International Business Chapter 5 Homework Education Ethics Corporate Social Responsibility And Sustain ability it Important Recognize That Employees

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Chapter 05 – Ethics, Corporate Social Responsibility, and Sustainability

Ethics, Corporate Social Responsibility,

and Sustainability

Learning Objectives

• LO5-1: Understand the ethical

issues faced by international

businesses.

• LO5-2: Recognize an ethical,

corporate social responsibility,

and/or sustainability dilemma.

• LO5-3: Identify the causes of

unethical behavior by managers as

they relate to business, corporate

social responsibility, or

sustainability.

• LO5-4: Describe the different

philosophical approaches to

business ethics that apply globally.

This chapter looks at ethics in international

business. Ethics becomes an issue across nations

because of differing political systems, economic

systems, legal systems, and cultural values. What

is acceptable behavior in one nation may be

considered unethical in another.

First, the chapter explores some of the more

common areas where ethical issues arise in

international business, such as employment

practices, human rights, environmental pollution,

corruption, and moral obligations. Then the

discussion moves to ethical dilemmas and the roots

of ethical and unethical decision-making. Next, the

text examines basic philosophical theories that

offer a foundation for ethical decision-making.

Finally, the chapter presents the managerial

implications of ethical decision-making, including

hiring and promotion, organizational culture,

sustainability, and corporate social responsibility.

Chapter 05 – Ethics, Corporate Social Responsibility, and Sustainability

OUTLINE OF CHAPTER 5: ETHICS, CORPORATE SOCIAL

RESPONSIBILITY, AND SUSTAINABILITY

Opening Case: Ericsson, Sweden, and Sustainability

Introduction

Ethics and International Business

Employment Practices

Management Focus: “Emissionsgate” at Volkswagen

Human Rights

Environmental Pollution

Corruption

Ethical Dilemmas

Societal Culture

Philosophical Approaches to Ethics

Straw Men

Utilitarian and Kantian Ethics

Rights Theories

Justice Theories

Chapter 05 – Ethics, Corporate Social Responsibility, and Sustainability

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.

OPENING CASE: Ericsson, Sweden, and Sustainability

Summary

The opening case explores the strategy of Sweden’s Ericsson, one of the most sustainable

organizations in the world. In fact, Ericsson is at the top of the list of the most sustainable

companies in the most sustainable country in the world, Sweden. Ericsson has achieved

this status in part by incorporating the United Nations’ Sustainable Development Goals

into its business framework so that it can measure the impact of its strategy on society.

Discussion of the case can begin with the following questions:

QUESTION 1: Discuss sustainability and why there needs to be a coordinated effort

between government, business, and society for it to succeed. How does the business

environment support the efforts of Ericsson?

ANSWER 1: Ericsson holds the enviable position of being one of the most sustainable

companies in the world, an accolade it can at least in part, attribute to the fact that it

operates in the most sustainable country in the world. Students should recognize that the

QUESTION 2: Why is Sweden so far ahead of other countries when it comes to

sustainability?

ANSWER 2: Many students will attribute Sweden’s commitment to sustainability to the

willingness of its population to make sustainability a way of life rather than an

afterthought. Students might note for example, that in Sweden 99 percent of household

waste is recycled, whereas that number is much lower in other developed countries and

QUESTION 3: Many people in Sweden have a microchip implanted into their hands

allowing them to access anything digital readers will allow. Reflect on this use of

technology. Would you be willing to use it? What are the ethical considerations of using

this technology?

ANSWER 3: The question will likely generate debate among students. Many will agree

that the ethical concerns related to the use of microchips imbedded in an individual’s

hand is terrifying. Students sharing this view might argue that the Big Brother nature of

LECTURE OUTLINE

This lecture outline follows the Power Point Presentation (PPT) provided along with this

instructor’s manual. The following provides a brief overview of each Power Point slide

along with teaching tips and additional perspectives.

Slide 5-3 What Is Ethics?

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

Chapter 05 – Ethics, Corporate Social Responsibility, and Sustainability

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

principles.

