Chapter 5 Ethics, Corporate Social Responsibility, Sustainability PDF

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These are a combination of both lecture and textbook notes. From the textbook Global Business Today....

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Chapter 5 Ethics, Corporate Social Responsibility, Sustainability Ethics & International Business ❖ Business Ethics: the accepted principles of right and wrong governing the conduct of business people ❖ Ethical Strategy: course of action that does not violate these accepted principles ❖ Human Rights ➢ Basic human rights are still not respected in large number of nations ■ EX: aparthied in Africa which denied basic political rights to nonwhite population ■ Companies such as General Motors worked in abolition of the aparthaid ➢ Authoritarian populism who are attacking human rights principles and fueling district of democratic institutions ➢ Is it ethical for multinational corporations to do business in these repressive countries? ■ Some argue inward investment can force for economic, political and social progress ■ Could pressurize for democratization ■ Pressure seen in China ❖ Environmental Pollution ➢ Can arise when host nations environmental regulations are inferior to those in home nation ➢ Regulations with pollution lack in developing countries ➢ Developed countries should not pollute in developing countries and use their lenient laws ➢ Tragedy of the Commons: occurs when a resource held in common by all but own by one one is overused by individuals ■ Corporations can contribute when they move productions to locations where they are free to pollute ❖ Corruption ➢ IB has gained from economic advantages by making payments to officials ➢ Tax violations ➢ Foreign Corrupt Practices Act (FCPA): act in US that outlawed paying bribes to foreign govt officials to gain business ■ Was amended to allow “facilitation payments” (or speed money/grease payments) ➢ Convention on Combating Bribery of Foreign Public Officials in International Business Transactions: adopted by the Organization for Economic Cooperation and Development (OECD) ■ Obliges member states and other signatories to make the bribery of foriegn public officials a criminal offense (excluded facilitating payments made to expedite routine government action) ➢ Pros of Bribery → can create jobs and investments ➢ Cons of Bribery→ reduce returns on business investment and low economic growth ➢ Many multinational corporations have adopted a zero tolerance policy Ethical Dilemmas: situations in which none of the available alternatives seems ethically acceptable ❖ Managers and companies are feeling more pressure to be transparent and ethical ➢ Ex of international dilemmas → gift bearing in china before a deal is seen as proper whereas in america seen as bribery Roots of Unethical Behavior ❖ Rooted in 6 determines of ethical behavior ➢ 1. Personal ethics ■ Generally accepted principles of right and wrong governing conduct of individuals

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■ General ethics code including honesty, not cheating, integrity ➢ 2. Decision making processes ■ Fail to ask if their decision is ethical ➢ 3. Organizational culture ■ Refers to the values and norms that are shared among employees of an organization ■ EX: paying bribes has long been seen as acceptable ➢ 4. Unrealistic performance goals ■ Pressure from the company to attain unrealistic goals ➢ 5. Leadership ■ Leaders can set a unethical example to their employees ➢ 6. Societal culture ■ Cultures where individuals and uncertainty avoidance wee string were more likely to emphasize the importance of behaving ethically than firms with a culture of high masculinity and power distance

Philosophical Approaches to Ethics ❖ Straw Men: are raised by business ethics scholars primarily to demonstrate that they offer inappropriate guidelines for ethical decision making in multinational enterprise ➢ Either deny the value of business ethics or apply the concept ina very unsatisfactory way ■ 4 approaches to business ethics ● 1. The Friedman Doctrine: the social responsibility of business is to increase profits so long as the company stays within the law ◆ Rejects idea that businesses should undertake social expenditures not mandate by law ◆ Pro Shareholder ◆ Only one social responsibility: use its resources and increase profits ◆ written by Milton Friedman ● 2. Cultural Relativism: the belief that ethics are nothing more than the reflection of a culture—all ethics are culturally determined— and that accordingly, a firm should adopt the ethics of the culture in which it is operating ◆ EX: if a culture supports slavery slave labor is okay ◆ Rejects notion of morality ● 3. The Righteous Moralist: claims that a multinational’s home-country standard of ethics are the appropriate ones for companies to follow in foriegn countries

