Sessions 7-8

Ethics, CSR, and Responsibility

BUS 135 «Introduction to Business Systems»

Dates: 13/02/2023 (Mon) & 16/02/2023 (Thu), 14:30-15:45
Place: Kaletsch Campus, Classroom 3
Prof.: Tatiana Balushkina, Ph. D.
Sessions 5-6: recap

1. The definition of culture of a society

2. The forces that lead to differences in
social culture
3. Business & economic implications of
differences in culture
4. The relationship between differences in
social culture and values in business
5. Economic & business implications for
cultural change.
Sessions 7-8: agenda

1. The definition of ethics, CSR, and

sustainability
2. The meaning of an ethical,
corporate social responsibility,
and/or sustainability dilemma
3. The causes of unethical behavior
4. Ethics, CSR, and sustainability,
and International Business
Session 8 agenda
Guest speaker: Dr. Andrea Ragni, Ph. D.
Current Positions:
Electronics Engineer, Cambridge Raman
Imaging (CRI, Milan)
R&D Engineer, NIREOS (Milan)

Topic: “Current situation in the market of

electronic components”

Your task: prepare at least one question for Dr.

Ragni and submit it on Moodle (Sessions 9-10-
>Questions submission) right now.
An example: Deepwater Horizon Spill 1/2
What happens if we do not consider ethics, CSR, and sustainability?

Any ideas on what is it about?

Deepwater Horizon spill: 20/04/2010 – 19/09/2010
Video 1: https://www.youtube.com/watch?v=vyfxInWQU9o
Video 2: https://www.youtube.com/watch?v=2wD-uR89AP8
An example: Deepwater Horizon Spill 2/2
What happens if we do not consider ethics, CSR, and sustainability?

Discussion questions:
1. Can we say that in 2023 the Gulf of Mexico has fully recovered
from the Deepwater Horizon Disaster? Why?
2. What is the role of BP in the disaster?
3. Do you know other similar disasters?
Ethics, CSR, and Sustainability 1/14

Ethics CSR Sustainability

Social Issues in the International Business

Ethics are the core starting point:
 Business ethics = the accepted principles of right or wrong that govern
the conduct of businesspeople.
 Ethical strategy refers to a strategy, or course of action, that does not
violate a company’s business ethics.
In what other session have we discussed ethical systems?
Ethical System = a set of moral principles, or values, that
are used to guide and shape behavior.
• Most ethical systems are the product of religions
Ethics, CSR, and Sustainability 2/14
Ethical issue

Political Economic
Legal system Culture
system system

What might be normal in one country, can be illegal in another

 It is incredibly difficult to come up with global
standards.
 Relevant for every international business
Ethics, CSR, and Sustainability 3/14
Ethical issue

Political Economic
Legal system Culture
system system

Most common ethical issues involve:

Ethical issue 1. Employment practices.
2. Human rights.
3. Environmental regulations.
4. Corruption.
5. Moral obligations of multinational
corporations.
Ethics, CSR, and Sustainability 4/14
Most common ethical issues involve:
Ethical issue 1. Employment practices.

An international business

Home country Host country

The EU Directive on the protection of Bangladesh: the minimum
young people at work (94/33/EC) insists age for most child labor is
that Member States must prohibit the 14; 18 for hazardous work.
employment of children (i.e. those
under the age of 15 or still in full-time
compulsory education)
Which standards should we apply?
Ethics, CSR, and Sustainability 5/14
Most common ethical issues involve:
Ethical issue 1. Employment practices.

An example: a European company XYZ employed ad

14-year-old girl for non-hazardous work in Bangladesh.
Is it a violation of the law?
NO
Is it ethical?
NO

Home country Host country

The EU Directive on the protection of Bangladesh: the minimum
young people at work (94/33/EC) insists age for most child labor is
that Member States must prohibit the 14, 18 for hazardous work.
employment of children (i.e. those
under the age of 15 or still in full-time
compulsory education)
Which standards should we apply?
 Ethics, CSR, and Sustainability 6/14
Most common ethical issues involve:
Ethical issue 1. Employment practices.

One of the most famous child labor scandals: Nike sweatshops, 1991
Paper: https://www.newidea.com.au/8ike-sweatshops-the-truth-about-the-nike-factory-scandal
Ethics, CSR, and Sustainability 7/14
Most common ethical issues involve:
Ethical issue 1. Employment practices.

What is the solution?

To guard against ethical abuses, firms should:

1. Establish minimal acceptable standards that safeguard the basic rights
and dignity of employees.
2. Audit foreign subsidies and contractors regularly to ensure standards
are being met.
3. Take corrective action as necessary.

What is the stimuli?

