Because learning changes everything.

Part One: Environmental

Foundation

Chapter 3: Ethics, Social

Responsibility, and
Sustainability
International Management:
Culture, Strategy, and Behavior
Twelfth Edition
Jonathan P. Doh, Fred Luthans,
Ajai S. Gaur

© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
 Ethics and Social Responsibility

Ethical scandals and questionable business practices have

received considerable media attention.

Ethics is the study of morality and standards of conduct.

Corporate social responsibility (CSR) is closely related to

ethics but it involves taking action.

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 Ethics Theories and Philosophy

• There are a range of ethical theories and approaches around

the world, many emanating from religious and cultural traditions.
• Kantian—individuals (and organizations) have responsibilities
based on moral principles that go beyond self-interest.
• Aristotelian virtue ethics focus on core, individual behaviors and
actions and how they express and form individual character.
• Utilitarianism favors the greatest good for the greatest number
of people under a given set of constraints.
• Eastern philosophy tends to view the individual as part of, rather
than separate from, nature.

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 Human Rights

Human rights issues present challenges for MNCs as there is

currently no universally adopted standard of what constitutes
acceptable behavior.

China’s human rights record continues to be a challenge for

MNCs.

Women’s rights and gender equity can be considered a

subset of human rights.

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 Labor, Employment, and Business Practices

• Political, economic, and cultural differences make it difficult to

agree on universal employment practices.
• Working conditions, expected work hours, and labor regulations
also create challenges in deciding appropriate employment
practices.
• Child labor initially invokes negative associations and is
considered an unethical employment practice.
• The reality is that of the 152 million children ages 5–17 working
globally in 2018—most worked to help support their families.
• In early 2010, low wages paid by Chinese subcontractors made
headlines after suicides by workers at factories run by Foxconn.

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 Environmental Protection and Development

Many poor, developing countries are more concerned with improving the
quality of life for their citizens than about endangered species or air or
water quality—the EKC (below) hypothesizes an inverted U-shape.
Recent progress includes the Paris Agreement with 194 signatories as of
2019. However, many companies continue to violate laws and/or
jeopardize safety and environmental concerns in their operations.

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 Globalization and Ethical Obligations of MNCs

How much responsibility do MNCs have in changing these

practices?
• One remedy could be to instill a business code of ethics
that extends to all countries or to create contracts for
situations that may arise.
• Another response to globalization has been to transfer a
large percentage of highly specialized jobs of all types to
foreign locations.
• Individuals moved offshore remain part of a corporate
citizenship.
• The opposite occurs when the firm moves to another
country and seeks to employ local citizens.

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 Reconciling Ethical Differences across Cultures

MNCs adhere to a code of ethical conduct while doing business around

the world, yet make adjustments to respond to local norms and values.
• One approach suggests there exist implied social contracts that
generally govern behavior around the world, some are universal.
• These “hyper” norms include principles like respect for human life or
abstention from cheating, lying, and violence.

This approach, called Integrative Social Contracts Theory (ISCT)

• Provides a framework for gaps between the moral and ethical values
of an MNC’s home country and the country where it does business.
• It does not provide precise guidance under specific conditions.

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 Corporate Social Responsibility and Sustainability

Corporate social responsibility (CSR) is the actions of a firm to benefit

society beyond legal requirements and the direct interests of the firm.
Pressure for greater CSR emanates from a range of stakeholders,
including nongovernmental organizations (NGOs).
• The table below depicts the public’s trust in each of the four
institutions.

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 Civil Society, NGOs, MNCs, and Ethical Balance

The emergence of organized civil society and NGOs has

dramatically altered the business environment globally and
the role of MNCs within it.

• Some now regard NGOs as a counterweight to business

and global capitalism.
• NGO criticism has been sharp in relation to the activities of
MNCs.
• Many NGOs recognize that MNCs can transfer “best
practices” from their home to host countries’ markets.
• In some instances, MNCs and NGOs collaborate.

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 Response to Social and Organizational Obligations

One response is the agreements and codes of conduct in

which MNCs commit to maintain standards in their domestic
and global operations.
• The U.N. Global Compact.
• The Global Reporting Initiative.
• The social accountability “SA8000” standards.
• The ISO 14000 environmental quality standards
• Fair trade is an organized social movement and market-
based approach that aims to help producers in developing
countries obtain better trading conditions and promote
sustainability.

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 Sustainability

Companies
The term Increased
realize loss of
sustainability is pressures from
resources will
no longer tied to NGOs also play
eventually halt
fiscal results. a part.
production.

Corporations are
Walmart and GE
now looking to
each have their
be leaders in the
own “green”
“green”
initiatives.
movement.

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 Corporate Governance

Corporate governance is the system by which business

corporations are directed and controlled.
• It provides the structure through which objectives are set
and the means of attaining those objectives and
monitoring performance.
• Governance rules and regulations differ among countries
and regions.
• The U.K. and the U.S. systems are termed “outsider” systems
because of dispersed ownership of corporate equity among a large
number of outside investors—each with limited direct control.
• In an insider system—many European countries—ownership tends
to be much more concentrated, with shares often being owned by
holding companies, families, or banks.

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 Corruption

Government corruption is a pervasive element in the

international business environment.

• The Foreign Corrupt Practices Act (FCPA) makes it illegal

for U.S. companies/managers to attempt to influence
foreign officials through personal payments or political
contributions.
• The Transparent Agents Against Contracting Entities
(TRACE) standard was developed after a review of the
practices of 34 companies—applies to business
intermediaries.

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 International Assistance

Governments and corporations are increasingly collaborating to

provide assistance to communities around the world through
global partnerships.
• Fighting malnutrition, controlling malaria, and immunizing
children are identified as the best investments.
• At the United Nations, world leaders placed development at the
heart of the global agenda by adopting the Sustainable
Development Goals.
• The 17 goals are an ambitious agenda to improve the human
condition by 2030.
• The Global Fund to Fight AIDS, Tuberculosis, and Malaria, has
committed over US$38 billion in grants to over 151 countries.

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 Summary

• Ethics and Social Responsibility

• Ethics Theories and Philosophy
• Human Rights
• Labor, Employment, and Business Practices
• Environmental Protection and Development
• Globalization and Ethical Obligations of MNCs
• Corporate Social Responsibility and Sustainability
• Civil Society, NGOs, MNCs, and Ethical Balance
• International Assistance
• Corruption
• International Assistance

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