Ethics, Corporate Social Responsibility, and Sustainability Cheat Sheet

Textbook Notes – Chapter 5 – Ethics, Corporate Social Responsibility, and Sustainability Vocab Business ethics - The accepted principles of right or wrong governing the conduct of businesspeople. Code of ethics - A business’s formal statement of ethical priorities. Convention on Combating Bribery of Foreign Public Officials in International Business Transactions - An OECD convention that establishes legally binding standards to criminalize bribery of foreign public officials in international business transactions and provides for a host of related measures that make this effective. Corporate social responsibility (CSR) - Refers to the idea that businesspeople should consider the social consequences of economic actions when making business decisions and that there should be a presumption in favor of decisions that have both good economic and social consequences. cultural relativism - The belief that ethics are culturally determined and that firms should adopt the ethics of the cultures in which they operate. Ethical dilemma - A situation in which there is no ethically acceptable solution. ethical strategy - A course of action that does not violate a company’s business ethics. external stakeholders - Individuals or groups that have some claim on a firm such as customers, suppliers, and unions. Foreign Corrupt Practices Act (FCPA) - U.S. law regulating behavior regarding the conduct of international business in the taking of bribes and other unethical actions. internal stakeholders - People who work for or own the business such as employees, directors, and stockholders. just distribution - A distribution of goods and services that is considered fair and equitable. Kantian ethics - The belief that people should be treated as ends and never as means to the ends of others. naive immoralist - One who asserts that 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. organizational culture - Norms and values shared by employees. righteous moralist - One who claims that a multinational’s home-country standards of ethics are the appropriate ones for companies to follow in foreign countries. rights theories - Twentieth-century theories that recognize that human beings have fundamental rights and privileges that transcend national boundaries and cultures. Stakeholders - The individuals or groups that have an interest, stake, or claim in the actions and overall performance of a company. sustainable strategies - Strategies that not only help the multinational firm make good profits but that do so without harming the environment, while simultaneously ensuring that the corporation acts in a socially responsible manner with regard to its multiple stakeholders. Universal Declaration of Human rights - A United Nations document that lays down the basic principles of human rights that should be adhered to. utilitarian approach to ethics - These hold that the moral worth of actions or practices is determined by their consequences. Summary 1. The term ethics refers to accepted principles of right or wrong that govern the conduct of a per- son, the members of a profession, or the actions of an organization. Business ethics are the accepted principles of right or wrong governing the conduct of businesspeople. An ethical strategy is one that does not violate these accepted principles. 2. Ethical issues and dilemmas in international business are rooted in the variations among political systems, law, economic development, and culture from country to country. 3. The most common ethical issues in international business involve employment practices, human rights, environmental regulations, corruption, and social responsibility of multinational corporations. 4. Ethical dilemmas are situations in which none of the available alternatives seems ethically acceptable. 5. Unethical behavior is rooted in personal ethics, societal culture, psychological and geographic distances of a foreign subsidiary from the home office, a failure to incorporate ethical issues into strategic and operational decision making, a dysfunctional culture, and failure of leaders to act in an ethical manner. 6. Moral philosophers contend that approaches to business ethics such as the Friedman doctrine, cultural relativism, the righteous moralist, and the naive immoralist are unsatisfactory in important ways. 7. The Friedman doctrine states that the only social responsibility of business is to increase profits, as long as the company stays within the rules of law. Cultural relativism contends that one should adopt the ethics of the culture in which one is doing business. The righteous moralist monolithically applies home-country ethics to a foreign situation, while the naive immoralist believes that 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. 8. Utilitarian approaches to ethics hold that the moral worth of actions or practices is determined by their consequences, and the best decisions are those that produce the greatest good for the greatest number of people. 9. Kantian ethics state that people should be treated as ends and never purely as means to the ends of others. People are not instruments, like a machine. People have dignity and need to be respected as such. 10. Rights theories recognize that human beings have fundamental rights and privileges that transcend national boundaries and cultures. These rights establish a minimum level of morally acceptable behavior. 11. The concept of justice developed by John Rawls suggests that a decision is just and ethical if people would allow it when designing a social system under a veil of ignorance. 12. To make sure that ethical issues are considered in international business decisions, managers should (a) favor hiring and promoting people with a well-grounded sense of personal ethics, (b) build an organizational culture and exemplify leadership behaviors that place a high value on ethical behavior, (c) put decision-making processes in place that require people to consider the ethical dimension of business decisions, ( d) establish ethics officers in the organization with responsibility for ethical decision making, (e) be morally courageous and encourage others to do the same, (f) make corporate social responsibility a cornerstone of enterprise policy, and (g) pursue strategies that are sustainable. 