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Managing Ethical Challenges in Multinational Companies

Explore ethical issues encountered by multinational managers, understand business ethics, social responsibility, and ethical philosophies, navigate national differences, and comply with international codes of conduct. Learn how to balance ethical consequences with business needs in the global marketplace.

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Managing Ethical Challenges in Multinational Companies

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  1. CHAPTER 4 MANAGING ETHICAL AND SOCIAL RESPONSIBILITY CHANGES IN MULTINATIONAL COMPANIES

  2. INTRODUCTION • Multinational managers face complex ethical issues • With an understanding of key ethical problems in multinational management, managers can make more informed ethical judgments

  3. BUSINESS ETHICS • Ethics - the rules and values that determine what goals and actions people follow when dealing with other human beings • Business ethics: all business decisions with ethical consequences

  4. INTERNATIONAL BUSINESS ETHICS • The unique ethical problems faced by managers conducting business operations across national boundaries

  5. SOCIAL RESPONSIBILITY • The responsibility businesses have to society beyond making profits • Often reflects the ethical values and decisions of the top management team • Ethics and social responsibility- not easily distinguished in practice

  6. Excepts from Exhibit 4.1 show examples of ethical/social responsibility issues faced by MNCs

  7. ETHICAL PHILOSOPHY

  8. TRADITIONAL VIEWS • Two basic systems of ethical reasoning • Deontological • Teleological

  9. DEONTOLOGICAL THEORIES • Actions have a good or bad morality regardless of the outcomes they produce

  10. TELEOLOCIAL • Morality from the consequences of an act • utilitarianism

  11. MORAL LANGUAGES • Basic ways that people use to make ethical decisions and explain ethical choices • a contemporary view

  12. SIX BASIC ETHICAL LANGUAGES • Virtue and vice • Self control • Maximize human welfare • Avoiding harm • Rights/duties • Social contract

  13. NATIONAL DIFFERENCES • National culture and social institutions affect ethical behavior/social responsibility

  14. EX 4.3 ETHICAL ISSUES IDENTIFIED BY SENIOR U.S. AND EUROPEAN MANAGERS

  15. EX 4.4 THE MANAGEMENT OF KEY ETHICAL ISSUES

  16. EX 4.5 BELIEFS REGARDING ETHICAL CODES

  17. FOREIGN CORRUPT PRACTICES ACT • Forbids U.S. companies to make or offer payments or gifts to foreign government officials to get or retain business • “Reason to know" provision • See Exhibit 4.7

  18. FCPA does not prohibit some forms of payments that may occur in international business • payments made under duress to avoid injury or violence are acceptable

  19. EFFECTS OF THE “ETHICS GAP” • FCPA and proliferation of ethical codes in US are creating and ethics gap • FCPA blocked some gains in export market share and FDI • Pressure on other countries to follow US rules

  20. TOWARD TRANSNATIONAL ETHICS

  21. ETHICAL CONVERGENCE • In spite of wide differences in cultures and social institutions, growing pressures for multinationals to follow same rules

  22. PRESSURES FOR ETHICAL CONVERGENCE • Growth of international trade • creates pressures for uniformity • Increased cross national imitation • Mixed cultural background employees

  23. PRESCRIPTIVE ETHICS FOR THE MULTINATIONAL • Donaldson suggests • guides based on the moral languages of avoiding harm, right/duties, and the social contract • specified in contracts and international laws

  24. INTERNATIONAL CODES OF CONDUCT • For moral language to work, there must be codes of conduct • Current codes exist based on codes from international governing bodies (UN, ILO) and international agreements (Exhibit 4.8)

  25. MULTINATIONALS DO NOT ALWAYS FOLLOW ETHICAL AGREEMENTS • Governments make agreements • Compliance voluntary • Not all governments subscribe • Each guide is an incomplete moral guide

  26. HOW SHOULD THE MANAGER DECIDE?

  27. ETHICAL RELATIVISM VS ETHICAL UNIVERSALISM • Ethical relativism - each society's view of ethics considered legitimate and ethical • Ethical universalism - basic moral principles transcend cultural/national boundaries

  28. PRACTICAL PROBLEMS OF FOLLOWING EITHER • Convenient relativism - companies use ethical relativism to behave any way they please • Cultural imperialism with ethical universalism

  29. BALANCING THE NEEDS OF THE COMPANY WITH ETHICAL CONSEQUENCES • Managers must weigh and balance the economic, legal, and ethical consequences of their decisions

  30. FORMS OF ANALYSES • Economic • Legal • Ethical

  31. CONCLUSIONS • Multinational managers face ethical challenges magnified by the international context • Need to understand home ethical codes and impact on ethics of foreign culture/social institutions

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