ETHICS AND SOCIAL RESPONSIBILITY OBJECTIVES OF THE CHAPTER The current concern that all businesses and the general public have for ethical behavior nd social responsibility is not restricted to the domestic situation. In this era ofa global sconomy, MNCs must be concerned with how they carry out their business and their so al role in host countries. This chapter examines business ethics and social responsibility in the international arena, and it looks at some of the critical social issues that will be con- fronting MNCS in the years ahead. The discussion includes ethical decision making in ‘atious countries, regulation of foreign investment, and current responses to social te sponsibility by today’s multinationals. The specific objectives ofthis chapter are: 1. EXAMINE some of the major ethical issues and problems confronting, MNCs in se- lected countries, 2. EXPLAIN some of the ways that host countries are attempting, to regulate foreign in ‘estments and why reciprocity is such an important trade issue 3. DISCUSS some of the actions being taken by selected industrialized countries to be "more socially responsive to world problems, 479480 INTERNATIONAL MANAGEMENT HORIZONS. ETHICS AROUND THE WORLD The ethical behavior of business has become a major issue. In the United State, insider trading scandals, bribes, and the MAD syndrome (Mergers, Acquisitions, and Divestitures) have received considerable media attention and aroused te public's concern about ethics in international business. Ethics isthe study of morality and standards of concluct. Ethics is important in the study of international management, because ethical behavior in one count sometimes is viewed as unethical behavior in other countries. Considerable atter. tion has been given in the management literature to ethical problems in the United States; not so well known are the ethical issues in other pars ofthe world. The fol lowing sections examine some of the ethical problems that occur in international business in selected countries Ethical Problems and Concerns in Japan In terms of both internal and external business relations, Japan, like the United States, has had more than its share of ethical problems in recent years. Some of the most devastating and widely publicized have occurred in both the political and business arenas. Political and Business Scandals Several years ago, Japan was rocked by a bribery scandal involving the Recruit Company. In an effort to curry favor, this firm had been giving politicians and influential businesspeople an opportunity to buy cut-rate stock in a Recruit real estate subsidiary. The shares eventually were listed on the public stock exchange, and the early stockholders, many of whom ‘were these targeted people, made large returns on their investment. When this in- formation became public, some members of the cabinet, including the prime min- ister, were forced to resign. ‘Since this time, there have been additional scandals. One of the more recent has been a bribery scandal involving ruling-party politicians. In this case, Japanese politicians received money from a property developer in return for helping to re- solve legal problems arising from a contract linked to building a factory? In an- other case, the official charged with running the ruling Liberal Democratic party admitted that he took campaign contributions from the head of a trucking concern and failed to report these funds.” Another major scandal in Japan has involved stock brokers, politicians, and mafia (or “yakuza”) members. Some of the country’s largest brokerages have been accused of giving inside stock tips to important politicians in return for favors Another charge has been that of reimbursing influential customers for losses in the stock market. A third charge leveled at one brokerage was that it did special favors, such as manipulating stocks owned by members of the mob and financing their fees for golf club applications. These charges resulted in resignation of the heads of two of the largest securities firms in the country. More recently, some security firms have been investigated for allegedly agree- ing to buy stocks at an inflated price, with the understanding that these securities would be bought back by the original seller at a higher price.” Instill another case five former officals of a Japanese futures investment firm were arrested for a legedly defrauding customers of almost $100 million by withholding funds it- tended for investment in Hong Kong sugar futures. In a third case, Japan’s FaiETHICS AND SOCALRESPONSIELITY 481 Fighting Back Aninereasing numberof working women in Japan fe! thay |, tect o axial harasanat. For example, oe female | Stecutve ata prestigious TOK serve company found | Stes on er desk ang so har sax if. Male colleagues | lnned up are centro reserbing the woman and on Srother occasion, they wrote te woman's nae the op fa dagram of ahuman bra, ideaing whi lobes dove her soxal obsessions, When tho woman prtete, she {es tanforedto another post andthe men were not di Sine Commenting on the pctor, te femal acute feted that she spent halo her energy tying to cae wth | te uration, wile er bosses acted as though the sa fon was something she would have to soe by here This 5078 eny eprsenttive of wht many Japanese omen ave 08d ovr the years. n facta recent Labor Minty fal raves that 2 percent of al women in management pontlons complan of sexial harassment Oni recent have thy ape aut and iesto do somtring Now thee trea gronng number of lavas charging fms with soa or seni Rarassment and seal crrination in adston oth egal acon being taken by Japanaco omen afarst ther employer, femsle smpiajee from hor courts who work for Japanaseased! mtinton- Sis aso are begining fot back. For example, some ‘Japanese firms in the United States have been ht with sex: ual harassment charges. Sumitomo Corporation, the giant traging firm, faces a complaint before the Equal Empioy- ment Opportunity Commission that its Chicago office ‘abused a female U.S. employee who worked as a sales as- Sistant. The woman charges that Japanese managers lowed pornographic materials to be ckculated and that one ‘anager continually asked her for pictures of hese in & bathing suit. The woman also has charged the fem with gi Ing her only token promotions. In another case, C. toh & Company is new tying to reach an out-t-court sattiement vith female employees at its New York offce. The UL. women employees have inated a classaction suit charg- ing the Japanese fr with sex discrimination. “The lawsuts in the Urited States are more damaging to Japanese multinationals, because thay ara being fled in a Country where sexual harassment is rowed an and courts are prepared to assess heavy damages against companies that break the law. In Japan, however, many firms sb be- love that this issue isnot a serious one. One Japanese lawyer recently stated that companies n Japan are lily to tty to handle the problem without making any significant ‘changes in the way things are done. If this is true, com- plains, lawsuits, and pressure on corporate Japan will un- ‘doubtedly continue untl equalty in the workplace receives ‘moe attention and steps are taken to rectiy @ very real problem, ‘Trade Commission began an investigation into allegations that the country's ma- jor makers of printing ink had conspired to raise prices. Changing Social Climate in Japan ‘The developments noted earlier have helped