Slides 5-4 – 5-13 Ethics and International Business

The most common ethical issues in business involve:

• Employment practices

• Human rights

• Environmental regulations

• Corruption

• The moral obligations of multinational companies

Employment Practices

Often employment practices differ among nations. What is the MNC’s obligation?

Should home standards be followed, even in less developed countries? Should local

standards be embraced? What is the right basis for employment-related ethical decisions?

Firms can minimize the potential for ethical abuses by establishing minimum standards

for employees, performing regular audits to ensure those standards are being met, and

taking corrective actions as necessary.

Human Rights

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.

These rights include freedom of speech, assembly, association, movement, and freedom

from political repression.

Chapter 05 – Ethics, Corporate Social Responsibility, and Sustainability

Corruption

The U.S. Foreign Corrupt Practices Act (FCPA) outlawed the practice of paying bribes

to foreign government officials in order to gain business, although facilitating payments

are still permitted.

The Convention on Combating Bribery of Foreign Public Officials in International

Business Transactions obliges member states and other signatories to make the bribery

of foreign officials a criminal offense.

CONNECT

Video Case

Corruption at Crimeler

Summary

This activity explores corruption and ethical behavior in international business. Corruption occurs

in almost every society, despite laws against it.

Class Discussion

Discuss why managers choose to act in corrupt ways. How might a country’s political and legal

system contribute to unethical behavior? Does a country’s level of economic development have

any bearing on corruption?

Slide 5-14 Ethical Dilemmas

Ethical dilemmas are situations in which none of the available alternatives seems

ethically acceptable.

The ethical obligations of a multinational corporation toward employment conditions,

human rights, corruption, environmental pollution, and the use of power are not always

clear cut.

Chapter 05 – Ethics, Corporate Social Responsibility, and Sustainability

5-7

• Unrealistic performance expectations

• Leadership

• Societal culture

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.

Organizational Culture

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.

Unrealistic Performance Goals

When there is pressure from the parent company to meet performance goals that are

unrealistic and can only be attained by cutting corners or acting in an unethical manner,

unethical behavior may result.

Chapter 05 – Ethics, Corporate Social Responsibility, and Sustainability

CONNECT

Click and Drag

Ethics in the Workplace

Summary

This activity focuses on ethics in the workplace. Personal ethics influence business ethics and the

decisions managers make.

Activity

Students are asked to match various ethical situations with determinants of ethical behavior.

Slides 5-21 ‒ 5-27 Philosophical Approaches to Ethics

There are several philosophical approaches to ethics including the straw men approach—

the Friedman doctrine, cultural relativism, righteous moralist, and the naïve immoralist;

the Utilitarian approach; the Kantian approach; and rights and justice theories.

Straw Men

Straw men approaches to business ethics are approaches that are raised by business ethics

scholars primarily for the purpose of demonstrating that they offer inappropriate

guidelines for ethical decision making in a multinational enterprise. Four such approaches

are the Friedman doctrine, cultural relativism, the righteous moralist, and the naïve

immoralist.

Rights Theories

Rights theories recognize that human beings have fundamental rights and privileges that

transcend national boundaries and culture. Moral theorists argue that fundamental human

Chapter 05 – Ethics, Corporate Social Responsibility, and Sustainability

rights form the basis for the moral compass that managers should use to navigate when

making decisions that have an ethical component.

The notion that there are fundamental rights that transcend national borders and cultures

was the underlying motivation for the United Nations Universal Declaration of Human

Rights, which lays down principles that should be adhered to irrespective of the culture

in which one is doing business.

It is important to note that along with rights come obligations.

Slides 5-28 ‒ 5-36 Focus on Managerial Implications

Making Ethical Decisions Internationally

Seven things an international business can do to make sure that ethical issues are

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.

To foster ethical behavior, businesses need to build an organizational culture that places a

high value on ethical behavior. A code of ethics provides a formal statement of ethical

priorities.

Chapter 05 – Ethics, Corporate Social Responsibility, and Sustainability

It is important to recognize that employees in an international business may need

significant moral courage.

Managers can also use a five-step process to think through ethical problems. The first

step is to consider the impact of a decision on internal and external stakeholders.

To ensure ethical behavior in a business, a number of firms now have ethics officers.

Having moral courage, the courage to walk away from a decision that is profitable, but

unethical, is also important.

