Global Business Module 6

Parmalat

1. 1961, family owned farm that grew 2. lied about earnings when in reality they were losing money -created fake assets to borrow from and fake sales

Cultural consideration that influence ethics and decision-making

1. The West -tends to be universalists in which all societies works, or should work in essentially the same way -rule based: trust the system 2. Not Western Culture -relationship based: honor, filial duty, friendship, or long term mutual obligation -cronyism: appointment of personal relationships to places of authority -in much of the world, cronyism is a foundation of trust --friends can be trusted --cronies don't want to destroy a valuable relationship

Banana Republics

1. United Fruit American Company (1899), cultivated bananas in central and south america to sell in US and Europe 2. set up banana republics to act as a monopoly

The Ethics of Controls

1. a company's ethics and compliance officer's role is to reduce the risk of misconduct, generally to a predetermined amount suggested by the board of directors 2. in this sense, a control is essentially a process of interlocking activities that use properly designed policies and procedures so officers can use due diligence -due diligence: adequately investigate and enforce given procedures -these procedures can be preventive, detective, corrective, corroborative, etch -need to establish effective and actionable procedures that allow you to achieve business objectives while also ensuring that your organization conducts itself ethically

discrepancies

1. accounting errors that are intentional and can corrected -shrinkage: petty theft, mismanaged inventory, perishable goods going unrecorded and others --can be prevented by ensuring that inventory is carefully managed, shrinkage is accounted for, and cash flows are carefully reviewed by both management and the accounting and finance teams

Lego's CSR

1. addresses climate change and reducing waste 2. invest $150 million to these causes over the next 15 yrs and reach a 90% recycling rate; packaging to be more environmentally friendly and invested

Global Reporting Initiatives

1. an international standards organizations that assists organizations in understanding and communicating their impact on ethical issues such as human rights, climate change, and corruption -many US citizens expect them to generate a profit and conduct themselves in an ethical and socially responsible manner -expectation: commitment to environmental sustainability, social justice, and philanthropy 2. CSR strategies encourage the company to make a positive effect on the environment and stakeholders -stakeholders:all parties who have a stake in the performance and output of the corporation --company's employees, unions, investors, suppliers, consumers, local and national governments, and communities that may be affected by corporate activities such as construction, manufacturing, and pollution 3. in 2017, Cone Communications CSR study in a year over 50% of Americans had boycotted a company for irresponsible business actions or for supporting an issue contrary to their beliefs -also noted that consumers felt companies had a role to play in social justice concerns, including racial equality, and women's rights

The effect of corporate ethics

1. business leaders today say their companies care about more than profit or loss, but also society as a whole 2. Enron -inconsistent bookkeeping and ultimately alerted the press -rocked the global financial market; worst stock value ever recorded during peace time; dramatic job loss, globally citizens lost faith in the american economic system -led to Sarbanes-ox Act of 2002: increase ethical transparency within corporate America and stricter rules for financial reporting for all publicly traded American companies and foreign firms listing in the US 3. Icelandic Bankers -bankers continued to inflate the value of bank assets to attract shareholders a massive debt -eventually rebounded 4. 2004 Olympic Games -Greece did not meet the requirements and falsified its budget books to gain conditional entry to the European Monetary fund (EMU) -when hosting the olympic games, Greece overspent on their budget and loss to no local investment -got bailed out by IMF and European creditors --conditional on Greece following the austerity measures to cut spending and increase tax revenue ultimately hurting the citizens -global financial crisis of 2008 made their trade deficit worse 5. Petroleum Industry -BP's oil spill -did not respond ethically -blamed contractors, needed to protect the ecosystem and the wildlife that lives in the region -should base decisions on ethical principles

Internal auditing

1. consists of investigating and evaluating employees compliance with company policies and procedures 2. internal auditors encourage operating efficiency throughout the company and are alert to breakdowns in the company's internal control structure and make recommendations for them 3. internal auditing is especially necessary in large organizations because the owners (stockholders) cannot be involved personally with all aspects of the business

Bosch's CSR

1. creating environmental protection technology 2. donate to support universities and research programs that are focused on the environment, energy, and mobility

Tom's shoes and CSR

1. each purchase of a pair of shoes by a consumer triggers the gift of one to an impoverished child in developing country

gift giving or bribery

1. gift giving in the global business world is used to establish or pay respects to a relationship -gift giving is more likely to be ingrained in the cultured not associated with winning a specific piece of business 2. bribery: practice in which an individual would benefit with little or no benefit to the company -usually paid in relation to winning a business deal

the British's East India Company

1. high levels of corruption: routine bribes and officials frequently stole from the people they ruled 2. endorsed in the 1600s by Queen Elizabeth

Coca cola CSR

1. in developing countries, coca cola promotes local economic development through a combination of philanthropy and social and economic development 2. environmentally friendly and invested in alternative energy sources

operational levels of business ethics

1. individual: day to day activities 2. organizational level: policies and procedures 3. macro level: governed by the wider operating environment , in which the organization exist 4. industry level: organization leaders and others might influence business ethics

irregularities

1. intentional misrepresentation of accounting data with the aim to defraud

Additional challenges for global business

1. operating outside national borders adds addition risk with oversight and detection 2. separation of divisions, departments, and functions all contribute to the risk of fraud 3. many nations are implementing regulations that are extraterritorial -UK-bribery Act: provides strict liability for the corporation offense of "failure to prevent bribery" also applies to foreign businesses operating in the UK 4. increase focused on employee training and one that happens at every level 5. MNCs need to develop a corporate conscience and company culture that establishes that corruption at any level will not be tolerated