to focus the attention of many MNCs on the changing social environment in Japan. The role of business ethies in the coming years likely will differ sharply from what it has been in the past, Previously, Japanese politicians and business- People thought nothing of giving favors to each other and looking for reciprocity but this behavior appears to be changing, Influence pedaling (trying to influence others through reciprocal favors) in Japan now is serious business, and everyone from the president of a foreign MNNC to the head of huge domestic corporations such as NTT will be held to the same high standard of ethical behavior. Prejudice and Discrimination in Japan Another area where Japan has faced ethical problems is that of prejudice and lscrimination. One of the most common amples is sexual harassment in the workplace, an issue on which more and more Japanese women are fighting back, as discussed in the accompanying box, “International Management in Action: Fighting Back.” In one recent case, a Woman won a judgment of $12,500 from her company. This was the first lawsuit ver filed in Japan charging sexual harassment, and it set off a wave of concern.*482 INTERNATIONAL MANAGEMENT HORIZONS Within 48 hours of the verdict, the government hac! issued 10,000 copies of a book. let on sexual harassment, and all were quickly snapped up. Besices sex discrimination, some Japanese firms also are having problems deal. ing with minority workers. Comments made by Japanese political figures about African-Americans and Hispanics, for example, have been criticized for their dis- criminatory meaning.” Japanese businesses also have been known to engage in in. sensitive racial stereotypes. For example, a Japanese department store drew fire 4 few years ago for displaying mannequins with distorted stereotypes of black faces, and an entertainment company provoked protests by selling, Little Black Sambo dolls." The biggest furor, however, has been created by Japanese firms’ attempts to keep minority hiring to a minimum. For example, evidence shows Japanese firms that set up operations in the United States tend to favor areas where minorities in general, and African-Americans in particular, are not situated." Most people live ‘within 30 miles of their job site, and national census data show that the propen- sity to commute declines rapidly once one goes beyond this limit. One analysis found that Japanese assembly plants and supplier plants in North America are less likely to set up operations within 30 miles of areas inhabited by minorities, ‘The researchers made observations such as the following: In the course of our research, we heard Japanese managers specifically explain their de cisions on plant siting in such terms... . Des Rosiers, who has carried out several site studies for Japanese auto companies, added: “They ask for profiles of the community by ethnic background, by religious background, by professional make-up... . There are de- mographic aspects that they like. They like a high German content... [The Japanese] probably don’t like other types of profiles.” Ina similar vein, a midwestern state official responsible for recruiting Japanese firms to his state in the early 1980s reported to us that “many Japanese companies atthe time specifically asked to stay away from areas with high minority populations This study provided further evidence for prejudice and discrimination when the percentage of African-American in the local area was compared with the per- centage that were employed by Japanese firms. The results showed that African- Americans were consistently underrepresented in the Japanese plants. Legal ac- tion stemming from discriminatory employment practices has been successful against some Japanese firms in the United States. For example, several years ag0, Honda of America Manufacturing, Inc. agreed to give 370 African-Americans and women a total of $6 million in back pay to resalve a federal discrimination com plaint, and Sumitomo Bank's US. operation was handed a $2.6 million sex dis- crimination verdict These examples and empirical evidence indicate that Japanese firms in the United States have had more than their share of problems in dealing with the hit- ing and treatment of minorities and women. More important, unless Japanese firms change their approach, these problems will grow worse during the coming, years, because equality in the workplace continues to be a central social issue and indicator for social responsibility of business in the United States.” In fairness to the Japanese, however, it should be noted that they are making an effort to im- prove equality in employment, and their concern for the safety and health of workers may be unmatched anywhere in the world." Social Responsibility Implications from Lobbying Another area of growing ethical concern is the Japanese lobbying effort in the United States."* Japan, more(CHAPTER 17; ETHICS AND SOCIAL RESPONSIBILTY 483 than othér countries, spends millions of dollars every year for lobbying in Wash- ington. For this money, Japanese firms have been able to hire very savvy, effective Jobbyists, and these investments seem to be getting results. For example, when the Japanese firm Toshiba sold defense-sensitive, high-tech milling equipment to the former Soviet Union, the Japanese lobby in Washington was able to defuse the is- sue effectively. The lobbyists persuaded those writing sanctions into a final trade bill to water down the penalties for Toshiba ‘The Japanese also have been very effective in lobbying at the state and local lev- els. Here are two examples: In Illinois, where Mitsubishi Corp. opened 2 $650 million auto plant with Chrysler CCorp., Mitsubishi executives became a driving force behind the month-long Festival of Japan. Working through the Chicago Japanese Chamber of Commerce and the Japan- ‘America Society, in cooperation with the Japanese consul-general, they raised $1.2 mil- lion for the festival. The highlight of the event: a vist by then Prime Minister Nobors ‘Takeshita to meet Illinois Governor James R. Thompson and other luminaries, In the southeast, Japan's regional effort is assisted by former Georgia Governor George Busbee, a founder of the Japan/US, Southeast Assn, which groups top Japa- nese and Southeastern political ane business leaders, When a Washington problem arises, these regional networks are in place to help Japan. Says TRW's Choate [a well- known trade expert), “The Japanese government and Japanese companies are infinitely ‘more effective in lobbying in this town [than US. companies)" Is it ethical for Japanese firms to hire bank-rolled, well-connected, talented lob- byists to argue their case in Washington? Is it ethical for former US. cabinet offt- cers and elected officials to become lobbyists for Japan? Recall the furor over ex- President Reagan's receiving millions of dollars for his speaking engagements in Japan soon after he left office. Certainly, these activities are legal. Many Americans feel that the interests of the United States and Japan are not the same when it comes to business dealings, however, and that Americans are being shortchanged in the process. To the extent that these feelings (some would call them latent racism)'” persist, Japanese lobbying will continue to be an area of ethical concern during the years ahead. 