INTERNATIONAL
MANAGEMENT:
EXPLORATIONS
ACROSS CULTURES
PART 4: Exploring
management ethics and the
dimensions of corporate
social responsibility
CHAPTER 10: Looking to
the future
PPTs by Elizabeth Christopher
PART 4: Exploring management ethics: corporate
social responsibility today and tomorrow
CHAPTER 10: Looking to the future
• The objective of this chapter is to continue the
argument in Chapters 4 and 9 that social
responsibility comprises the obligations on
organizations to protect and enhance society.
2
History of business ethics
• Many transnationals are learning to manage their
businesses profitably and contribute to societies
overall through economic, environmental and social
action: thus they ‘do well by doing good’.
• The movement is not limited to the Western world. In
China environmental degradation has been
increasing and China's environmental protection
industry has developed in response.
3
Open and closed societies
• In Asian companies, corporate governance is now
regarded as critical to their health.
• However, imposition of the entire Western model
without modification is likely to be unproductive.
• There are fundamental cultural differences between the
Anglo-Saxon and East Asian economies.
• The United States and Europe are open societies with
written constitutions that protect freedom.
• Asian societies tend to have a more closed nature and
management in Asian companies is more reluctant to
accept openness and transparency and to admit fault.
4
Most Asian firms are owned and managed by family
members: no need for written policies and procedures
• In most cases non-executive directors accountable to
chairman or MD and trust their decisions.
• Foreign investors have found it difficult to protect their
interests by law. In China, the economy is still
dominated by state-owned enterprises that used to
operate under a ‘budgeted economy’.
• China’s move towards a market economy has entailed
rules and regulations for equity but there is lack of social
capital and institutional activities to promote corporate
governance.
5
The Kyoto Protocol
• An international agreement linked to the UN
Convention on Climate Change. It sets a binding target
for 37 industrialized countries and the European
Community for reducing greenhouse gas emissions on
an average of 5% against 1990 levels over the period
2008–12.
• Solutions to climate change are relatively
straightforward – such as phasing out fossil fuels – but
difficult to implement because the politics driving
negotiations are controversial; and the future of the
Kyoto Protocol is a critical issue.
6
Carbon tax
• Based on a global price for carbon, it should be the
simplest, most logical way to use market forces to bring
down greenhouse gas emissions.
• But the idea meets fierce resistance from the private
sector, so not politically feasible in most countries.
• The United States is the only major industrialized
country which has not ratified the protocol but
collectively the developed countries that did were on
track in 2011 to achieve the target of an average
decrease in emissions of 5.2% below 1990 levels between
2008 and 2012.
7
Commercial opportunities
• Corporate leaders are investing in new types of
education, technologies, skills, knowledge and expertise
that will be needed for transition to a green economy,
including transfer strategies for developing countries
and industrial strategies for developing green
technologies and green jobs.
• Commercial opportunities are to be found in climate
financing, green banking and green insurance, as well as
risks linked to regulation, reputation, and the financial
and the physical aspects associated with climate change.
8
2011 report by UN agencies, Oxfam and World
Resources Institute
• It claimed that climate adaptation offers competitive
advantages in new opportunities for the private sector.
• Recommendations: businesses should integrate climate
adaptation with core strategic planning and build a
portfolio of climate-resilient goods and services;
financial and risk-reduction incentives to stimulate the
market; new forms of public–private partnerships.
• The well-being of societies most vulnerable to climate
change is inescapably linked to the viability of business.
9
Social responsibility as sustainable growth strategy
• Increased visibility of corporate dealings means that
corporate social responsibility is an active agent in the
success or failure of a business.
• Corporations are bound in most countries to comply
with legislation to safeguard public interest; but seen
traditionally as a regrettable cost with no benefits.
• Now many managers have begun to view corporate
social responsibility as a platform for growth and
differentiation, from which to create new revenue
streams and provide competitive advantage.
10
The natural environment
• Until recently, many organizations dumped sewage,
waste products from production and rubbish into
streams and rivers, into the air and on vacant land.
• Laws now regulate disposal of waste.
• Companies are developing economically feasible ways to
minimize acid rain and global warming; to avoid further
depleting the ozone layer; and finding other methods of
handling sewage, hazardous wastes and ordinary
rubbish.
• Many e-commerce businesses and transactions reduce
both energy costs and pollution.