Source: https://worldsmostethicalcompanies.com/7onorees/
Ethics, CSR, and Sustainability 8/14
Most common ethical issues involve:
Ethical issue 2. Human Rights

Basic human rights found in developed nations are not universally

accepted worldwide:
1. Freedom of association.
2. Freedom of speech.
3. Freedom of assembly.
4. Freedom of movement.
5. Freedom from political repression.
Freedom of assembly = individual right or
ability of people to come together and
collectively express, promote, pursue, and
defend their collective or shared ideas
 Ethics, CSR, and Sustainability 9/14
Most common ethical issues involve:
Ethical issue 2. Human Rights

Should companies operate in nations that do not respect basic human rights?

1. A company may leave the nation:
The shipping company A.P. Moller-Maersk
announced it would no longer ship Iranian oil
due to the U.S. sanctions.
2. …or keep operating in the nation
3…or influence the situation in the nation: GM
came to the Sullivan principles (didn’t obey
the apartheid laws and did everything within
its power to promote the abolition of
apartheid laws). Apartheid legislation was
repealed on 17 June 1991
 Ethics, CSR, and Sustainability 10/14
Most common ethical issues involve:
Ethical issue 3. Environmental pollution

Problems occur when environmental regulations differ between host and home nations.
Home country Host country
EU has approved ban on sale Euro V standards apply to all
of new petrol and diesel cars light-duty vehicles in Russia
from 2035 as of 2016

The tragedy of
commons and global
tragedy of commons:
none owns the ocean
and the atmosphere
 Ethics, CSR, and Sustainability 11/14
Most common ethical issues involve:
Ethical issue 4. Corruption

We have already discussed this issue in Sessions 3-4.

If a U.S. corporation engages in bribery in Thailand, will it be punished in the U.S.?

Yes!
1. Foreign Corrupt Practices Act (FCPA):
 Illegal to bribe a foreign government official to obtain or maintain
business over which that foreign official has authority.
 Requires all publicly traded companies to keep detailed records that
would reveal whether a violation of the act has occurred.

2. Convention on Combating Bribery of Foreign Public Officials in International

Business Transactions (1997):
• Makes bribery of a foreign public official a criminal offense.
• Allows for facilitating or expediting payments.
 Ethics, CSR, and Sustainability 12/14
Most common ethical issues involve:
Ethical issue 4. Corruption

1. Foreign Corrupt Practices Act (FCPA)

2. Convention on Combating Bribery of Foreign Public Officials in International
Business Transactions (1997)

Speed money = facilitating payments made to expedite routine government action.

 An example: a bribe paid to an embassy employee to speed up the visa
procedure.

Speed money is excluded from both FCPA and OECD’s convention on combatting
bribery -> you will not be punished for that.
Bribery reduces the returns on business
Bribes may improve
investment and leads to low economic
efficiency and help growth growth.

Several multinationals have adopted a zero-tolerance policy

 Ethics, CSR, and Sustainability 13/14
Most common ethical issues involve:
Ethical issue 5. Moral obligations of multinational corporations

Ethical obligations of multinational corporations are not always clear-

cut.
 How should corporations handle ethical dilemmas regarding
employment, human rights, corruption, and environmental
pollution?
 There is no universal world agreement on ethical principles

Ethical dilemmas = situations in which no alternatives seem ethically

acceptable.
 Ethics, CSR, and Sustainability 14/14
Most common ethical issues involve:
Ethical issue 5. Moral obligations of multinational corporations

Ethical dilemmas = situations in which no alternatives seem ethically

acceptable.

The ethical dilemma of self-driving cars:

https://www.youtube.com/watch?v=ixIoDYVfKA0
What is the main idea of this video?
To some questions, there are no easy answers.
Unethical behavior 1/7
One example of unethical behavior in the workplace is sexual harassment:
Sexual coercion = assigning career outcomes contingent on sexual
compliance
Unwanted sexual attention (inappropriate e-mails, inappropriate grabbing)
Gender harassment (derogatory jokes on women)

“…one of the top executives at L Brands, the parent company

of Victoria’s Secret, was the subject of repeated complaints
about inappropriate conduct. He tried to kiss models. He asked
them to sit on his lap” (source: NY Times)
Link: https://www.nytimes.com/2020/02/01/business/victorias-secret-
razek-harassment.html
Unethical behavior 2/7
Why do managers behave in an unethical manner?
There are multiple causes underlying their behavior:
 Unethical behavior 3/7
Personal Ethics = generally accepted principles
of right and wrong governing the conduct of
individuals.
 Formation of ethics is guided by our parents,
our schools, our religion, and the media.

MNC’s managers often face the following problem

Personal Ethics External Environment

“There is nothing bad about Spain: consumption of alcohol in public

drinking a bottle of beer in a places, except licensed bars and
park” restaurants, is forbidden in Madrid, the
Balearic Islands and the Canary Islands
 Unethical behavior 4/7
Personal Ethics = generally accepted principles
of right and wrong governing the conduct of
individuals.
 Formation of ethics is guided by our parents,
our schools, our religion, and the media.