4 The Status of Women Managers in Japan The number of women in manager- | ial positions in Japan has been increasing in recent years, but statistics reveal that | these opportunities still are quite limited and, similar to the US., a “glass ceiling” exists, For example, in 1979, as part of the background research for the forthcom- : ing Japanese Equal Employment Opportunity Law, a cabinet-level commission surveyed companies listed on the stock exchange and special corporations in three ‘major urban centers. The data revealed that of the 1497 companies surveyed, the average firm had 3321 employees, and of these, 242 were in management posi- tions. Women, however, constituted 23 percent of the work force of these large firms—but only 0.3 percent of those in decision-making positions. Since then, follow-up studies have tried to determine whether Japanese women Were making any headway in large firms. In 1981, the same cabinet-level com- mission found that the number of women employees had grown to 40 percent of the work force in these large firms—but still only 0.5 percent of the management group. A 1984 study found a very slight improvement, but women still repre- | sented less than 1 percent of management. In a 1989 update, the Women’s Bureau surveyed 7000 Japanese companies with 30 or more employees. This study was conducted 3 years after the Equal Employment Opportunity Law went into effect. '4840 paRTs: INTERNATIONAL WANAGEMENT HORIZONS Inthe largest frm, the Bureau found that 12 percent of companies with more than “100 workers and 67 percent of those with 1000 to 4999 workers had woman the division-hend level, For women at the section-head level, the rates were at Percent for companies with over 300 workers and 25 percent for those with 10) {o 4999 workers. For women atthe first supervisory level, which represents the Pool from which managerial personnel will be selected in the futur, the ae were 72 percent of companies with 5000 or more employees and 52 percent ot companies with 1000 to 4999 employees. Overall, the japanese Women’s Burton concluded! These gure area remarkable improvement over the situation reported in 196. They all refer, however tothe percentage of companies that report having any women at] in theic managerial ranks. The actual percentage of women in these postions reraing minuscule, According tothe national wage census for 1989, in companies employing 1.000 oF more persons, only 0.36 percent of division heads and 0.13 percent of sce heads were women but women held 36 percent ofthe... subsection-head positions By the most generous measure, women occupied only 22 percent of managerial positn, in companies with 1000 or more employees." There are a number of reasons for the lack of progress among women in large Japanese firms. One is that they often are excluded from transfers to branch offices OF posts far away from their homes. As a result, they are unable to acquire the range of experience needed for promotion to upper-level managerial positions Among those Japanese women who have been able to achieve managerial rank in large corporations, there is evidence that they have done so only after long ser vice to the company and often at the expense of marriage and motherhood. The fastest road to the top for Japanese women appears to be in small businesses, where they are able to play an important role and are recognized for their achieve. ments. The opportunities do not seem to be as promising in large firms, despite the enactment of the Equal Employment Opportunity Law that was supposed to help reduce barriers to promotion. In fact, under current interpretations of this law, firms can require women to commit themselves at the time of hiring to either (1) a traditional track with good benefits but no promotion opportunities; or 2) a career track with more rigorous standards and opportunities ostensibly equiva- lent to those offered to male permanent employees. Since most women are un- willing to opt for the latter track, businesses feel they can legitimately refuse to Promote them to higher level positions. Moreover, because few women work in government ministries that could put political pressure on companies to alter. their current practices, there appears to be little likelihood that things will change in the near future. About the only major development that could change this bleak picture for Japanese women may be the inereasing demand for skilled employees and the growing labor shortage now being brought about by declining birth rates. Commenting on this development in Japan, Steinhoff and Tanaka recently pre dicted: ‘The labor shortage will not only increase employment opportunities for women in large companies but will atthe same time lead to changes in the way large companies utilize their managerial employees. The companies assume that women are unwilling OF able to meet the high time and energy commitments the current managerial system de ‘mands, but young men are also increasingly reluctant to pay the price. As the compat nies reduce working hours, social demands, and arbitrary transfers in order #9 KeeP ; their male managers, they will also be creating a more favorable working environmentCHABTER 17: ETHICS AND SOCAL RESPONSIOLITY 485 for women. Thus Japan appears tobe at a turning point, with several factors converging 'o change both the opportunity structure and the work environment for women in mane agement." Ethical Problems and Concerns in Europe Ethical behavior in European countries is an important area of interest in interna- tional management, Because in some respects, these countries differ sharply from Japan and the United States.™ France and Germany are good representative ex. amples. One study surveyed 124 US,, 72 French, and 70 German managers." Each was asked to respond to a series of five vignettes that examined ethical situations re, lated to coercion and control, conflict of interes, the physical environment, pater- nalism, ancl personal integrity. In most cases, the U.S, managers’ responses were quite different from those of their European counterparts. The following is an ex. ample of one of the vignettes: Rollfast Bicycle Company bas been barred from entering the market in a large Asian country by collusive efforts ofthe local bicycle manufacturers. Rolfast could expect to net 5 million dollars per year from sales if it could penetrate the market. Last week » businessman from the country contacted the management of Rollfast and stated that he could smooth the way for the company to sellin his country for a price of $500,000. ‘The executives from the three countries were asked how they would respond to the request for payment. The Americans were opposed to paying the money; 39 Petent of them said that a bribe was unethical oF illegal under the Foreign Cor- rupt Practices Act, Only 12 percent of the French managers felt that way, and none of the Germans agreed. However, 55 percent of the French and 29 percent of the Germans said that paying the money was not unethical but merely the price to be paid for doing business. Part of the reason for these answers is that to date, neither France nor Germany has laws that make it a crime to bribe or corrupt a public or private official of an- other country. Legal restrictions are not the only reasons for the differences in ‘managerial views of ethical behavior, however, Here is the conflict-of-interest vi pnette that was presented to the managers: Jack Brown is vice president of marketing for Tangy Spices, «large spice