11
Philanthropy and strategy
• To have a lasting impact on society and on the business,
the closer philanthropy is in line with core strategy the
easier it becomes to support it.
• Philanthropy includes responsibility towards alleviating
the dreadful poverty, sickness and malnutrition of
millions of people in developing and underdeveloped
countries.
12
The pharma industry globally spends billions
annually on research and development of new drugs
• Despite its notable contributions to human progress, the
industry has come under fire from human rights groups
for too little attention to life-saving drugs and resisting
the manufacture and distribution of generic drugs in
poor countries.
• One possible compromise between profit and
philanthropy might be for the pharma giants to mutate
into a variety of smaller, specialist entities.
13
Criticism of international subsidiaries
• In general, local operations of international firms are
accused of a unethical activities on a regular basis, eg:
o They raise needed capital locally, hence increasing
interest rates in host countries.
o The majority shareholding (even 100%) of most
subsidiaries continues to be owned by parent companies.
o Host-country people do not have much control over local
subsidiaries and key positions are reserved for
expatriates, rather than host-country nationals being
recruited and trained to take managerial
responsibilities.
14
Criticism of international subsidiaries (continued)
• Subsidiaries do not always adapt the technology of the
home country to local conditions; R&D by the parent
and transfer restricted.
• Home firms buy host-country firms rather than
developing new facilities, and tend to dominate major
industrial sectors.
• They contribute to inflation by stimulating demand for
scarce resources while earning excessive profits and fees.
• They are not accountable to their host nations, nor are
they concerned with host-country development; and
promote demand for luxury goods instead of essentials.
15
Balancing act
• The trick for all international corporate leaders is to
balance the need to maintain competitive advantage
with social responsibility.
• For the most part they are quite sensitive to issues of
ethical behaviour – if only because of pressure from the
public, from interest groups worldwide, from legal and
governmental concerns and because of concern over
media exposure.
16
Under scrutiny
• International trade is more under the scrutiny of nongovernment agencies and other guardians of society – to
be examined for irresponsible behaviour.
• However, fundamental changes are occurring for the
better in the management of global enterprises.
• Steve Jobs’ creative and technologically brilliant
'iLeadership' has inspired and driven breakthroughs in
other organizations.
17
Visionary leaders
• After the death of visionary leaders, their innovations
and social movements live on.
• Because of Steve Jobs, computers are taken for granted
as essential and ubiquitous communication tools.
• Granted that organizational structures implement,
support and maintain such visions, and that individuals
on their own cannot succeed without this infrastructure,
nevertheless honour should be given where it is due.
• Original ideas can only come from uniquely creative
minds.
18
Transformations in product, talent, organization and
marketing
• Traditionally, marketing by large firms was through
emphasis on brand names and massive expenditure on
campaigns.
• But Jobs’ boast that Apple was ‘the biggest start-up on
the planet’ challenged existing concepts.
• The idea of operating with the attitude of a technology
start-up was revolutionary. PepsiCo joined the
revolution with an international contest to identify the
best start-ups in the European tech industry.
19
Starting up on the internet
• Established businesses risk damage when they turn
to marketing via the internet. However, they cannot
avoid the impact of electronic commerce and need to
come to terms with it.
• The internet links companies directly to customers,
suppliers and other interested parties.
• It allows firms to bypass others in an industry's
value chain, and is a tool for developing and
delivering new products and services.
20
Starting up on the internet (continued)
• It enables companies to dominate the electronic
channel of an entire industry or segment, to control
access to customers and to set business rules in
cyberspace.
• A major disadvantage is that companies cannot
continue to grow and develop in their old forms as
big bureaucratic organizations. If they try to do so
they are likely to stifle innovation.
• A more subtle threat is loss of motivation after
acquisition of wealth and success.
21
Virtual corporations
• Internet tactics include a resolve to take risks and
adapt quickly by trying a number of different
approaches, finding one that works best and
building on it.
• This is a totally different mindset from those of huge
corporations with palatial head offices and multiple
subsidiaries.
• 'Virtual corporations': small businesses networking
in joint ventures, then disbanding; with great
flexibility for fast-track projects and low overheads.
22
Cloud computing
• Shifting computing tasks and storage from local
desktop PCs and company servers to remote systems
across the internet.
• Cloud computing services are helping to change the
face of businesses across the globe.
