Definition of Interdependence:

Relatingtotwoormorepeopleorthingsdependentoneachoth
Relatingtotwoormorepeopleorthingsdependentoneachot

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2-1

Chapter Learning Goals

1)

2)

3)

4)

Appreciate the complexities (difficulties) involved in the

corporations obligations toward its various
constituencies around the world.
Understand the changing perceptions (options) and
demands of corporations doing business in other
countries, in particular the responsibilities toward
human rights.
Acknowledge (Knowing) the strategic role that CSR
(Corporate social responsibility) and Codes of
Ethics must play in global management.
Provide guidance to managers to maintain ethical
behavior amid (Among) the varying standards and
practices around the world.
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2-2

Chapter Learning Goals

5.

Recognize that companies must provide benefits to the Host

country in which they operate in order to maintain cooperation.

6.

Discuss the
(Business

need for cooperation to consider Sustainability

sustainability, also known as corporate

sustainability, is the management and coordination of
environmental, social and financial demands and
concerns to ensure responsible, ethical and Ongoing
Success.).in their long-term plans in order to manage
environmental impacts on Host locations.
7.

Identify the challenges involved in human rights issues when

operating in China.
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2-3

Opening Profile: Primarks Moral

Maze (Case, Industry Garments.
happens India)
1)

2)

3)

4)

Primark announced in June 2008 that it had fired three

suppliers in India after it was found that they had
subtracted work to home workers who used child labor.
Although many suppliers are determined to keep their
breaches (corrupted) from being discovered, the companies
need to get suppliers to recognize that adhering (stick
together) to sound employment practices is in their own
interests.
Whereas in the past, a companys responsibility was almost
exclusively profit, now corporate social responsibility (CSR)
has come to the forefront.
Transparency (Clearness) has become the watchword
and the lesson is that CSR is now a vital part of corporate
culture and strategy.

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2-4

The Social Responsibility of

MNCs

CSR Dilemma

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2-5

MNC Stakeholders
MNC Stakeholders
Home Country
Owners
Customers
Employees
Unions
Suppliers
Distributors
Strategic Allies
Community
Economy
Government

Host

MNC
Society in General

Economy
Employees
Community
Host
Government
Consumers
Strategic Allies
Suppliers
Distributors

Global
interdependence/standard
of
living
Global
environment
and
ecology
Sustainable
resources
Populations
standard of living
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2-6

Global Consensus
(Agreement) or
Regional Variation?
1)

Global Corporate Culture:

2)

An integration of the business environments in

which firms currently operate.

3)

The United States and Europe adopt strikingly

different positions that can be traced largely to
history and culture.

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2-7

Dealing with Confusion About

Cross-Cultural Dilemmas
1)

Engaging stakeholders (and sometimes NGOs) in

a dialog.

2)

Establishing principles and procedures for

addressing difficult issues such as labor
standards for suppliers, environmental reporting,
and human rights.

3)

Adjusting reward systems to reflect the

companys commitment to CSR
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2-8

General Guidelines for Code of

Morality and Ethics in Individual
Countries

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2-9

International Codes of Conduct

1)

The Sweatshop Code of Conduct.

2)

The Electronic Industry Code of Conduct

(EICC)

3)

(SA 8000) Social Accountability 8000

Definition( I.C of C): is a set of principles for private security providers, created
through a multi-stakeholder initiative convened by the Swiss government. This
process involved and continuously involves representatives from private
security companies, states, and civil society organizations))
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Comparative Management in
Focus:
Doing Business in China

The Attraction of doing business in

China:
1)
2)
3)
4)

Cheap labor cost

A larger market
An expanding market
A growing economy

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Comparative Management in
Focus:
Doing Business in China
Human Rights and Freedom
of Information Challenges

Human Rights and Freedom

of Information Issues in China

Potentially

Nike

(out
of
violation of
rights

Repression

speech

Difficulty

rampant
control)
workers
of

free

Government

crackdown
on propaganda
Google
Microsoft

monitoring
and correcting human
rights violations

Yahoo

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2-12

Ethics in Global Management

International
Business Ethics
The business
conduct or
morals of MNCs
in their
relationship
with
individuals and
entities

Ethics vary based

on the cultural
value system in
each country or
society

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213

A Moral Philosophy of CrossCultural Societal Ethics

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214

Top 20Least (Less) Corrupt

Bottom 20Most Corrupt

Global Corruption Barometer:

2009 Corruption Perception Index (CPI)Selected Ranks

Source: Selected data from the TI Corruption Perception index, 2009
Created by Dr.NaasiR

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215

To Bribe or NOT to Bribe?

