MGMT 110- Ch 15

Corruption Perceptions Index Scores 2015 (score out of 100)

*look at pic*

The following topics are covered in standards of conduct, but vary from one standard to another: Competition

Activities should not be undertaken that adversely affect competition by abusing a dominant position of market power.

The following topics are covered in standards of conduct, but vary from one standard to another: Disclosure of information

Information about operations should be available, but not to the extent that business confidentiality is violated. MNCs will issue CSR and environmental reports.

Economic Globalization

Involves the integration of fragmented markets into a global economy. The markets for goods and services, information, capital, and labour become worldwide, leading to free trade among nations; although progress has been made, the world has a long way to go before this is fully implemented. Barriers still exist to free trade among nations even through developing nations are now the producers of many goods and services consumed in industrialized economies. This could eventually mean worldwide standards or practices for product quality, pricing, service, and design. This is the type of globalization that is most commonly being referred to when the term is use

Driving ideas behind the start of engaging the poor:

Many corporations see a need to break out of mature market sectors. Framework conditions in many developing countries are improving. Communications are faster and cheaper, making the world a smaller place. Public expectations of corporations are changing. New and better partners are available. Aid and investment are beginning to reinforce one another

Global Standards of Conduct Developed by International Organizations: The Equator Principles (EPs)

The Equator Principles is system for determining, assessing, and managing environmental and social risk in projects; it is primarily intended to provide a minimum standard for due diligence to support responsible risk decision-making. The EPs have been adopted by 82 financial institutions in 36 countries.

The following topics are covered in standards of conduct, but vary from one standard to another: Corporate governance

The MNC shall follow appropriate governance practices.

Global Standards of Conduct Developed by International Organizations: The United Nations' Principles for Responsible Investment (PRI)

The Principles were formulated in partnership with the UNEP Finance Initiative and the UN Global Compact and developed by an international group of institution investors. The initiative has prompted as environmental, social, and corporate governance (ESG) issues can affect the performance of investment portfolios

supranational institutions: the world bank

The World Bank was established with the objective of providing financing to enhance the economic development of countries after the Second World War. Today it focuses its financial and technical assistance to developing countries in Africa, Asia, Latin America, and the Middle East. The bank is owned by the 184 member countries and aims to reduce poverty and improve living conditions in developing countries. Low-interest loans, interest-free credit, and grants are given for education, health, infrastructure, communications, and other purposes

Global Standards of Conduct Developed by International Organizations: Principles for Global Corporate Responsibility: Benchmarks for Measuring Business Performance

This is a comprehensive set of more than 100 principles, 129 criteria, and 118 benchmarks to measure business' social and environmental performance. It was developed by interfaith organizations from several countries including the Taskforce on the Churches and Corporate Responsibility of Canada (TCCR, now KAIROS-Canada).

Globalization and Canadian Business and Society: Investing

Canada must attract more investment in plants that further process our natural resources. Such investment will lead to productivity growth, increased competitiveness, and greater employment opportunities. On the other hand, Canadian direct investment abroad is a critical element in globalization. Businesspeople must be willing to invest money in operations outside of Canada. Governments must "think globally" when developing programs and policies, and be aware of the trend to globalization and encourage business to react appropriately.

Globalists arguments for globalization

Globalists: those that support globalization Trade is encouraged as it leads to the most efficient production of goods and services from which all gain. Private corporations and open markets provide better goods and services to society. Opportunities for employment and higher incomes are enhanced in developing countries. The standard of living has increased in most developing countries. The transfer of capital, technology, intellectual property, and even skilled labour occurs. Several stakeholders benefit, including owners, consumers, suppliers, and employees.

Bribe Payers Survey

Several organizations monitor and measure bribery practices. TI conducts a Bribe Payers Survey, which allows it to evaluate foreign bribery by corporations in more than 20 countries by exploring the frequency of different types of foreign bribery. The three types of bribery assessed included: Bribery of high-ranking politicians or political parties. Bribery of low-level public officials to "speed things up." Use of personal or familiar relationships to win public contracts.

supranational institutions: The world trade organization (WTO)

The World Trade Organization (WTO), which came into force on January 1, 1995, is an international body that oversees and coordinates agreements reducing trade barriers. There have been many NGO demonstrations at WTO meetings, mostly opposing the liberalization of trade. The issues identified include the unfairness to developing nations, the abuse of workers, the low prices received by producers, the arbitrary practices of multinational corporations, and the loss of jobs.

