International Management

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Chapter 2: Managing Interdependence

Social Responsibility and Ethics

Chapter Learning Goals

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

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

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

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

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Chapter Learning Goals

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

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

Identify the challenges involved in human rights issues when operating in around the world.

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Opening Profile: McDonald’s CSR Experience in China

McDonald’s defined their own framework for supply chain issues, health and nutrition issues, people issues, and environmental _____

Strategic, pro-active CSR can save a corporation money by producing less waste, less packaging, etc.

Partnering with third parties such as NGOs, or academics can help a company gain credibility

Corporations need to understand what their consumers care about

McDonald’s has contributed to the _____ economy, created philanthropic charities and has been environmentally conscious

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Chapter Learning Goals

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

The Social Responsibility of MNC’s

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CSR Dilemma

Profit is MNC’s only goal

MNCs should anticipate and solve social needs

The Social Responsibility of MNC’s

______ social responsibility concerns the benefits versus harm wrought by MNCs, especially in less developed countries (LDCs).

Issues of social responsibility tend to center on poverty and lack of equal opportunity, the environment, consumer concerns, and employee safety and welfare.

The question is, how much should MNCs concern themselves with the social and economic effects of their ______ ?

At one extreme, the answer to this question is that MNCs are only responsible for earning profits. At the other extreme is the notion that MNCs should anticipate and solve ______ needs. Of course, firms can take a stance anywhere between these two extremes.

MNC Stakeholders

MNC ______

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

______ CSR is more complex than domestic CSR because there are additional stakeholders in the firm’s activities. Managers must weigh the rights of domestic stakeholders versus those of host country stakeholders. Most decisions will involve a trade-off between the rights of various ______ .

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Benefits from CSR

Improved access to capitol

Secured license to operate

Revenue increase and cost and risk reduction

Better brand value and reputation with customer attraction and retention

Improved employee recruitment, motivation, and retention

Global Consensus or Regional Variation?

______ Corporate Culture:

An integration of the business environments in which firms currently operate

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

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MNC Stakeholders

Some argue consensus regarding moral and ethical behavior is emerging because of the development of a global corporate culture—an integration of the business environments in which firms ______ operate.

Nonetheless, regional variations still exist. One example is the differing approaches to CSR often taken by U.S. and European businesses. Also, companies may face confusion about how to behave in host countries, which may have differing expectations and ______ .

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International Codes of Conduct

International Chamber of Commerce

OECD Organization for Economic Cooperation and Development

ILO International Labour ______

United Nations Commission on Transnational Corporations

Go to these www sites and review their codes of conduct.

Dealing with Confusion About Cross-Cultural Dilemmas

Engaging stakeholders (and sometimes NGOs) in a dialog

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

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

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General Guidelines for Code of Morality and Ethics in Individual Countries

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Moral Universalism

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

Ethnocentric Approach

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

Ethical Relativism

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

Moral ______ suggests the need for a moral standard that is accepted by all cultures. With the ethnocentric approach, a company applies the morality used in the home country—regardless of the host country’s system of ethics.

With ethical relativism, the company adopts the local ______ code of the country in which it is operating.

Whereas some argue moral that ______ is preferable to the other two approaches, it can be insensitive to the needs and values of the ______ country.

______ relativism, on the other hand can result in conflicts between home and host country values.

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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______ Code of Conduct, which includes a ban on forced labor, abuse, and discrimination, requires companies to provide a healthy and safe work environment, and requires companies to pay at least the local prevailing minimum wage. A group has been created to monitor compliance, but enforcement is difficult. The Department of Labor publishes the names of those companies that comply.

The EICC is an example of companies within an industry uniting to form their own code of conduct. The EICC bans forced and child labor and excessive overtime, includes basic environmental requirements, and requires audits of ______ suppliers.

Code of Conduct Continued

The ______ (modeled after the quality standard ISO9000) is a code of conduct intended to establish standards to improve the quality of work life for workers around the world.

Comparative Management in Focus: Doing Business in China

The attraction of doing business in China:

Cheap labor cost

An expanding market

A growing economy with growth in higher skilled jobs and services

Continuing concerns

Uncertain legal environment

Protecting ______

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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

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Potentially rampant violation of workers’ ______

______ of free speech

Difficulty monitoring and correcting ______ rights violations

Wal-Mart

Government limits on media and internet freedoms

Google

Microsoft

Yahoo

Perhaps the most public recent case is Google’s decision to agree to Chinese censors’ demands. Microsoft and Yahoo have made similar decisions. As a result, Amnesty International accused Yahoo, Microsoft, and Google of overlooking their human rights obligations in order to tap into China’s online market.

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Chapter Learning Goals

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

Ethics in Global Management

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______ 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

Many practices and behaviors considered ______ or illegal in some countries are accepted ways of doing ______ in others.

A Moral Philosophy of Cross-Cultural Societal Ethics

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EXHIBIT 2-3 A Moral Philosophy of Cross-Cultural Societal Ethics

Heather Hetzler (HH) - The text on this image may be difficult to read, even on a large projector screen. Consider enlarging this image.

