What is CSR

Corporate Social Responsibility is a form of corporate self-regulation integrated into business model. CSR policy functions as built-in, self-regulating mechanism whereby a business monitors and ensures its active compliance with the spirit of law ethical standards, and international norms. The goal of CSR is to embrace responsibility for the company actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public who may also considered as stakeholders.

Difficulties of Managing CSR Across Border

The role of the corporation in society varies across countries is the challenges facing corporations in establishing their policy toward corporate social responsibility.

·         Multinational corporations, which by definition operate in multiple political and legal jurisdictions - Are continually attempting to find the proper balance between the roles and behaviors expected by their home government and those expected by all the host governments in the countries in which they operate.

The approach (by Rob van Tulder & Alex van der Zwart) suggests are the main actors in the policy formulation process:

The Aglo-Saxon Approach

By the analysis of van Tulder and van der Zwart’s:

• Government must contract with the private sector to purchase goods or services, it should be done through an open and competitive bidding process.
•   Based on the analysis, when the business and the government fail to maintain sufficient separation, Anglo-Saxons deem that failure as corruption.
•  U.S – Anglo-Saxons focuses on competition, not cooperation.

The Asian Approach

•  Many Asian countries such as Japan, Korea, China and Indonesia come to mind-rely on close cooperation between the private sector and the government.
• For example, the economic influenced of Japan’s keiretsu and Korea’s chaebol rests on their willingness to do the government’s bidding and vice-versa.
• “Asian Way” are called by mostly of Asian leaders that view this cooperation the linchpin of their successful development strategies.
• The important thing that we should remember are, based on the perspective of Anglo-Saxon approach, the “crony capitalism” is viewed as the relationship between business and government. Then, the civil society plays a minor role in this process.

The Continental European Approach

• In continental European countries, the three actors have more cooperative ways of working with one another.
• In germany, large employer associations bargain with umbrella labor organizations under the watchful supervision of the government.
• Germany's codetermination policy gives workers a well-defined role in the governance of large business. 
• In general, the public policy process is based upon creating consensus among the three actors. Cooperation, not competition is higlighted of this approach
• Based on the three approached that have been explained, conceptualizes the responsibilities of government, business, and civil society quite differently. 

Regulating International Ethics and Social Responsibility

There has a few description of the important and representative regulations:

Foreign Corrupt Practices Act (FCPA)

The FCPA prohibits U.S. firms, their employees, and agents acting on their behalf from paying or offering to pay bribes to any foreign government official in order to influence the official actions or policies of that individual to gain or retain business.
For example, Baker Hughes paid a $44 million fine to settle charges it violated the FCPA in Angola, Indonesia, Nigeria, Russia, and Uzbekistan. The FCPA does not outlaw routine payments, regardless of their size, made to government officials to expedite normal commercial transactions. 

Alien Tort Claims Act

Alient Tort Claims Act has recently emerged as a potentially significant law affecting U.S. multinational corporations. U.S multinationals may conceivably be responsible for human rights abuses by foreign governments if the companies benefited from those abuses.

For instance, the U.S Court of Appeals for the Ninth Circuit recently allowed citizens of Burma to proceed with a case accusing Unocal of knowingly using forced labor by the Burmese military.

Anti-Bribery Convention of the Organization for Economic Cooperation and Development

The Convention is an attempt to eliminate bribery in international business transaction. Its centerpiece mandates jail time for those convicted of paying bribes.

International Labor Organization (ILO)

Became to monitoring working conditions in factories in developing countries. ILO has begun to systematically inspect working conditions in countries such as Bangladesh, Combodia, and the Philippines. Corporation find that such an independent inspection mechanism helps allay concerns from consumer activist groups, factory owners are also finding that subjecting themselves to regular ILO inspections helps them establish new business relationships with multinational corporations.  

SOCIAL RESPONSIBILITY IN CROSS CULTURE AND INTERNATIONAL CONTEXTS

     Ethic in business relate to individual managers and other employees and their decision and behaviors. Organizational themselves do not have ethics but do relate to their environment in ways that often involve ethical dilemmas and decisions by individuals within the organization. These situations are generally referred to within the context of the organization's social responsibility.
     Social responsibility is the set of obligations and organization undertakes to protect and enhance the society in which it functions. The complexities for managers in an international business are clear.
Clear means balancing the ideal of a global stance on social responsibility against the local conditions that may compel  differential approaches in the various countries where the firm does business.

AREA OF SOCIAL RESPONSIBILITY

Organizations may exercise social responsibility toward their stakeholders, toward the natural environment, and toward general social welfare. Some organizations acknowledge their responsibilities in all three areas and strive diligently to meet each of them, while others emphasize only one or two areas of social responsibility.