Corporations should not ignore people living in poverty

The concept is that corporations should not ignore—as potential customers—the segment of the world's population living in poverty. An estimated 4 billion persons are in this segment, living on less than $2 per day. Individually they do not have much purchasing power, but collectively they do. The market potential for these people is often overlooked as corporations focus on the few wealthy customers or the emerging middle-income people in a developing economy.

Social or cultural globalization

The emergence of a worldwide cultural system. This system emerges due to a variety of social and cultural activities, including common patterns of consumption, such as demand for American entertainment and brand-name clothing; worldwide sporting events, such as football competitions and the Olympic Games; increasing tourism travel; movements common around the world, such as environmentalism and the trend toward holding business accountable for social and environmental responsibilities; and health problems affecting most of the world ,such as AIDS and flu pandemics. As a result, the world is thought of more as a single place

Political globalization

the process by which world power relationships change and there is a loss of sovereignty by the state. The reduced role of the state is replaced by power being assumed by multinational corporations, religious organizations, non-governmental organizations, social movements, and transnational terrorism.

Global Standards of Conduct Developed by International Organizations: United Nations Global Compact Network

In 1999, the World Economic Forum developed a set of principles referred to as the Global Compact, covering human rights, labour, and environment.

Global Standards of Conduct Developed by International Organizations: OECD "guidelines for multinational enterprises"

This is one of the oldest guidelines and has influenced corporate behaviour around the world. Clauses include disclosure, employment and industrial relations, environment, combating bribery, consumer interests, science and technology, competition, and taxation.

Corruption of Foreign Public Officials Act

Canadian corporations and managers must adhere to the Corruption of Foreign Public Officials Act when doing business globally. This Act features three offences: bribing of a foreign public official; laundering of property and proceeds; and possession of property and proceeds. In addition to this act, the federal government is participating in anti-corruption initiatives through organizations such as the Organisation for Economic Co-operation and Development (OECD), the Organization of American States, the Council of Europe, the Commonwealth of Nations, and the United Nations

Standards of conduct

Standards of conduct apply to the worldwide operations of a multinational corporation (MNC) and are applicable to all, although compliance is voluntary. Most of the standards cover a range of economic, ethical, and environmental measures. Human rights are included in most, but corporate governance practices in only some. They are a valuable resource for corporations and can be modified by industry. They provide a basis for reporting and guidelines for establishing policies. If used, there is need for annual auditing of compliance, preferably by an independent body or consultant. If not used or followed, any benefits from the standards will be lost.

Globalization and Canadian Business and Society: Global competitiveness report

A second measure of competitiveness is provided by the "Global Competitiveness Report" published by the World Economic Forum, an independent international organization committed to improving the state of the world by engaging leaders in partnerships to shape global, regional, and industry agendas. A Global Competitiveness Index provides an overview of a country's productivity and competitiveness based on nine factors. On this Index, Canada ranked 13th but Canada's score is being dragged down by weak innovation, insufficient access to financing, and inefficient government bureaucracy

Bribery

Bribery involves making questionable payments, or bribes, to government officials to influence their decisions. Sometimes bribes are referred to as facilitation payments, and involve smaller payments to expedite something an official should be doing by encouraging him or her to do it faster and more efficiently. Such payments may be justified as necessary to do business in a particular country and often are rationalized since everyone does it; bribery is an accepted practice and considered akin to a commission, tax, or compensation. On the other hand, there are numerous arguments against making such payments: it is viewed as being simply wrong, unacceptable, and illegal. The practice compromises a manager's ethical standards when honesty and fairness should be practised all the time. Some corporations simply refuse to deal with corrupt governments, because in the long term limited benefits exist and once started the practice is unlikely to stop. In some cultures and national environments bribery is an acceptable practice, and it is argued that foreigners accept it. Thus, managers can justify acting according to the circumstances in which they find themselves.

