3 - 1 © 2004 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.

3 - 1

© 2004 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

3 - 2


Chapter

3Global Social Responsibility and Ethical DecisionMaking

3 - 3


IntroductionIntroduction• The public expects responsible and

ethical behavior from managers and leaders

• The stakeholders outside the organization receive impressions or become a judge and jury regarding ethical or unethical behavior

• Companies must pay attention to this

3 - 4


Social Responsibility Social Responsibility (1 of 2)(1 of 2)

• Global firms must concern themselves with the social, economic, and human asset effects of their decision making

• Specific social responsibilities:• Ethical

• Legal

• Economic

3 - 5


Social Responsibility Social Responsibility (2 of 2)(2 of 2)

• Responsiveness to these responsibilities:• Proaction

• Accommodation

• Reaction

• Beneficiaries of responsible management:• Internal

• External

3 - 6


Internal Beneficiaries of Internal Beneficiaries of Responsible ManagementResponsible Management

Employees

Customers

Owners

3 - 7


Specific External Beneficiaries of Specific External Beneficiaries of Responsible Management: Responsible Management: (1 of 2)(1 of 2)

• Groups seeking to redress historical grievances:• racial and ethnic minorities

• women

• the handicapped

• the aged

• Contend they have been discriminated against in the past

3 - 8


Specific External Beneficiaries of Specific External Beneficiaries of Responsible Management: Responsible Management: (2 of 2)(2 of 2)

• Contend that corporations have played major roles in this discrimination

• Transnational firms must take some responsibility to erase the vestiges of prior discrimination

• Transnational firms must create programs of equal access to employment opportunities and economic advancement

3 - 9


General External Beneficiaries of General External Beneficiaries of Responsible Management: Responsible Management: (1 of 2)(1 of 2)

• Company efforts to solve or prevent general social problems in a society

• Stakeholder management devices (SMDs)• Mechanisms through which organizations

respond to stakeholder concerns• written codes of ethics

• corporate sponsorship of community functions

• ethics committees on the board of directors

3 - 10


Human Rights Human Rights (1 of 2)(1 of 2)

• Basic standards of treatment for all people, regardless of nationality, gender, race, economic status, or religion

• These standards include:• the avoidance of child labor in global operations• nonparticipation in a country’s action that results in

depriving citizens of civil liberties• avoidance of using forced labor to produce products or

services

3 - 11


Human Rights Human Rights (2 of 2)(2 of 2)

• Declaration of Human Rights• most widely recognized human rights benchmark• adopted by many countries

• Companies can avoid legal challenges to their global operations by following human rights principles, as contained in international law

3 - 12


Examples of Organizational Human Examples of Organizational Human Rights Efforts and Programs Rights Efforts and Programs (1 of 2)(1 of 2)

• Reebok and Nike have established centralized stitching centers in Pakistan to ensure that this work is not outsourced where violations can’t be determined

• California and Massachusetts legislators have banned imports that used forced labor, convict labor, or child labor

3 - 13


Examples of Organizational Human Examples of Organizational Human Rights Efforts and Programs Rights Efforts and Programs (2 of 2)(2 of 2)

• Rugmark uses monitoring that includes surprise inspections of employees, working conditions, and human rights policies• Prior to this program, bonded child labor was used to

produce carpets in India, Pakistan, and Nepal

3 - 14


Business EthicsBusiness Ethics• Business ethics is two things:

1. It refers to standards of right and wrong2. It is the development of one’s own ethical standards

• Establishing a standard of conduct, belief, values, and sensitivity is what ethics means to people, communities, and institutions

3 - 15


Managerial Ethics Managerial Ethics (1 of 2)(1 of 2)

• Ethics – commonly refers to principles of behavior that distinguish between what is good, bad, right, and wrong

• Used by global managers as guidelines in making decisions that affect:• employees• the organization• consumers• other parties

3 - 16


Managerial Ethics Managerial Ethics (2 of 2)(2 of 2)

• The importance of ethics increases in proportion to the consequences of the outcome of a decision or behavior

• As a manager’s actions become more consequential for others, the more important are the ethics of that manager

• Ethical misconduct by management can be extremely costly for the company and society as a whole

3 - 17


What comprises an ethical decision?What comprises an ethical decision?

