Chapter Two

Ethics and
Social Responsibility

McGraw-Hill/Irwin .
 Contents

1. Ethics and Social Responsibility

2. Human Rights around the world

3. Globalization and Ethical Obligations of MNCs

3-3
Ethics and Social Responsibility in
International Management
 Ethics
 Study of morality and standards of conduct (Luthans,
2018)
 Study of business situation, activities, and decisions
where issues of right and wrong are addressed
(Crane and Matten, 2010)

3-4
Ethics and Social Responsibility in
International Management
 Ethical Dilemmas
An ethical dilemma is a situation
that offers a potential benefit or an
advantage but going ahead with the
situation is unethical.
Involve:
 a conflict between our own
What would you do?
behaviour and our values You work in the accounting
and beliefs department of a large company.
 a situation where there is no One day your supervisor tells you
clear consensus on what is ‘right’ to change some numbers in a
report you completed. You know
and ‘wrong’ that changing these numbers will
 placing the burden on the benefit your supervisor financially.
individual to make good choices You could lose your job if anyone
else finds out. You… 3-5
Ethics and Social Responsibility in
International Management
 Social responsibility: business’s intention, beyond its
legal and economic obligations, to do the right things
and act in ways that are good for society
 Corporate Social Responsibility (CSR)
 Involves the voluntary actions of a firm to benefit
society beyond requirements of law and direct
interests of firm
 Closely related to ethics
 CSR concerns include working conditions in
factories and service centers as well as
environmental impacts of corporate activities
Discuss: What is the difference between Ethics and CSR?
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 Differences between
Ethics and CSR?
Ethics CSR

Ethics is the study of morality While CSR involves

and standards of conduct taking action.

The area of ethics has a lawful CSR is based more on

component, and implies right voluntary actions.
and wrong in a legal sense.

3-7
Carol’s CSR pyramid

3-8
 Human Rights

 Human rights issues challenge MNCs

 Currently no universally adopted standards for what
is acceptable behavior
 A great deal of subjectivity and culturally
biased viewpoints exist
 Some basic rights: life, freedom from slavery or
torture, freedom of opinion and expression, general
ambiance of nondiscriminatory practices
 Human rights violations still rampant globally
Tiananmen Square and apartheid
Women’s rights

3-9
 Ethics and Social Responsibility
Around the World: JAPAN
 Equal opportunity issues
 Gender discrimination: Refusal to hire women or
promote them into management positions
 Hostile work environment: excessively long hours
 Traditional role of males and female employees
 Sexual harassment may not be considered a moral
issue

3-10
 Ethics and Social Responsibility
Around the World: EUROPE
 Equal employment opportunity
 How would you define the concept of a "glass ceiling" in a professional or business
context? The "glass ceiling" is a metaphorical barrier within a professional or business
context that prevents certain groups, particularly women and minorities, from advancing to
higher levels of leadership or management, despite having the qualifications and abilities
to do so. This invisible barrier is often rooted in systemic biases, cultural norms, and
organizational practices that perpetuate unequal opportunities.

 In your opinion, is the "glass ceiling" likely to become less of an issue in different
countries over time? What factors might influence this progress or lack thereof?
The likelihood of the "glass ceiling" becoming less of an issue depends on a range of
social, economic, and political factors, which vary by country.

Factors Contributing to Progress:

  Legislation and Policies: Enforcing anti-discrimination laws, mandating diversity
quotas, and providing parental leave policies can facilitate greater gender and minority
representation in leadership roles.
 Cultural Shifts: As societies place more value on diversity and inclusivity, biases may
diminish, allowing more equitable opportunities.
 Education and Mentorship: Increased access to education for women and minorities,
alongside mentorship programs, can empower underrepresented groups to rise in their
careers.
 Corporate Initiatives: Businesses adopting diversity and inclusion practices, such as
leadership training and unbiased recruitment, can break traditional barriers.
 Economic Necessities: Talent shortages may compel organizations to leverage the full
range of human potential, fostering opportunities for historically underrepresented
groups.