manufacturer Jack recently joined a business venture with Tangy’s director of purchasing to import black pepper from India. Jack’s new company is about to sign a five year contract with Tangy to supply their black pepper needs. The contract i set ata price 3 cents per pound above the current market price for comparable black pepper imports” Should Brown sign the contract? Once again, the managers were divided regard ing what should be done ancl why. Most U.S. managers felt that signing the con. tract would be dishonest or a conflict of interest. Many of the French managers asreedi, but only one-third of the Germans indicated that they would not sign the agreement, Summing up the responses of the managers to all five vignettes, the researchers concluded lone were to generalize, the US, managers were noticeably more concerned with eth “al and legal questions. Their French and German counterparts appeared to worry486 PARTS: INTERNATIONAL MANAGEMENT HORIZONS ‘more about maintaining a successful business posture, To e sure, there was some over. 8: Ps over lapping of responses; however, the dtferences remained.” This cross-national research on ethical behavior shows that MNCs must be aware that the ethical practices oftheir home country may be quite different from, those of countries where they do business. A number of reasons account for these differences, including culture, personal values, incentives, and the obvious legal restrictions. ‘The Status of Women Managers in Europe Because most European countries have experienced only limited population growth in recent years, integration of women into the work force has become a critical goal. Similar to the United States and Japan, however, European women have encountered equal opportunity problems and a “glass ceiling” in the man. agerial ranks. The following discussion examines the current status of women ‘managers in three major European nations: France, Germany, and Great Britain, France The proportion of French women in the labor force from 1900 until 1979 remained at about 35 percent. Since then, however, more than 2 million women have entered the work force, compared with less than 200,000 men. This trend ‘would seem to indicate that women now should be gaining a greater foothold in the managerial ranks—and to a degree, this is true. Over the last 35 years, the number of women managers has increased almost ninefold, while the number of ‘managerial positions has increased fivefold. The greatest gains have been in prod- uct promotion and sales, import-export, sales administration, real estate, urban planning and architecture, socioeconomic studies, and chemistry. Table 17-1 pro- vides some of the latest available cata on French managers by function. Although French women are making strides in the management ranks, they still are underrepresented in corporate management. Table 17-1 shows that women still are far behind men in terms of corporate management and the tradi- tional functions of manufacturing and sales. A number of reasons are given for this underrepresentation. One is that promotion into top management depends on more than diplomas, abilities, and ambitions As in the United States and Japan, French women face many obstacles when trying to break the glass ceiling, As one analysis of women managers in France notes; Being a manage incades having to work long hour, travel, make difcult decisions! tmotvate people, and achieve high bjsctives “most often with limited resources and strong business competitors, For women manages it also often means ghting thin their own company to establish a reputation asa leader—since women are rarely spot taneously seen as leaders avoiding or responding appropriately to Sexist ceca tvating employees to accept and execte ther decision, and sometimes hiding thet iamily problems. Women frequently have more dificult than men getting acess 0 formation necessary to make wise corer decisions. Although its important for women to understand the organization's carer cir, few companies in France provide such information through ether equal opportunity managers or assertiveness courses™ Froma legal standpoint, French law guarantees equal treatment and equal pro- fessional opportunities. Enforcement of these guarantees is fairly weak, howevel, and organizations that could be valuable to women generally are uninvolved. Fot example, unions have generally resisted taking on women’s issues, and there afonneren 17 Tics ano soci ResPoxsiouTy 487 Function Percentage of women Percentage of men Corporate management 29 66 Manufacturing, construction 22 107 Manufacturing support services 24 a5. esearch, dovelonmant 79 129 Marketing Sales 199 ara Banking, insurance, rel estate, 40 44 tourism, transportation Administration 184 61 Finance, accounting, contol 86 57 Information ystems 78 97 Personnel, education 7 a7 (Communications 87 18 Medical, social, culture oa 24 Others 28 14 Total 100.0 1000 eee ‘The total i tas tan 100 becaute of rounding, ‘Source: Helene Alexandre, Les Fermes Cazes [Women Manages. Pas: APEC, 1850. zo organizations in France comparable to the Coalition of Labor Union Women in the United States that could promote equal opportunity issues. Even French asso- ciations of women managers are limited in their efforts and, for the most part, fo- us primarily on social networking, So, while some French companies have pro- ‘moted women into higher-level positions and have affirmative action programs in place, these firms unfortunately still are the exception rather than the rule. As one analyst recently put it, “Companies’ needs for the best possible managers will fa- vor highly qualified women; but to succeed, these women will most likely have to accept even more difficult working conditions.” Germany Before unification, 47 percent of working-age women in West Ger- many and 91 percent of those in East Germany were in the work force. In both West and East, however, women held few top management positions. Studies of large West German firms found that 5.9 percent of top managers and 7.8 percent of managers at the next level were women, but only 0.7 percent were members of managing boards of public companies. [n East Germany, one-third of all manage- ment positions were held by women, but these primarily were low-level jobs. With the unification of Germany, the status of women in management does not look any more promising, One reason is that professional qualifications appear to relate inversely to hierarchical position. Antal and Krebsbach-Gnath explained this seeming paradox as follows: ‘The higher the position, the less significance the organization attaches to... “objective” ériteria. The factors that receive more weight in promotion decisions for senior manage- ‘ment positions are both less objective and more often based on traditional male career Patterns. In effect, therefore, they discriminate against women. Among the factors listed488. pants: IVTERNATIONAL MANAGEMENT HORIZONS in one study for promotion into upper-level management were professional com, tence, effectiveness, professional experience, length of experience, time with the cue pany, commitment to the jo, and professional and regional mobility. To the extent the: “objective” factors and qualifications, such as education and training that women car consciously acquire, play a lesser role in decision making, other sociopsychological and systemic factors assume increasing importance and