Globalization and Canadian Business and Society

Canadian business is influenced by globalization and must respond; there are several implications. With global markets emerging, Canadian business is under pressure to forge international links as there will be less distinction between domestic and foreign enterprises. Ownership and control of business will be less important than performance at supplying goods and services. Canada, and Canadian business, has no choice but to meet the challenges of global market restructuring as new trading agreements are completed by governments. Several developing nations are becoming major economies—for example India, Brazil, Russia, and China—and Canadian business must prepare for the opportunities and threats that are emerging.

The following topics are covered in standards of conduct, but vary from one standard to another: Financing

Corporate financing should be arranged to consider the impact on national balances of payments and credit policies.

Prahald and Hart outlined the commercial infrastructure necessary at the bottom of the pyramid:

Creating Buying Power: Giving persons in poverty access to credit that can be used to establish economic activity to generate income. Shaping Aspirations: This can be accomplished through consumer education and sustainable development of developing countries' resources. Tailoring Local Solutions: The solutions include targeted product development appropriate to developing economies and bottom-up innovation. Improving Access: Developing distribution systems and communication links within countries to facilitate economic activity and trade. For success at the bottom of the pyramid, all aspects of this infrastructure must be put together in an appropriate way to facilitate the commercial efforts.

Global Standards of Conduct Developed by International Organizations: Global Reporting Initiative (GRI)

GRI guidelines cover all aspects of economic, social, and environmental reporting and apply to multinational corporations

Globalization increases business' economic, social, and environmental responsibilities, including issues arising from the following:

Damage to the environment occurring as a result of using natural resources, including pollution and depletion. Business' alleged support for oppressive governments. Criticism of the marketing practices of many industries and corporations, for example tobacco, pharmaceutical, and baby formula products. Businesses associated with the arms trade are blamed for facilitating violence and warfare in various parts of the world. The treatment of employees in developing countries, the existence of sweatshops in industrialized as well as developing countries, and the attempts to prevent union formation. In many parts of the world, including Canada, indigenous peoples are attempting to regain control over ancestral lands. Genetic modification of plants and animals has aroused concern, as has the patenting of life forms in the production of food. Corruption, bribery, and questionable payments are involved with doing business in some countries. As a result of these issues and others, the desirability of globalization is open to debate.

Summary of globalization

Globalization has resulted in a reduction of government involvement in most economies and an increase in the reliance on markets and capitalism to provide society's goods and services. This trend reinforces the definition of globalization stated at the beginning of the chapter. It involves more than economic activities and is interwoven with the social and environmental responsibilities of business. Some question exists as to whether globalization will be influenced by the economic downturn beginning in 2015. It appears that the trend may be slowing, but there is little evidence that it is being reversed. The current crisis of global capitalism—first in financial markets and now in a recessionary downturn in consumption and production —reveals the dependency of business on an underlying social culture of trust and responsibility

Why is it important for Canadian to do well in the global market?

How well Canadian business is able to compete in the global market influences how well Canadian corporations can respond to social, ethical, and environmental responsibilities associated with globalization. Many Canadian corporations with global operations willingly accept, or are being pressured to accept, these additional responsibilities. The International Code of Ethics for Canadian Business provides assistance in this area. This Code was developed especially for Canadian businesses by a joint effort among an academic institution, business leaders, and public administrators. It comprises four parts: a vision statement, a list of beliefs, a list of values, and a set of principles

Global Poverty

Human rights and sweatshop labour abuses are related to the reduction of global poverty. This issue has been receiving more attention in part because of the United Nations' Millennium Development Goals MDG), which identify the needs of the world's poorest. The private corporation will have to be involved if the goals are to be met, and some Canadian corporations have initiated projects to address various goals. Although governments shoulder much of the responsibility for human development, it is in business' interests to participate. An opportunity exists to capture future markets, corporations benefit from the stability of enhanced human development, and the risks of doing business are reduced. Business brings inherent skills to meet the goals, including providing leadership through partnerships and cooperative undertakings.

INGO's represent who?

INGOs believe that they have a role to play in globalization by representing those with the little or no voice, including the poor, sick, and uneducated; the victims of civil wars; and indigenous peoples. This role is an important contribution in civil society and cannot be ignored by governments or corporations. Not all INGOs are alike or hold the same views, and not all are opposed to globalization. However, they do believe that poverty and inequality must be addressed. They are concerned that rich countries are becoming better off and that rich persons within countries are becoming richer at the expense of the poor. It is believed that corporate influence is dominating government decision making and that corporate ownership of the media prevents alternative views from being aired.