CONNECT

Click and Drag

Thinking Through Ethical Problems

Summary

This activity focuses on thinking through ethical problems and the responsibility of the

multinational firm to its stakeholders. In many situations, there are no conclusive right or wrong

answers and so managers must rely on basic ethical principles to guide their thinking.

Many companies today are pursuing strategies that are viewed as sustainable. By

sustainable strategies, we refer to strategies that not only help the multinational firm

make good profits, but that also do so without harming the environment while

simultaneously ensuring that the corporation acts in a socially responsible manner with

regard to its stakeholders.

Chapter 05 – Ethics, Corporate Social Responsibility, and Sustainability

CONNECT

Case Analysis

UNCTAD Sustainable Development Goals

Summary

This activity explores the need for companies, civil society, and governments to work together to

promote prosperity, end poverty, and protect the planet. The United Nations Conference on Trade

and Development (UNCTAD) is calling for this type of cooperation by 2030.

Activity

Students are asked to read a case on the efforts of the United Nations Conference on Trade and

Development (UNCTAD) to promote sustainable development and then respond to questions

about the case.

CRITICAL THINKING AND DISCUSSION QUESTIONS

QUESTION 1: A visiting American executive finds that a foreign subsidiary in a poor

nation has hired a 12-year-old girl to work on a factory floor, in violation of the

company’s child labor prohibition. He tells the local manager to replace the child and tell

her to go back to school. The local manager tells the American executive that the child is

an orphan with no other means of support, and she will probably become a street child if

she is denied work. What should the American executive do?

ANSWER 1: This question, which illustrates a potentially very real ethical dilemma

facing managers working in foreign subsidiaries, is designed to stimulate class

QUESTION 2: Drawing upon John Rawls’s concept of the veil of ignorance, develop an

ethical code that will (a) guide the decisions of a large oil multinational toward

Chapter 05 – Ethics, Corporate Social Responsibility, and Sustainability

environmental protection, and (b) influence the policies of a clothing company in the

potential decision of outsourcing its manufacturing operations.

ANSWER 2: John Rawls suggests that a decision is just and ethical if people would

allow for it when designing a social system under a veil of ignorance. Rawls’s veil of

QUESTION 3: Under what conditions is it ethically defensible to outsource production

to the developing world where labor costs are lower when such actions also involve

laying off long-term employees in the firm’s home country?

ANSWER 3: This question is likely to stimulate some lively discussion, particularly if

students have personally felt the impact of this practice. Many U.S. companies are

outsourcing not only blue-collar work, but also white-collar positions to the developing

QUESTION 4: Do you think facilitating payments (speed payments) should be ethical?

Does it matter in which country, or part of the world, such payments are made?

ANSWER 4: Students will probably be divided on this question, and a lively debate

QUESTION 5: A manager from a developing country is overseeing a multinational’s

operations in a country where drug trafficking and lawlessness are rife. One day, a

representative of a local “big man” approaches the manager and asks for a “donation” to

help the big man provide housing for the poor. The representative tells the manager that

in return for the donation, the big man will make sure that the manager has a productive

stay in his country. No threats are made, but the manager is well aware that the big man

heads a criminal organization that is engaged in drug trafficking. He also knows that the

big man does indeed help the poor in the rundown neighborhood of the city where he was

born. What should the manager do?

ANSWER 5: Students will probably approach this question in very different ways. Some

Chapter 05 – Ethics, Corporate Social Responsibility, and Sustainability

QUESTION 6: Milton Friedman stated in his famous article in the New York Times in

1970 that “the social responsibility of business is to increase profits.” Do you agree? If

not, do you prefer that multinational corporations adopt a focus on corporate social

responsibility or sustainability practices?

ANSWER 6: Student responses will vary. Friedman’s argument, also known as the

Friedman doctrine, is that a corporation’s sole responsibility is to increase profits for its

QUESTION 7: Can a company be good at corporate social responsibility but not be

sustainability oriented? Is it possible to focus on sustainability but not corporate social

responsibility? Based on reading the Focus on Managerial Implications section, discuss

how much CSR and sustainability are related and how much the concepts differ from

each other.

