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What Are the Forms of Conducting International Business

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					  CHAPTER 4
  MANAGING
   ETHICAL
     AND
    SOCIAL
RESPONSIBILITY
   CHANGES
     IN
MULTINATIONAL
  COMPANIES
               INTRODUCTION


• Multinational managers face
  complex ethical issues
• With an understanding of key
  ethical problems in multinational
  management, managers can make
  more informed ethical judgments
              BUSINESS ETHICS

• Ethics - the rules and values that
  determine what goals and actions
  people follow when dealing with
  other human beings
• Business ethics: all business
  decisions with ethical
  consequences
            INTERNATIONAL
           BUSINESS ETHICS


• The unique ethical problems
 faced by managers conducting
 business operations across
 national boundaries
                        SOCIAL
                 RESPONSIBILITY

• The responsibility businesses have
 to society beyond making profits
• Often reflects the ethical values
  and decisions of the top
  management team
• Ethics and social responsibility-
  not easily distinguished in practice
 Excepts from Exhibit 4.1
          show examples of
ethical/social responsibility
     issues faced by MNCs
 Stakeholder   Ethical/Social    Example Problem For the
   Affected    Responsibility             MNC
                   Issue

                                Should an MNC delete
                                safety features to make a
Customer       Product safety
                                product more affordable for
                                people in a poorer nation?

                                If a product is banned
                                because it is unsafe in one
               Fair return on   country, should it be sold in
Stockholders                    country where it is not
               investment
                                banned to maintain profit
                                margins?
                               Should an MNC use child
Employees      Child Labor     labor if it is legal in the
                               country of their location?
                               Should an MNC follow local
               Following Local laws that violate home
Host Country
               Laws            country laws against
                               discrimination?
                                Is an MNC obligated to
               Protection of
Society in                      control its hazardous waste
               the
General                         to a degree higher than
               Environment
                                local laws require?
ETHICAL PHILOSOPHY
                  TRADITIONAL
                        VIEWS


• Two basic systems of ethical
  reasoning
   – Deontological
   – Teleological
                DEONTOLOGICAL
                     THEORIES


• Actions have a good or bad morality
 regardless of the outcomes they
 produce
                     TELEOLOCIAL


• Morality from the consequences
 of an act
  – utilitarianism
          MORAL LANGUAGES


• Basic ways that people use to
 make ethical decisions and
 explain ethical choices
  – a contemporary view
        SIX BASIC ETHICAL
               LANGUAGES

•   Virtue and vice
•   Self control
•   Maximize human welfare
•   Avoiding harm
•   Rights/duties
•   Social contract
                    NATIONAL
                  DIFFERENCES


• National culture and social
  institutions affect ethical
  behavior/social responsibility
   EX 4.2 INSTITUTIONAL AND CULTURAL
 EFFECTS ON BUSINESS ETHICS ISSUES AND
              MANAGEMENT
                            KEY SOCIAL
                           INSTITUTIONS
                              Religion
                           Laws and Legal
                              System

                                                 MANAGEMENT
IMPORTANT ETHICAL                                PRACTICES TO
     ISSUES FOR                                  MONITOR AND
      BUSINESS                                CONTROL ETHICAL
 (e.g., equal rights for                          BEHAVIOR IN
         women)                                 ORGANIZATIONS
                                              (e.g., codes of ethics)

                             CULTURAL
                            NORMS AND
                              VALUES
                           (e.g., norms for
                              gift giving)
                               EX 4.3 ETHICAL
                         ISSUES IDENTIFIED BY
                              SENIOR U.S. AND
                          EUROPEAN MANAGERS

                                                   Political and
            ari




                                                   Local
          st
       Au




                                                   Involvement
    y/
   an




                                                   Personnel
  m


            K.




                                                   Issues
er


         U.
G




                                                   Use of
                                                   Information
            S.
         U.




