Pennsylvania State University



Chapter 11

Managing for Ethics and Social Responsibility in a Global Environment

Contents: (Please note: the Instructor Guide for every chapter will follow this structure.)

1. Chapter Outline

2. Teaching Notes

3. In-Class Exercises

4. Homework Assignments

5. Additional Resources

Chapter Outline

I. Introduction

II. Focus on the Individual Expatriate Manager

A. The Difficulties of Foreign Business Assignments

B. The Need for Structure, Training, and Guidance

C. Foreign Language Proficiency

D. Learning about the Culture

E. Recognizing the Power of Selective Perception

F. Assumption of Behavioral Consistency

G. Assumption of Cultural Homogeneity

H. Assumption of Similarity

I. Ethics-Related Training and Guidance

J. How Different Are Ethical Standards in Different Cultures – Really?

K. Development of Corporate Guidelines and Policies for Global Business Ethics

III. The Organization in a Global Business Environment

A. Deciding to Do Business in a Foreign Country

B. Development of a Transcultural Corporate Ethic

IV. Conclusion

V. Discussion Questions

VI. Short Cases

A. The Gift

B. Selling Medical Ultrasound Technology in Asia

C. Google Goes to China

VII. Appendix – Caux Roundtable Principles for Business

Teaching Notes - Discussion Questions

1. If you were going on your first overseas business assignment, what would you do to ensure that you were prepared to deal with ethical dilemmas you would face?

Possible Responses

Study the culture

- Social, political and economic

- Similarities and differences in relation to the U.S.

- Cultural perspectives on business

Learn the language and cultural idioms

Talk to employees who have been there before

- Their perceptions of differences in business practices

- Pitfalls to avoid

Talk to foreign nationals

- Their perceptions of differences in business practices

- Pitfalls to avoid

Learn business practices

- Ethical issues typical of the culture

- Negotiation tactics

What questions would you ask your superiors in preparation for the trip?

Possible Responses

What training is available to prepare me?

What are the guidelines for doing business ethically?

Specific job expectations

How job expectations and ethical guidelines align. (Will you be rewarded for making ethical decisions, even if company profit is not as great?)

2. Your firm is expanding globally and is sending executives overseas for the first time. What will you do, to be sure these individuals are prepared to deal with the ethical dilemmas they will face?

Possible Responses

Provide training

- Nature of culture

- Language

- Business customs

Establish corporate guidelines for doing business

Adjust the reward system to reward ethical decision making

3. Imagine that someone from another culture asked you to provide information about business ethics, when dealing with American managers. What would you say?

Possible Responses

Describe the Foreign Corrupt Practices Act that U.S. corporations and their members must obey

Share that American managers prefer to follow U.S. and local laws

Emphasize the similarities in practices and point out the differences

Americans are eager to learn about the culture and business practices of partner nations

Suggest they explain the differences in business practices to the American managers

* Americans expect you to look them in the eye

* Americans are task, not process, oriented

* Bluffing in negotiation is generally accepted

* Americans sometimes withhold information, because they think information is power

American law has become policy in other countries

4. Talk with someone from another culture. Ask for information that would be helpful to you, if you had to do business in their culture. What did you learn that you did not know before? How might you behave differently, because of what you know?

Examples of Cultural Differences

On a business trip to Japan, one of the authors established a business relationship with a Japanese man who was educated in America. During her tenure in Japan, their interaction included business meals, joint travel and extended meetings. A year later, when the Japanese man came to New York for business, the author greeted him with a kiss on the cheek, much to his embarrassment. It was a totally inappropriate greeting.

The other author encountered a Korean student, who was not comfortable making eye contact during conversation. In Korea, who you establish eye contact with and for how long is determined by gender, age and status. This can make negotiations difficult.

5. If you were planning to do business in a culture that was opposite from your own on the cultural dimensions of “power distance” and “individualism/collectivism,” what challenges would you expect to face? How would you prepare?

With power distance, you would need to be sensitive to any hierarchical differences between you and your business partner and consider how those might impact your interactions. In doing business with someone from a high power distance culture, you may also need to understand that your partner will defer to those in higher positions.

With individualism/collectivism, again you would need to be sensitive to the potential differences. Collectivists value harmony and the group, while individualists value individual achievement and tend to be more aggressive. Collectivists also tend to engage in gift-giving and nepotism. So, you would need to be prepared for that and ready to respond in a sensitive manner.

6. Imagine yourself in a situation, where you had to bribe someone or lose the deal. How would you think about it? What do you think you would do? Why? What position would you hope your employer takes?