• Many companies and professional services use them
to slash costs without losing status by transforming
themselves into virtual organizations.
23
Cloud computing (continued)
• Cloud-based technology is a great equalizer: very
small companies can present themselves as fully
professional entities; and companies of any size
become more accessible anywhere in the world.
• It saves costs and eliminates the problem of
managing and integrating multiple applications and
vendors.
• It is easier to attract the best people if employers can
promise a better quality of life by letting people
work from home or move easily from place to place,
for instance if their partners are transferred.
24
Raising the cash
• Getting from proof-of-concept to maturity can cost a
lot of money.
• At this stage many start-ups run into trouble.
• In 2011 there was a big jump in calls to venture
capitalists from entrepreneurs seeking further
investment.
• They now need funding from mainline firms such as
Benchmark Capital to take them to the next level.
• Benchmark focuses only on helping entrepreneurial
operations such as Nextdoor, a private social
network for neighbourhoods.
25
Face-saving acquisition – selling the business,
sometimes at a loss, before it has a chance to grow
• Acquiring companies often are interested mainly in
the start-up's staff, whose talents may be transferred
to the core business.
• Another way to manage a cash-strapped start-up is
simply to muddle along without ever achieving a scale
that might be possible with more money.
• Some entrepreneurs will fail outright.
26
Protecting people
• Modern travellers face new risks; technologies have
evolved to protect individuals and small groups by
linking them electronically with their organizations.
• Instant communications services are ideal for
emergencies when rapid response is vital.
• Managers of emergency crews can locate and speak to
them instantly, on a one-to-one basis, one-to-many, or
as a broadcast communication to a group.
• Crew members have an added layer of security as
they can contact the control centre for instant
assistance.
27
Privacy concerns
• Effectiveness of mobile phone security can only be
maintained if managers can tell exactly where their
staff are at any given moment.
• Naturally some employees object to having their every
movement monitored.
• There is an argument that the very act of surveillance
changes people by altering their behaviour.
• Maybe technology is not neutral; digital media are
profoundly transforming consumer behaviour.
28
Espionage
• More prevalent and sophisticated than ever.
• Telephone encryption technology is becoming more
important as more people are able to listen in on
conversations.
• Calls can be intercepted, locations traced and
information pieced together. Hence recent innovations
in encryption systems.
29
Technologies of surveillance
• From computer networks to grocery store checkout
scanners, it is increasingly easy for governments,
employers, advertisers and individuals to gather
detailed and sophisticated information about anybody
and everybody.
• We should question the impact of these new
technologies of surveillance on individual privacy and
collective culture.
30
Surveillance as a subjective force
(literally ‘watching over’)
• Technology makes surveillance increasingly global and
integrated: personal data flow across national
boundaries, and between private and public sectors.
• Online surveillance tools have reached new levels of
precision and their use compels the surveyed to adopt
the values that led to their construction.
• Cyberspace theory explains how virtual environments
restructure the nature of individuality.
31
The new class of generic top-level domains
• .honda may be possible but generic top-level domains
may not be accessible to all.
• For example, Lisa with her lingerie boutique in
London is unlikely to be able to register .lisa.
• The ubiquitous dot com is probably safe for a long
time and some firms and individuals will prefer it
because it allows somebody else to run the
infrastructure.
• A major concern may be that the rich will get richer
and the poor poorer as a result of 'selling off the
internet real estate'.
32
The internet of things. Brand names are not the only
'things' to go online
• Technology allows physical objects to do the same.
• A pair of jeans may one day start silently tweeting the
wearer's location as soon as they walk out of the shop.
• RFID chips use radio waves to send data to be
connected to the web, one of the current ways of
allowing physical objects – cars, homes, even farm
animals – to go online.
• Smart buildings and intelligent cars with assigned IP
addresses are already making cities smarter, while
elderly people can have sensors in their homes for
remote monitoring.
33
Privacy is a consideration in many monitoring,
tracking and tracing devices
• Stores such as Wal-Mart use RFID tags to scan items
and track products, but they can read documents
equipped with the same kind of chip, such as people's
passports or driving licences.
• This could lead to identity theft; although the tag is
supposed to be removed at the checkout, if it is not the
item could be tracked on the street.
• Even if RFID tags are thrown away, they can still be
scanned; hackers know how to decode them; and
because the information is transmitted via radio
waves, people can simply listen in.