create less easly surmountable bar, riers to carver development for women Unlike some other countries, Germany in the last decade has introduced laws that mandate equal opportunity and the creation of equal opportunity positions throughout the public sector. Today, all German states must ensure that ther leg. islation provides for equal treatment of men and women in the workplace. On the other hand, use of quotas are unacceptable, and this makes the legislation difficult to enforce. Additionally, those individuals who are designated as equal opportu. nity officers typically have difficulty carrying out their tasks, because they often lack the needed authority to enforce their decisions. In the private sector, there has been some progress toward increasing the nume ber of women in upper-level management positions through the introduction of voluntary equal opportunity programs. Some German firms also have nominated individuals or groups and assigned them the responsibility of ensuring equal op- portunity for all personnel. Another, and more recent, development is the concla- sion of company-level, work-family agreements between employers and workers’ representatives regarding parental leave and return plans. These plans allow em ployees to take a longer parental leave than is granted by law, and to attract these employees back, these plans guarantee an equivalent job on returning from the ex- tended leave. Some analysts indicate that Germany’s growing need for competent managers likely will increase the number of women in management and the opportunity for them to achieve higher-level positions. On the other side, critics argue this is wishful thinking and that what is needed is stronger legislation. Still others con- tend! that until there is a fundamental change in the way that male managers view the role and status of women, nothing significant will happen. These arguments all point to one conclusion: Opportunities for women managers in Germany re- ‘main limited and do not seem likely to improve significantly before the turn of the century: Great Britain By the beginning of the 1990s, approximately 12 million women ‘were in the British work force, which was about 44 percent of the country’s total work force. As shown in Table 17-2, the number of women in management and re- lated occupations has been steadily increasing over the last two decades. Once again, however, as in other countries, British women are not well represented at the highest levels of most organizations. As one analyst notes: If membership in the Institute of Directors is an indicator, the proportion of women at the most senior levels in both the public and private sector remains very small, There are ‘ho woman chief executives among Britain’s top 100 companies, as listed in The Times. and a 1989 report found that among members of company boards in the 200 langest i lustrial companies in the United Kingdom, only 21 had women board members. In o- tal, 24 women were appointed, but the majority, eighteen, were either part-time of rnonexeeutive directors. Several of the appointed women had a family connection to the ‘company or a title—that of Indy of baroness.»OARETER 17) ETHICS AND SOOIALRESPONSILTY 489 nM DRITISH WOMEN IN MANAGEMENT AND RELATED OCCUPATIONS — ‘Women as a percentage of all employees in catagory category 1975 1996 1991 oneral management 97 104 = Management positions, excluding general 109 164 = management Professional and related supporting management 120 203 - and administrative positions Managers and administrators = = 308 Professional occupations = - 383 ‘Associate professional and technical occupations = = 43 ‘Wal, all management and related occupations 13 174 379 Source: New Earings Survey 1975 Pat. Table 198 aw Eurngs Survey 1986, Pan. Taba 198, Laon HMSO: M. Nayor ana: Purd, "asus of he 1991 Labour Free Savy Ehploroon aan Ae ee ‘Most women managers in Britain are employed in retail distribution, hotel and catering, banking, finance, medical and other health services, and food, drink, and tobacco: Almost all of these women managers are atthe lowest levels, and they have a long way to go if they hope to reach the top. Legislation designed to pre- vent discrimination in the work place is proving to be of limited value; however, number of steps are being taken to help British women attain equal opportunity in employment. In recent years, British women have been setting up their own associations, 1 such as the Women’s Engineering Society, to develop sources for networking and i to increase their political lobbying power. There also is a national association, known as The 300 Group, that campaigns for women seeking election to Parla. ment, In addition, women have become very active in joining management and Professional associations, such as the Hotel, Catering and Institutional Manage- ‘ment Association; the Institute of Personnel Management; and the Institute of \ Health Service Management. Women now constitute 50 percent or more of the i membership in these professional associations. At the same time, a growing number of British companies are proactively try- ing to recruit and promote women into the management ranks. They are intto- ducing career development programs specifically for women and are prepared to take whatever steps are necessary to ensure that outstanding women remain with ‘he company. For example, the National Westminster Bank allows women man agers to leave for up to 5 years to raise their children and then return to a man~ agement position at their previous level. Firms also are designing strategies to en. | Sure that equal opportunities are, in fact, being implemented. Chief executives and directors of leading companies recently have formed a group known as Op- Portunity 2000. One of the group's goals is to provide a wide range of assistance ‘o women who are interested in business careers; in particular, the focus is on helping firms to demonstrate a commitment to these goals, change their old ways of doing business, communicate their desires to potential women managers, and490 FARTS: INTERNATIONAL MANAGEMENT HORIZONS. make the necessary financial and time commitments that are needed to ensure success. While its sil foo early to say how successful Opportunity 2000 vl be these efforts do appear tobe onthe right track. One analysts summed up the cat rent status and future direction as follows: Recent forecasts of the economy in Britain have highlighted the increased dependence that companies will have on women in the twenty-first century It forecasts that there will be greater need for managers, professionals, and associated staff and that women ‘will generally represent an increasing proportion of that workforce. It remains to be seen ‘whether initiatives such as Opportunity 2000 will enable the number of women man agers to reach a self-sustaining critical mass. Women managers have made strides for. ‘ward in the last eecade. Perhaps with many companies waking up to the necessity of re- taining all good employees, more will also learn to use the full potential of their women as managers in order to benefit both the corporate and the national economies Ethical Problems and Concerns in CI Along, with the tremendous market opportunities in China are some ethical prob- lems for MNCs doing business there. After the violent, June 1989 crackdown on the student protestors in Beijing’s Tiananmen Square, many questioned whether