1. Organizational Stakeholders
2. The Natural Environment
3. General Social Welfare 

 Organizational Stakeholders

  Organizational stakeholders are those people and organizations that are directly affected by the practices of an organization and that have a stake in its performance. Most companies that strive to be responsible to their stakeholders concentrate first and foremost on three main group;

• Customers

    Organization that are responsible to their customers strive to treat them fairly and honestly. They pledge to charge fair price, to honour product warranties, to meet delivery commitments, and to stand behind the quality of the product they sell.

•  Employees

  Organizations that are socially responsible in their dealings with employees treat their workers fairly, make them  a part of the team, and respect their dignity and basic human needs.

• Investors

   To maintain a socially responsible stance toward investors, managers, should follow proper accounting procedures, provide appropriate information to shareholders  about the financial performance of the firm, and manage the organization to protect shareholder rights and investments.

   Moreover, they should be accurate and candid in their assessment of future growth and profitability and avoid even appearance of improprieties involving such sensitive areas as insider trading, stock price manipulation, and the withholding of financial data.

The Natural Environment

  A second critical area of social responsibility relates to the natural environment . Not long ago,     many organizations indiscriminately dumped sewage, waste products from production and trash into streams and rivers , into the air, and on vacant land.Many laws regulate the disposal of waste  materials.In many Instance, companies themselves have become more socially responsible in their  release of pollutants and general treatment of the environment.

Companies need to developed economically feasible way to avoid contributing to acid rain and global warming;to avoid depleting the ozone layer and to develop alternative methods of handling  sewage, hazardous waste and ordinary garbage.

  

General Social Welfare

• Some people believe that in addition to treating their stakeholders and the environment  responsibly, business organizations also should promote the general welfare of society. 
•  Some people also believe that organizations should act even more broadly to correct the  political and/or social inequities the exist in the world

 

MANAGING ETHICAL BEHAVIOR ACROSS BORDERS

Ethics reside in individuals, but many businesses nevertheless endeavour to manage the ethical behaviour of their managers and employees by clearly establishing the fact that they expect them to engage in ethical behaviours. The most common way of doing this are through the use of guidelines or codes of ethics, ethics training and organizational practices and the corporate culture.

• Guidelines and Codes of Ethics

       Many large multinationals have written guidelines that detail how employees are to treat  suppliers, customers, competitors, and other constituents. Other company also have developed formal codes of ethics.  codes of ethics written statements of the value and ethical standards that guide the firms' actions.
       a multinational firm must make a decision  as to whether to establish one overarching code for all of  its global units or to tailor each one to its local context. In order for a code to have value, of course it must be clear and straightforward, it must address the major elements of ethical conducts relevant to its environment and business operations, and it must be adhered to when problems arise.

• Ethic Training

      
       Offering employees training in how to cope with ethical dilemmas are the way that address ethical issues proactively. For example, line manager lead training sessions for other employees and the company also has an ethics committee that reports directly to the Board of Directors.
      The training sessions involve discussions of different ethical dilemmas that employees might face and how they might best handle those dilemmas. One decision for international firms is whether to make ethics training globally consistent or tailored to local contexts. Regardless of which approach they use, though, most multinationals provide expatriates with localized ethics training to better prepare them for their foreign assignment.

• Organizational Practices and The Corporate Culture

      Organizational practice and the corporate culture also contribute to the manager of ethical behaviour. If the top leaders  in a firm behave in an ethical manner and violations of ethical standards are promptly and appropriated addressed, then everyone in the organizational will understand that the firm expects them to behave in an ethical manner .
      Ethical manner is to make ethical decisions and to do the right things. But, if top leaders appear to exempt themselves from ethical standards or choose to ignore or trivialize unethical behaviour, then the opposite message is being sent.

TEST YOUR KNOWLEDGE

Written Questions

1.      People and organizations that are directly affected by the practices of an organization and that have a stake in its performance

2.    Firms take to heart the arguments in favor of social responsibility, view themselves as citizens in a society

3.    Alien Tort Claims Act

4.    Firm meets its legal and ethical requirements but will also go beyond these requirements in selected cases

5.     Things a person feels to be important

6. Anti-bribery Convention of the Organization for Economic Cooperation and Development

7.     Organization leadership and culture, Whistle-blowing

8.    Formal and thorough analysis of the effectiveness of the firm's social performance

9.    Obstructionist Stance, Defensive Stance, Accommodative Stance, Proactive Stance

10. Firms take to heart the arguments in favor of social responsibility, view themselves as citizens in a society

TEST YOUR KNOWLEDGE

Part 1: Matching Questions

1.     Firms generally adopt one of four different basic approaches to Managing Social Responsibility Across Borders (in order from least responsible to most responsible):