Possible Answers

Apply the "Eight Steps to Sound Ethical Decision Making in Business" that were introduced in Chapter 2

1. Gather the facts

2. Define the ethical issues

3. Identify the affected parties

4. Identify the consequences

5. Identify obligations

6. Consider your character and integrity

7. Think creatively about potential actions

8. Check your gut

Refer to the culture of your organization. What guidelines does it provide for decision making? (See Chapter 5 for a discussion of organizational culture.)

Recall the code of conduct or policy manual of your organization. What guidelines does it provide for decision making? (See Chapter 6 for a discussion of codes of conduct.)

Probes to Stimulate Discussion

"What factors would you consider in weighing your options?"

"What are the options?"

"What criteria would influence your final decision?"

"What would be the short and long term ramifications of each option?"

“What do you think you would do? Why?”

Probe to Stimulate Discussion

“Explain your decision in terms of the factors you considered and the ramifications of your choice versus other options.”

7. Assume the role of corporate decision maker in a decision about whether to do business in a particular foreign country in the developing world. What criteria will you establish for making the decision from an ethics and social responsibility perspective? Why are these the most important criteria? What information will you use to help you make the decision?

This question is designed to get students to think deeply about values and how those should drive decisions about whether to do business in a particular country. (See suggested assignment below, as well as “Google Goes to China” case at the end of this Instructor’s Manual).

Probes to Stimulate Discussion

“What core values will you establish for your firm?”

“What will you do, if these core values cannot be satisfied in the country?”

“What information will you need in order to make the decision?”

8. What are the costs and benefits of developing a transcultural corporate ethic? Whose responsibility should it be to develop such an ethic - governments, corporations, and intergovernmental organizations, all of these?

Probes to Stimulate Discussion

“Could such an effort be seen as just a form of U.S. interference in other cultures?”

“How do you think American business people in general would react to it?”

“What countries would be most (least) amenable to such a development?

9. Choose a multinational company. Study its website and compare its emphasis on business ethics and social responsibility with the Shell Group. What did you find – more or less emphasis? Do you have any ideas about why that might be?

10. If you had to create a global code of conduct for your company, what would you include? What core values would you state? How would you treat behaviors such as gift giving and nepotism?

The code will depend somewhat on the countries you are in and the particular ethical issues that are of concern in those places. But, you would certainly deal with typical issues of bribery, working conditions (if that is an issue), protection of the natural environment, gift giving, nepotism, non-discrimination in hiring, etc. For how to treat gift giving and nepotism, see the section of the chapter on Tom Donaldson’s approach, which we think is best.

In-Class Exercises:

1. Case #1: The Gift

You are an account executive with a multinational financial firm, and one of your biggest accounts is that of a shipping magnate in Greece. Several months after you have arranged very complex financing to build a new fleet of oil tankers for this customer, he asks if you and your wife would attend the christening of the first tanker. You, of course agree to attend - it would be an insult to him if you did not. When you arrive, he asks your wife to break the traditional champagne bottle over the bow of the tanker. Two weeks after the christening, your wife receives a package from your customer. In it is a gold bracelet with her initials and the date of the christening set in diamonds. To return the gift would insult your customer, but accepting it, would clearly violate your company's policy.

What should you do?

Possible Answers

Go to the corporate counsel before you go to a foreign country and ask what to do in such an event.

Return it and nicely explain the corporate policy.

Accept on behalf of the organization. Then sell it and give the proceeds to charity - but tell the magnate what you are doing and why.

Accept on behalf of the organization and buy it back from them.

Case-based Questions

1. What kind of ethical issue is this?

Possible Responses

Conflict of Interest

- Subtle "bribes"

- Influence

2. Why would it be against corporate policy to accept such a gift? Do you agree with the policy? Why or why not?

Could encourage blatant bribes in the future

Could be interpreted as a bribe

Very expensive gift

Do you agree with the policy? Why or why not?

3. Put yourself in the "shoes" of each of the parties. How might they think about the issue?

Shipping Magnate

Money to burn

Common practice to lavish gifts

Insulted if gift returned

Might understand if policy was explained

Executive

Caught in the middle between following policy and not insulting the customer

Does not want to lose business, on the other hand, the magnate needs our money to do business, so he should follow our business practices

Spouse

No harm done or insulted, depending on perspective

4. Imagine that you are the corporate vice-president in charge of business ethics and conduct for your firm. Would you be willing to change this policy? Why or why not?

Policy is consistent with spirit of the Foreign Corrupt Practices Act, so would not change it

Practice is turning away from "In Rome do what the Roman's do," to following customs of American business

If situation is unique, if you have been careful to disclose and document all facts; policies can sometimes be flexible. However, it should be a rare occasion.

