• http://www.wto.org/english/tratop_e/devel_e/d1who_e.htm
(WTO guidelines for developing countries)
• http://www.unctad.org/Templates/Page.asp?intItemID=3073&lang=1
(United Nations listing of least developed countries)
•www.transparency.de/ (European perspective)
•www.cceia.org/ (Carnegie Council on Ethics)
•www.globalethics.org (Ethical dilemnas)
• http://www.business-ethics.org/
• http://management.about.com/gi/dynamic/offsite.htm?zi=1/XJ&sdn=m anagement&zu=http%3A%2F%2Fwww.islamist.org%2Fimages%2Fet hicshm.pdf
•http://www.iit.edu/departments/csep/PublicWWW/codes/

Ethics -the study of morality and standards of conduct
– Unethical Business Practices

Insider Trading Scandals

Bribes

“Mad” Syndrome
– mergers, acquisitions, divestitures

Measures the effect of unclear legal systems and regulations
0 20 40 60 80 100 0 20 40 60 80 100
China
Russia
Indonesia
Turkey
South Korea
Czech Republic
Romania
Kenya
Ecuador
Thailand
Guatemala
India
Poland
Venezuela
Pakistan
Argentina
Brazil
Taiwan
Current
Index?
Columbia
Japan
South Africa
Egypt
Lithuania
Peru
Greece
Israel
Uruguay
Hungary
Italy
Mexico
Hong Kong
Britain
Chile
United States
Singapore


Regulation of Acquisitions
– MNC’s must obtain host government clearance prior to establishing new operations or purchasing ongoing businesses

Purpose: To control own economies and gain independence from foreign companies










Parmelat – Falsifying records and documents to conceal losses and to funnel money privately (up to $8 Billion)
The Recruit company - allowed politicians and influential business people to buy cut-rate stock
Honda of America- settled a $6 million discrimination pay back to 370
African American women
EEOC filed sexual harassment lawsuit against Mitsubishi on behalf of
300 women
Enron…. Arthur Anderson…(sophisticated accounting manipulation)
Adelphia – Diverting corporate funds to private (family) use, and using off-book financing of $3.5 Billion)
Global Crossings – falsifying marketing and cost information
Etc..
Etc..



Ethical concerns about the reciprocity of the relationship between the home country of the
MNC and the host country
Regulation of Acquisitions
– The U.S. regulates the acquisition of domestic companies by foreign investors

Other countries are following the U.S.’s lead
– EU regulations making it more difficult for non-European companies to do business in Europe
– Nonreciprocal trade partners

Nations that sell (export) goods to other countries but do not buy (import) from them

 Reciprocity
– Is their an ethical and social responsibility to engage in reciprocal trade?

Example: obligations to maintain an import/export balance with trading partner?
– retaliation?
• ongoing issue between Japan and the
U.S.

Ethics and Social Responsibility
Around the World

Ethics
– Vital role of ethics in conduct of business

Sarbanes-Oxley Act (2002)
– CEO and CFO required to approve and declare accurate all financial statements provided to SEC for publication
– Ensure transparency of all disclosures
– Make content appropriately accessible for audit and verification
– MNCs face difficulty because of differing standards between countries where they operate

Ethics and Social Responsibility
Around the World
Ethical Problems and
Japan
Concerns

Political and business scandals
– Japanese cabinet member forced to resign for receiving over
$2 million from Japanese corporations
– Failure of banking system to take corrective action regarding
Japan’s recession
– Concealing customer complaints
– Failure to inform car owners about possible auto defects and maintenance of two sets of customer complaint records
– Encouraging employees to mislead government inspectors

Ethics and Social Responsibility
Around the World
Ethical Problems and
Japan
Concerns

Hostile work environment
– Cultural expectations


Traditional role of females and female employees
Sexual harassment may not be considered a moral issue

Equal opportunity issues
– Refusal to hire women or promote them into management positions
– Mitsubishi sued by U.S. EEOC