2.     Major watchdog for monitoring working conditions in factories in developing countries

3.     Corporate Social Audit

4.     Legal Compliance

5.     Most companies that strive to be responsible to their stakeholders concentrate first and foremost on three main groups:

A Extent to which the organization conforms to regional, national, and international laws

B Customer, Employees, Investors

C International Labor Organization (ILO)

D Formal and thorough analysis of the effectiveness of the firm's social performance

E Obstructionist Stance, Defensive Stance, Accommodative Stance, Proactive Stance

Part 2: Matching Questions

1.     Obstructionist Stance

2.    Legal Compliance

3.    Most companies that strive to be responsible to their stakeholders concentrate first and foremost on three main groups:

4.    Defensive Stance

5.    Dutch CSR experts Rob van Tulder and Alex van der Zwart suggest there are three main actors in the policy formulation process:

A Organization will do everything that is required of it legally but nothing more

B The state (which passes and enforces laws), The market (which utilizes inputs and allocates outputs to members of the society), Civil society (includes churches, charitable organizations, labor unions, etc)

C Customer, Employees, Investors

D Extent to which the organization conforms to regional, national, and international laws

E Organization does as little as possible to address social or environmental problems

TEST YOUR KNOWLEDGE

True/False Questions

1.   Common ways of Managing Ethical Behavior Across Borders (3): → Their stakeholders, The natural environment, General social welfare

 True         False

2.  A useful way to characterize ethical behaviors in cross-cultural and international context is in terms of (3): → How an organization treats its employees, How employees treat the organization, How both the organization and its employees treat other economic agents

 True         False

3.  Social Responsibility (Corporate Social Responsibility (CSR)): → Set of obligations an organization undertakes to protect and enhance the society in which it functions

 True         False

4.  Whistle-Blowing → Disclosure by an employee of illegal or unethical conduct on the part of others within the organization

 True         False

5.     Dutch CSR experts Rob van Tulder and Alex van der Zwart suggest there are three main actors in the policy formulation process: → The state (which passes and enforces laws), The market (which utilizes inputs and allocates outputs to members of the society), Civil society (includes churches, charitable organizations, labor unions, etc)

 True         False

6.    Organizations may exercise social responsibility toward (3): → Their stakeholders, The natural environment, General social welfare

 True         False

7.   US multinationals may conceivably be responsible for human-rights abuses by foreign governments if the companies benefited from those abuses → Customer, Employees, Investors

 True         False

8.    A useful way to characterize ethical behaviors in cross-cultural and international context is in terms of (3): → Guidelines and codes of ethics, Ethics training, Organizational practices and the corporate culture

 True         False

9.    Codes of Ethics → Written statements of the values and ethical standards that guide the firms' actions

 True         False

10. Organizational Stakeholders → People and organizations that are directly affected by the practices of an organization and that have a stake in its performance

 True         False

NATURE OF ETHICS AND SOCIAL RESPONSIBILITY

The basic reason for the existence of a business is to create value (usually in the form of profits) for the owners. Furthermore, most individuals work in order to earn income to support themselves and their families. As a result, the goal of most decisions made on behalf of businesses or individuals in business is to increase revenue (for business and / or individual) and cut spending (again, for business and / or individual). In most cases business decisions, and engage in behavior, for both their personal behavior and conduct of their organizations, which can be accepted by society. But sometimes they deviate too much from what other people see as acceptable.

In recent years, it seems that the incidence of behavior that is unacceptable to the business and / or people in the business has increased. No matter whether this increase is real or just an illusion, like a high-profile and well-documented cases such as Enron, WorldCom, Tyco, and Arthur Andersen will certainly attract the attention of managers, investors, and regulators. The business world is becoming increasingly internationalized, so too are the concern for ethics and social responsibility by managers and their business running.

Ethics is defined as an individual's personal beliefs about whether the decision, behavior or action is right or wrong. So, what is ethical behavior vary from one person to another? The concept of ethical behavior usually refers to behavior that is appropriate to the norms generally accepted. Unethical behavior, then, is behavior that does not conform to generally accept social norms.

These values also affect one's ethical standards. On the other hand, those who are clearly creating a family and / or friends as their top priorities will adopt different ethical standards. People who use the law generally reflect the existing informal social norms of ethical standards - members.

This suggests the following general definition:

* Individuals have their own personal belief system about what is ethical and unethical behavior.

* The people from the same cultural context are likely to hold the same, but not necessarily the same - beliefs about what is ethical and unethical behavior.

* Individuals may be able to rationalize its behavior based on the situation.

* Individuals may depart from their own systems based on the situation.

* Ethical values are heavily influenced by the culture and customs of the country. Values are the things one feels to be important. Culture has a direct impact on the value system of the members of the culture. In turn affects the way individuals define ethical than unethical behavior.