How can corporations market to those living in poverty?

If corporations are innovative enough, they can profitably market goods and services to those living in poverty. If corporations succeed in this, they will experience growth and profits while at the same time improving the living conditions of those persons and aiding regional development. This approach empowers those at the bottom by providing new options for improving their state. It allows corporations to make money and at the same time be socially responsible. Thus, the concept appeals to businesses that are pressured by various stakeholders to be more socially responsible.

Canada's history of enforcing bribery practices

In March 2011, the OECD released a report pointing out that Canada is doing a poor job at enforcing bribery practices. Canada has prosecuted and convicted only one case, in 2005, and has one ongoing prosecution and more than twenty cases under investigation. The report made the following recommendations to the Canadian government: Provide more resources to its lawyers to prosecute more cases. Clarify the Act to apply to all conduct, not just "for profit" business. Make sanctions more effective. Make sure to prosecute Canadian businesspersons for bribery. Eliminate factors such as national economic interests and relations with a foreign state from consideration in making a decision to prosecute

Globalization and Canadian Business and Society: Competitiveness Scoreboard

In this global economy, Canadian corporations must be competitive with those from other countries in order to also behave as responsible corporate citizens. One measure of this ability to compete is the "Competitiveness Scoreboard" published annually by the International Institute for Management Development, which surveys the competitiveness of most national economies. Four factors are measured: economic performance, government efficiency, business efficiency, and infrastructure. In 2015 Canada ranked 5th out of 61 and on the four factors its rankings were 10th, 8th, 3rd, and 6th. Canada's ranking will face challenges in the future because of low productivity growth, lack of business scale, skilled labour shortages, and aging infrastructure

n June 2007, the Aspen Institute's Business and Society Program issued a bulletin on the Bottom of the Pyramid concept

It identified how the concept is being incorporated into the curricula for business programs and the university centres interested in the concept. Teaching materials were also identified. The bulletin asked some interesting questions about the BOP concept: Is the concept merely an academic fad, or will the trends of increasing curricular exposure to the topic continue? Why is a discussion of the concept noticeably absent from most top academic journals? Will corporations address the felt needs of the poor when providing goods and services or rather exploit marketing tactics to promote any potentially profitable product?

The following topics are covered in standards of conduct, but vary from one standard to another: Science and technology

MNCs must cooperate with the scientific and technological policies of the countries in which they operate and grant licences for the use of industrial property rights under reasonable terms.

The following topics are covered in standards of conduct, but vary from one standard to another: Political factors

MNCs must respect national sovereignty and observe domestic laws, regulations, and administrative procedures. Corporations must not interfere (illegally) in the internal affairs of the countries in which they operate and adhere to taxation policies.

The following topics are covered in standards of conduct, but vary from one standard to another: Environmental protection

MNCs shall carry out their activities in accordance with national laws, regulations, administrative practices, and policies relating to the preservation of the environment of the countries in which they operate and with due regard to international standards of sustainability.

The following topics are covered in standards of conduct, but vary from one standard to another: Stakeholder consideration

MNCs shall consider the interests of all stakeholders. Consumers must be dealt with fairly, marketing and advertising practices must be honest, privacy must be respected, and products sold must be safe and of good quality. The views of INGOs should be taken into consideration. Local supplier capacity should be developed.

The following topics are covered in standards of conduct, but vary from one standard to another: Corrupt practices

MNCs shall refrain from offering, promising, or giving any payment, gift, or other advantage to the benefit of a public official or politician.

The following topics are covered in standards of conduct, but vary from one standard to another: Employment and human resources

MNCs should respect the right of their employees to join trade unions, observe standards of employment and industrial relations, train persons from the local labour force, and be sensitive to the impacts of layoffs and closures. MNCs should respect human rights, not be involved in child or forced labour, and provide safe and healthy workplaces.

The following topics are covered in standards of conduct, but vary from one standard to another: Sociocultural objectives and values

MNCs should respect the social and cultural objectives, values, and traditions of the countries in which they operate.

Codes, guidelines or principles for businesses in the global economy

Numerous codes, guidelines, or principles provide direction to corporations operating in the global economy. These measures are developed by various INGOs, some in cooperation with business, supranational institutions, business associations, or other civil society organizations. Corporations can use the standards to assess their response to social and environmental responsibilities relating to international business.