 Glass ceiling pervasive throughout the world: France, Germany, Great Britain have seen
increase in number of women in management, but tend to represent only lower levels

3-11
 Ethics and Social
Responsibility Around the
World: CHINA
 Workers not well paid
 Often forced to work 12 hours a day, 7 days a week
 996 work culture
 Human rights violations
 Use of child labor
3-12
Labor, Employment and Business
Practices
 Employment and business practices
 Difficult to establish a universal foundation of
employment practices
 Difficult dilemmas in deciding working conditions,
expected consecutive work hours, and labor
regulations
 Offshoring due to differences in labor costs

3-13
 Environmental Protection
and Development
 Countries approach the issue of
conservation of natural resources differently
 Poor countries are more focused on improving the
welfare of their citizens rather than improving the
environment
 Environmental Kuznets Curve
 Many companies violate laws and
jeopardize the environment
 2010 BP Gulf explosion
 Volkswagen case- discuss in class

3-14
 Globalization and Ethical
Obligations of MNCs
 Should the MNC adopt the regulations in
the country of origin or those in the country
of operation?
 Should Japanese business executives operating in
Vietnam adhere to the ethical standards of Japan
or should they follow local standards of acceptable
gifts of officials?
 Should Coca-Cola employees in Saudi Arabia
adhere to U.S. ethical standards, or should they
follow local standards of acceptable behavior?
 “Doing the right thing” is not always easy
 Levi Strauss in Bangladesh
3-15
 Reconciling Ethical Differences
across Cultures
 It’s important for individual managers working
in foreign cultures to recognize the social,
cultural, and political-legal influences on what
is appropriate and acceptable behavior.
 Meanwhile, international businesses must
clarify their ethical guidelines so that
employees know what’s expected of them
while working in a foreign location, which adds
another dimension to making ethical
judgments.
3-16
 Corporate Social Responsibility
and Sustainability

 Sustainability
 Development that meets humanity’s needs without harming
future generations
 Nongovernmental organization (NGO)
 Private, not-for-profit organization that seeks to serve society’s
interests by focusing on social, political, and economic issues
such as poverty, social justice, education, health and the
environment.
 NGOs have grown in number, power, influence: NGOs
have urged MNCs to be more responsive to range of social
needs in developing countries
 NGO activism has caused major changes in corporate behavior:
NGOs have been active in promoting fair trade products
3-17
UN’s 17 SDGs

3-18
 Corporate Social Responsibility
and Sustainability
 NGOs in U.S. and globally
 Save the Children
 Oxfam
 CARE
 World Wildlife Fund
 Conservation International

3-19
 Corporate Response to Social
and Organizational Obligations
 Agreements and codes of conduct
committing MNCs to maintain certain
standards
 U.N. Global Compact
3-20
 Corporate Response to Social
and Organizational Obligations
 Codes help offset real or perceived concern
that companies move jobs to avoid higher
labor or environmental standards in their home
markets
 Contribute to raising of standard in developing
world by exporting higher standard to local firms in
these countries

3-21
 Corporate Governance

 Corporate governance
 The system by which business corporations are
directed and controlled.
Distribution of rights and responsibilities
Stakeholder management
Spells out rules and procedures
Makes decisions

 Becoming more important after

numerous scandals
 Arthur Anderson, Enron, UnitedHealthcare

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 Corporate Governance

 Many continental European countries

are “insider” systems
 Ownership more concentrated
 Shares owned by holding companies, families or
banks
 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

3-23
 Corruption

 Corruption
 Government corruption is a pervasive element in
international business environment
 Scandals in Russia, China, Pakistan, Lesotho,
South Africa, Costa Rica, Egypt and elsewhere
 Some evidence that discontinuing bribes
does not reduce sales of the firm’s products
or services in that country

3-24
 Global Initiatives to Increase
Accountability and Limit Corruption
 Foreign Corrupt Practices Act
 makes it illegal for U.S. companies and their
managers to attempt to influence foreign officials
through personal payments or political contributions
 “Entertainment” expenses
 “Consulting” fees

 Organization of American States Inter-

American Convention Against
Corruption Foreign Corrupt Practices Act

3-25
 Corruption and
Foreign Corrupt Practices Act
 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

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 International Assistance

 Governments and corporations are

collaborating 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