any business should be conducted there until more freedom and human rights, were restored. As.a result, many MNCs pulled out or have not gone into China Despite the ethical implications stemming from Tiananmen Square, many MNCs were, and still are, attracted to the competitive advantages offered by China, One of these advantages is the low cost of labor. Companies as nearby a8 Hong Kong and as far away as the United States have found this cheap labor at tractive, In the case of Hong Kong, a severe labor shortage and strict labor laws have made it difficult to meet mounting work demands in industries such as clothing and toy making. In the case of US. manufacturers, many toy makers have subcontracted their work to the Chinese, because labor is such a large percentage of their overall costs. Factory workers in China are not well paid, and to meet the demand for out put, they often are forced to work 12 hours a day, 7 days a week. In some cases, children are used for this work and are paid very litte, usually only one-half of an adult's wages. The government also has been using prison labor to produce goods for the export market.* In addition, since China recently has opened up to the out side world and there has been a rush to get rich under the market economy re forms, there has been a dramatic increase in crime and illegal business activities” These developments have led to friction between the U.S. Congress and China, and they have resulted in continual efforts by the Senate to impose conditions on the renewal of China's favorable trade status with the United States." During the 1990s, the personal support of Presidents Bush and Clinton have been needed to ensure that China's most favored nation trade status remained intact." Piracy and Counterfeit Problems The US. government is taking a harder line oon Chinese piracy of intellectual property. In the case of music recordings, pirated sales in recent years were 265 percent greater than retail sales of these products, as shown in Figure 17-1. This makes China the largest pirate of this intellectual property in the world. Industry analysts also believe that 90 percent of computer software in China has been pirated from USS. firms; the same is true fora host ofCHAPTER 17: ETHICS AND SOCIAL ResPONSLTY 491 PIRATE SALES OF MUSIC RECORDINGS AS A PERCENTAGE OF TOTAL UNIT SALES; 1999 Pate uit sales, m France Bian Canada United States Hoenn Gemany Australia Argentina lodia hay Bran Hungary Souci Arabia Thalahs china Mexico es 20 ers) oo ees On) Sales of Music Recordings Total Unit Sales, 1999 ‘Soarcrremaonal Federation ate Pronographie di other electronic and technological offerings. The accompanying sidebar, “Getting Tough... Or Else,” gives some specific examples ofthis huge pirating problem. Although, to date, words are louder than actions, the Chinese government keeps promising to crack down on piracy, and a number of high-ranking people within China want to see copyright laws enforced, One recent report noted Reformist officials have told American businessmen privately that they would like China's copyright laws enforced. This camp includes officials at the influential State Science and Technology Commission as well, presumably, as the foreign-trade min- ister, Wu Li, These people have little quarrel with America’s demands that China's cus- toms officials should be given more power, that taskforces should be created in the Provinces to deal with property, and that the intellectual-property courts should be492 PARTS: INTERNATIONAL MANAGEMENT HORZONS ee, Get Tough... or Else A growing number of multinationals are very concerned about doing Business in China, and they have good rea- son to be. Within hours ofthe time their goods are on the street, many find that counterfeiters are already working ton developing their own version of the product—and in many cases, these clones look just like the original. To- dy, there are fake cans of Coca-Cola, fake MeDonald's hamburger restaurants, fake versions of the Jeeps that Chrysler manufactures with a joint-venture partner in Beijing, and fake Gillette razor blades. ‘One of the most disconcerting things for foreign MNCS in China is that counterfeiters often are blatantly obvious in ther efforts. One good example isa fast-food restaurant in downtown Shanghai about 100 yards from ‘4 MeDonald’s outlet, This restaurant uses a sign with golden arches on a red background in a way that makes it look like a McDonald's. Lawyers for McDonald's say they are looking into taking legal action. Even more disconcerting is that when counterfeiters are caught, the Chinese government often does very it Ue about it.The Gillette Razor Blade Company is a good example of this. The Huaxing Razor Blade Factory was proclucing Gillette look-alike blades and packaging them in the same blue package as that used by Gillette. After Chinese authorities raided the factory, they fined the company $3500 and told management that it was illegal to produce counterfeit blades and they swere to stop. Five ‘months later, when it became evident that the company ‘was still manufacturing the blades, there was a second raid, followed! by a fine of $3300. At that time, the man- ager was asked why he not only kept producing the blades but also used the same packaging as before, He remarked that he didnot want to throw aay packaging that had already been printed. "We didnt want to was it” he sal Will sucha “slap on the writ” type of enforcement stop the counterfeiting? Thisis unlikely, because the ns are small compared withthe revenues being generate The Chinese government also does not seem fo be interested in fling sterner measures. Infact tn sone Cases sehen MNCs have complained that counterets have gone back otheirold ways, inspectors have refused to take any adliinal action, anguing that “we aleady addressed that sce an we ae now moving ont othe matters” Such an atitude worres MNCs, Beause they fel there iso protection for their ntllectial properties Alawyer who has represented several US. companies a trademark disputes in China putt tis wy. I most counties, if you have 10 pirates, you ean 10 after one, expect seven to stop, and then figure ut how to get the remaining two. But in China, when you go after one the other nine see exactly what you're doing, Not only do they keep pirating, but you invite 10 more to join in Unless the government of China takes more stringent steps to do something about pirating and counterfeiting, MNCS likely will take action of their own. One of the 'most commonly mentioned steps isto demand that Chi- nove exports to the United States be limited and that levies be assessed! on these goods to offset the loss of rev- tenues being sustained by the US. MNCs. In the final analysis, it appears that China will have to get tough on pirates and counterfeiters... or else ‘made friendlier to the plaintiff. They know that China's own companies, such as soft ware producers, need protection from pirates." Until safeguards such as these become a reality, China will continue to be a hot bed of pirating and counterfeit activities—and MNCs will proceed with caution when doing business there. ‘The Status of Women Managers in China As in other countries, women mam agers in China confront a “glass ceiling” when trying to reach top management ranks, There are a number of reasons for this, including cultural stereotypes, 7 stricted opportunities, and of course, discrimination. Cultural