3 ◆ Does have some complications/ proponents go too far 4. Naive Immoralist: asserts that if a manager of a multinational see that firms from other nations are not following ethical norms in a host country, that manager should not either ◆ The drug lord problem: managers paying drug lords so they don't bomb their buildings ◆ Not sufficient just because everyone else is doing it ❖ Utilitarian and Kantian Ethics ➢ Utilitarianism: hold that the moral worth of actions or practices is determined by their consequences ■ MAXIMIZE GOOD & MINIMIZE HARM ■ Produces the greatest amount of good for the greatest number of people ■ Judged desirable if it lead to the ebay possible balance of good consequences for bad consequences ■ David hume, Jermy bentham, John stuart mill ■ Modern day EX: cost-benefit analysis ● Drawbacks→ even if there is majority good the harm can still be very harmful (drilling oil bad for environment for good for most people) ● This omits the consideration of justice (may result in unjust treatment of minority) ➢ Kantian Ethics: holds that people should be treated as ends and never purely as means ■ People are not machines ■ Sweatshops = violation of kantian ethics ■ Many philosophers view Kantianism as incomplete… no place for moral emotions ❖ Rights Theories: recognize that human beings have fundamental rights and privileges that transcend national boundaries and cultures ➢ Establishes min level of morally acceptable behavior ➢ Fundamental right = trumps a collective good ➢ Moral Compass ➢ UN Universal Declaration of Human Rights: adopted in 1948 and has been ratified by almost every country in the world ■ Declares every human being free and equal in dignity and rights ■ Article 23 = employment status ● Everyone has right to work ● Everyone has right to equal pay ● Everyone has right to social protection ● Everyone has right to form trade union ■ Also everyone has an obligation to provide these services ● Moral agent: any person or institution that is capable of moral actions such as government or corporation ❖ Justice Theories: focuses on the attainment of a just distribution of economic goods and services ➢ Just Distribution: one that is considered fair and equitable ➢ John Rawls believes valid principles of justice are when all persons would agree if they could freely and impartially consider the situation ➢ Veil of Ignorance: impartiality is guaranteed by a conceptual device ■ Under the veil supposed to be ignorant of any characteristics you have such as race, sex any biases ● 2 fundamental principles of justice ●

4 ◆ 1. Each person be permitted the max amount of basic liberty compatible w a similar liberty for others (right to vote) ◆ 2. Once equal basic liberty is ensured, inequality in basic social goods—such as income and wealth distribution— is to be allowed only if such inequalities benefit everyone ➢ Difference Principle: inequalities are justified if they benefit the same position of the least-advantaged person Making Ethical Decisions Internationally ❖ Actions international business and managers can take to make sure ethical issues are considered ➢ 1. Favor hiring and promoting people w a well-grounded sense of ethics ➢ 2. Build an organizational culture and exemplify leadership behaviors that place a high value on ethical behavior ■ Code of Ethics: formal statement of ethical priorities a business adheres to ■ Make company culture that values morality ➢ 3. Put decision-making processes in place that require people to consider their decisions ■ Step 1. Think about all stakeholders→ individuals w interest, claim, or stake in the company, in what it does and how it performs ● Internal stakeholders (employees, board of directors, shareholders) ● External stakeholders (customers, suppliers, governments, communities) ■ Step 2. Jude the ethics of proposed strategic decision ■ Step 3. Requires managers to establish moral intent ■ Step 4. Requires the company to engage in ethical behavior ■ Step 5. Requires the business to audit its decisions, reviewing them to make sure they are consistent with ethical principles ■ Step 6. Must audit past decisions ➢ 4. Institute ethics officers in organizations ■ RESPONSIBILITIES= assessing the needs and risks that an ethics program must address, developing code of ethics, conducting training for employees, confidential service to address employees questions, making sure the company is in compliance with laws, monitoring ethical conduct, taking action, updating code of ethics ➢ 5. Develop moral courage ■ Enables managers to walk away from decision that is profitable but unethical ➢ 6. Make CSR a cornerstone of enterprise policy ■ Corporate Social Responsibility: refers to the idea that businesspeople should consider the social consequences of economic actions when making business decisions and that there should be presumption in favor of decisions that have both good economic and social consequences ■ Noblesse Oblige: french term that refers to honorable and benevolent behavior considered the responsibility of people of high (noble) birth / in business means benevolent behavior that is the responsibility of successful enterprises ■ CSR about giving back to the communities they have impacts or profited off of ■ Companies have moral obligations to use their power to enhance social welfare ➢ 7. Pursue strategies that are sustainable ■ Sustainable strategies: strategies that not only help the multinational firms make good profit but also do so without harming the environment while simultaneously ensuring that corporation acts in a socially responsible manner with regard to its stakeholders ■ Does not exert negative impact on the environment ■ Long-term gain

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Moving from csr to total societal impact (TSI) - the sum of all the ways a company influences society, our communities, and the environment through its fundamental business strategy and its core assets, capabilities, and operations. - CSR is not enough usually is the first thing cut when the company is going through financial hardship, and this sense of like once in a while philanthropy is not enough to battle climate change should be embedded within the business model...