• The basis that an individual manager can use in determining which alternative to use in a decision-making situation

• What organizations can do to ensure that managers follow ethical standards in their decision making

3 - 18


Rankings of Perceived Ethics by Rankings of Perceived Ethics by OccupationOccupation

Very High High

Nurses 27% 57%

Military Officers 18% 47%

High school teachers 15% 49%

Medical doctors 11% 52%

Bankers 3% 33%

Building contractors 3% 17%

Business executives 2% 15%

Labor union leaders 2% 12%

3 - 19


Corporate Ethics and LeadershipCorporate Ethics and Leadership

• How can a business enterprise respond successfully to the day-to-day challenges of corporate ethics?1. Common sense or “moral reason”

2. Corporate codes of conduct3. Comprehensive policies4. On-going, rewarding management development

3 - 20


Moral Common SenseMoral Common Sense1. Avoid harming

others

2. Respect the rights of others

3. Do not lie or cheat

4. Keep promises and contract

5. Obey the law

6. Prevent harm to others

7. Help those in need

8. Be fair

9. Reinforce these imperatives in others

3 - 21


Corporate Codes of ConductCorporate Codes of Conduct

• Standards of behavior that a corporation adopts without being compelled to by law• become binding on all employees• to minimize potential conflicts arising from normal

business activities’ undesirable effects on society and the environment

• Make it clear that management is not indifferent to how business goals are achieved

3 - 22


Corporate codes of

conduct rule out what

the corporation believes

to be clearly

unacceptable behavior.

3 - 23


Criteria for the Criteria for the FormationFormation of Corporate of Corporate Codes of ConductCodes of Conduct

• The principles of the code must be tailored to the specific corporate culture

• The code of conduct addresses those activities that are particularly sensitive or that concern the greatest vulnerability

• Corporate codes of conduct have to be pragmatic

3 - 24


Criteria for the Criteria for the ImplementationImplementation of ofCorporate Codes of ConductCorporate Codes of Conduct

• A communication program must ensure that all people affected by the code of conduct actually know and understand it

• There should be at least one person who may be approached in confidence

• Employees should certify in writing that they have read, understood, and complied with the code of conduct in their work

3 - 25


Criteria for the Criteria for the EnforcementEnforcement of ofCorporate Codes of ConductCorporate Codes of Conduct

• Codes of conduct only make sense if the managers concerned are accountable for the objectives

• Audit committees, ombudspersons, a hot line, or other means should ensure that employees can have their concerns heard

• Violations of the code of conduct must be investigated and resolved

3 - 26


A Sample of Codes of Conduct Used in A Sample of Codes of Conduct Used in Different Countries and Organizations Different Countries and Organizations 1/21/2

• European Initiative for Ethical Production and Consumption

• Social Accountability 8000 (SA8000)• Caux Roundtable Principles for Business• Global Sullivan Principles• ICFTU Basic Code of Labor Practice

3 - 27


• Investors in People• Ethical Trading Initiative• Amnesty International’s Human Rights Principles for

Companies• Clean Clothes Campaign Code of Labor Practices

for the Apparel Industry

A Sample of Codes of Conduct Used in A Sample of Codes of Conduct Used in Different Countries and OrganizationsDifferent Countries and Organizations 2/22/2

3 - 28


Good Ethics is Good BusinessGood Ethics is Good Business

• The reputation of a company is one of its most valuable assets

• The verdict of the public depends significantly on the company’s perceived contribution to socially valued ends

3 - 29


Employees’ MotivationEmployees’ Motivation• Positive correlation between ethical

conduct in a corporation and job satisfaction

• Where top management is seen as giving strong support for ethical conduct,• job satisfaction increases together with the degree of

employee identification with the corporation

3 - 30


Corporations whose

ethical conduct is

considered above

reproach are seen as

more attractive

employers.

3 - 31


Corruption and BriberyCorruption and Bribery

• Bribery – the paying of money or providing benefit to someone in business or government to obtain an inappropriate• market

• workplace

• individual economic gain

• Foreign Corrupt Practices Act (FCPA) of 1977

3 - 32


Home CountryHome Country Factors Responsible for Factors Responsible for BribesBribes

• Competitors are giving bribes to obtain business

• Top management and shareholders pressure for higher levels of performance

• This is an accepted practice in the host country

• Tax laws of the country encourage bribery

3 - 33


Host CountryHost Country Factors Responsible for Factors Responsible for BribesBribes

• Permits and licenses from government officials are required to conduct normal business functions

• Government officials are poorly paid, use bribes to supplement salary

• Bureaucratic delays can be costly for business

• Politicians pressure for contributions

3 - 34


Transnational Company Efforts to Transnational Company Efforts to Promote Ethics Promote Ethics (1 of 2)(1 of 2)

1. Top executives are committed and involved in ethics training and initiatives

2. A clearly communicated company code of ethics and code of conduct is prepared, continuously upgraded, and used

3. The company establishes a formal point of reference and contact for training, advisory services, and resources

3 - 35


Transnational Company Efforts to Transnational Company Efforts to Promote Ethics Promote Ethics (2 of 2)(2 of 2)

4. Once codes of conduct and support services are in place, violations must be strictly enforced

5. Monitoring the program and enforcement should be formally conducted

3 - 36


ConclusionConclusion• Social responsibility and ethics are limited

by the host-country• precedents• laws• infrastructure• culture

• How social responsibility and ethics are managed differs across cultures

3 - 1 © 2004 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.

Documents

Transcript of 3 - 1 © 2004 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.