stereotypes are deep-rooted and very prevalent in China, and they 8° a long way toward hindering women’s preparation for managerial roles as well aS =CHAPTER 17; ETHICS AND SOCIAL RESPONSIALTY 493 their more direct opportunities for promotion. Women have been socialized to be shy and unassertive. As a result, they often are viewed as being unprepared to.as- sume leadership positions. A common stereotype is that Chinese women are dis- organized, narrow-minded, and hard to-work with compared to men.” Such widespread thinking greatly inhibits the advancement of women in management. Coupled with this are restricted opportunities. For example, Chinese women are not well represented in the Communist party, which is one of the fastest ways | to gain upward mobility. Additionally, Chinese women are less likely to be chosen for education and training programs, again restricting their opportunity to enter the upper-managerial ranks. In particular, women typically are required to have higher test scores on university entrance exams to ensure their admission. They also face segregation on the job and, as a result, often end up with the less mean- ingful tasks. For example, men typically operate the high-tech equipment and processes, while women do the routine work. i Discrimination in the work place is both blatant and subtle. For example, women often are given additional workplace favors, such as extra rest periods, i bat in turn, these serve as the basis for bypassing them for promotions, which go instead to men who work longer hours. Additionally, women are required to re- 5 tire at the age of 60, while men can work until 65. This inhibits their career ad- | vancement and helps to prevent them from reaching senior management posi- { tions, Drawing together many of these perceptions and stereotypes, Korabik has | summed up the series of interviews that she conducted with women managers in the People's Republic of China by noting: Stereotypes in China are particularly insidious because no research exists to show them ha tobe inaccurate. Many Chinese therefore believe them to represent the “true” nature of I women and men. Government campaigns to eradicate such stereotypes have been largely ineffective, and their consequences are often not redressed because they are not \ \ viewed as discriminatory. Thus, despite many laws intended to insure equality in the workplace, Chinese women managers are still at a disadvantage compared to men.” l REGULATING FOREIGN INVESTMENT ( i ‘The regulation of foreign investment is another area of international business that | i \| ‘tas at least indirect implications for ethics and social responsibility. Many coun- tries have a growing concern regarding the ethies of an MNC’s gaining an eco- i nomic foothold and then taking the resources and profits back home. This concern i focuses on reciprocity between the home country of MNCs and the host country. The United States again provides a good example. The latest available data reveal that foreigners have invested triple-digit billions in the United States, and US. in- vestments abroad also are in triple-digit billions. Moreover, foreign investors have | Put more money into this country than US. investors have put overseas. The rapid increase of foreign investment in the United States has raised ethical concerns among many Americans, who believe that such foreign investment needs i ‘o be regulated more closely." In addition, some are concerned that countries like i Japan seem much more interested in selling to the United States than in buying. lth fom US. firms. These concerns have ethical and social responsibility implications, and they have led to regulation of acquisitions and reciprocal trade agreements in the United States."? Other countries are following the U.S. lead by also looking, ™ore closely at these two areas and how they affect their own country.494 PARTS: INTERNATIONAL MANAGEMENT HORIZONS Regulation of Acquisitions In the United States, under preliminary regulations published by the Treasury De. partment, most foreign investors now must obtain formal approval before acquir. ing a US. company. The primary exceptions are industries such as toys and games, food products, hotels and restaurants, and legal services. Acquisition re- quests are reviewed by the interagency Committee on Foreign Investment, which is made up of eight agencies and headed by the Treasury Department. The stated objective of the regulation is to prevent foreign firms from gaining control of US, businesses that are important to US. security Although at first glance this regulation might appear to be a major barrier to acquisitions by overseas investors, its scope is really quite restricted, and it applies to only a small number of deals. The Treasury Department estimates that fewer than 170 acquisitions a year are covered by this regulation; however, as noted in the following analysis, there can be far-reaching consequences: ‘The proposed regulations subject acquisitions, including those that have already been completed since the bill was passed, to divestiture over an indefinite period. They pro- vide that a transaction could be dissolved any time should a foreign investor fail to no- tify the Government, provide false and misleading information oF omit material infor- ‘mation. Foreign investors could also become subject to the law if under an acquisition loan agreement, a default would allow then to step in and control the company Other countries are following the US. lead and implementing similar regula- tory practices. For example, many Third World nations now refuse to allow MNCs to establish new operations or purchase ongoing businesses unless they first ob- tain governmental clearance. This ensures that the government remains in control of the economy and is not overly reliant on foreign companies. In practice, how= ever, many of these countries need MNC operations and are willing to accede to most requests for setting up, acquiring, or expanding local operations. ‘The countries in the European Union also are beginning to limit the business dealings of foreign multinationals. In particular, in the EU new regulations are making it more difficult for MNCs not located in Europe to do business there. ‘The EU, except for England, is particularly sensitive to the rise of Japanese indus- trialism and the likelihood that Japanese auto manufacturers will dominate the world market. The BU also is trying to support local companies by mandating that certain parts and equipment, such as computer chips, that are to be sold in Europe also be built there by firms from the EU. ; ‘These regulatory developments show that countries around the globe are con- cemed about the increasingly large amount of foreign investment being made in their economies. This is particularly true in the case of those nations that are viewed as nonreciprocal trade partners, or those which sell goods to others but do not buy from them. The Implications of Reciprocity Is there an ethical and social responsibility to engage in reciprocal trade? This question is atthe forefront of current trade talks between many counties, but e5- pecially between the United States and Japan. How much of an obligation does Japan have to import US. goods and services in light of its tremendous volume of exports to the United States? Every year, the Japanese have massive trade(CHAPTER 17; ETHICS ANO SoC RESPONSIBLITY 