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INTERNAL RESEARCH ASSIGNMENT

Name of the candidate: KHUSHBOO MALHOTRA

Enrollment No. : 07380303914

Course: MBA II (EVE SHIFT) SECTION -B

Batch: 2014-2016

Subject: MANAGEMENT OF INTERNATIONAL


BUSINESS

Subject code: MS-203

Topic of assignment: Q2.

Subject Teachers name: MS. DEEPIKA VARSHNEY

Question2.
(a) Discuss various social responsibilities of a global firm.
(b) What are different ethical issues involved in context of international business.
Answer 2.
(a) Discuss various social responsibilities of a global firm.

CORPORATE SOCIAL RESPONSIBILITY IN INTERNATIONAL


BUSINESS
INTRODUCTION
The concept of Corporate Social Responsibility derives from the study of ethics.
Business ethics as defined is the study of business situations, activities and decisions
where issues of right and wrong are addressed. Business Ethics can be defined as
the critical, structured examination of how people & institutions should behave in the
world of commerce. In particular, it involves examining appropriate constraints on the
pursuit of self-interest, or profits, when the actions of individuals or firms affects
others . One can then define business ethics as actions and activities of organisations
that revolve around right and wrong; good and bad; acceptable and unacceptable.
Corporate Social Responsibility (CSR) is a subject with varied names. It is also called
corporate sustainability, corporate citizenship, corporate social investment, the triple
bottom line, socially responsible investment, business sustainability and corporate
governance

CSR IN INTERNATIONAL BUSINESS


CSR initiatives engaged in by Multinational companies (MNCs) can be categorised
thus:
1. CSR for global talent acquisition and retention
2. CSR for branding and reputation management
3. CSR as regulatory requirement

4. CSR as philanthropic engagement/initiative


1.CSR FOR GLOBAL TALENT ACQUISITION AND RETENTION
The best professionals in the world want to work in organizations in which they can
thrive, and they want to work for companies that exhibit good corporate
citizenship.The basis for CSR as a strategy for acquiring and retaining global talent
for MNCs is that in both theory and practice it has been observed that just as
companies succeed in the market by fulfilling the needs of their respective customer
base, they can manage their employees best by viewing them as internal customers,
fulfilling their needs through a compelling menu of job-products .These job
products include salary, health benefit, packages and job responsibilities and when
designed properly, can contribute dramatically to job satisfaction, employee retention
and productivity. By engaging in CSR initiatives that are both specific and relevant,
the values of a company are revealed and as such, its values can act as an Employee
Value Proposition which is the holistic sum of everything people experience and
receive while they are a part of a company.

A good reputation making it easier to recruit employees.

Employees may stay longer, reducing the costs and disruption of recruitment
and retraining.

Employees are better motivated and more productive

2. CSR FOR BRANDING AND REPUTATION MANAGEMENT.

3. CSR AS REGULATORY REQUIREMENT


New laws like the carbon emission tax for airline operators currently in force in Europe
is an example of how CSR initiatives can be pre-empted by government. As reported by
Discovery News, countries can avoid the tax by developing plans to reduce harmful
emissions. This trend means that companies would have to engage in research and
development to generate more innovations and products that are both commercially