Social Responsibility/Lobbying

Ethics and Social Responsibility
Around the World
Ethical Problems and
Europe
Concerns
 Survey of 124 U.S., 72 French, and 70
German managers responding to five ethical vignettes
– In most cases, the U.S. managers’ responses were quite different from those of their European counterparts
 U.S. managers more concerned with ethical and legal questions
 French and German managers more concerned with maintaining a successful business posture
 Reasons for difference between countries
Culture
Incentives
Personal values
Legal restrictions

Ethics and Social Responsibility
Around the World
Ethical Problems and
Concerns
Europe
 Status of women managers in Europe
– France
 Proportion of women in the labor force trends
 Glass ceiling
 French law guarantees equal treatment and professional opportunities
 Enforcement is weak

Ethics and Social Responsibility
Around the World
Ethical Problems and
Concerns
Europe
 Status of women managers in Europe

Germany

Remaining differences between East and West
Germany

Proportion of females in higher positions

Professional qualifications relate inversely to hierarchical position

Lack of objective criteria for selection to higher positions

Has mandated equal opportunity throughout the public sector

Ethics and Social Responsibility
Around the World
Ethical Problems and
Concerns
Europe
 Status of women managers in Europe

Great Britain

45 percent of workforce is female

Not well represented at higher levels

Women creating associations for networking and lobbying
 Women’s Engineering Society

The 300 Group
 Some companies becoming proactive in women’s work rights

Discrimination lawsuits becoming more commonplace

Ethics and Social Responsibility
Around the World
Ethical Problems and
Concerns
China
 Ethical issues
– Workers not well paid (often work 12 hours a day, 7 days a week)
– Piracy of intellectual property, counterfeiting, and industrial spying
 Human rights violations
 Use of prisoner and child labor

Corporate Social Responsibility

Corporate social responsibility (CSR)
– Actions of a firm to benefit society beyond the requirements of the law and the direct interests of the firm
– Pressure for greater attention to CSR

Civil society

Nongovernmental organizations (private, not-for-profits that focus on social, political and economic issues)
– CSR concerns


Working conditions in factories and service centers
Environmental impacts of corporate activities

Trust in Leaders
(Percentage saying “A Lot,” or “some” trust)
52 NGO leaders
Leaders at the U.N.
Spiritual/religious leaders
Leaders of Western Europe
Managers of the global economy
Managers of the national economy
Executives of MNCs
Leaders of the U.S.A.
27
35
33
36
36
42
41
0 10 20 30 40 50 60
Average Across All 15 Countries Surveyed
Adapted from Figure 3-1: Trust in Leaders: Percentage Saying “A Lot” and “Some Trust”

Rise of Civil Society and NGOs


Emergence of organized civil society and
NGOs altered
– Business environment globally
– Role of MNC within global business environment
NGOs in the U.S. and globally
– Save the Children
– Oxfam
– CARE
– World Wildlife Fund
– Conservation International

Rise of Civil Society and NGOs

Corporations receiving heavy criticism
– Nike
– Levi’s
– Chiquita

Major criticisms
– Exploitation of low-wage workers
– Environmental abuses
– Intolerable workplace standards

Response to social obligations
– Agreements and codes of conduct
– Maintenance of standards in domestic and global operations
– Cooperation with NGOs regarding certain social issues

Response to Social Obligations
Table 3-1
Principles of the Global Compact
Human Rights
Principle 1: Support and respect the protection of international human rights within their sphere of influence.
Principle 2: Make sure their own corporations are not complicit in human rights abuses.
Adapted from Table 3-1: Principles of the Global Compact

Response to Social Obligations
Table 3-1
Principles of the Global Compact
Labor
Principle 3: Freedom of association and the effective recognition of the right to collective bargaining .
Principle 4:
The elimination of all forms of forced and compulsory labor
.
Principle 5: The effective abolition of child labor.
Principle 6:
The elimination of discrimination with respect to employment and occupation.
Adapted from Table 3-1: Principles of the Global Compact

Response to Social Obligations
Table 3-1
Principles of the Global Compact
Environment
Principle 7: Support a precautionary approach to environmental challenges.
Principle 8: Undertake initiatives to promote greater environmental responsibility.
Principle 9: Encourage the development and diffusion of environmentally friendly technologies.
Anti-Corruption
Principle 10: Business should work against all forms of corruption, including extortion and bribery.
Adapted from Table 3-1: Principles of the Global Compact

