Global Marketing Management Social Responsibility & Ethics in Global Marketing

1. Global Marketing ManagementSocial Responsibility & Ethics in Global Marketing MKTG 3215-001 Spring 2013 Mrs. Tamara L. Cohen Class # 11

2. KEY TERMS Ethicsis: • a branch of philosophy that studies morals & values • a study of differences between right & wrong • often shaped by religion

3. KEY TERMS more Social Responsibilityis • an ethical or ideological theory that • an entity - whether it is a government, corporation, organization or individual - • has a responsibility to society. negative responsibility = responsibility to refrain from acting positive responsibility = responsibility to act Social Responsibilityis an aspect of CHARACTER = what you do when no-one is watching, or when you think no-one is watching

4. ETHICS:Historical Figures Aristotle called character “ethos” = most potent means of persuasion Roman Emperor Justinian was 1st to incorporate ethics into legal system; established schools to educate lawyers concerning ethics, morality, law Napoleon established code of 36 statutes based on concept that all citizens, regardless of circumstances of birth or social stature, should be treated fairly & equally Confucius, Chinese philosopher, taught ethics via the Golden Rule before 500 BC

5. E T H I C S 1950 – 2000: • world trade expanded 20 X • exports + foreign direct investment play increasing role in global economy As markets globalize and an increasing proportion of business activity transcends national borders, institutions need to help manage, regulate, and police the global marketplace, and to promote the establishment of multinational treaties to govern the global business system.

6. E T H I C S Vary from culture to culture Ethical issues in cross-cultural settings IMF: “as globalization has progressed, living conditions have improved significantly in virtually all countries. However, the strongest gains have been made by the advanced countries and only some of developing countries.”¹ • Global institutions: • GATT and its successor, WTO - monitors world trading system • IMF • World Bank • United Nations

7. Universal Declaration of Human Rights (Article 23) Everyone has the right to: • work, free choice of employment, just and favorable conditions of work, protection against unemployment; • equal pay for equal work; • just and favorable remuneration ensuring … an existence worthy of human dignity; • form and to join trade unions to protect his interests.

8. Ethical & Socially Responsible Decisions • 5 decision-making areas in business: • employment practices & policies • consumer protection • environmental protection • political payments & involvement in political affairs of country • basic human rights & fundamental freedoms • Laws are markers of past behavior that society has deemed unethical or socially irresponsible • Ethical principles help marketer: • distinguish between right & wrong • determine what ought to be done • justify actions

9. Corporate Social Responsibility = corporate citizenship / responsible business / sustainable responsible business / corporate social performance • form of corporate self-regulation integrated into a business model • ideally functions as built-in, self-regulating mechanism whereby business monitors and ensures adherence to law, ethical standards, and international norms. Business would embrace responsibility for impact of their activities on environment, consumers, employees, communities, stakeholders and all other members of public sphere • “CSR is about how companies manage the business processes to produce an overall positive impact on society.” ¹

10. examining globalization's impact on children, women, the poor, democracy, labor rights, the environment, and culture. "Poor parents, no less than rich parents, generally want the best for their children.” In Defense of Globalizationby JagdishBhagwati • “… simply demanding that poor countries eliminate child labor can easily backfire. Bhagwati cites the case of the Bangladeshi textile industry in 1993.”

11. Social Responsibility & Environmental Management • “Environmental protection not an optional extra”¹ • Pollution on verge of being completely out of control - clean up decades of neglect; e.g. EU laws re amount & types of potentially toxic substances companies required to take back to recycle • China has 16 of world’s 20 most polluted cities 21% waters - toxic; 16% rivers - excrement • Critical issue: disposal of hazardous waste +/- 300 million tons collected annually • Sustainable development = joint approach toward economic growth; cooperative effort among businesses, environmentalists & others to seek growth with “wise resource management, equitable distribution of benefits, and reduction of negative efforts on people and the environment from the process of economic growth.” Win-win opportunity.

