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

Profit is MNC’s only

goal

MNCs should anticipate and

solve social needs

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CSR Dilemma

MNC Stakeholders

MNC Stakeholders

Home Country Host

Society in General

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Owners

Customers

Employees

Unions

Suppliers

Distributors

Strategic Allies

Community

Economy

Government

MNC

Economy

Employees

Community

Host

Government

Consumers

Strategic Allies

Suppliers

Distributors

Global interdependence/standard of living

Global environment and ecology

Sustainable resources

Population’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

Moral Universalism

• Addressing the need for a moral standard that is accepted by all cultures

Ethnocentric Approach

• Applying the morality used in home country—regardless of the host country’s system of ethics

Ethical Relativism

• Adopting the local moral code of whatever country in which a firm is operating

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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 China

Human Rights and Freedom

of Information Challenges

Human Rights and Freedom

of Information Issues in China

2-12

Potentially rampant violation of worker’s rights

Repression of free speech

Difficulty monitoring and correcting human rights violations

Nike

Government 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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EXHIBIT 2-4 A Moral Philosophy of Cross-Cultural Societal Ethics

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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1. New Zealand

2. Denmark

3. Singapore

3. Sweden

5. Switzerland

6. Finland

6. Netherlands

8. Australia

8. Canada

8. Iceland

11. Norway

12. Honk Kong

12. Luxembourg

14. Germany

14. Ireland

16. Austria

17. Japan

17. United Kingdom

19. United States

20. Barbados

158. Tajikistan

162. Angola

162. Congo Brazzaville

162. Dem Rep Congo

162. Guinea-Bissau

162. Kyrgyzstan

162. Venezuela

168. Burundi

168. Equatorial Guinea

168. Guinea

168. Haiti

168. Iran

168. Turkmenistan

174. Uzbekistan

175. Chad

176. Iraq

176. Sudan

178. Myanmar

179. Afghanistan

180. Somalia

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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

Is it legal?

Does it work in the long run?

Can it be talked about?

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The Process for Companies to Combat Corruption

and to Minimize the Risk of Prosecution

Having 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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Require managers to go beyond issues of CSR to deal with specific concerns of MNC and host-country relationship.

MNCs must learn to accommodate the needs of other organizations and countries.

MNCs Benefits and Costs to Host Countries

Benefits Costs

Access 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 Interdependence

The Risks of Interdependence Issues in Managing

Environmental Interdependence

2-25

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 Countries

1. 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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