23/1/2007

1
ETHICS & SOCIAL
RESPONSIBILITY
23/1/2007
2
TODAYS PLAN
TOPIC: Ethics & Social Responsibility
Social Responsibility & the Corporation
Cultural relativism & ethical imperialism?
CORRUPTION
Caselets
Discussion
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WHEN IS DIFFERENT JUST
DIFFERENT, & WHEN IS DIFFERENT
WRONG?
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GUIDELINES THAT HAVE BEEN
USED
Cultural relativism
No cultures ethics are better than any others (no
international rights & wrongs)
Ethical imperialism
Do everywhere exactly as they do at home
Theory behind cultural imperialism: absolutism
Single list of truths
Can only be expressed with one set of concepts
Call for the same behavior around the world.


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BALANCING THE EXTREMES:
THREE GUIDING PRINCIPLES
Respect for core human values, which
determine the absolute moral threshold for
all business activities
Respect for local traditions
The belief that context matters when
deciding what is right & what is wrong
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GUIDELINES FOR ETHICAL
LEADERSHIP
Treat corporate values & formal standards of
conduct as absolutes
Design & implement conditions of engagement
for suppliers & customers
Allow foreign business units to help formulate
ethical standards & interpret ethical issues
In host countries, support efforts to decrease
institutional corruption
Exercise moral imagination
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7
ADVERTISING & FREE SPEECH? THE
CASE OF NIKE & HUMAN RIGHTS
Identify the ethical issues faced by MNCs in their treatment of foreign workers that could
bring allegations of misconduct in their operations?
Would the use of third party independent contractors alleviate or insulate MNCs from being
attached, and would such use be a good defensive shield against charges of abuse of
their employees?
Are statements by companies that show good social and moral conduct in the treatment of
their workers part of the image they create therefore part of their advertising message?
Are statements by companies that show good social and moral conduct in the
treatment of their workers part of the image they create therefore part of their
advertising message? Do consumers judge companies and make their buying
decision based on their perceptions of corporate behavior and values they
exhibit? Is the historic made in question (e.g. Made in the USA) now being
replaced by the made by inquiry (e.g. Made by Company X or for Company
X by Company Y)?
Given the principles noted in the case, how can companies comment on their
positive actions to promote human rights so consumers will think well of them?
What would propose a company do (a) nothing? (b) construct a corporate code
of ethics? (c) align with some of the universal covenants or compacts prepared
by international agencies?

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CASELETS ON CORRUPTION
Divide into groups
Decide what you
should do in each
case if you were the
decision-maker
Class discussion
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BRIBERY & CORRUPTION
Corruption: abuse of public office for
private gain
Corruption is both an ethical matter & an
economic matter (large costs
Considered by many to be the key reason
for the lack of progress in economic reform
in non-Western countries.
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CORRUPTION
Causal factors
Interdependence of the economic & political spheres
Types of corruption
Petty
Grand
How do you draw the line between legitimate &
illegitimate interactions between the private sector &
politicians is more difficult to draw
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WHERE DOES CORRUPTION
OCCUR?
Most of the corrupt countries are developing
countries
Corruption also varies across sectors and
activities
Highest in the public works, construction, & defense
sectors
Lowest in banking & agriculture
In terms of government activities, most prone are: tax
departments, police departments, customs agencies,
procurement & distribution of international aid
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THE COSTS OF CORRUPTION
Corruption is associated with a range of negative
macroeconomic effects
Reduced investment & GDP growth, reductions in
the flow of foreign direct investment, income
inequality, & misallocation of government resources
For managers engaged in international business,
corruption has become a major concern
Prediction that half of the worlds GDP growth will
occur in non-OECD countries & those countries rank
high in corruption
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ECONOMIC COST OF CORRUPTION
CORRUPT ACTIVITY ECONOMIC COST
Government bureaucrat accepts
speed money to issue licenses
3% to 10% premium above licensing
fee
Organized crime, with sanction of
local officials, controls & sets prices in
the markets
Goods sell at 15% to 20% premium
Tax collectors permit under-reporting
of income in exchange for a bribe
Income tax revenues reduced by up to
50%
Government officials order expensive
capital goods, or overpay or
overinvoice for public works, in
exchange for kickbacks.
Goods & services priced 20% to 100%
higher than necessary.
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THE CANADIAN SITUATION
BUSINESS ACTIVITY: International Code of
Ethics for Canadian Business (1997)
GOVERNMENT ACTIVITIES:
OECD Guidelines for Multinational Enterprises (
Canada obliged to established a National Contact Point to
promote the guidelines
OECD Analytical Work on Corporate Codes
Corruption Convention of the OECED
Corruption of Foreign Public Officials Act passed by
Parliament in 2/1999