Gift giving and shifting values

1. paying bribes is relatively common in many countries, and bribes often take the form of grease payments -grease payments: small inducements intended to expedite decisions and transactions 2. Transparency International tracks illicit behaviors, such as bribery and embezzlement -it assigns a corruption perceptions index (CPO) --rating to each country 3. Siemens -routine used bribes and slush funds to secure large public works contracts 4. Walmart -orchestrated a large-scale bribery campaign to win market dominance 5. Herbal life lied about its China business model and operated like usual 6. according to the Securities and Exchange Commission: aimed at regulating the nation's securities industry, the company, Herbal life, stated in annual filings that because multilevel marketing is not permitted in China, the company would be using a different business model but they didn't -multilevel marketing: marketing strategy in which revenue is derived from a non salaried worker selling the company's products or services and earning a commission

Siracha's lack of CSR

1. producer, Huy Fong Foods, need tests of air quality after claims of headaches and sore throats -in response to the claims, strung a banner, and due to a production ban will move its plant elsewhere which will affect the local economy

preventing irregularities

1. segregating employee duties: someone other than the employee responsible for safeguarding an asset maintains the accounting records for the asset -minimizes the probability of an employee being able to steal assets and conceal theft 2. assigning specific duties to each employee: ensures that a particular employee is accountable for a specific task -company can quickly identify the responsible person, trace docs, or determine how a particular transaction was recorded 3. rotating employee job assignments: defers long-term schemes 4. using mechanical devices: check protectors, cash registers, and time clocks 5. keeping records: maintain complete and accurate accounting records -for optimal control: source docs should be serially numbered -a company must hire competent and trustworthy employees and properly train them

internal controls

1. the redundancies that are build into a system to make certain that it accurately maintains material statements -added safeguard included solely to minimize the chance of theft or error

Unethical examples from accounting and finance

1. today, transparency in accounting and finance are key values in western culture 2. without checks in place, there is fear of unethical financial abuses such as creative accounting, earnings management, misleading financial analysis, insider trading, securities fraud, bribery or kickback, and facilitation payments -US transparency from Enron Scandal, World Com led to Sarbanes-Ox act of 2002: influencing accounting and financial ethics in the US 3. Contrasts with the Chinese: respect for authority outweighs freedom of information -long reign of authoritarian rule in which access to information was limited -since 2008, China adopted the open government information regulations: which provides citizens greater insight into government information -culture of save face "do not ask, do not ask" 4. power distance: the degree to which people accept an unequal distribution of power and status privileges -high power distance countries: there is more tolerance for concentration of power

Module 6

Ethical Considerations

United States Foreign Corrupt Practices Act of 1977 (FCPA) and the Organization for Economic Cooperation and Development Convention on Combating Bribery (OECD Anti-Bribery Convention of 1997

FCPA: criminalized bribery of foreign public officials by American business enterprises OECD Anti-Bribery: established legally binding standards for defining bribery in international business transactions--mainly bribery of public officials -Teapot Dome Scandal: jail sentence to US cabinet official, Albert B. Fall, for the first time fine of bribery

culture

a collective way of doing life or way of doing things -it is the sum of attitudes, values, goals, and practices shared by individuals in a group, organization, or society -culture reflects the moral and ethical beliefs and standards that speak to how people should behave and interact with others

ethical behavior

a direct representation of the principles and values that govern the individual and the organization represented -organizations create an internal culture that is reflected externally as organizational values -these values affect the relationships within the organization, productivity, reputation, employee morale and retention, legalities, and the broader community in which they operate

ethical consumerism

a movement in which consumers make purchasing decisions based on a company's ethical profile -Websites such as ethical consumer promote ethical consumerism -businesses that are perceived as valuing ethical actions more than the bottom line are gaining favor with the buying public -corporations and professional organizations, particularly licensing boards will usually have a written code of ethics that governs standards of professional conduct expected -42% of North American consumers reported having punished socially irresponsible companies by not buying their products -visibility into their supply chains has also become a priority -it is clear today ethical consideration strongly affect international business decisions and outcomes

UN Global Copact

a non-binding UN agreement aimed at encouraging businesses to adopt sustainable and socially responsible policies and to report on implementation

descriptive ethics

concerned with describing, characterizing, and studying the morality of a people, an organization, a culture, or a society

normative ethics

concerned with establishing norms or standards by which business might be guided or judged

business ethics

contemporary standards or sets of values that govern the actions and behavior of individuals in the business organization and the actions of the business itself -applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations -governments use laws and regulations to point business behavior in what they perceive to be beneficial directions

conflict of interest (COI)

ethical challenges in which multiple interests are at conflict with one another

organizational ethics

how an organization ethically responds to an internal or external stimulus

odebrechts

paid kickbacks to politicians to secure lucrative contracts

cultural norms

shared, sanctioned, and integrated systems of beliefs and practices that are passed down through generations and characterize a group -as culture intersects with ethics what might be ethical to one group may not be ethical to another group

Corporate Social Responsibility (CSR)

the ethical role of a corporation in society -the aim of CSR is to increase long-term profits and shareholder trust through positive public relations and high ethical standards

culture and unethical business practices

to some extent, perceptions of corruption may derive from cultural differences because behavior that is considered corrupt in one society may represent normal in another