tenable and whose production, use and disposal is environmentally sustainable. CSR
regulation by government may come in the form of requiring that Environmental
Impact Assessment report be produced before any development that would have a
major impact on the environment and communities around it is carried out detailing
measures that would be taken to mitigate its adverse effects. This is a means of
anticipating the effects of negative externalities of business. This law would have a far
reaching effect on global airline companies who ply the European route as they would
have to compulsorily contribute to making the air cleaner in Europe. Already, China,
India and the United States have made bold protests as an affront to the new law and
have threatened reciprocal action as well as boycott of European routes. This would be
of grave concern in international business as easy travel to various global destinations
may be impeded as a result.
In Nigeria however, a bill to make companies dedicate 3.5 per cent of their profits to
CSR ventures is currently before the countrys legislature for deliberation and passage.
The bill which was brought before the parliament by the countrys government seeks to
make it mandatory for companies to engage in CSR initiatives. This would make
Nigeria the first country to legislate on CSR. Taxes, however, do not fall under the
remit of CSR as they are the responsibility of government. The law would apply to both
local and multinational companies operating in the country. This law, however, would
have several controversial areas as it requires 3.5 per cent of profit before tax as a
blanket requirement for all companies, whether large ones or SMEs. This could
discourage SMEs, who are already stretched for profit and lack the encouragement to
continue in difficult economic times. The law however would ensure that companies
engage in CSR, as a commission would be established to monitor and regulate it. Yet, it
is likely that many nations are watching Nigeria, and waiting to find out if the CSR law
works. If this law does work, it is likely that many other countries might find similar
laws proposed and implemented over time.

4.CSR AS PHILANTROPIC ENGAGEMENT/ INITIATIVE


Regarding philanthropy, top executives more often are caught up in the dilemma of
having to choose between following critics who demand more corporate social
responsibility investments and pressure from shareholders and investors who want the

maximisation of short term profits. Philanthropy is now being used as a means of


public relations or advertising, promoting a company's image through high-profile
sponsorships. Addressing the business context of charitable donations also helps a
company leverage its capabilities and relationships. Adopting a context-focused
approach requires a far more disciplined approach than is prevalent today. But it can
make a company's philanthropic activities far more effective
With these, the context of CSR as a philanthropic engagement and initiative of charity
can better be understood. CSR, as many have argued, is not corporate philanthropy as
in giving money away just because of some sentimental reasons, given that there is an
overflow of financial capabilities; CSR is about giving back to the community
voluntarily and in a mutually beneficial way, yet not totally within the remit of
business activities. CSR is an engagement in enlightened self-interest. Organizations
make long-term investments usually buying intangible investments in the long run by
making tangible payments in the near term. Companies are finding an increasing
need to depend on value adding activities such as corporate philanthropy in order to
distinguish themselves from their competitors and cultivate goodwill amongst their
stakeholders. The money they plough into philanthropic activities should not be
viewed as a sunk cost. Instead companies should view it as an investment for the good
of the overall firm. If targeted well, a company can make its strategic CSR
investments in areas where its potential customers can recognise its efforts. CSR for
philanthropic engagement has been in use by various global businesses, for example
MTN - the international telecommunications giant in Africa and the Middle East which mandates its country operations to spend 1% of their profit after tax for
philanthropic activities. In Nigeria, the MTN Foundation engages in philanthropic
projects around health, education and empowerment of minorities.

CONCLUSION
As CSR becomes more and more popular, it has increasingly become a must do
rather than a nice to do. Companies across the globe, from large brands as Coca
Cola, MacDonalds and IBM to smaller ones doing business across boundaries are
reaping the returns of improved visibility, positioning and rebuilding brand image and
customer perception; talent acquisition and retention; and helping communities help

businesses. CSR as a corporate strategy is indeed expedient for businesses, and more
so MNCs, in the 21st century.

(b).What are different ethical issues involved in context of international business.