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EFFORTS BY INTERNATIONAL
DEVELOPMENT ORGANIZATIONS: THE
WORLD BANK
World Bank
Since 1996, Bank launched more than 600 anti-
corruption programs in nearly 100 countries
(including loans)
Institutionalized efforts: Department of Institutional
Integrity to investigate claims of fraud & corruption
& a Sanctions Committee to adjudicate cases &
assess penalties
More than 180 companies & individuals debarred
from doing business with the Bank
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EFFORTS BY INTERNATIONAL
DEVELOPMENT ORGANIZATIONS:
REGIONAL DEVELOPMENT ORGANIZATIONS
The Inter-American, European, & Asian
Development Banks followed World
Banks lead
IMF has suspended aid to some countries
because they did not combat corruption
Suggestion that anti-corruption
requirements be placed in the
conditionality agreements
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PRIVATE EFFORTS:
TRANSPARENCY INTERNATIONAL
Founded in 1994 in Berlin active in more than
70 countries
72 national chapters, source book of best
practices & started several innovative pilot
projects.
Lobby governments, inform media & bring
together people concerned with corruption
Annual corruption Perception Index (measures
perception of corruption in 85 countries)
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2006 BRIBE PAYERS INDEX
HIGHEST LEVEL LOWEST LEVEL
India Switzerland
China Sweden
Russia Australia
Turkey Austria
Taiwan Canada
Malaysia UK
South Africa Germany
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2006 CORRUPTION
PERCEPTIONS INDEX
MOST CORRUPT MOST HONEST
Haiti Finland, Iceland, New Zealand
Myanmar, Iraq, Guinea
Denmark
Sudan, Congo, Chad, Bangladesh
Singapore
Uzbekistan, Guinea, Ivory Coast,
Cambodia, Belarus
Sweden
Turkmenistan, Tajikistan, Sierra
Leone, Pakistan, Nigeria,
Kyrgyzstan, Kenya, Rep. Congo,
Angola
Switzerland
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CORPORATE TRANSPARENCY
Role of codes of conduct
Large accounting firms have forensic accounting
experts
Collective action several industry groups
developed sector-specific guidelines on tackling
corruption & promoting access to information.
Whistleblowers importance of giving these
individuals protection
Importance of tightening up financial reporting &
maintaining the independence of auditors
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BRIBERY IN BUSINESS SECTORS
Public works/construction
Arms & defense
Oil & gas
Real estate/property
Power generation/transmission & telecommunications
Mining
Pharmaceuticals/medical care & transportation & storage
Heavy manufacturing
Banking & finance
Civilian aerospace
IT & forestry
Agriculture, light manufacturing, fishery

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RELATIONSHIP BETWEEN GNP
& PROPENSITY FOR BRIBERY
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ASSIGNMENT FOR 25/1/2007
CASE: Conocos Green
Oil Strategy
Division of the class into
four groups:
Read both the main case &
your case
First part of class: work in
groups: Ecuadorian
government, indigenous
peoples, environmental
groups, management
Second part: negotiation (2
representatives per side)