13. Multinational corporations that are practicing business-focused sustainability integrate a focus on market orientation, addressing the needs of multiple stakeholders, and adhering to corporate social responsibility principles. Notes Introduction o Ethics, corporate social responsibility, and sustainability are intertwined issue Ethics and International Business o Many ethical issues in ibus rooted in differences in political systems, laws, economic development, and culture across countries o Most common ethical issues involve employment practices, human rights, environmental regulations, corruption, and moral obligations of multinational corporations  Employment practices o when work conditions in another country are inferior to the corporation’s home nation, which standards should be applied?  Human rights o basic human rights still not respected in large number of nations  Environmental pollution o Many developed nations have regulations governing emission of pollutants o Regulations often lacking in developing nations o Many companies argue that some degree of pollution is acceptable o No one owns atmosphere or oceans but polluting both no matter where originating harms all o Tragedy of commons – when a resource held in common by all but owned by no one is overused resulting in its degradation o Climate scientists argue human industrial and commercial activity is increasing amount of carbon dioxide in atmosphere -> greenhouse gas -> reflects more heat to earth’s surface -> warming globe -> increases avg. temp. of earth  Corruption o International businesses have gained economic advantages by making payments to corrupt officials o FCPA outlawed paying bribes to foreign government officials o Speed money or grease payments – ensure receiving standard treatment from foreign government but might not due to obstruction of foreign official o Bribery of foreign public officials is a criminal offense o Some say corruption may improve efficiency and help growth  Countries where preexisting political structures distort workings of market mechanism o Others say corruption reduces returns on business investment and leads to low economic growth  Countries where corruption is common, officials may siphon off profits reducing businesses incentive to invest o Many multinationals adopted zero-tolerance policy Ethical Dilemmas o Managers feeling pressure to be transparent about ethical decision making o Some argue ethics depend on one’s cultural perspective o Ethical dilemmas – situations in which none of the available alternatives seems ethically acceptable Roots of Unethical Behavior  Personal ethics  Decision-making processes  Organizational culture  Unrealistic performance goals  Leadership  Societal culture Philosophical Approaches to Ethics  Straw men approach o Friedman doctrine – the social responsibility of a business is to increase profits o Cultural relativism – a firm should adopt the ethics of the culture in which it is operating o Righteous moralist – a multinational’s home-country standards of ethics are the appropriate ones for companies to follow in foreign countries o Native 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 Utilitarian ethics – the moral worth of actions or practices is determined by their consequences o Maximization of good and the minimization of harm o One problem is measuring benefits, costs, and risks of a course of action o Another problem is that the philosophy omits the consideration of justice  Kantian ethics – people should be treated as ends and never purely as means to the ends of others  Rights theories – recognize that human beings have fundamental rights and privileges that transcend national boundaries and cultures o Fundamental human rights form basis for moral compass o Universal declaration of human rights – principles that should be adhered to irrespective of the culture in which one is doing business o With rights come obligations o Certain people or institutions are obligated to provide benefits or services that secure the rights of others o Moral agent – any person or institution that is capable of moral action  Justice theories o Focus on attainment of a just distribution of economic goods and services o Rawls argument  All economic goods and services would be distributed equally except when unequal distribution would work to everyone’s advantage  Veil of ignorance – everyone is imagined to be ignorant of all their characteristics  Each person is permitted maximum amount of basic liberty compatible with similar liberty for others  Inequality in basic social goods is to be allowed only if such inequalities benefit everyone Focus on Managerial Implications  Making ethical decisions internationally o Hiring and promotion – strive to identify and hire people with a strong sense of personal ethics o Organizational culture and leadership  Explicitly articulate values that emphasize ethical behavior (code of ethics)  Give meaning to code by emphasizing importance and acting on them  Incentivize and reward ethical behavior o Decision-making processes  Answer yes to each question  Does decision fall within accepted values  Willing to see decision communicated to stakeholders  Would people approve of decision  5 step process  Identify stakeholders affected  o o o o o Internal – work for business o External – direct claim to firm  Judge ethics of proposed decision  Establish moral intent  Engage in ethical behavior  Audit decisions Ethics officers – high ranking person who oversees business behavior in ethical manner Moral courage – saying no to unethical decision Corporate social responsibility – consider social consequences of economic actions when making business decisions  Noblesse oblige – honorable and benevolent behavior responsibility of high people Sustainability – decisions that help firm make profits but also don’t harm environment and ensure corporation acts in socially responsible manner in regard to stakeholders