Corporate Governance
Corporate
Governance
Structure
Spells out the rules and procedures
Making decisions
Distribution of rights and responsibilities
Stakeholders
• Board
• Managers
• shareholders
The system by which business corporations are directed and controlled
• Setting objectives
• Means of attaining objectives
• Monitoring performance



Corporate Governance
Rules and regulations differ among countries and regions
– U.K. and U. S. systems are “outsider” systems


Dispersed ownership of equity
Large number of outside investors
– Many continental European countries are “insider” systems


Ownership more concentrates
Shares owned by holding companies, families or banks
Other effects on corporate governance include
– Differences in legal systems
– Responsiveness and accountability of corporate managers to stakeholders

Corruption and
Foreign Corrupt Practices Act

Foreign Corrupt Practices Act (FCPA)
– Illegal for U.S. firms and their managers to attempt to influence foreign officials through personal payments of political contributions, including such tactics as

“Entertainment” expenses

“Consulting” fees
– Some evidence that discontinuing bribes does not reduce sales of the firm’s products or services in that country
– Some evidence that firms from other countries continue to win business through corrupt practices such as bribery
– Recent formal agreement by many industrialized nations to outlaw the practice of bribing foreign government officials

Corruption Index
140
120
100
80
60
40
20
0
TPI-Corruption
Index
Adapted from Figure 3–2: Corruption Index: Ranking of Least Corrupt to Most

Corruption and
Foreign Corrupt Practices Act(s)

Recent formal agreement by many industrialized nations to outlaw the practice of bribing foreign government officials
– Organization for Economic Cooperation and
Development
– 29 members plus several other countries have signed on
– Fails to outlaw most payments to political party leaders.
– Does indicate growing support for anti-bribery initiatives

International Assistance

Governments and corporations increase collaboration to provide assistance to communities and locales through global partnerships

Best “investments”
– Controlling and preventing AIDS
– Fighting malnutrition
– Reducing subsidies and trade restrictions
– Controlling malaria

Table 3-2
Copenhagen Consensus Development Priorities
Project rating Challenge Opportunity
Very good
Good
1 Diseases
2 Malnutrition
Control of HIV/AIDS
Providing micro nutrients
3 Subsidies and trade Trade liberalization
4 Diseases Control of malaria
5 Malnutrition Development of new agricultural technologies
6 Sanitation and water Small-scale water technology for livelihoods
7 Sanitation and water community-managed water supply and sanitation
Adapted from: Table 3.2: Copenhagen Consensus Development Priorities


Universality of ethical guidelines / principles
– Background (shapes the foreground)
– Procedural knowledge (communication)

E.g., reciprocity, fairness

Socialization processes
– Attitudes
– Theories (believe systems) = Major principles = institutional rules = actions

5.
6.
3.
4.
1.
2.
Principles for Universal
Morality
Ethical Egoism
Utilitarianism
Natural Rights Theory
Social Contract Theory
Kantian Duty Ethics
Discourse Ethics

What are some facets?

Social

Economic
– Formal and informal economies

Environmental

Institutional
– Policy and capacity issues


Economic System
– Market vs. command

Free-Market (voluntary)
– Tradition-based society
– Lockean Rights (Life, liberty, property)
– Smith’s (competition advances welfare, government intervention does not.)
– Say’s law: All resources used, demand will always expand to absorb available supply
– Social Darwinism: Economic competition produces human progress (survival of fittest)
– Naturalistic fallacy: Assumption that naturally is best
– Alienation (depriving working class of full potential)


Economic substructure
– Materials and social controls

Social Superstructure
– Ideologies, government

Forces of production
– Resource controls

Relations of productions
– Social controls (organization of workers)

1.
2.
3.
4.
Possibility of “Universality?”
Respect for core human values
• Determines the absolute moral threshold for business activities
• http://www.hrweb.org/legal/undocs.html#UDHR
Respect for local traditions
Recognizing that context influences the determination of what is “right” or “wrong”
Communication
• Do more than “post” codes of conduct