Introduction to the Module
THOUGHTS TO PONDER:
• ‘A business that makes nothing but money is a poor kind of business’ (Henry Ford, US industrialist 1863-1947) • ‘The one and only social responsibility of business is to make profits’ (the economics guru Milton Friedman) The subject of ethics forms a central element in managerial responses to social forces. In many situations, an individual must reach a personal decision in regard to what is the right thing to do. In this process, the individual may look to philosophy or religious beliefs concerning what is right and wrong or may turn to history and laws for guidelines.
Recent years have seen a proliferation of academic articles and media commentary concerning “corporate social responsibility”, with the search for consistent corporate positions on these issues. Many firms have sought to develop guidelines and formal statements that can assist employees when they confront ethical dilemmas. However, it is not easy for an organization to develop clear and useful pronouncements. Values, cultural behaviors, and even ethical standards differ significantly among countries. For some issues, such as those relating to social interaction, there may be a general acceptance of local norms. For certain issues, such as prohibitions against bribery of government officials, some firms attempt to enforce their home-country code of conduct globally while realizing that this could handicap their financial success; other firms adapt to local practices. In each country, managers need to understand such cross-cultural differences and consider what adjustments in corporate practices would be appropriate.
Recent years have also witnessed a proliferation of stakeholder groups who believe that their views should be incorporated into the decision-making process of the firm. Stakeholders may use a variety of mechanisms to influence corporate decisions.
Several subject areas have become particularly important as the focus for corporate social responsibility and stakeholder actions. Concerns about environmental pollution now cover a host of corporate activities. Investments in new technologies to reduce pollution may be expensive, and so investment decisions can also be affected by differences in environmental regulations and labor standards, as firms locate in countries with lower standards and/or lax enforcement. There is a concern that corporations may tend to invest in less developed countries because they have lower environmental standards. At the same time, air and water cross national boundaries, and so corporate pollution has increasingly become an international concern, with new international agreements creating new environmental regulations.
Government programs and policies are affected by societal pressures, and societal pressures may also affect a firm directly. Societal forces differ significantly among countries, and they change significantly over time. Corruption and human rights violations have become international concerns rather than just domestic issues and have led to new international agreements that seek to create common standards. For businesses, trade sanctions in response to human rights violations pose a recurring dilemma. The repressive violation of human rights has led people throughout the world to urge their governments to place embargoes on certain countries, placing a halt to trade and investment with them.
The current ‘antiglobalization debate’ deserves consideration because many express the view that poverty and inequality have been exacerbated by the reduction of trade and investment barriers. Antiglobalization protestors blame corporations for exploiting less developed countries in their trade and investment decisions. This debate extends to the obligations that rich nations should accept in assisting poor nations in the development process, including criteria for foreign aid and debt...
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