ANSWER 7: A firm pursuing a sustainable strategy focuses on making profits but doing

so in a way so that the environment is not harmed and at the same time ensuring that it

acts in a socially responsible way toward its stakeholders. The notion of corporate social

choose strategies that are sustainable.

CLOSING CASE: Sustainability Initiatives at Natura, The Body Shop,

and Aesop

Summary

The closing case explores strategic initiatives at Natura Cosmetics, The Body Shop, and

Aesop. The three companies come together under the umbrella of Brazil’s Natura & Co,

SA, but run largely as independent companies. A common theme between them is the

strong commitment to sustainability in everything they do. In 2014, Natura gained the

distinction of being the first publicly traded company to earn the status of Certified B

Chapter 05 – Ethics, Corporate Social Responsibility, and Sustainability

QUESTION 1: With its three core companies (Natura Cosmetics, The Body Shop, and

Aesop), Natura & Co, SA blends three different business models for interacting with the

customer. In the end, three models are focused on sustainable business practices. What

can other companies learn from Natura & Co, SA on how to be sustainable?

ANSWER 1: Natura, The Body Shop, and Aesop consider sustainability in everything

they do. Many students will probably suggest that this ingrained focus that permeates

QUESTION 2: The Body Shop has been a leader in banning animal testing of cosmetics

products worldwide since the 1980s and is tirelessly working to ban animal testing in the

cosmetics industry. Is this part of being sustainable or is animal testing a different focus?

ANSWER 2: This question will likely generate some debate among students. While most

students will likely agree applaud the efforts of The Body Shop and its commitment to

ban animal testing in the cosmetic industry, they may not agree as to whether these

efforts are part of a sustainability strategy. Some students will probably have a fairly

QUESTION 3: Aesop is not using traditional advertisements or discount sales to

promote its products. Instead, Aesop gets its promotional communication mostly by

word-of-mouth for the design of its products, stores, and events, which are a singular mix

of indulgent product experiences, thoughtful language, and modern minimalist design. If

you had to interact with Natura & Co, SA, which customer engagement model—

Natura’s, The Body Shop’s, or Aesop’s—would be the best for you and why?

QUESTION 4: How much would it mean to you that a company operated in a

sustainable way? Would you pay 5 percent, 10 percent, or 25 percent more for a product

if the quality was the same as non-sustainable alternatives? What if the quality of the

product was lower but the price the same?

ANSWER 4: This question gets to the heart of the debate on sustainability. Students

should recognize that while in theory many people support sustainability initiatives, when

Chapter 05 – Ethics, Corporate Social Responsibility, and Sustainability

MHE INTERNATIONAL BUSINESS VIDEO LIBRARY

ongoing stream of updated video suggestions correlated by key concept and major topic.

Every new clip posted is supported by teaching notes and discussion questions. Please

feel free to leave comments in the library that you feel might be helpful to your

colleagues.

CONNECT

Geography

Activity

Students are asked to respond to a series of questions related to the geographic location of several

countries.

Class Discussion

Understanding the geographic location of countries is essential to the understanding of

international business. Ask students to discuss the implications of the geographic locations of the

countries in this exercise on the subject matter.

INCORPORATING globalEDGE™ EXERCISES

Exercise 1

Promoting respect for universal human rights is a central dimension of many countries’

foreign policy. As history has shown, human rights abuses are an important concern

society organizations to prevent abuses of power. The annual Country Reports on Human

Chapter 05 – Ethics, Corporate Social Responsibility, and Sustainability

Exercise 2

The use of bribery in the business setting is an important ethical dilemma many

companies face both domestically and abroad. The Bribe Payers Index is a study

published every three years to assess the likelihood of firms from leading economies to

Answers to Exercises

Additional Info:

Each report is drafted by the U.S. Department of State and outlines in detail the human

rights practices of each country in the world.

Exercise 2 Answer

Additional Info:

Published every other year (odd years) by Transparency International, this index ranks

the likelihood of companies from 28 leading economies to win business abroad by paying

bribes. You can view the results by country, or also by sector (i.e., companies from which

sectors are more or less likely to bribe). Higher scores indicate a lower likelihood to

engage in bribery.