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Part One: Environmental

Foundation

International Management,5th ed.

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International Management,

5th ed.

Hodgetts and Luthans

Chapter Four

Ethics and Social Responsibility

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EXAMINE some of the major ethical issues and problems confronting MNCs in selected countries

EXPLAIN some of the ways that host countries are attempting to regulate foreign investments and why reciprocity is such an important trade issue

DISCUSS some of the action being taken by selected industrialized countries to be more socially responsive to world problems

Objectives of the Chapter

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Ethics Around the World

Ethics The study of morality and standards of conduct Growing number of MNCs have prepared codes of

ethics Ethical behavior in one country is sometimes viewed as

unethical behavior in other countries Ethical Problems and Concerns in Japan

Political and Business Scandals Forced resignations of politicians for assisting private

corporations Failure of banking system to take steps to end the recession Relationship of politicians to organized crime Business firms engaged in unethical and illegal practices

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Ethics Around the World (cont.)

Ethical Problems and Concerns in Japan (cont.) Hostile Work Environment Issues

Sexual harassment Equal Opportunity Issues

Gender discrimination Creates problems for Japanese firms operating in the U.S

Social Responsibility Implication from Lobbying Some Americans are concerned because Japan spends more

money than other countries on lobbying in the U.S.

Ethical Problems and Concerns in Europe Europeans differ from U.S. and Japan in some respects French and German managers concerned about

maintaining a successful business posture

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Ethics Around the World (cont.)

Status of Women Managers in Europe Integration of women into the workforce is a critical goal France

Although French women are making strides in the management ranks, they still are underrepresented in corporate management

French law guarantees equal treatment and equal professional opportunities

Enforcement of these laws is fairly weak

Germany Women underrepresented in high-level management Has introduced laws mandating equal opportunity

Laws have had a greater impact on employment in the public sector Need for competent managers should increase the number of

women in managerial jobs

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Ethics Around the World (cont.)

Status of Women Managers in Europe (cont.) Great Britain

Women not well represented in high-level managerial positions

Women establishing associations to develop networking and increase lobbying power

Growing number of British companies proactively trying to recruit and promote women

Discrimination lawsuits becoming more common Some companies trying to avoid potential litigation by

attempting to create diversity in their workforces

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Ethics Around the World (cont.)

Ethical Problems and Concerns in China Human rights violations trouble MNCs contemplating

doing business in China Piracy, Counterfeiting, and Industrial Spying Problems

U.S. taking hard line against Chinese piracy of intellectual property

Chinese government has closed down some factories and offered rewards for information about piracy

Opaque index Measures the effect of unclear legal systems and regulations China’s system is the most opaque

Chinese-sponsored spying on foreign MNCs has increased Chinese partners in joint ventures may break the agreement

and walk off with patents and/or capital

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Figure 4-1 The Opaque Index

0 20 40 60 80 100

ChinaRussia

IndonesiaTurkey

South KoreaCzech Republic

RomaniaKenya

EcuadorThailand

GuatemalaIndia

PolandVenezuelaPakistan

ArgentinaBrazil

Taiwan

ColumbiaJapan

South AfricaEgypt

LithuaniaPeru

GreeceIsrael

UruguayHungary

ItalyMexico

Hong KongBritainChile

United StatesSingapore

0 20 40 60 80 100

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Ethics Around the World (cont.)

Ethical problems and Concerns in China (cont.) Status of Women Managers in China

Women managers confront a “glass ceiling” due to: Cultural stereotypes Restricted opportunities Discrimination that is both blatant and subtle

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Regulating Foreign Investment

Ethical concerns about the reciprocity of the relationship between the home country of the MNC and the host country

Regulation of Acquisitions The U.S. regulates the acquisition of domestic

companies by foreign investors Other countries are following the U.S.’s lead

EU regulations making it more difficult for non-European companies to do business in Europe

Nonreciprocal trade partners Nations that sell (export) goods to other countries but do not

buy (import) from them

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Regulating Foreign Investment (cont.)

Implications of Reciprocity International meetings being held to discuss the

ethical and social responsibility to engage in reciprocal trade Concerns about countries with massive trade

surpluses U.S. has targeted relations with Japan, China, and Brazil

retaliation considered as a means to force reciprocity EU disagrees with the use of sanctions

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Response to Social Obligations

Foreign Corrupt Practices Act (FCPA) Revisited Makes it illegal for U.S. companies to attempt to

influence foreign officials through personal payments or political contributions

Internal Revenue Service audits the expenses of MNCs to make sure that there are no deductions for illegal activities

Benefits of the FCPA outweigh its costs Forced to conclude that bribery has not played a major role in

foreign business conducted by U.S. companies Bribery and corruption still exist, however

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Figure 4-2 The Corruption Index

0 2 4 6 8 10 0 2 4 6 8 10

Finland

Singapore

Hong Kong

United States

Germany

Japan

Taiwan

Italy

South Africa

South Korea

1

4

14

16

20

21

27

29

38

42 Nigeria

Brazil

Mexico

Argentina

China

Thailand

Philippines

India

Russia

Indonesia

46

51

57

57

61

65

71

79

88

90

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Response to Social Obligation (cont.)

Foreign Corrupt Practices Act Revisited (cont.) More efforts to force compliance

FCPA violators now subject to Federal Sentencing Guidelines

Agreement recently signed by 29 members of the Organization for Economic Cooperation and Development (OECD)

Prohibits the practice of bribing foreign government officials

Does not outlaw payments to political party leaders U.S. wants to expand the scope of the agreement

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Response to Social Obligation (cont.)

International Assistance Governments of developed countries display social

responsibility when providing assistance to underdeveloped countries Assistance has taken the form of:

Gifts of food, machinery, and equipment Forgiving foreign debts

MNCs do not provide foreign aid to countries Some play philanthropic role in local communities

This strategy serves to protect the MNCs foreign investment