Members of one culture may look unethical behavior, while other members can see the same behavior is considered reasonable. These differences can create ethical dilemmas concern for international business practitioners when their country’s ethical standards are different from the host country. However, we would like to emphasize that the concept of ethics is clearly an individual, rather than an organization. In general, the relationship between the organization and its environment revolves around the concept of social responsibility.

ETHICS IN THE CONTEXT OF CROSS-CULTURAL AND INTERNATIONAL

A useful way to characterize ethical behavior in cross-cultural and international context is in terms of how organizations treat employees, how employees treat the organization, and how the two organizations and their employees treat other economic agents. This relationship is shown in Figure 5.1.

How an organization treats its employee’s

One important area of cross-cultural and international ethics is the treatment of workers by the organization. At one extreme, an organization may seek to hire the best people, to provide ample opportunities for skill development and career, to give the appropriate compensation and benefits, and to generally respect the privacy and dignity of every employee. On the other hand, firms can hire using the criteria and priorities may accidentally harm the opportunity, can provide the minimum allowable compensation, and can treat employees callously and without regard to personal dignity.

In practice, the most susceptible to changes in the area of ethics , including the hiring and firing practices , wages, and working conditions, and employee privacy and respect. In some countries both ethical and legal guidelines suggest that hiring and firing decisions should be based solely on an individual's ability to perform tasks. But in other countries it is perfectly legitimate to give preferential treatment to individuals based on gender, ethnicity, age, or factors other non-work related.

Wages and working conditions, while regulated in some countries, as well as areas of potential controversy. A manager of paying workers less than he deserves, just because the manager knows the employee is not able to stop and so will not risk losing her job by complaining, may be considered unethical.

Manager of international organizations face a number of challenges that clear on this. The firm must address the specific ethical issues regarding the treatment of workers , but must also be prepared to face up to international comparison . Consider the ethical dilemmas posed by the various practices of outsourcing production to overseas locations.

Shaping perspective it can be said that the firm ethically bound to move jobs wherever possible for the lowest cost. But some critics argue that this practice is unethical, because it lowers a lot of employee contributions to the firm and ignoring the hardship imposed on employees who terminated. In some countries, such as Japan, outsourcing results in cessation of aggressive domestic firms violated the implied covenant of life -time employment opportunities. The ethical issues faced by managers of firms do not end once the production moved overseas.

For example: Some businesses in Africa have taken steps to educate their employees about how AIDS infected.

How organizations treat employees

Many ethical issues are also related to how the organization treats employees. Central issues of ethics in this regard, including conflicts of interest, confidentiality and privacy, and honesty. A conflict of interest occurs when the results of the potential benefits to individuals for harm that might organization. Ethical perceptions of the importance of ethical conflict of interest vary from culture to culture. Consider the simple example of a provider that offers gifts to employees. Some companies believe that any gifts that may pose a conflict of interest. They worry that employees will begin to favor suppliers who offer the best gifts from the best suppliers of products for the firm. To control the hazards, many companies have policies that prohibit their buyers from accepting gifts from suppliers.

Uncover the secrets of the company is seen as unethical in some countries, but not in others. Employees who work for businesses in the competitive electronics, software, fashion clothing, for example - may be tempted to sell information about the company's plans to competitors.

Consider the plight of Dura wool, an American manufacturer of steel wool. It shocked to learn Chinese laws offer little protection when a Chinese local employees leaving their company and immediately start Dura wool rival firms using this technology.

A third area of concern is the honesty in general. The problem is quite common in this area include things like using a business phone to make a personal long distance calls , steal supplies, and expense accounts . In some business cultures, the action is viewed as unethical; in others, employees may develop a sense of entitlement and believe that the potential conflict “if I worked here, then it is the responsibility of the company to take care of my needs.” Explains when individuals from the different ethical perspectives work together.

How organizations treat employees and other economic agents

A third major perspective for viewing ethics involves the relationship between the firm and its employees with the agents of the economy. The main agents include customers, competitors, shareholders, suppliers, distributors, and labor unions. The behaviors between organizations and agents which may be subject to ethical ambiguities , including advertising and promotion, financial disclosure, and purchase orders , delivery and search of customers , bargaining and negotiation, and other business relationships .

Differences in business practices across the countries to create additional ethical complexities for firms and their employees. In some countries small bribes and payments are usual and customary part of doing business; foreign companies often follow local customs, regardless of what is considered ethical practice at home.

For example: Admissibility of corruption vary from one country to other countries such as: -

• Acceptable - Russia - China - Taiwan - South Korea

• Unacceptable - Australia - Sweden - Switzerland - Austria