Global Standards of Conduct Developed by International Organizations: Caux Round Table: Caux Principles

The "Caux Principles of Business" were developed by a network of senior business leaders from both industrialized and developing nations. The principles cover responsibilities to all stakeholders, economic and social impact of business, business behaviour, respect for rules, support for multilateral trade, respect for the environment, and avoidance of illicit operations.

Another example of a business approach to addressing the globalization issue relating to the low prices received by producers in developing countries has been fair trade.

The Fairtrade Foundation, Oxfam, and Traidcraft have agreed on the following common definition of fair trade: "an alternative approach to conventional international trade. It is a trading partnership which aims at sustainable development for excluded and disadvantaged producers. It seeks to do this by providing better trading conditions, by awareness raising and by campaigning."The fair trade movement is not anti-capitalist, but instead intends to use the market system to enhance the influence of the supplier stakeholder. The best known fair trade product is coffee, and today most retailers carry a fair trade product. Other fair trade products are flowers, spices, and cocoa. The entrepreneurs promoting fair trade products claim that the local suppliers in developing countries are now receiving a higher price for their product.

supranational institutions: The international Labour Organization (ILO)

The International Labour Organization (ILO) is the United Nations agency that "seeks the promotion of social justice and internationally recognized human and labour rights." It formulates standards of basic labour rights including the freedom of association, the right to organize, collective bargaining, abolition of forced labour, and equality of opportunity and treatment. This organization has been influential in the area of accountability for sweatshops in developing countries. It also established the World Commission on the Social Dimension of Globalization to assist people coping with changes brought about by globalization. The Commission is searching for innovative ways to combine economic, social, and environmental objectives

supranational institutions: The international Monetary Fund (IMF)

The International Monetary Fund (IMF) is "an organization of 188 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty." Although monetary and financial policies are a focus for the organization, it is also concerned with the social impacts of these policies.

Emergence of Globalization

The emergence of globalization has occurred with the increasing acceptance of capitalism around the world. The trend to greater reliance on market systems rather than government initiatives is illustrated by some recent initiatives: the "Bottom of the Pyramid" concept, fair trade, microfinance, and increasing entrepreneurship in developing countries. Business corporations may appropriately play a greater role in alleviating poverty in the world by applying the concept of the Bottom of the Pyramid (BOP).

Anti-globalists arguments against globalization

The expansion of global corporations is undesirable as decisions are based on profit-making or greed. Conspiracies exist between corporations and governments resulting in any benefits being received by a few. Unemployment is created in developed economies. Poverty and inequality increases in the developing economies. Periodic financial crises are caused disrupting the economies of many countries. There is destruction of local environments as standards are lowered to attract developments. The cultures of societies are lost or changed. Human rights are violated, in particular in relation to sweatshops. Questionable payments are made to governments or their officials to facilitate business. Intellectual property is not respected. The sovereignty of nations is undermined. Worldwide organizations such as the World Bank, the International Monetary Fund, and the World Trade Organization have too much influence.

Small business in developing countries

The role of small business in improving the circumstances in developing countries has increased. This is illustrated by the Grameen Bank, which is a commercial, profit-making operation. One view of reducing poverty is to rely more on business models and less on aid or charity, which have failed in many cases to reduce poverty. The assumption is that the poor are assisted more by unleashing their energy, creativity, and entrepreneurial spirit. Corporations must realize that doing business with the poor benefits the poor and themselves. It will be necessary for some governments to eliminate the barriers to private enterprise or capitalism. Challenges are involved, including poor infrastructure, illiteracy, religious/racial/tribal tensions, crime, corruption, and excessive government regulation.

Sweatshop production

The sourcing of products from sweatshops in developing countries—and to a lesser extent within Canada—is an issue with most retailers. Goods are supplied at low costs, but the plants where they are produced violate many human rights through the abuse of workers. The abuses include child labour, low pay, poor working conditions, poor health and safety, and overall mistreatment of workers. In addition to corporations developing policies and codes, many industries also have done so. Many INGOs monitor production facilities, often on behalf of the corporations. Consultants have specialized in the area of verifying the conditions and practices of these plants. Despite all these efforts, some suppliers in developing countries are avoiding labour rules and inspections. Others argue that sweatshops are a stage in the industrial development of a country; they provide employment where there would be little or none and the developing economy is better off, which eventually leads to further economic development

Two most common ways Canadians are affected by globalization

The two most common ways are through the availability of lower-priced goods in greater variety, and the employment adjustments that occur from outsourcing goods and services. The well-being of Canadian society is increasingly influenced by the performance of Canada's corporations in the global environment both within and outside Canada. As well, societies and stakeholders in developing countries are being affected; some benefit, while others are harmed.