2. Case #2: Selling Medical Ultrasound Technology in Asia

Notes:

Frontline created a powerful video that you may want to show before discussing this case. It is called “India: The Missing Girls”

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Case Questions:

1. Should Pat raise this issue with management? If so, what should he say?

This is a good example of an opportunity to voice one’s values (see Chapter 4). Pat will have to decide if this is a “spear in the sand” issue and, if so, how to raise it in a way that is likely to garner a positive response. Pat may want to educate management about the problem and talk in terms of potential risk to the company’s reputation, if nothing is done. He may also want to bring in allies to raise the issue with him. You may want to role play this one.

2. What if he does raise the issue and the company does nothing? What should he do then?

This becomes an ethical dilemma for Pat and can be analyzed using the ethical decision making frameworks provided in Chapter 2. For example, how much harm is being done to these societies in the long term (versus the medical benefit provided by the machines)? How do Pat’s personal values come into play? Does the disclosure rule help?

3. Does this use of the technology breach a core value? Or is this a case, where the company should respect local cultural practice? Is there some compromise position in between?

It seems to us that this does breach a core value of human rights, particularly for women. Think of all the girls who will never be born, if this practice is allowed to continue. On the other hand, there is evidence that women feel pressured to engage in this practice, so that they will have a son who will take care of them.

If we think long-term, the human rights of boys may also be at stake, if we think of the opportunity to have a life partner as a human right. If so, this right is seriously in jeopardy. Finally, the human right to the best health care may also be at stake, making this a really tough ethical issue.

4. Should the company be anticipating additional government regulation?

The practice is already against the law in most countries, but the law is not well enforced. Will increased enforcement be likely and, if so, does the company risk fines and other punishments? It is hard to say. But, it is generally good management practice to be out in front of government regulation.

5. What is the risk to the company’s reputation of doing nothing? Of doing something?

Again, this is tough to anticipate. But, given the transparency in our interconnected world, one never knows who will pick up an issue and run with it. Management certainly needs to be concerned, about getting a reputation for contributing to sex-selection abortions. On the other hand, taking strong action could have negative effects, if they are seen as cultural imperialists. So, action will have to be taken with sensitivity to the local culture.

6. How might the company think about their responsibility from a supply-chain perspective? Might they learn anything from companies in other industries that have had to deal with this issue? For example, would it be appropriate to initiate a policy to engage with customers, who certify that they will sell exclusively to authorized users? Even if the company did that, how could they be sure customers were complying?

As other industries have done before, this company is going to have to get more involved in relationships in the supply chain from an ethics perspective. They might want to obtain some legal document from customers, certifying that they are complying, but as the question asks, it would be difficult to ensure compliance, without putting an expensive monitoring system in place. And, given that many of these clinics are located in remote areas, doing so would not be a simple matter.

7. Should the company also be educating and training employees and clients on the ethical uses of the products? Or, would that be seen as ethical imperialism?

The company has an obligation to do this, but it will be difficult to do it in a way that is not seen as ethical imperialism. They may explain why they are doing it in terms of core values. Or, they may hire locals from the culture, who agree with the company’s stance to conduct the training, if they are willing to do so (remember – gender selection abortion is against the law in most of these countries – therefore one can likely find locals who agree with the company’s stance.

8. What should a sales representative do, if he or she suspects that a client will be using the ultrasound equipment for sex-selective purposes?

Hopefully, the sales representative has been trained and prepared to offer a carefully designed response that is consistent with company policy. The rep may actually stop the sales call and leave, if it is clear that the machine is going to be used for that purpose. If there has been no direction from the company, the least the sales rep should do is to report this back to the company.

9. The company provides service for these machines. Might that be a way to monitor use?

This may be the very best hope for getting a handle on this issue. The company might add labels to all machines, making it clear that they should not be used to identify the sex of fetuses. They can also refuse to service machines that are being used for sex selection purposes. But, this will work only if no local competitors exist, who can just move in and take over the service.

10. Can the company do anything to better understand the root cause of the problem and tackle that?

Certainly, company representatives should do their best to understand the drivers of this problem, so that they can attempt to arrive at creative solutions. They may work with governments and activists to attempt to do so. But, with this problem, there do not seem to be apparent solutions (such as building schools for children who are removed from factories with the child labor issue). Entire cultures would need to change in order to resolve this one, perhaps through educating the public and making social investments that promote equality for girls. In fact, this is what GE has done.