Global Corruption Barometer: 2010 Corruption Perception Index (CPI)—Selected Ranks Source: Selected data from the TI Corruption Perception index, 2010

Top 20—Least Corrupt

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Denmark

Singapore

New Zealand

Finland

Canada

Australia

Hong Kong

______

Japan

Chile

Belgium

______

France

Taiwan

South Korea

Poland

Greece

S. Africa

Turkey

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Chapter Learning Goals

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

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Ethical Use of Technology

Varied expectations about the use of technological devices/programs as they intersect with people’s private ______

EU Directive on Data Protection  Google mapping service (from unsecured wireless networks in Germany)

______ PlayStation Network (77 million users information breached)

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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______ ______

Bribery across Countries

Common throughout history

“Word” for it in most ______

Practiced in many cultures today

Most countries have laws against it

Some countries allow payments and even ______ write-offs

Internal and external rules may differ

Words That Mean Bribery in a Variety of Different Countries

Country Word

Brazil jeitnho

Egypt baksheesh

France pot au vin

Germany Trink Gelt/Schmiergeld

Greece baksissi

Honduras pajada

Hong Kong hatchien

India speen money/baksheeh

Indonesia uong sogok

Iran roshveh

Italy bustarella

Source: Adapted from Jacoby, N.H., Nehemkis, P., & Eells, R. Bribery and extortion in

world business: A study of corporate political payments abroad. New York: McMillan.

Country Word

Japan wairo

Malaysia makan siap

Mexico mordida

Nigeria dash

Pakistan roshvat

Peru coima

Phillipines lagay

Russia vzyatha

Thailand sin bone

U.S. Grease monkey/payola

Zaire tarif de verre

The U.S. and Questionable Payments

U.S. companies commonly engaged in activity prior to legislating it

Foreign Corrupt Practices Act (FCPA) passed in the 1970s (Why?)

Made payments to foreign governments to obtain business illegal

Distinguishes between bribery and “______ ” payments

Impact of FCPA on Competitiveness

Business often argues that it ______

Level playing field

Initial conclusions indicate no ______ impact: on US companies, on subsidiaries

Some business is likely lost

Managing the Corruption

______ Corrupt Practices Act (FCPA)

Organization for Economic Cooperation and Development convention on ______

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Three Tests of Ethical Corporate Actions

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Bribery ______ all three of these tests.

Is it ______ ?

Can it be talked ______ ?

Does it work in the long ______ ?

The Process for Companies to Combat Corruption and to Minimize the Risk of Prosecution

Having a ______ 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 ______

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

Keeping an effective ______ ______ 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 ______ development.

Plan regular assessment of the company’s ethical posture.

If ethical problems cannot be resolved, withdraw from that market.

Questionable behavior can be a “______ ______ .” What starts with a small bribe or cover-up—a matter of personal ethics– can, over time, and in the aggregate of many people covering up, result in a situation of a truly negligent, and perhaps criminal, stance toward ______ responsibility.

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Chapter Learning Goals

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

Managing Subsidiary—Host-Country Interdependence

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

The ______ (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 ______ .

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

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Common Criticism of MNC Subsidiary Activities

Common Criticism of MNC Subsidiary Activities Cont.

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

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

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

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

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

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

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Heather Hetzler (HH) - Consider extending these bullet points out to additional slides so that the text will be larger.

Managing Subsidiary—Host-Country Interdependence

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Require ______ 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 ______ .

Managing Subsidiary—Host-Country Interdependence

When considering the ______ of global interdependence, it is necessary to highlight not only US subsidiaries in foreign countries, but also foreign subsidiaries in the US.

Because FDI in the US is increasing, Americans are becoming more sensitive to what they perceive as a lack of control over their ______ country’s business.

The goal of managing interdependence is to create cooperation, rather than confrontation. The goal is not to create the dependence of an organization or ______ on another.

In Japan, CSR traditionally means taking care of employees. In the US, it often means sharing responsibility for the community. One reason for this difference is that US companies get tax deductions for corporate ______ , whereas Japanese companies do not.

To date, many Japanese firms in the US have not been active in US philanthropy. Sadahei Kusumoto, CEO of Minolta Corporation, believes that, in the long run, failure to play an active role in the community will brand Japanese (or other) companies as irresponsible outsiders and hurt their prospects for the future. Kusumoto recognizes ______ in globalization and acts accordingly.

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Chapter Learning Goals

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

MNCs Benefits and Costs to Host Countries

Benefits	Costs
Access to outside ______	Competition for capital
Foreign-exchange earnings	Increased ______ rates
Access to ______	Inappropriate technology
Infrastructure development	Development investment exceeds benefits
Creation of new jobs	______ skills development
More humane employment standards	Few managerial jobs for locals

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Heather Hetzler (HH) - In the slide notes, consider adding a page number from the text where Exhibit 2-5 can be located.

Managing the Interdependence

The Risks of Interdependence

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______

Under nationalism, public opinion is rallied in favor of national goals, and against foreign influences.

Under protectionism, the host institutes a partial or complete closing of borders to withstand competitive foreign products, using tariff and nontariff barriers.

Under Governmentalism, the government uses its policy-setting role to favor national interests, rather than relying on market forces.

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Chapter Learning Goals

Identify the challenges involved in human rights issues when operating in around the world.

Recommendations for MNCs Operating in and Doing Business with Developing Countries

Do no intentional harm. This includes respect for the integrity of the ecosystem and consumer safety.

Produce more good than harm for the host country.

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

Respect the ______ rights of their employees.

To the extent that local culture does not violate ethical norms, respect the local culture and work with and not against it.

Pay their fare share of ______ .

Cooperate with the local government in developing and enforcing just background ______ .

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End Ch2