Chapter 5 - Ethics and Social Responsibility in International Business

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Ethics

Beliefs about whether a decision, behavior, or action is right or wrong

Values

Things a person feels to be important

A useful way to characterize ethical behaviors in cross-cultural and international context is in terms of (3):

How an organization treats its employees, How employees treat the organization, How both the organization and its employees treat other economic agents

Common ways of Managing Ethical Behavior Across Borders (3):

Guidelines and codes of ethics, Ethics training, Organizational practices and the corporate culture

Codes of Ethics

Written statements of the values and ethical standards that guide the firms' actions

Social Responsibility (Corporate Social Responsibility (CSR)):

Set of obligations an organization undertakes to protect and enhance the society in which it functions

Organizations may exercise social responsibility toward (3):

Their stakeholders, The natural environment, General social welfare

Organizational Stakeholders

People and organizations that are directly affected by the practices of an organization and that have a stake in its performance

Most companies that strive to be responsible to their stakeholders concentrate first and foremost on three main groups:

Customer, Employees, Investors

Firms generally adopt one of four different basic approaches to Managing Social Responsibility Across Borders (in order from least responsible to most responsible):

Obstructionist Stance, Defensive Stance, Accommodative Stance, Proactive Stance

Obstructionist Stance

Organization does as little as possible to address social or environmental problems

Defensive Stance

Organization will do everything that is required of it legally but nothing more

Accommodative Stance

Firm meets its legal and ethical requirements but will also go beyond these requirements in selected cases

Proactive Stance

Firms take to heart the arguments in favor of social responsibility, view themselves as citizens in a society

(Managing Compliance) Formal dimensions used to implement a firm's social responsibility include (3):

Legal compliance, Ethical compliance, Philanthropic giving

Legal Compliance

Extent to which the organization conforms to regional, national, and international laws

Ethical Compliance

Extent to which the members of the organization follow basic ethical (and legal) standards of behavior

Philanthropic Giving

Awarding of funds of gifts to charities or other social programs

Informal dimensions of social responsibility (2):

Organization leadership and culture, Whistle-blowing

Whistle-Blowing

Disclosure by an employee of illegal or unethical conduct on the part of others within the organization

Corporate Social Audit

Formal and thorough analysis of the effectiveness of the firm's social performance

Dutch CSR experts Rob van Tulder and Alex van der Zwart suggest there are three main actors in the policy formulation process:

The state (which passes and enforces laws), The market (which utilizes inputs and allocates outputs to members of the society), Civil society (includes churches, charitable organizations, labor unions, etc)

Prohibits US firms, employers, and agents acting on their behalf from paying or offering to pay bribes to any foreign government official in order to influence the official actions of policies of that official to gain or retain business

Foreign Corrupt Practices Act (FCPA)

US multinationals may conceivably be responsible for human-rights abuses by foreign governments if the companies benefited from those abuses

Alien Tort Claims Act

This convention is an attempt to eliminate bribery in international business transactions, its centerpiece mandates jail time for those convicted of paying bribes

Anti-bribery Convention of the Organization for Economic Cooperation and Development

Major watchdog for monitoring working conditions in factories in developing countries

International Labor Organization (ILO)

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