developed nations Should tobacco company put warnings? Should
they advertise in LDC?
Cigarette consumption and production isincreasing at an alarming rate in LDC Targeted at young people and women
Cigarettes in LDC contain more tar andharmful chemicals
Should tobacco be cultivated?
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Tobaccos Industry Position
Tobacco cultivation in LDC grants higher
returns than alternative crops More than 100 million people depend on
tobacco for survival
People in LDC have been cultivating andsmoking tobacco for centuries
Dilemma:
What weight should be given to humanfreedom (freedom of farmers and smokers)versus weight of human welfare?
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Introduction
Multinational managers face
complex ethical issues all the time With an understanding of key
ethical problems in multinational
management, managers can makemore informed ethical judgments
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Ethics & Multinational Ethics
Ethics - the rules and values that
determine what goals and actionspeople follow when dealing withother human beings
Business ethics: all businessdecisions with ethical consequences
The unique ethical problems facedby managers conducting businessoperations across nationalboundaries
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Social Responsibility
The responsibility businesses have
to society beyond making profits
Often reflects the ethical valuesand decisions of the topmanagement team
Ethics and social responsibility- noteasily distinguished in practice
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Research Evidence
Cullen, Parboteeah & Hoegl (2004)
shows that specificcultural/institutional variables areassociated with justification of
unethical behaviors Universalism, Pecuniary Materialism
lead to more unethical behavior
Industrialization, Family Weakness andEducation
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Is American Capitalism Moral?
Marxist Critic
Exploitation of workers
Alienation of human beings
Protects the vested interest of few
Non-Marxist Critic
False needs and overproduction wasteful nature of the system
The Military-Industrial complex
Inequalities inherent in the system
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In Defense of Capitalism
Great emphasis on the importance and
value of human freedom Political freedom is only possible with
economic freedom
Enormous stride in the ability to producegoods and services very efficient
Redistribution of wealth
Although Bill Gates has become the richest manin around 15-20 years, large number of otherpeople have benefited from the Microsoft wealth
No system is perfect
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Approaches to Deal With InternationalEthical Dilemmas
When in Rome do as the Romans do?
Only guide is what is legal andappropriate in that country
Justification:
In some instances, laws and regulations maybe stricter (e.g., Europe have stricterenvironmental laws)
If things are sufficiently different, then it is(maybe) necessary to apply differentstandards (e.g., US companies complied withArab firms not to post women and Jews forfear of losing lucrative contracts)
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Is the adage wholly justified?
No because a country permits bribery,unsafe working conditions, and violationof human rights does not mean that thesepractices are acceptable
Key issues Questionable payments/Bribery
Employment
Environmental issues
Product safety
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Bribery
Making a payment to a foreign official for
the purpose of influencing any act ordecisions of such foreign official in his in hisofficial capacity or of inducing such foreignofficial to do or omit to do any act in
violation of the lawful duty of such official A bribe is made with the intention to corrupt
Classic case of Lockheed Corporation paidJapanese officials $25million to win an
aircraft contract
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Whats wrong with bribery?
Systematic and widespread
corruption inhibits the developmentof fair and efficient markets
Does not provide open market access to
all competitors/individuals Is not an efficient allocation of resources
higher prices
Results in poverty andunderdevelopment
Violation of duty or trust by an
official
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Foreign Corrupt Practices Act
Forbids U.S. companies to make or offer
payments or gifts to foreign governmentofficials to get or retain business
Reason to know" provision
Exceptions: Grease payments facilitating payments to expedite
routine governmental action
Reasonable expenditures to entertain a foreign official inthe course of doing business
Any laws that permits or requires payments in thecountry even if it is bribe
payments made under duress to avoid injury orviolence are acceptable
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Key Issues
Some evidence that discontinuing bribesdoes not reduce sales of the firmsproducts or services in that country
Some evidence that firms from other
countries continue to win businessthrough corrupt practices such as bribery
Recent formal agreement by many
industrialized nations to outlaw thepractice of bribing foreign governmentofficials
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Criticisms of Multinationals
Multinationals operate in LDC to seekcheap labor, available resources, taxshelters and relief and new markets
Unfair competition of MNCS
Can borrow at great rates from local lendersand do not carry fair share of socialdevelopment
Increase in tax rate
MNCs and impoverishment of LDCs Take away scarce resource from locals
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Other Criticisms of MNCs
Majority of stock owned by parentcompany
MNCs reserve key managerial andtechnical positions for expatriates
MNCs concentrate R&D activities athome limiting transfer oftechnology
Rise in demand for luxury goods atexpense of essential goods
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What can be done? Apply UniversalCodes
Countries and companies should
abide by suggested guidelines forethical behaviors
There is pressure now across the
world for ethical convergence
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DeGeorges 7 principles
Multinationals (MNCs) should do no harm
MNCs should produce more good than bad for thehost country
MNCs should contribute by their activities to the hostcountrys development
MNCs should respect the right of their employees MNCs should pay their fair share of taxes
To the extent that the local culture does not violatemoral norms, MNCs should respect these norms
MNCs should cooperate with the local governmentsin the development and enforcement of backgroundinstitutions
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Best Practices for Enforcement of Codeof Ethics
Lead by example international
executives should also adhere to the codeof ethics
Make ethics part of the corporate culture
Involve employees at all levels
Set and monitor goals
Effective integration in business processes
Open forum to discuss ethical issues
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Ethics in Japan
Japanese cabinet member forced toresign for receiving over $2 million fromJapanese corporations
Failure of banking system to takecorrective action regarding Japans
recession Concealing customer complaints
Failure to inform car owners aboutpossible auto defects and maintenance of
two sets of customer complaint records
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Ethics in Japan
Hostile work environment
Cultural expectations Traditional role of females and female
employees
Sexual harassment may not be
considered a moral issue Equal opportunity issues
Refusal to hire women or promotethem into management positions
Mitsubishi sued by U.S. EEOC
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Conclusions
Multinational managers face ethical
challenges magnified by theinternational context
Need to understand home ethical
codes and impact on ethics offoreign culture/social institutions