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We need to address transparency,

accountability and institutional


capacity. And let's not mince words:
we need to deal with the cancer of
corruption.
James Wolfensohn, President of the
World Bank,
Annual Meeting 1996
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 The cost of doing ‘bad business’ accrues/grows not
only to the firm responsible, but affects the society and
stakeholders with which the firm is involved:
 Government-imposed fines
 Negative impacts on international
contracts
 Reduced tax revenues
 Diversion of funds intended for development
Bribery and
 Discouraged foreign investment corruption hurt the
 The costs of employee fraud poor
disproportionately
by diverting funds
intended for
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 If ethical mores differ from society to society what
rules do you follow?
 How do we do business with integrity in countries
where bribery and corruption are widespread?
 How can we develop ethical norms that can guide
global marketers and business people to act with
integrity and accountability?

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 Ethics are the behavioral standards determined by
society that stipulate/specify how its members should
act in a moral manner
 Disregarding an ethical code/system may result in
sanctions
 Laws are codes of conduct stipulating how members of
a society are required to act and are enforced by
relevant
 Breaking the law carries penalties, governance agencies

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 What is perceived as unethical may also be illegal
 What is perceived as unethical may still be legal
 What is in fact illegal may still be perceived as ethical
When the legal system does not cover all situations
regarding corporate ‘rights’ and ‘wrongs,’ an ethical
code must be referenced.

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Figure 16-1

In global business, the questions arise:


Whose law? Whose ethics?
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 Ethical relativists ‘plan globally but act locally’ when it
comes to ethics.
 “When in Rome, do as the Romans do.”
 Ethical absolutists import their ethical norms to the
countries in which they operate.
 They believe their norms superior and should be
adopted by host nations
 Ethical universalists believe there is common ground
among ethical standards globally.

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 The multinational corporation has economic, ethical,
legal and social responsibility to its stakeholders.
 MNCs must integrate ethical and social responsibility
values and goals into its management process.

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 CSR assumes that businesses should contribute to the
welfare of all stakeholders beyond providing
employment and making a profit
 And, profits should be shared by the community in which
the firm operates
 CSR is practiced globally, but less so in developed
nations
 Some adoption of CSR activities in
less developed countries is attributed to NGOs such as
the Global Reporting Initiative

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 Brazil
 Two-thirds of the 445,000 firms surveyed had invested
in social programs, while half intended to increase their
involvement, fueled by
 A desire to gain legitimacy /legality and customer loyalty
 The rise of global codes

 Russia
 Businesses realize that CSR is crucial to their
sustainability, but most efforts are by large companies.
Adoption of CSR is constrained by:
 Lack of transparency
 Misunderstanding of the nature of CSR
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 China
 CSR is a new concept in China, not actively promoted by
the government
 Large government bureaucracy hinders efforts
 Intellectual property issues abound
 Recent improvements to laws and supervision
 Guidelines that address social and environmental issues are
not common
 India
 CSR is linked to Indian culture and religion
 Corporate philanthropy is part of normal business operations
(See Table 16-3 following)

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 The answer would seem to be ‘no.’
 Several studies affirm that:
 In the UK, firms with an ethics code financially
outperformed those without
 There is a correlation between a reputation for integrity
and the growth of long term shareholder value as noted
by a U.S. study
 Some research indicates that CSR’s impact on
performance is long term rather than short term

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 Two instigators of corruption and bribery:
 monetary gain
 weak governance
 NGOs monitor this activity
 Transparency International publishes surveys that rank
corruption and bribery
 The OECD (Organization for Economic Co-operation and Development)
Bribery Convention sets legally binding standards that
criminalize bribery of public officials in global business
transactions.
 The UN Convention Against Corruption prohibits
corruption in both the public and private sectors
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 U.S. Foreign Corrupt Practices Act
 Two provisions
 Bribery of foreign officials is illegal
 Companies must maintain accurate and fair financial and
transaction records
 Sarbanes-Oxley Act of 2002 mandates greater control and
management accountability
 The UK Bribery Bill
 Bribery, and failure to prevent it, is illegal

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 An ethics code is a set of guidelines that stipulates a set
of acceptable behaviors.
 A written code is not sufficient unless it includes a
mechanism for enforcement.
 An ombudsman(official Auditor) must have the
responsibility for coordinating ethics policy and
advocating for employees who are involved in an ethics
issue
 Attempts have also been made to motivate ethical
behavior in a company’s supply chain(system to supply
services/products to end user)

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 Firms can promote basic, universal human principles
 Physical security
 Education
 Decent working conditions and wages
by practicing them in the workplace
 This task can be supported by adhering to universal
codes of behavior
 Ethical and social responsibility must both be
encompassed

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1. The responsibilities of businesses: Beyond
shareholders toward stakeholders
2. The economic and social impact of business:
Toward innovation, justice and world community
3. Business behavior: Beyond the letter of the law
toward a spirit of trust’
4. Respect for rules
5. Support for multilateral trade
6. Respect for the environment
7. ‘Avoidance of illicit operations

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 The dilemma/problem: how to act in a situation
where what you consider being unethical at home is
acceptable elsewhere
 “Moral free space” in which there are no right or wrong
answers and core moral values must be recognized
 Conflict of relative development
 What would you do if your country were in a similar stage of
development (or lack of development)?
 Conflict of tradition
 Gift-giving in Asia: bribe, or common courtesy?

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