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Chapter 05 – Ethics, Corporate Social Responsibility, and Sustainability
5-1
Ethics, Corporate Social Responsibility,
and Sustainability
Learning objectives
• Understand the ethical issues faced
• Identify the causes of unethical
behavior by managers.
• Explain how managers can
incorporate ethical considerations
This chapter looks at ethics in international
business. Ethics becomes an issue across nations
because of differing political systems, economic
First, the chapter explores some of the more
common areas where ethical issues arise in
international business, such as employment
of ethical and unethical decision-making. Next, the
text examines basic philosophical theories that
offer a foundation for ethical decision-making.
The opening case explores Woolworth’s Corporate
Responsibility Strategy 2020 is composed of
strategic initiatives in three areas: People, Planet,
and Prosperity. The Australian conglomerate
believes that success in these areas provides the
toward a common vision.
5
Chapter 05 – Ethical Issues in International Business
5-2
OUTLINE OF CHAPTER 5: ETHICS, CORPORATE SOCIAL
RESPONSIBILITY, AND SUSTAINABILITY
Human Rights
Environmental Pollution
Corruption
Ethical Dilemmas
Roots of Unethical Behavior
Societal Culture
Philosophical Approaches to Ethics
Straw Men
Utilitarian and Kantian Ethics
Rights Theories
Ethics Officers
Moral Courage
Corporate Social Responsibility
Management Focus: Corporate Social Responsibility at Stora Enso
Sustainability
Chapter 05 – Ethical Issues in International Business
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CLASSROOM DISCUSSION POINT
Create a hypothetical business scenario, then ask students to consider the ethics involved.
For example, suppose a British manager pays a Saudi prince 1 percent of the contract he
helps negotiate in the Kingdom of Saudi Arabia.
Ask students whether the British manager acted ethically. Jot student responses on the
board according to whether students believe the action was ethical or unethical, and their
reasoning behind the argument.
Now, ask students about the following scenario. A U.S. law firm has box seats at all the
major professional games (baseball, hockey, basketball) and season tickets to the nearest
Big-10 conference university games. The partners take their prospective clients to these
games, wine and dine them, and play golf together at the firm’s expense at posh courses.
In ethical terms, what are the differences in these behaviors?
Do cultural differences influence responses?
OPENING CASE: Woolworths Group’s Corporate Responsibility Strategy
2020
Summary
The opening case explores corporate social responsibility at Woolworths Group. The
Australian conglomerate has set 2020 as the deadline to achieve goals across three areas
that comprise its Corporate Social Responsibility Strategy 2020. Woolworths believes
that it needs to be socially responsible across multiple areas within the framework of
People, Planet, and Prosperity. Because the focus in each of these areas is unique,
specialized strategic initiatives have been developed for each focus. The focus on People
is about encouraging diversity, Planet focuses on the environment, and Prosperity focuses
on trusted relationships. Discussion of the case can begin with the following questions:
QUESTION 1: Discuss social responsibility at Woolworths. What makes the People,
Planet, and Prosperity framework so appealing to the company?
ANSWER 1: Woolworths Group’s Corporate Social Responsibility Strategy 2020 is built
on a framework composed of three main focus areas: People, Planet, and Prosperity. In
QUESTION 2: Woolworths Group has interests across multiple industry sectors and
Chapter 05 – Ethical Issues in International Business
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across multiple countries. Rather than following norms of corporate behavior in each
market, Woolworths has chosen to set its own initiatives to follow in each market. What
can other firms learn from this approach?
ANSWER 2: Students will probably recognize that Woolworths’ approach of setting and
adhering to a single corporate-wide strategy to achieve corporate social responsibility
will probably mean that in some markets, it will exceed local regulations and norms,
QUESTION 3: Some 80 percent of Woolworths’ suppliers have partnered with the
organization for more than a decade. Discuss the importance of relationships like to
Woolworths’ competitive advantage. How can firms encourage this type of loyalty?
ANSWER 3: Three core businesses, more than 200,000 employees, and 13 business
subsidiaries organized across multiple countries comprise the complex organization
called Woolworths Group. Despite this complexity, Woolworths had developed close and
LECTURE OUTLINE
Chapter 05 – Ethical Issues in International Business
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ethical strategy is a strategy, or course of action, that does not violate these accepted
principles.
• Corruption
• The moral obligations of multinational companies
Another Perspective: The Carnegie Council on Ethics and International Affairs maintains
a substantive and thought-provoking website at {http://www.carnegiecouncil.org/}. This
site contains publications that comment on many of the ethical issues that surround
for employees, performing regular audits to ensure those standards are being met, and
taking corrective actions as necessary.
The idea of what constitutes human rights varies considerably across national borders.
How can the tensions that this reality fosters be reconciled?
Basic rights, often taken for granted in developed countries, are not universally available.
by no one, is overused by individuals, resulting in its degradation.
Another Perspective: Consumers International {http://www.consumersinternational.org/}
is dedicated to protecting the rights of consumers worldwide. In doing so, it promotes
ethical behavior on the part of companies. Go to the site and explore some of the
organization’s current efforts.
Chapter 05 – Ethical Issues in International Business
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The Convention on Combating Bribery of Foreign Public Officials in International
Business Transactions obliges member states and other signatories to make the bribery
human rights, corruption, environmental pollution, and the use of power are not always
clear cut.
Slides 5-15 ‒ 5-20 The Roots of Unethical Behavior
The causes of unethical behavior are complex and reflect:
• Personal ethics
Business ethics reflect personal ethics (the generally accepted principles of right and
wrong governing the conduct of individuals). The personal ethical code that guides our
behavior comes from a number of sources, including our parents, our schools, our
religion, and the media.
Home country managers working abroad in multinational firms may experience more
The term organization culture refers to the values and norms that are shared among
employees of an organization.
In a company with an organizational culture that de-emphasizes business ethics, all
decisions are reduced to the purely economic.
When there is pressure from the parent company to meet performance goals that are
Chapter 05 – Ethical Issues in International Business
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Slides 5-21 ‒ 5-27 Philosophical Approaches to Ethics
There are several philosophical approaches to ethics including the straw men approach—
are the Friedman doctrine, cultural relativism, the righteous moralist, and the naïve
immoralist.
In contrast to the straw men, most moral philosophers see value in utilitarian and
Kantian approaches to business ethics. The utilitarian approach to business ethics dates
back to philosophers such as David Hume, Jeremy Bentham, and John Stuart Mill.
rights form the basis for the moral compass that managers should use to navigate when
making decisions that have an ethical component.
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. There is no one
theory of justice, and several theories of justice conflict with each other in important
considered in a business decision are:
(1) Hire and promote people with a well-grounded sense of personal ethics.
(2) Build an organizational culture that places a high value on ethical behavior.
(3) Make sure that leaders within the business not only articulate the rhetoric of
ethical behavior, but also act in manner that is consistent with that rhetoric.
Not only should businesses strive to identify and hire people with a strong sense of
personal ethics, but it is also in the interests of prospective employees to find out as much
as they can about the ethical climate in an organization.
