Managing Ethical and Social Responsibility Challenges in Multinational Companies

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• Managing Ethical and Social Responsibility
  Challenges in Multinational Companies

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International Business Ethics Social
Responsibility

• International business ethics
• Are unique ethical problems faced by managers
  operating across national boundaries
• More complex as different cultures do not agree
  on what one ought to do
• Social responsibility supports the idea that
  businesses have a responsibility to society
  beyond making profits and it is closely related
  to business ethics
• Firms must take into account the welfare of other
  constituents in addition to stockholders

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Basic Systems of Ethical Reasoning

• Teleological ethical theory
• Morality of an act or practice comes from its
  consequences
• Utilitarianism what is good and moral comes from
  acts that produce the greatest good for the
  greatest number of people
• Deontological Ethical Theory
• Actions have a good or bad morality regardless of
  the outcomes they produce

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Moral Languages

• Basic ways that people use to make ethical
  decisions and to explain their ethical choices
• Six basic ethical languages
• Virtue and vice
• Self-control
• Maximizing human welfare
• Avoiding harm
• Rights/duties
• Social contract

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National Differences in Business Ethics and
Social Responsibility

• National culture and social institutions affect
  ethical behavior and social responsibility
• Messner and Rosenfeld argue that specific
  national culture and social institutions affect
  ethics
• National cultures high achievement, high
  individualism, high universalism, high
  materialism are all related to higher deviance
• Social institutions high industrialization,
  capitalist systems, lower family breakdown and
  highly accessible educational systems should all
  encourage deviance

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Exhibit 15.2 A Model of Institutional and
Cultural Effects on Business Ethics Issues and
Management
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Exhibit 15.3 Comparison of Key Ethical Issues
Identified by Senior U.S. and EU Managers
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Exhibit 15.4 Management of Key Ethical Issues in
U.S. and European Companies
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Exhibit 15.5 National Differences in Beliefs
Regarding Ethical Codes
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Questionable Payments and U.S. Foreign Practices
Act

• Questionable payments
• Bribes or gifts to expedite government actions or
  to gain advantage in business deals (Grease
  Money)
• In many countries, people routinely offer gifts
  of bribes.
• U.S. Foreign Corrupt Practices Act (FCPA) forbids
  illegal payments or gifts to officials of foreign
  governments for the sake of getting or retaining
  business
• Does not prohibit payments made under duress to
  avoid injury or violence
• Reason-to-know component Firms are liable for
  bribes even if bribes are made by agents of
  company

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Ethical Gap and Ethical Convergence

• Ethical gap between US and rest of the world
• More coercive and normative pressure for U.S.
  businesses to follow ethical standards
• Recent evidence suggests that FCPA has not
  necessarily caused U.S. business to fall behind
• Ethical convergence is the growing pressure for
  MNC to follow the same rules in managing ethical
  behavior and social responsibility
• Four Basic Reasons for Ethical Convergence
• The growth of international trade and trading
  blocks (NAFTA, etc)
• Increased pressures to imitate business practices
• Varied cultural background employees require
  common standards
• An increasing number of business watchdogs (NGOs)

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Prescriptive Ethics

• Suggested guidelines for the ethical behavior of
  multinational companies (Code of Conduct
  Exhibit 15.8)
• Three moral languages should guide MNCs
  irrespective of national backgrounds
• Avoiding harm MNCs should engage in practices
  that avoid negative consequences to stakeholders
• Rights/duties Right to make a profit but duty to
  provide fair wage
• Social contract Between itself and its
  stakeholders.

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International Ethics Guideline Sources

• The United Nations Universal Declaration of Human
  Rights
• The United Nations Code of Conduct on
  Transnational Corporations
• The European Convention on Human Rights
• The International Chamber of Commerce Guidelines
  for International Investment
• The Organization for Economic Cooperation and
  Development Guidelines for Multinational
  Enterprises
• The Helsinki Final Act
• The International Labor Office Tripartite
  Declarations of Principles Concerning
  Multinational Enterprises and Social Policy

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Two Basic Rationales for the Code of Conduct for
the Multinational

• Basic deontological principles dealing with human
  rights
• Right to work and right to be safe
• History of experiences in international business
  interactions
• However, despite the existence of extensive
  agreements, multinationals may not always follow
  ethical principles.

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Why Multinationals Might Not Follow Ethical
Principles

• Governments make agreements
• The agreements have only voluntary compliance
• Not all governments subscribe to the agreements
• Each agreement is an incomplete moral guide to
  the company

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Some Best Practices Steps

• Leading by example
• Making ethics part of the corporate culture
• Involving employees at all levels
• Setting and monitoring goals
• Effective integration in business processes
• Open discussion of ethics and other ethical
  issues
• Governments make agreements

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The Ethical Dilemma in Multinational Management
How Will You Decide?

• Ethical relativism vs. Ethical universalism
• Ethical relativism each societys view of ethics
  must be considered legitimate and ethical
• Ethical universalism basic moral principles that
  transcend cultural and national boundaries
• There is difficulty in following either ethical
  relativism or universalism
• Convenient Relativism Some companies use the
  logic of ethical relativism to behave any way
  they please

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Individual Ethical Decision Making for the MNC
Manager

• Forms of analyses
• Economic analysis focuses on what is the best
  decision for a companys profits (Must do)
• Legal analysis focuses on only meeting legal
  requirements of host and parent countries (Have
  to do)
• Ethical analysis goes beyond focusing on profit
  goals and legal regulations (Should do)

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Exhibit 15.9 Decision Points of Ethical Decision
Making in Multinational Management
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Exhibit 15.9 Decision Points of Ethical Decision
Making in Multinational Management
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Individual Ethical Decision Making

• Purely ethical issues must be weighed against
  economic and legal analyses.
• However, multinational managers are guests in
  other nations and ethical decision making must go
  beyond legal constraints.
• There is no single accepted ethical theory that
  managers can use but there are generally accepted
  theories that can be used as guides.
• Such ethical analyses can help raise managers
  awareness of ethical issues.