ETHICAL ISSUES INTERNATIONAL BUSINESS


International business ethics is a particularly complex issue as ethical standards are
different depending on where you are. Corporate governance, bribery, corruption,
working conditions and targeted marketing are all issues that require organisations to
establish an ethical standpoint from which they can work on.
There is an increasing emphasis on the corporate responsibility of large organisations
from developed nations and the way they operate in third world countries. Many
nations now impose their ethical standards on developing countries even though they
themselves have been guilty of arguably unethical practices in the past. For example,
the poor working conditions suffered in the third world were commonplace during the
industrialisation of many western economies.Some of the most common international
ethical issues surround the environment, child labour, working standards and
conditions, targeting marketing to vulnerable individuals and corruption.
Corporate governance is the trend towards large organisations developing their own
systems of dealing with ethical issues and setting strategic direction. Ethical corporate
governance is concerned with encouraging organisations to be transparent in their
operations, finances and behaviour in domestic and international markets. It is
believed that this transparency forces organisations to act in a way that is popular with
the wider consumer market rather than just the stakeholders in a company.
Social responsibility is a current issue being debated by the public, government,
organisations and critics. Organisations who claim to be socially responsible ensure
that their business practices don't impede on human rights and increase the global
standard of living. Many also claim to be reducing their impact on the environment
through a variety of strategies. However, critics argue that such policies can make it
difficult for developing nations who don't have the systems and social structures in
place to meet the high demands placed on them.
Bribery and corruption is another critical ethical concern for international
organisations. Whilst it may seem like a clearly defined legal issue at first, it becomes

more complex when you realise that it is far from illegal in some countries and can
even be part of the business culture. International organisations are encouraged to not
participate in such business practices. Any payments made should be within the law of
both the local country and the home country and should be fully disclosed to the
public.

MOST COMMON ETHICAL ISSUES

Employment practices

Human rights

Environmental regulations

Corruption

Moral obligation of multinational firms

1. Employment Practices

When work conditions in a host nation are clearly inferior to those in a


multinationals home nation, companies must decide which standards should be
applied, those of the home nation, those of the host nation, or something in between
When work conditions in a host nation are clearly inferior to those in a multinational's
home nation, what standards should be applied?

Those of the home nation?

Those of the host nation?

Or something in between?

Firms should establish minimal acceptable standards that safeguard the basic rights
and dignity of employees and audit the foreign subsidiaries and subcontractors on a
regular basis.

2.Human Rights

Basic human rights taken for granted in the developed world such as freedom of
association, freedom of speech, freedom of assembly, freedom of movement, and so
on, are by no means universally accepted .Basic human rights are still not respected
in many nations
Many rights are not universally accepted such as freedom of:

association

speech

assembly

movement

political expression

3.Role of the Multinational Firm

It is often argued that inward investment by a multinational firm can be a force for
economic, political, and social progress that ultimately improves the rights of people .
But there is a limit to this argument because some governments are so repressive that
investment cannot be justified on ethical grounds

4.Environmental Pollution
When environmental regulations in host nations are far inferior to those in the home
nation, ethical issues arise:

The tragedy of the commons occurs when a resource held in common by all,
but owned by no one, is overused by individuals resulting in its degradation .

Ethical issues arise when environmental regulations and/or enforcement are


inferior to those in the home nation .

This might result in higher levels of pollution from the operations of


multinationals than would be allowed at home

Should a multinational feel free to pollute in a developing nation and is it the


right and moral thing to do?

5.Corruption
In the United States, the Foreign Corrupt Practices Act outlawed the practice of
paying bribes to foreign government officials in order to gain business . The
Organization for Economic Cooperation and Development (OECD) adopted a
Convention on Combating Bribery of Foreign Public Officials in International
Business Transactions in 1997 which obliges member states to make the bribery of
foreign public officials a criminal offense .Some economists suggest that the practice
of giving bribes might be the price that must be paid to do a greater good. These
economists believe that in a country where preexisting political structures distort or
limit the workings of the market mechanism, corruption in the form of blackmarketeering, smuggling, and side payments to government bureaucrats to speed up
approval for business investments may actually enhance welfare . Other economists
have argued that corruption reduces the returns on business investment and leads to
low economic growth .Corruption has a been a problem in almost every society in
history and it continues to be one today.
Some international businesses can and have gained economic advantages by making
payments to government officials
Two laws addresses this issue :

1977 U.S. Foreign Corrupt Practices Act

1997 OECD Convention on Combating Bribery or Foreign Public Officials in


International Business Transactions

VIPER REPORT