See below for a website that offers information about how GE is handling a similar problem:

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3. Case #3: Google Goes to China

Case Questions

1. Why do you think so many American citizens and lawmakers reacted negatively to Google’s decision in 2006?

First, Americans value free speech and freedom of the press, because these are constitutionally protected values in the U.S. Thus, many saw China’s censorship as a breach of human rights. They also saw Google as hypocritical, given their stated values and principles.

2. Does the fact that Google is an Internet company change societal expectations of it with regard to information openness?

We think it does. The Internet is associated with freedom of expression and the free movement of information around the globe. China’s censorship seems totally counter to the ethos of the Internet.

3. Was Google facing an ethical dilemma (values in conflict) in 2006?

Absolutely! This is a company that says it values freedom of information. But, it also values financial success and China is the fastest growing market in the world. At the time, the company seemed to compromise by saying that being in China (and continually bugging the government about its stance), would be more helpful than not. But, it does not seem to have worked out that way.

4. Analyze the dilemma from consequentialist, deontological and virtue ethics perspectives. Based upon your analysis, what do you think is the right thing to do? Do you agree with Google’s CEO that the company made “a principled decision?” Why or why not?

Consequentialist analysis would identify all the stakeholders and the harms and benefits to each, caused by either staying in this market or not (or some creative alternative). Without a crystal ball, Google would not have been able to assess these harms and benefits very effectively and it does seem that they were wrong in their estimation of how powerful Chinese censorship would continue to be.

Deontological analysis would focus us right back on values. What are the company’s values and what are its duties and obligations as a responsible company in this situation?

What about virtue ethics? What does it take to be viewed as a virtuous company in this situation? Obviously, many critics in the US Congress, the media, NGOs etc. did not view the company as very virtuous at the time. The “disclosure rule” suggested many critics were not very kind to the company, with criticisms that are outlined in the case.

5. Google’s motto is “Don’t Be Evil.” What does that mean? And, how does it apply in this situation? Is the company living up to its motto? Is it a good motto?

This is a great topic for discussion. We think the motto means, do not do unethical things (if you can be clear about what those are). But, it clearly does not say anything about doing good things, or attempting to be an ethical leader in any way. Over time, it does seem that the company was attempting to live up to its motto. It continually reassessed the situation and eventually decided that it could no longer do business in China, as it previously had. One interesting statement is that “withdrawing the service would be a ‘greater evil.’” But, the company motto did not say “do less evil.” It says do “NO” evil. The question is, did Google live up to that motto? We do not think so, but others may disagree.

6. Consider Google’s other values related to democracy, not doing evil, focusing on the user, providing information, etc. Can Google do business in China and maintain these ideals? If so, how? If not, why not?

It seems pretty hard to us. China is clearly not democratic, and it is impossible to say that the company is providing accurate information on certain topics, when China engages in such powerful censorship. Also, the company clearly says things in its stated goals and values that seem impossible to live up to in the Chinese environment. For example, “Google has refused to make any change that does not offer a benefit to the users who come to the site.”

7. In defense of its 2006 decision, Google said that it complies with the law in countries where it does business. But, the author of a book on IBM and the holocaust says that IBM used the same defense in the 1930s, when it provided Adolf Hitler with the tools to keep “the wheels of the Holocaust running on time.” The author says “[they] want to be good Americans in the U.S. and good collaborators in China. They want it both ways but there are certain things we must not do” (Page, 2006). (This needs an appropriate citation. I’m assuming that it’s a reference to an Edwin Black book, called IBM and the Holocaust, but the authors need to confirm.) Do you agree with the company’s stance? If so, what changed in 2010?

Complying with the law in countries where the company does business, creates a “floor” or minimum standard for ethical and socially responsible behavior. Remember the corporate social responsibility pyramid. Ethical behavior goes beyond just legal behavior and this is particularly important in foreign countries, where the laws may be quite different in terms of human rights or care for the natural environment. Recall that we said that companies must start with their own core values and base decisions upon those. What if the law says, it is okay to kill workers who do not work hard enough? Or, what if the law says that workers do not need to wear protective gear despite the harmful health effects of their work? Will the company comply with those laws and feel okay about what it is doing???

8. Google and other companies routinely comply with government rules to censor other types of material, especially pornography, but also hate speech and other moral matters, such as sexual images in Islamic countries. Are some forms of censorship acceptable? If so, where/how would you draw the line?