Corruption

When operating in a global economy, Canadian corporations must be aware of the legal and ethical circumstances existing in various countries. Transparency International (TI) has developed an index of corruption, the Corruption Perception Index (CPI), to assist corporations in coping with particular countries. TI defines corruption as "the abuse of entrusted power for private gain" and their "Corruption Perception Index measures the perceived level of public sector corruption in countries and territories around the world

Globalization

a process of decreasing constraints on the interactions among the nations and peoples of the world. There are several dimensions to globalization; three important ones for business are economic, political, and social or cultural.

supranational institutions

an international organization that transcends national boundaries where the member states share in decision making on particular issues pertaining to the members. They are usually viewed as economic agencies, but they can also have an impact on the ethical, social, and environmental responsibilities of the corporation. INGOs are often critical of such institutions as they promote globalization.

International non-governmental organizations (INGOs)

are groups that hold shared values and attitudes about the issues relating to globalization and advocate for changes to improve the conditions in developing countries. Many INGOs are opposed to globalization and attempt to counterbalance what they consider the excessive influence of multinational corporations. Some address all issues of globalization, while others focus on human rights or the environment. Sometimes INGOs are referred to as transnational non-government actors (TNGAs), or transnational social movement organizations (TSMOs)

Extractive Industries Transparency Initiative (EITI)

he Extractive Industries Transparency Initiative (EITI) is a global standard that promotes revenue transparency by monitoring and reconciling corporation payments and government revenues at the country level. It believes that in countries that are rich in oil, gas, and minerals, the revenues received from the extraction of these resources should be used to foster economic growth and reduce poverty. When the government systems are inadequate, the revenues may be lost through corruption or used to finance conflicts. EITI aims to strengthen governance by improving transparency and accountability in the extractives sector. The process is overseen by participants from the government, corporations, industry associations, INGOs, institutional investors, and supranational institutions. More than 90 of the world's largest oil, gas, and mining corporations support and actively participate in the EITI process including the Canadian corporations Barrick Gold, Goldcorp, Kinross, and Teck Resources.

Criticism of microfinancial institutions

he primary criticism is the high rates of interest charged, which is at 20 to 30 percent. The rates are justified on the higher costs of administering, making, and collecting the loans and administering small savings accounts. Some MFIS have been accused of pursuing growth by ignoring the ability to pay and using coercive collection tactics. Overlending is another problem, where multiple loans are made to the same person. There has been consideration of regulating the MFIS, for example by limiting the interest rates, but this may discourage lenders and force borrowers to less scrupulous lenders. Other initiatives to improve the industry include the establishment of credit bureaus, requirement of more transparency, and stronger ethical and regulatory framework. These actions are similar to the regulation of the payday loan industry in Canada. Finally, an issue is the morality of profiting by providing services that are intended to alleviate poverty.

Human Rights

the fundamental rights and freedoms to which all individuals, groups, and societies are entitled. Canadian corporations operating on a global scale need proactive human rights policies and practices both globally and within Canada. Financing and human talent may be harder to obtain without attention being given to human rights. Respect for human rights is a key to establishing market footholds in developing countries—which is important as they are the largest untapped market, estimated at 3 billion.

Microfinance

the provision of financial products, such as micro-credit, micro-insurance, and savings accounts, to persons living in areas of poverty without access to banking services. Organizations providing these services are often referred to as microfinancial institutions (MFIS). Micro-credit has received the most attention and involves making small loans to poor persons to start or expand small businesses. Women are often the entrepreneurs who borrow money. The practice started about 30 years ago; the pioneer in this approach was Muhammad Yunus and the Grameen Bank in Bangladesh. Today, as many as 10,000 other institutions are involved in the practice, including government, business foundations, and aid agencies as well as commercial banks