Chapter 5

Corporate social responsibility

the idea that business people should take the social consequences of economic actions into account when making business decisions -There should be a presumption in favor of decisions that have both good economic and good social consequences

Leadership

If a firms leaders fail to act in an ethical manner, other employees may not act ethically

Some economists suggest that the practices of giving bribes might be the price that must be paid to do a greater good.

In countries where preexisting political structures distort or limit the workings of the market mechanism, corruption in the form of black-marketeering, smuggling, and side payments to government bureaucrats to "speed up" approval for business investments may actually enhance welfare.

Managerial behavior is influenced by:

Personal ethics Decision making processes Organizational culture Unrealistic performance expectations Leadership Societal culture

John Rawls

all economic goods and services should be distributed equally except when an unequal distribution would work to everyone's advantage -Impartiality is guaranteed by the veil of ignorance (everyone is imagined to be ignorant of all his or her particular characteristics)

Kantian Ethics

based on the philosophy of Immanuel Kant who argued that people should be treated as ends and never purely as means to the ends of others -people have dignity and need to be respected, they are not machines

Most Common Ethical Issues In Business Involve

employment practices human rights environmental regulations corruption moral obligations of multinational companies

Justice Theories

focus on the attainment of a just distribution (one that is considered fair and equitable) of economic goods and services

Rights theories

human beings have fundamental rights and privileges that transcend national boundaries and culture -fundamental human rights form the basis for the moral compass that managers should navigate by when making decisions that have an ethical component The idea that some fundamental rights transcend national borders and cultures was the underlying motivation for the UN's Universal Declaration of Human Rights (specifies the basic principles that should always be adhered to irrespective of the culture in which one is doing business)

Naive Immoralist (Straw Men)

if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either -actions are ethically justified if everyone else is doing the same thing

Sustainable strategies

strategies that not only help the MNC make good profits, but that also do so without harming the environment while simultaneously ensuring that the company operates in a socially responsible manner with regard to its stakeholders Sustainable strategies can be good for shareholders, the environment, local communities, employees, and customers

difference principle

suggests that inequalities are justified if they benefit the position of the least advantaged person

Business Ethics

the accepted principles of right or wrong governing the conduct of business people.

Cultural Relativism (Straw Men)

the belief that ethics are culturally determined and that firms should adopt the ethics of the cultures in which they operate -"when in Rome, do as the Romans do"

Social Responsibility

the idea that business people should take the social consequences of economic actions into account when making business decisions, and that there should be a presumption in favor of decisions that have both good economic and good social consequences.

Utilitarian Ethics

the moral worth of actions or practices is determined by their consequences -actions have multiple consequences, some good, some not -actions are desirable if they lead to the best possible balance of good consequences over bad consequences Problems with this approach -measuring the benefits, costs, and risks of a course of action -the philosophy fails to consider justice

Friedman Doctrine (Straw Men)

the only social responsibility of business is to increase profits, so long as the company stays within the rules of law. -companies should not undertake expenditures beyond those mandated by law and those required for the efficient running of a business.

Personal Ethics

Business ethics reflect personal ethics (the generally accepted principles of right and wrong governing the conduct of individuals). -Expatriates may face pressure to violate their personal ethics because: --they are away from their ordinary social context and supporting culture --they are psychologically and geographically distant from the parent company

Org. Culture and Leadership

Businesses need to build an organization culture that places a high value on ethical behavior -the business must explicitly articulate values that place a strong emphasis on ethical behavior --code of ethics - a formal statement of the ethical priorities a business adheres to -leaders in the business should give life and meaning to the code of ethics by repeatedly emphasizing their importance, and then acting on them -the business should put in place a system of incentives and rewards that recognize people who engage in ethical behavior and sanction those who do not

Hiring and Promotion

Businesses should strive to identify and hire people with a strong sense of personal ethics Prospective employees should find out as much as they can about the ethical climate in an organization

MORAL COURAGE

Employees in an international business may need significant moral courage -managers need to be able too walk away from decisions that are profitable, but unethical -employees need to be able to say no to actions that are unethical

Social Culture

Ethical policies differ by country. -MNEs located in countries where individualism and uncertainty avoidance are strong are more likely to emphasize ethical behavior -MNEs located in countries with high masculinity and high power distance are less likely to promote ethical behavior

Ethics Officers

Ethics officers ensure that -employees are trained to be ethically aware -ethical considerations enter decision-making -the company's code of ethics is followed

Ethical Strategy

a strategy, or course of action, that does not violate these accepted principles.

Ethics

accepted principles of right or wrong that govern the conduct of a person, the members of a profession, or the actions of an organization.

5 step decision-making process

1. How would a decision affect stakeholders - the individuals or groups who have an interest, stake, or claim in the actions and overall performance of a company -Internal stakeholders - people who work for or who own the business such as employees, the board of directors, and stockholders. -External stakeholders - the individuals or groups who have some claim on a firm such as customers, suppliers, and unions 2. Managers need to determine whether a proposed decision would violate the fundamental rights of any stakeholders 3. Managers need to establish moral intent - the business must resolve to place moral concerns ahead of other concerns in cases where either the fundamental rights of stakeholders or key moral principles have been violated 4. The company should then engage in ethical behavior 5. The business must audit its decisions, reviewing them to make sure that they were consistent with ethical principles

Unrealistic Performance Expectations

Pressure from the parent company to meet performance goals that are unrealistic, and can only be attained by cutting corners or acting in an unethical manner can cause unethical behavior

Straw Men

Raised by business ethics scholars primarily for the purpose of demonstrating that they offer inappropriate guidelines for ethical decision making in a multinational enterprise

Ethical Dilemmas

Situations in which none of the available alternatives seems ethically acceptable. - They exist because real world decisions are complex, difficult to frame, and involve various consequences that are difficult to quantify. - Managers often face situations where the appropriate course of action is not clear.

Philosophical Approaches to Ethics

Straw men -the Friedman doctrine -cultural relativism -the righteous moralist -the naïve immoralist Utilitarian and Kantian Rights theories Justice Theories

Decision making process

Studies show that business people may behave unethically because they fail to ask the relevant question - is this decision or action ethical? -decisions are made based on economic logic, without consideration for ethics

Organizational Culture

Unethical behavior may exist in firms with an organization culture - the values and norms that are shared among employees of an organization - that does not emphasize business ethics -Values and norms shape the culture of a firm, and that culture influences decision making

Righteous Moralist (Straw Men)

a multinational's home country standards of ethics are the appropriate ones for companies to follow in foreign countries -approach is common among managers from developed countries