This question will require much ethical deliberation and companies may want to bring in ethics experts, to help when matters such as these come before them. Core values can help, to the extent that one can decide whether any proposed action breaches a core company value. For example, if human dignity is a core value, it might seem permissible to censor pornography. If harm to people is an issue, the decision is even clearer. For example, most of us can agree that child pornography is harmful to the children involved and can have other harmful effects. We can ask questions, such as -- is hate speech likely to cause harm to the targets of the hate?

9. Tom Donaldson rejects ethical relativism (“when in Rome”) and ethical absolutism (insisting on the same exact standards everywhere for every situation). Instead, he recommends that companies operating overseas adopt an ethical threshold, based upon core values, such as the golden rule and respect for human rights. Those must then be translated into specific guidelines. Do you think Google’s 2006 operating standards were consistent or inconsistent with Donaldson’s recommendations? If you were going to recommend a set of standards for Google, what would they say and why?

We think that Google went against its core values in this case. But, we also think, Google has more work to do to develop a set of core values that can truly guide company behavior in situations like this. Do not be evil does not seem to do it.

10. Every transcultural set of ethics standards for global business practice includes the principle of human rights. For example, the UN global compact says that companies should protect internationally proclaimed human rights and not be complicit in human rights abuses. The Caux Roundtable Principles state that businesses should contribute to human rights in the countries in which they operate. Is Google’s behavior consistent with these expectations? Do you agree that the company “negotiated away users’ human rights” in 2006?

We are critical of Google’s 2006 stance. The company seemed to naively conclude that the company could come in and change the culture of a country like China. There have been examples of that, such as when companies entered South Africa, abiding by the Sullivan Principles. Some argue that they helped to change the country for the better. Although this is still debated, this was a country already in transition and very different from China. We think Google learned a powerful lesson from this experience. But management is still trying to navigate these difficult waters.

11. What about the company’s threat to pull out of China in 2010, if its users could not conduct censorship free searches? Do you agree with it? If so, why was it the right decision at that moment? How might it affect other companies doing business in China? Does it change how you think about the company’s original decision?

We agree with the decision. The company’s action was precipitated by concerns for human rights activists in China, whose email accounts were apparently hacked by the government. This is a government that takes its censorship and repression of dissent very seriously and the company felt that it could no longer protect user security. At press time, the company was sending users to its Hong Kong website.

It is unclear how this might affect other companies, but it would not be surprising to see other US firms follow Google’s lead.

It does not change our perspective on the original decision. The company miscalculated.

Homework Assignments

1. Assignment: Research a Country

Assign students (as individuals or in teams) to research specific countries. What information will they look for, in trying to decide whether to do business there or not? What criteria will they use?

The following are excellent on-line resources for completing such an assignment. It would be interesting to discuss what students or teams learned.

Country Information Resources:

The Library of Congress country studies:



Political Risk Yearbook, a subscription database:



(Despite its title, this is an excellent resource!)

Additional Resources:

1. Exercise: Bafa Bafa

Bafa Bafa is a tried and true cross-cultural simulation exercise. It requires two facilitators, takes two hours and works best with about 35 students. Students are divided into two groups. Each group learns its "culture" (alpha or beta) from audio taped instructions and practice. The cultures are designed to be quite different. In fact, the "betas" even learn a different language. (It is easy to learn, but hard to figure out.) Then, the groups exchange visitors who do not try to interact, but do try to understand the other culture. They return with information for their respective group. Then, the cultures trade visitors who actually try to understand the other culture they are visiting. They inevitably make cultural mistakes, and some are even asked to leave. After all students have had an opportunity to visit and interact, the entire group is brought together for debriefing.

The experience teaches:

The power of culture

The discomfort associated with being in a culture where you do not know the rules

The comfort of being at "home"

What one needs to do to have a successful cross-cultural experience?

“Bafa Bafa” is available from Simile II, P.O. Box 910, Delmar, CA 92014,

619-755-0272.

2. Discussion: Parable of the Sadhu

This is another good place to use the Harvard Business Review case, “The Parable of the Sadhu.” Discussing it at this point in the course, allows you to revisit many of the major themes in the course: values, values in conflict, ethical decision making frameworks, moral awareness, goals, leadership, rewards, cross-cultural issues, etc. Note: It is difficult, if not impossible, to obtain the video version of “The Parable of the Sadhu.” However, the print version is readily available through Harvard.

3. Suggested Final Exam

An idea for a final exam that has worked very well is to have students analyze a film using the various concepts from the course. Select a film such as Wall Street or Dead Poets’ Society or The Insider. Instruct students that they can watch the film as often as they would like and they can discuss the film with others. However, they must analyze the film on their own, using concepts they have learned from the course. In most of these films, we have identified well over 20 concepts.

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