PowerPoint by:Mohamad Sepehri, Ph.D.

Jacksonville University

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Chapter Learning Goals

1. Appreciate the complexities involved in the corporation’s obligations toward its various constituencies around the world.

2. Understand the changing perceptions and demands of corporations doing business in other countries, in particular the responsibilities toward human rights.

3. Acknowledge the strategic role that CSR and codes of ethics must play in global management.

4. Provide guidance to managers to maintain ethical behavior amid the varying standards and practices around the world.

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Chapter Learning Goals

5. Recognize that companies must provide benefits to the host country in which they operate in order to maintain cooperation.

6. Discuss the need for cooperation to consider sustainability in their long-term plans in order to manage environmental impacts on host locations.

7. Identify the challenges involved in human rights issues when operating in China.

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Opening Profile: Primark’s Moral Maze

Primark announced in June 2008 that it had fired three suppliers in India after it was found that they had subtracted work to home workers who used child labor.

Although many suppliers are determined to keep their breaches from being discovered, the companies need to get suppliers to recognize that adhering to sound employment practices is in their own interests.

Whereas in the past, a company’s responsibility was almost exclusively profit, now corporate social responsibility (CSR) has come to the forefront.

“Transparency” has become the watchword and the lesson is that CSR is now a vital part of corporate culture and strategy.

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The Social Responsibility of MNC’s

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CSR Dilemma

MNC StakeholdersMNC Stakeholders

Home Country Host

Society in General

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OwnersCustomersEmployeesUnionsSuppliersDistributorsStrategic AlliesCommunityEconomyGovernment

MNC

EconomyEmployeesCommunityHost GovernmentConsumersStrategic AlliesSuppliersDistributors

Global interdependence/standard of livingGlobal environment and ecologySustainable resourcesPopulation’s standard of living

Global Consensus or Regional Variation?

Global Corporate Culture: An integration of the business environments in which firms currently operate

The United States and Europe adopt strikingly different positions that can be traced largely to history and culture.

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Dealing with Confusion About Cross-Cultural Dilemmas Engaging stakeholders (and

sometimes NGOs) in a dialog Establishing principles and

procedures for addressing difficult issues such as labor standards for suppliers, environmental reporting, and human rights

Adjusting reward systems to reflect the company’s commitment to CSR

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General Guidelines for Code of Morality and Ethics in Individual

Countries

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International Codes of Conduct

The Sweatshop Code of Conduct The Electronic Industry Code of

Conduct (EICC) Social Accountability 8000 (SA

8000)

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Comparative Management in Focus:

Doing Business in China The attraction of doing business in

China: Cheap labor cost A larger market An expanding market A growing economy

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Comparative Management in Focus:

Doing Business in ChinaHuman Rights and Freedom of Information Challenges

Human Rights and Freedom of Information Issues in China

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Potentially rampant violation of worker’s rights

Repression of free speech

Difficulty monitoring and correcting human rights violations

NikeGovernment crackdown

on “propaganda”Google

Microsoft

Yahoo

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Ethics in Global Management

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International Business Ethics

The business conduct or

morals of MNCs in their

relationship with individuals and

entities

Ethics vary based on the cultural value system in each

country or society

A Moral Philosophy of Cross-Cultural Societal Ethics

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Global Corruption Barometer:2009 Corruption Perception Index (CPI)—Selected Ranks

Source: Selected data from the TI Corruption Perception index, 2009

Top 20—Least Corrupt Bottom 20—Most Corrupt

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To Bribe or NOT to Bribe?

Paying mail carriers in Mexico to prevent them from “losing” mail

Paying $100 to get a computer picked up from a rainy dock

Gift-giving to bond social ties

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Questionable Payments

Managing the Corruption

Foreign Corrupt Practices Act (FCPA)

Organization for Economic Cooperation and Development convention on bribery

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Three Tests of Ethical Corporate Actions

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The Process for Companies to Combat Corruption

and to Minimize the Risk of ProsecutionHaving a global compliance system which

shows that employees have understood, and signed off on, the legal obligations regarding bribery and corruption in the countries where they do business

Making employees aware of the penalties and ramifications for lone actions, such as criminal sanctions

Having a system in place to investigate any foreign agents and overseas partners who will be negotiating contracts

Keeping an effective whistle-blowing system in place

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Policies to Help MNCs to Confront Concerns About Ethical Behavior and

Social Responsibility Develop worldwide code of ethics.Build ethical policies into strategy

development.Plan regular assessment of the

company’s ethical posture.If ethical problems cannot be resolved,

withdraw from that market.

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Managing Subsidiary—Host-Country Interdependence

1. MNCs locally raise their needed capital, contributing to a rise in interest rates in host countries.

2. The majority (sometimes even 100 percent) of the stock of most subsidiaries is owned by the parent company. Consequently, host-country people do not have much control over the operations of corporations within their borders.

3. MNCs usually reserve the key managerial and technical positions for expatriates. As a result, they do not contribute to the development of host-country personnel.

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Common Criticism of MNC Subsidiary Activities

Common Criticism of MNC Subsidiary Activities Cont.

4. MNCs do not adapt their technology to the conditions that exist in host countries.

5. MNCs concentrate their research and development activities at home, restricting the transfer of modern technology and know-how to host countries.

6. MNCs give rise to the demand for luxury goods in host countries at the expense of essential consumer goods.

7. MNCs start their foreign operations by purchasing existing firms rather than by developing new productive facilities in host countries.

8. MNCs dominate major industrial sectors, thus contributing to inflation, by stimulating demand for scarce resources and earning excessively high profits and fees.

9. MNCs are not accountable to their host nations but only respond to home-country governments; they are not concerned with host-country plans for development.

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Managing Subsidiary—Host-Country Interdependence

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MNCs Benefits & Costs to Host Countries

Benefits CostsAccess to outside capital

Competition for capital

Foreign-exchange earnings

Increased interest rates

Access to technology

Inappropriate technology

Infrastructure development

Development investment exceeds benefits

Creation of new jobs

Limited skills development

Local management development

Few managerial jobs for locals

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Managing the InterdependenceThe Risks of

InterdependenceIssues in Managing

Environmental Interdependence

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Nationalism

Protectionism

Governmentalism

Dumping of 8000 drums of toxic waste in Koko, Nigeria

The export of U.S. pesticides

Industrial ecology

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Recommendations for MNCs Operating in and Doing Business

with Developing Countries1. Do no intentional harm. This includes respect for

the integrity of the ecosystem and consumer safety.

2. Produce more good than harm for the host country.

3. Contribute by their activity to the host country’s development.

4. Respect the human rights of their employees.5. To the extent that local culture does not violate

ethical norms, respect the local culture and work with and not against it.

6. Pay their fare share of taxes.7. Cooperate with the local government in

developing and enforcing just background institutions.

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