1

International Business in Focus,

2013-14

Corporate Social Responsibility

& Business Ethics

2

On the following slide we consider the case of Apple and

its use of Foxconn to manufacture Apple’s ipad.

Corporate social responsibility relates to how company’s

treat their own staff, and their relation with suppliers, as

well as more general social and environmental impacts

of their activity.

3

Foxconn, a Taiwanese company that produces components for Apple

products, has come under fire for harsh working conditions at its China

facilities. Recently it was reported that Foxconn even forced employees to

sign a pledge promising that they wouldn't commit suicide..

A watchdog group travelled to two of Foxconn's more remote factories to

interview workers, and found that most were working long hours for little pay,

battling exposure to dust and harmful chemicals, and undergoing "military

style" training sessions…

“…campaigners are asking Apple to improve their purchasing practices as fair

prices….will allow suppliers to pay a living wage and prevent long overtime

hours and Apple has to check the wages and the overtime hours," SACOM

(Students & Scholars Against Corporate Misbehaviour) said.

http://www.pcmag.com/article2/0,2817,2385024,00.asp

Do you think that Apple has a responsibility

to the staff

that Foxconn employs?

4

What is Corporate Social

Responsibility (CSR)?

According to one of the most frequently cited definitions, CSR is ‘a

concept whereby companies integrate social and environmental

concerns in their business operations and in their interaction with

their stakeholders on a voluntary basis’.

But what is a stakeholder?...

(From: Commission of the European Communities, Promoting a European framework for

corporate social responsibility, green paper (Brussels: European Commission, 2001), cited in

Critical perspectives on CSR and development: what we know, what we don’t know, and what we

need to know Prieto-Carron et al (International Aff airs 82: 5 (2006) 977–987).

5

What’s a stakeholder?

“A person, group, or organization that has a

direct or indirect stake in an organization

because it can affect or be affected by the

organization's actions...

Key stakeholders...include creditors,

customers, directors, employees, government

(and its agencies), owners (shareholders),

suppliers, unions, and the community from

which the business draws its resources.”

Read more:

http://www.businessdictionary.com/definition

/stakeholder.html#ixzz1ksy17grw

6

An example (Unilever)

http://www.youtube.com/user/Unilever?v=fiX4NjDLe2U&feature=py

v&ad=16692761013&kw=sustainability

http://www.youtube.com/user/Unilever?v=fiX4NjDLe2U&feature=py

v&ad=16692761013&kw=sustainability#p/c/2/QEUwLK7Nx84

7

Alternative approaches to CSR

1. Milton Friedman: "there is one and only one social responsibility of

business--to use its resources and engage in activities designed to increase

its profits so long as it stays within the rules of the game, which is to say,

engages in open and free competition without deception or fraud.” see:

http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html

& http://reason.com/archives/2005/10/01/rethinking-the-social-responsi/singlepage

2. The Stakeholder Approach, Freeman, R. Edward (1984) In Strategic Management: A stakeholder approach.... Here we find an emphasis on

the wider impacts of corporate conduct..

3. The ‘Business Case’ for CSR: http://www.youtube.com/watch?v=3qap_lY0lOk

8

Consider: Strategy and Society: The Link Between

Competitive Advantage and Corporate Social

Responsibility by Michael E. Porter and Mark R. Kramer

http://www.salesforcefoundation.org/files/HBR-

CompetiveAdvAndCSR.pdf

The next slide brings out the main points of this much

discussed article..

9

Porter & Kramer’s paper, the essentials:

1. An organisation should look at the social impacts of its ‘value

chain’

2. It should also consider the ‘social dimensions of its competitive

context’.

3. It should then identify social and/or environmental concerns

that it can most directly address – and that have most direct

impact on it. It should make these CSR issues an integral part of

its strategy.

4. These are opportunities for ‘Shared Value’ – a win-win for

business and society – (and Porter sells this as a new form of

capitalism).

10

11

Using Porter and Kramer’s value chain

analysis..

Using the diagram we can see how we might identify the

ways in which the different parts of the value chain

might impact on society and the environment. The

international business can then address what it sees as

most connected to its strategy.

12

A thought: Who’s Responsible?

Who is responsible for the poor working

conditions at Foxconn?

Is it Foxconn, is it Apple, or is it the

people who buy ipads?

13

4-13

Some general considerations about business ethics. What Is Ethics?

Ethics refers to accepted principles of right or wrong that govern the conduct of a person

the members of a profession

the actions of an organization

Business ethics are the principles of right or wrong governing the conduct of business people

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

Note the potential relevance for the assignment. The strategic response you consider may relate to the idea of ethical strategy.

14

4-14

Which Ethical Issues Are Most Relevant To International Firms?

The most common ethical issues in business involve

employment practices

human rights

environmental regulations

corruption

the moral obligation of multinational companies

15

4-15

How is Ethics Relevant To Employment Practices?

Suppose work conditions in a host nation are clearly

inferior to those in the multinational’s home nation

Which standards should apply?

home country standards

host country standards

something in between

Is it ok to employ minors to work a 50 hour week if it doesn’t violate local

laws?

Do you have to supply safety gear to employees if it’s not required by

law?

16

4-16

How Are Ethics Relevant To Human Rights? Basic human rights are taken for

granted in developed countries

freedom of association

freedom of speech

freedom of assembly

freedom of movement

What are the responsibilities of firms in countries where basic human rights are not respected?

17

4-17

How Are Ethics Relevant To Environmental Regulations?

Some parts of the environment are a public good that no one owns, but anyone can despoil

The tragedy of the commons occurs when a resource held in common by all, but owned by no one, is overused by individuals, resulting in its degradation

What happens when environmental regulations in host nations are far inferior to those in the home nation?

Is it permissible for multinationals to pollute in developing countries simply because there are no regulations against it?

18

4-18

What Are The Straw Men Approaches To Business Ethics? There are four common straw men approaches

Friedman doctrine - the only social responsibility of business is to increase profits, so long as the company stays within the rules of law

Cultural relativism - ethics are culturally determined and firms should adopt the ethics of the cultures in which they operate

“when in Rome, do as the Romans do”

Righteous moralist - a multinational’s home country standards of ethics should be followed in foreign countries

Naïve immoralist - 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

All approaches offer inappropriate guidelines for ethical decision making

19

4-19

What Are Rights Theories?

Rights theories - human beings have fundamental rights and privileges which transcend national boundaries and cultures establish a minimum level of morally acceptable

behavior the 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

Moral theorists argue that fundamental human rights form the basis for the moral compass that managers should navigate by when making decisions which have an ethical component

20

4-20

What Are Justice Theories?

Justice theories focus on the attainment of a just distribution of economic goods and services a just distribution is one that is considered fair

and equitable

John Rawls argued that 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