Questionable
Payments

Paying

mail carriers in
Mexico to prevent them
from losing mail
Paying $100 to get a
computer picked up from a
rainy dock
Gift-giving to bond social
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Managing the Corruption

Foreign

Corrupt Practices Act

(FCPA)
Organization

for Economic
Cooperation and Development
convention on bribery

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217

Three Tests of Ethical

Corporate Actions

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218

The Process for Companies to Combat ( To

fight) Corruption
and to Minimize the Risk of Prosecution
(Suiting)
1)

2)

3)

4)

Having a global compliance system which shows that

employees have understood, and signed off on, the
legal obligations regarding bribery and corruption in
the countries where they do business
Making employees aware of the penalties and
ramifications (outcomes) for lone (Single) actions,
such as criminal sanctions
Having a system in place to investigate any foreign
agents and overseas partners who will be
negotiating contracts
Keeping an effective whistle-blowing system (is a
person who reveal the true such asmisconduct,
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2alleged dishonest
orEducation,
illegal
activity
occurring
in
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19

Policies to Help MNCs to Confront (deal

with) Concerns About Ethical Behavior
and Social Responsibility
1)
2)
3)
4)

Develop worldwide code of ethics.

Build ethical policies into strategy
development.
Plan regular assessment of the companys
ethical posture.
If ethical problems cannot be resolved,
withdraw from that market.

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220

Managing SubsidiaryHost-Country
Interdependence
Common Criticism of MNC
Subsidiary Activities
MNCs locally raise their needed capital, contributing
to a rise in interest rates in Host countries.
2. The majority (sometimes even 100 percent) of the
stock of most subsidiaries is owned by the parent
company. Consequently, Host-country people do
not have much control over the operations of
corporations within their borders.
3. MNCs usually reserve the key managerial and
technical positions for expatriates (immigrants ) As
a result, they do not contribute to the development
of Host-country personnel.
1.

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Common Criticism of MNC Subsidiary

Activities Cont.
4.
5.

6.
7.

8.

9.

MNCs do not adapt their technology to the conditions that exist

in Host countries.
MNCs concentrate their research and development activities at
home, restricting the transfer of modern technology and knowhow to Host countries.
MNCs give rise to the demand for luxury goods in Host
countries at the expense of essential consumer goods.
MNCs start their foreign operations by purchasing existing firms
rather than by developing new productive facilities in Host
countries.
MNCs dominate major industrial sectors, thus contributing to
inflation, by stimulating demand for scarce resources and
earning excessively high profits and fees.
MNCs are not accountable (responsible) to their host nations
but only respond to Home-country governments; they are not
concerned with Host-country plans for development.
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Managing SubsidiaryHostCountry Interdependence

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223

MNCs Benefits & Costs to Host

Countries
Benefits

Costs

1) Access to outside
capital

1) Competition for
capital

2) Foreign-exchange
earnings

2) Increased interest
rates

3) Access to
technology

3) Inappropriate
technology

4) Infrastructure
development

4) Development
investment exceeds
benefits

5) Creation of new jobs 5) Limited skills

development
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Managing the Interdependence

The Risks of Interdependence

Nationalism
Protectionism
Governmentalism

Issues in Managing
Environmental Interdependence

Dumping

of 8000
drums of toxic waste in
Koko, Nigeria

The

export of U.S.
pesticides
(Insect-Killer)
Industrial

ecology

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225

Recommendations for MNCs Operating

in and Doing Business with Developing
Countries
1.

2.
3.
4.
5.

6.
7.

Do no intentional harm. This includes respect

for the integrity of the ecosystem and
consumer safety.
Produce more good than harm for the Host
country.
Contribute by their activity to the host
countrys development.
Respect the human rights of their
employees.
To the extent that local culture does not
violate ethical norms, respect the local
culture and work with and not against it.
Pay their
fare share of taxes.
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Cooperate with the
government in
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