13. Major International Marketing Ethical Problems • Traditional Small Scale Bribery- small sums to foreign official in exchange for violating some official duty or to speed routine gov’t actions (grease payments, kickbacks, lubrication). • Large Scale Bribery- to allow a violation of law or to influence policy directly or indirectly (e.g. political contribution; subornation). • Gifts/Favors/Entertainment- includes lavish gifts, call girls, personal travel at company`s expense, gifts received after completing transaction, other extravagant expensive entertainment. • Pricing-unfair differential pricing, questionable invoicing (buyer requests written invoice showing price other than actual price paid, pricing to force out local competition, dumping products at prices well below that in home country, pricing practices illegal in home country but legal in host country (e.g. price fixing agreements). • Products/Technology- includes products and technology banned for use in home country but permitted in host country and/or appear unsuitable or inappropriate for use in host country.

14. Major Ethical Problems more • Tax Evasion Practices- such as transfer pricing (i.e. where prices paid between affiliates and/or parent company adjusted to affect profit allocation) including use of tax havens, where profit made is in low tax jurisdiction; adjusted interest payments on intra-firm loans; questionable mgt and service fees charged between affiliates and/or parent co. • Illegal/Immoral Activities in Host Country- e.g. polluting environment; maintaining unsafe working conditions; product/technology copying where intellectual property rights not enforced; short-weighting overseas shipments. • Questionable Commissions to Channel Members- unreasonably large commissions of fees paid to channel members, e.g. sales agents, middlemen, consultants, dealers and importers. • Cultural Differences- potential misunderstandings related to traditional requirements of exchange process regarded by one culture as bribes but acceptable business practices in another culture, e.g. gifts, monetary payments, favors, entertainment, political contributions. • Involvement in Political Affairs- combination of marketing activities and politics including: exertion of political influence by multinationals; engaging in marketing activities when either home or host countries are at war; illegal technology transfers.

15. DEFINITION:Corruption Value judgments differ widely among cultures. Types of Corruption • profits (former communist countries) • individualism (Japan)“The nail that sticks up gets hammered down.” • rampant consumerism (India) • missionaries (China) • intellectual property laws (Sub-Sahara Africa)prevented treatment of AIDS for millions of people • currency speculation (SE Asia)during 1997-98 financial crisis

16. CORRUPTION “Corruption is the abuse of entrusted power for private gain. It hurts everyone whose life, livelihood or happiness depends on the integrity of people in a position of authority.” Transparency International • Corruption is both a cause of poverty, and a barrier to overcoming it. It is one of the most serious obstacles to reducing poverty. • Human rights are denied where corruption is rife, because a fair trial comes with a hefty price tag where courts are corrupted. • Corruption jeopardizes … ethics in the private sector.

17. 2011 Corruption Perception Index CPI

18. 2012 CPI

19. Bribe Payer’s Index Bribe Payers Index Based on questions like: In business sectors with which you are most familiar, how likely are companies from the following countries to pay or offer bribes to win or retain business in this country?

20. Why IKEA Is Fed Up with Russia Bureaucracy + red tape have Swedish furniture giant holding back on further investment

21. Wayward organizations … Scandals at Enron, WorldCom, Tyco, Arthur Anderson, Madoff, and others are in part due to executives trying to increase shareholder value in opposition to accounting rules and laws.

22. Keys to success in Social Responsibility & Ethics • “To behave in an ethically and socially responsible way should be a hallmark of every marketer's behavior, domestic or international.” ¹ • Milton Friedman: responsibility of the executive is to make profits subject to law and ethical custom

23. Next class: GUEST, Jennifer Epstein, SPX Corporation Homework #6: Send me an e-mail, telling me one interesting thing you learned from the site.

24. REMINDERSGuest Speaker: Wednesday, Feb.20 • Attendance is mandatory (sign in) • Please be on time • No screens • No hats • Bring (and display) your name tent • General principles discussed during guest speakers’ presentations will be included on subsequent exams.

25. Next-next class: Emerging Markets Preparation: EITHER: WATCH Thomas Friedman speech OR: READ Summary of The World is Flat by Thomas Friedman Homework: Summarize key concepts of The World is Flat