MNC’s managers often face the following problem

Personal Ethics External Environment

“Bribery is bad” China: 35% of companies in China pay

bribes or give gifts to operate
Source: Forbes
(https://www.forbes.com/sites/richardlevick/2015/01/2
1/new-data-bribery-is-often-an-unspoken-rule-in-
china/?sh=1bb6ee0179c6)
 Unethical behavior 5/7
2 sources of Decision-Making Processes leading to
unethical behavior:
1. Businesspeople may act unethically when
they fail to ask, “Is this decision or action
ethical?”
2. Lack of company standards
Do you know that in 1985, Steve Jobs was
fired from his own company?
Link:
https://www.youtube.com/watch?v=5WzQ
jbqbAiw

Discussion questions:
1. What events preceded Steve Jobs’ firing? Why was he fired?
2. Was the behavior of Steve Jobs ethical? Why?
3. Who made the decision to fire Steve Jobs?
4. Was the decision to fire Steve Jobs ethical? Why?
 Unethical behavior 6/7
Organizational Culture = values and norms shared among
an organization’s employees.
 Some organizational cultures may not encourage people
to think through ethical consequences of decisions.

One example: companies,

favoring the Chinese 996 working
system:
9 am – 9pm, 6 days a week

Why is this toxic? Why can this lead to unethical behavior?

Unrealistic Performance Goals = pressure from parent

company to meet unrealistic performance goals by cutting
corners or acting unethically.
 Unethical behavior 7/7
Societal Culture: cultures that emphasize individualism and
uncertainty avoidance are more likely to stress ethical behavior
than cultures where masculinity and power distance are
emphasized.

Leadership helps to establish the culture of an organization

and set the examples that others follow.
 Employees often take cues from business leaders

Steve Jobs and Elon Musk are examples The case of Enron: unethical behavior of Ken Lay
of strong charismatic leaders, able to (funder), Jeffrey Skilling (CEO), Andrew Fastow
significantly influence their employees (CFO), and Arthur Andersen (auditing firm)
Ethics, CSR, Sustainability & International Business 1/4
How to make ethical decisions?

The following 5-step approach is

recommended for the companies to
think through ethical problems:

1. Identify which stakeholders a decision would affect and in what ways.

2. Determine whether a proposed decision would violate the fundamental rights
of any stakeholders
3. Establish moral intent—place moral concerns ahead of other concerns in cases
where either the fundamental rights of stakeholders or key moral principles
have been violated
4. Engage in ethical behavior
5. Audit decisions to make sure they are consistent with ethical principles
Internal stakeholders External stakeholders
Within the company: employees, Outside the company: customer, suppliers,
managers, stockholders government, competitors, creditors
 Ethics, CSR, Sustainability & International Business 2/4

Corporate social responsibility (CSR) refers to the idea that

businesspeople should consider the social consequences of
The majority of MNCs
economic actions when making business decisions and that report their CSR
there should be a presumption in favor of decisions that have initiatives on their
both good economic and social consequences. corporate web-sites.

 “With power comes the social responsibility” to give For example, here are
something back to the societies that enabled MNCs to those of Apple:
grow and prosper. https://investor.apple
 Advocates argue that businesses need to recognize their .com/esg/default.asp
x
noblesse oblige: benevolent behavior is the responsibility
of successful enterprises
 Power can be used in a positive way to increase social
welfare, which is ethical, or used in a manner that is
ethically and morally suspect.
 Ethics, CSR, Sustainability & International Business 3/4
Sustainable strategies help the firm make good
profits without harming the environment while
acting in a socially responsible manner to
stakeholders.

Core idea of sustainability: organization’s actions do not exert a negative impact on

the ability of future generations to meet their own economic needs and actions
impart long-run economic and social benefits on stakeholders.
 Do not precipitate or participate in a situation that results in a tragedy of the
commons.

What shall we do if the long-term impact on the environment is unclear?

When scientific knowledge regarding the impact of a course of action is

Use precautionary insufficient, inclusive, or uncertain, and preliminary scientific
principle! evaluation indicates there are reasonable grounds for concern that the
action may have potentially dangerous effects on the environment, and on
human, animal, or plant health, then that action should not be pursued or
should be postponed until our knowledge improves.
 Ethics, CSR, Sustainability & International Business 4/4
Sustainable strategies help the firm make good
profits without harming the environment while
acting in a socially responsible manner to
stakeholders.

Core idea of sustainability: organization’s actions do not exert a negative impact on

the ability of future generations to meet their own economic needs and actions
impart long-run economic and social benefits on stakeholders.
 Do not precipitate or participate in a situation that results in a tragedy of the
commons.

What shall we do if the long-term impact on the environment is unclear?

Use precautionary
principle!
Food Quality and Protection Act of 1996
(U.S.): all new drugs have to be tested
before they are put on the market
The long-term consequences of
facial fillers are unknown. However,
they are frequently used.
Thank you!