              -100       -50        0         50

                  Relative Frequency of Concern
                             0 = mean
                                     EX 4.4 THE
                                MANAGEMENT OF
                             KEY ETHICAL ISSUES
            ia
          tr
        us
       A
    y/
   an
  m



           .
er



         .K
G



        U
           .
         .S
        U




                                                                   0 = Mean
              -15         -10        -5        0           5

                    Ethical Issues Addressed in Training
                    Ethical Issues Addressed in Written Policies
                          EX 4.5 BELIEFS
                      REGARDING ETHICAL
                                  CODES
Violate if not Detected

         Define Limits


        Aid to Refuse


   Raise Ethical Level

                          0    1     2   3            4
                                           5=Agree
       French      German     U.S.        3=Neutral
                                         1=Disagree
              FOREIGN CORRUPT
                PRACTICES ACT

• Forbids U.S. companies to make
  or offer payments or gifts to
  foreign government officials to
  get or retain business
  – “Reason to know" provision
• See Exhibit 4.7
• FCPA does not prohibit some forms
  of payments that may occur in
  international business
   – payments made under duress to
     avoid injury or violence are
     acceptable
                  EFFECTS OF THE
                     “ETHICS GAP”

• FCPA and proliferation of ethical
  codes in US are creating and ethics
  gap
• FCPA blocked some gains in export
  market share and FDI
• Pressure on other countries to follow
  US rules
      TOWARD
TRANSNATIONAL
       ETHICS
                         ETHICAL
                     CONVERGENCE

• In spite of wide differences in
  cultures and social institutions,
  growing pressures for multinationals
  to follow same rules
                  PRESSURES FOR
                        ETHICAL
                   CONVERGENCE
• Growth of international trade
  – creates pressures for
    uniformity
• Increased cross national imitation
• Mixed cultural background
  employees
                    PRESCRIPTIVE
                  ETHICS FOR THE
                  MULTINATIONAL
• Donaldson suggests
  – guides based on the moral
    languages of avoiding harm,
    right/duties, and the social
    contract
  – specified in contracts and
    international laws
              INTERNATIONAL
            CODES OF CONDUCT

• For moral language to work, there
  must be codes of conduct
• Current codes exist based on
  codes from international
  governing bodies (UN, ILO) and
  international agreements (Exhibit
  4.8)
               MULTINATIONALS
                DO NOT ALWAYS
                FOLLOW ETHICAL
                    AGREEMENTS
•   Governments make agreements
•   Compliance voluntary
•   Not all governments subscribe
•   Each guide is an incomplete moral
    guide
HOW SHOULD THE
MANAGER DECIDE?
                      ETHICAL
                RELATIVISM VS
                      ETHICAL
                UNIVERSALISM
• Ethical relativism - each society's
  view of ethics considered
  legitimate and ethical
• Ethical universalism - basic moral
  principles transcend
  cultural/national boundaries
                    PRACTICAL
                  PROBLEMS OF
                   FOLLOWING
                       EITHER

• Convenient relativism - companies
  use ethical relativism to behave
  any way they please
• Cultural imperialism with ethical
  universalism
              BALANCING THE
               NEEDS OF THE
              COMPANY WITH
                    ETHICAL
              CONSEQUENCES

• Managers must weigh and balance
  the economic, legal, and ethical
  consequences of their decisions
         FORMS OF ANALYSES


• Economic
• Legal
• Ethical
        IS THE BEHAVIOR OR ITS CONSEQUENCE:
                            Violates Host
                              or Home
                              Country
                                             Yes   STOP!
                               Laws?
       Legal
                                 No
      Analysis
                               Violates
                             MNC's Code      Yes   STOP!
                             of Conduct?


                                 No

                                   In
                              Violation of
                            the Company's
                                             Yes   STOP!
                             Ethical Code?
  Organizational
     Ethical                     No
    Analysis
                             Consistent
                            with Company     No    STOP!
                               Culture?


                                Yes
                             Consistent
Cultural Sensitivity         with Local
                              Cultural
                                             No    STOP!
 Ethical Analysis
                              Norms?

                                Yes
Personal Ethical Analysis
                             Consistent
   Do It!        Yes        with Personal    No    STOP!
                            Moral Beliefs?
                     CONCLUSIONS

• Multinational managers face ethical
  challenges magnified by the
  international context
• Need to understand home ethical
  codes and impact on ethics of foreign
  culture/social institutions

				
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