34
The internet of things raises questions around the
changing roles and power relations between
informed citizens, organizations and institutions
• One is how to balance security with end-user
programming, convenience and innovation.
• Another is how to find a new legal definition of
privacy in a world where communicating objects are
likely to give the impression that they can substitute
for humans to take decisions.
• A third question is how to deliver ethics with
technological design.
35
Key points
1. Social responsibility is the set of obligations of an
organization to protect and enhance the society in
which it functions. In international business
managers must balance global responsibilities against
demands of local conditions.
2. Corporate social responsibility refers to the ways in
which company leaders can manage their businesses
not only profitably but also in ways that contribute to
society overall through economic, environmental and
social action.
36
3.
o
4.
5.
Key points
Organizational stakeholders are those directly
affected by the practices of an organization.
In a sense the natural environment is also a
stakeholder; and businesses have a role to play in
alleviating global poverty.
Social responsibility is now seen as a sustainable
growth strategy for competitive advantage.
There are fundamental cultural differences between
the Anglo-Saxon and East Asian economies.
Convergence is taking place but on standards of
governance, not necessarily its forms. Culture and
corporate governance are interdependent.
37
Key points
6. Solutions to climate change are difficult to implement
because the politics are controversial; and the future
of the Kyoto Protocol is a critical issue.
7. Under the TRIPS agreement drug manufacture and
purchase entail paying royalties to the owners. This
restricts the availability of low-cost generic medicines,
but a growing number of pharmas are trying to
develop cheaper drugs and vaccines for diseases of
the developing world. However, drug counterfeiting
undermines the medical system and puts patients'
lives at risk.
38
Key points
8. If even a fraction of spending on preventive medicine
and luxury pharmaceuticals in rich countries were to
be shifted to developed countries, this would benefit
the health of everyone and make a huge difference to
the health of poorer nations.
9. Development of medicines for human use is evolving
into a pattern whereby each step is simultaneously
undertaken or managed by a number of small and
highly skilled independent companies.
39
Key points
10. Local operations of international firms are accused of
raising needed capital locally, with majority stock
owned by parent companies. Key positions are
reserved for expatriates. Technologies are not always
well adapted. Investors tend to buy existing firms in
host countries rather than developing new productive
facilities. They tend to dominate major industrial
sectors and contribute to inflation by stimulating
demand for scarce resources while earning excessive
profits and fees. They are not accountable to their
host nations, nor are they concerned with hostcountry development, rather promoting demand for
luxury goods instead of essentials.
40
Key points
11. Corporations continue to seek promising start-ups.
Virtual corporations have great flexibility for fasttrack projects and can operate at very low overheads.
Cloud-based technology allows very small companies
to present themselves as fully professional entities,
and companies of any size become more accessible.
12. Early-stage IT companies have been set up by the
dozens in recent years but development is expensive
and many firms fade away or are bought up by bigger
companies.
41
Key points
13. Instant communication services are ideal for
emergencies but for the sake of security telephone
encryption technology is becoming more important.
14. Effectiveness of mobile phone security can only be
maintained if managers always know where their
staff are; some employees object to having their
movements monitored.
15. New technologies impinge on individual privacy and
collective culture. Cyberspace theory explains how
virtual environments restructure the nature of
individuality.
42
Key points
16. When brands have their own internet domains the
dominance of .com might be at an end, though one
concern is that the rich will get richer and the poor poorer
as a result of 'selling off the internet real estate'.
17. Technology now allows physical objects to go online: the
‘internet of things’.
18. Challenges include balancing security with end-user
programming, convenience and innovation; finding a new
legal definition of privacy; and incorporating ethics with
technological design.
43
Definitions
1. Social responsibility is...
• Answer: the set of obligations of an organization to protect and
enhance the society in which it functions.
2.Corporate social responsibility is...
• Answer: comprised by the ways company leaders not only
manage their businesses profitably but also contribute to society
overall through economic, environmental and social action.
3. Organizational stakeholders are...
• Answer: those directly affected by the practices of an
organization.
44
Definitions
4. The TRIPS agreement is...
• Answer: an agreement under which drug
manufacture and purchase entail paying royalties
to the owners.
5. The ‘internet of things’ is...
• Answer: a technology that allows physical objects
to go online.
45