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Chapter 03 – Ethics, Social Responsibility, and Sustainability
the petroleum sector. For example, exports to Saudi Arabia are on the upswing, and
many Saudi Arabian businesses are eager to seek out new U.S. firms to operate in
an attractive market. It seems that the market potential in Saudi Arabia is in areas
2. Is it legal for Auger's firm to make a payment of $100,000 to help ensure this
contract?
Answer: It is not legal under U.S. law for the firm to make such a payment.
American law strictly forbids such action even though it is being carried out in a
3. Do you think other firms are making these payments, or is Auger's firm being
singled out? What conclusion can you draw from your answer?
Answer: This is a difficult question to answer. From what Auger's Saudi friend said
toward the end of the case, it is likely that other firms are not making payments
similar to the one being asked of Auger. Rather, his firm is being singled out.
4. What would you recommend that Skyblue do?
Answer: The company cannot and should not pay the money. There are two
reasons for this. First, it is illegal. Second, even if Auger was willing to break the
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Chapter 03 – Ethics, Social Responsibility, and Sustainability
International Management in Action: The Ethics of an Offshoring
Decision
Suggestion for Using the Exercise
1. Many financial service firms are active in offshoring, to the surprise of many
people who think of their bank as a local business. Credit card management is one
example of an activity easily offshored. Financial firms can keep costs down by
moving such activities to areas with lower rent, property, labor, and other resource
costs. Just as important, such moves open up new markets.
2. Ethical considerations:
Kantian approach: Offshoring decisions should be measured against the
company’s core tenets, such as the corporate code of conduct.
Virtue theory: The decisions should consider the social and economic impact on
communities and the people involved.
impact on the environment as well as on humans, for example.
Understanding these ethical perspectives could help managers make their own
ethical decisions in the international business environment.
3. Apply each ethical framework to one or more of the examples presented in the case.
An Internet search can add more facts to the situation.
A Closer Look: Anatomy of a Disaster: Key Events in 2010 BP Oil
Spill, the Largest in History
Summary
1. The reading provides a timeline of the BP oil spill in the Gulf of Mexico and its
impact. Discussion of the timeline and the actions of BP and the U.S. government
are instructive regarding corporate responsibility and government oversight.
2. Source: David Cutler, London Editorial Reference Unit, Reuters,
http://www.reuters.com/article/idUSTRE65F05V20100616.
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A Closer Look: Fair Trade in the U.S.: Transfair USA
Summary
1. Fair Trade helps farming families across Latin America, Africa, and Asia to
improve the quality of life in their communities. Fair Trade principles:
Fair price
Fair labor conditions
Direct trade
Democratic and transparent organizations
Community development
Environmental sustainability
2. TransFair USA is a nonprofit, independent, third-party certifier of Fair Trade
products. Fair Trade Certified products meet strict Fair Trade standards. Fair Trade
Certification is currently available in the U.S. for coffee, tea and herbs, cocoa and
chocolate, fresh fruit, sugar, rice, and vanilla.
Brief Integrative Case 1.1: Advertising or Free Speech? The Case of
Nike and Human Rights
1. What ethical issues faced by MNCs in their treatment of foreign workers could
bring allegations of misconduct in their operations?
Answer: These issues include, but are not limited to the following:
wage rates and benefits
working conditions such as job security, workplace safety, temperature,
environmental standards
2. Would the use of third party independent contractors alleviate or insulate MNCs
from being attacked? Would that practice offer MNCs a good defensive shield
against charges of abuse of “their employees”?
Answer: As is the case in the United States, the “independent contractor” status can
be supported only through clear, legally defensible criteria, such as the amount of
control the “contractor” has over the tasks to be achieved, the method the contractor
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Chapter 03 – Ethics, Social Responsibility, and Sustainability
contractors”, which exposes MNCs to more problems.
Moreover, even if MNCs find a legal loophole to continue to classify their foreign
workers as independent contractors, this will not shield their public image and
3. Do you think statements by companies that describe good social and moral conduct
in the treatment of their workers are part of the image those companies create and
therefore are part of their advertising message? Do consumers judge companies and
base their buying decision on their perceptions of corporate behavior and values? Is
the historic “made in” question (e.g. “Made in the USA”) now being replaced by a
“made by” inquiry (e.g., “Made by Company X” or “Made for Company X by
Company Y”)?
Answer: Since awareness and expectations of corporate social responsibility are on
the rise, good social and moral conduct will be an increasingly important criterion
in consumers’ purchasing decisions. Therefore, it is legitimate to consider these
statements as advertising messages. Moreover, companies have found that their
ingredients with certain countries are also likely to persist (e.g., Italian leather,
Brazilian coffee, Egyptian cotton, etc.). However, there is likely to be an integration
of where a product is made with which company is making it and how it is being
made, as viewed in Nike and many other cases.
4. Given the principles noted in the case, how can companies comment on their
positive actions to promote human rights so that consumers will think well of them?
Would you propose that a company (a) do nothing, (b) construct a corporate code of
ethics, or (c) align itself with some of the universal covenants or compacts prepared
by international agencies?
Answer: There are two sets of interrelated considerations involved in this issue:
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Chapter 03 – Ethics, Social Responsibility, and Sustainability
ethical considerations and communication issues. The bottom line response with
regard to communication issues is that companies should emphasize truthfulness in
actions, future forecasts, changes in the external and internal corporate
environment, actions, initiatives, and interests of diverse global stakeholders, and
others. In other words, good publicity should be a byproduct, rather than the goal,
of ethical conduct and corporate social responsibility.
5. What does Nike’s continued financial success, in spite of the lawsuit, suggest about
consumers’ reactions to negative publicity? Have American media and NGOs
exaggerated the impact of a firm’s labor practices and corporate social
responsibility on its sales? How should managers of an MNC respond to such
negative publicity?
Answer: Nike’s continued financial success despite its scandals involving
sweatshops indicates that either its customers have very short memories or that they
simply do not care as much about Nike’s ethics as they do about the company’s
products. Most students will probably agree that the actions of media and NGOs to
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Chapter 03 – Ethics, Social Responsibility, and Sustainability
Brief Integrative Case 1.2: Dansko Puts Its Right Foot Forward
1. How did Dansko's founder Peter Kjellerup's Danish heritage affect the development
of Dansko's shoe line and its commitment to ethics and social responsibility?
Answer: According to Mandy Cabot, the company’s cofounder, “As a Dane, Peter
has always been sensitive to the impact we make on the planet. Denmark is a tiny
country with very limited resources, and kids are taught from an early age how to
Responsible Environmentalism (a policy of “doing no harm” and leaving the planet
in better shape than they found it).
2. Why might employee ownership be a positive thing for a company's growth and
development? What might be some downsides?
Answer: Employees of a company such as Dansko are likely to hold the values of
the founders and the company (see 1. above). Thus, when consulted, they will most
3. Is Dansko's production in China a concern from an ethics and social responsibility
perspective? Should its decision to return some production to the U.S. be viewed
positively by its customers and stakeholders
Answer: Dansko claims that its move to China and continued production in Italy
was not due to cost concerns, but rather the production capabilities and skilled
workers that ensure that its shoes are long lasting. Low cost production and price is
not as important as quality and reliability for the company. However, in 2012,
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