495 curpluses with the United States. The 1990s provide an excellent example. Despite | some success in reducing barriers in areas stich as tobacco and telecommunica- tions and the weakening of the dollar against the yen, the annual trade deficit re- mained in the $50 to $60 billion range in the mid 1990s. In recent years, the executive branch has undertaken a review of US-Japanese trade relations. One primary source of information for the analysis was a Volummi- nouis report prepared by a special task force consisting of members from both gov emment and business. The group recommended a l-year trial period during which trade negotiations would be conducted with Japan. Ifno substantive results } were achieved, the group suggested using Super 301, which is a provision of the Omnibus Trade and Competitiveness Act of 1988 that allows for sanctions against “unfair traders.” In the past few years, the United States has targeted Japan and Brazil, among others, for retaliatory action. Whether or not retaliatory action will work, the im portant thing to remember is that the United States feels itis unethical and iere- sponsible for countries such as Japan and Brazil to behave in trade relations as they do. Most European countries disagree with the United States and believe there are more effective ways of negotiating trade problems than the use of sanc- tions. However, as long as the US. administration believes that the United States is not being treated ethically in the international trade arena, retaliation will con- tinue to be a means to obtain reciprocity in international trade Remember that many critics of Japan point to the fact that Japan deserves such retaliation, that Japan refuses to do business with many outside companies, and that Japan stacks the deck so that all the cards are favorable to its self-interest. A second argument in favor of a retaliatory stance against Japan focuses on the fact that the Japanese often buy foreign businesses such as hotels. Then, when the ; Japanese travel abroad, they stay at these hotels and Japan recaptures funds that if otherwise would flow into the international community. One report described this i process as follows Japan's well-heeled travelers ... prefer neatly wrapped package tours when they go i abroad. The Tokyu group, another retailing conglomerate, provides such services by i funneling vacationers through an affiliated travel agency to Toky’s 15 Pacific Basin re sors, hotels, and condominiums. An aieine partially owned by Tokyu fies vacationers to the holiday complexes. Joining the retailers in going global ae Japan’ aieines. In ad- ' dition to managing 23 Nikko hotels, JAL uses its reservations network to book passen- Bers into 90 other affiliated Nikko hotels. The airline is also developing five overseas re- . Sorts. Rival All Nippon Airways manages seven overseas hotels, from China to California, and is scouting for more... And a hefty chunk of profits will end up in Japanese coffers.® Another reason to support retaliation against Japan is that many countries al- ready have sought and reached joint trade agreements with the United States. The argument goes that if Japan were serious in its efforts, it would have done so as Well. For example, as early as 1987, South Korea had reached an agreement with the United States to increase imports from the United States by $2.6 billion and to buy a wide range of products, from supercomputers to grain. South Korea also al- lowed the import of USS. computers a year ahead of schedule, cut financing to ex- porters to restrain exports, and pledged to create a service network for imported US. machinery. Similarly, Taiwan cut tariffs on a wide variety of products, from farm goods to footwear. Taiwan also allowed U.S. insurance companies to enter its496 PARTS; INTERNATIONAL MANAGEMENT HORZONS market, liberalized restrictions on foreign banks, and gave some USS. firms con. tracts for building the Taipei subway." By offering concessions, countries are more likely to placate the United States, which often is their largest international mar. ket, and to ensure there is no trade backlash. There is recent evidence that the years of US. pressure on Japan are beginning to pay off. By the mid 1990s, with only a few exceptions, such as rice imports, foreign companies no longer are to- tally excluded by law, regulation, or tariff from doing business in Japan." RESPONSE TO SOCIAL OBLIGATIONS So far, the discussion has focused on differences in ethical standards between countries and why nations such as the United States are concerned about trade reciprocity. However, many countries are responsive to their international social obligations. For example, the United States is leading the way in pushing for higher ethical codes, and others, such as Italy, which has had a tradition of cor- ruption, are putting forth considerable effort to clean things up.* Japan is work- ing hard to help Third World countries deal with their economic problems as well. Foreign Corrupt Practices Act During the special prosecutor's investigation of the Watergate scandal in the early 1970s, a number of questionable payments made by U.S. corporations to publicof- ficials abroad were uncovered. These bribes became the focal point of investiga- tion by the Internal Revenue Service, the Securities and Exchange Commission (GEC), and the Justice Department. Concern over bribes in the international busi ness arena eventually culminated in the passage of the Foreign Corrupt Practices ‘Act (ECPA) of 1977, which makes it illegal to influence foreign officials through personal payment oF political contributions. The objectives of the FCPA were to Stop US. MNCs from initiating or perpetuating corruption in foreign government and to upgrade the image both of the United States and U.S. businesses abroad.” Some critics of this legislation feared the loss of sales to foreign competitors, &- pecially in those countries where bribery is viewed as a way of doing business Nevertheless, the US. government pushed ahead and attempted to enforce the act. Some of the countries that were named in early bribery cases included Alge ria, Kuwait, Saudi Arabia, and Turkey, although the State Department strived to convince the SEC and the Justice Department not to reveal the names of countries or foreign officials involved in its investigations for fear of creating internal polt- ical problems for US. allies. Although, for the most part, this political sensitivity ‘was justified, a couple of interesting developments were: (I) MNCs found they could live within the guidelines set down by the FCPA; and (2) many foreign gO% ferments actually applauded these investigations under the FCPA, because it helped them crack down on corruption in their own country. One analysis reported that since passage of the FCPA, U.S. exports to “bribe prone” countries actually have increased. Investigations reveal that once bribes vere removed as a key competitive tool, more MNCs were willing to do business in that country. This proved to be true even in the Midalle East, where many US. MNCS always had assumed that bribes were required to ensure contracts. On the other hand, this does not mean that bribery is a thing of the past. Ae cent report issued by the US. Commerce Department contends that since 19%CHAPTER 17: ETHICS AND SOCIAL RESPONSUTY 497 foreign companies have used bribes to edge out U.S. MNCs on some $45 billion of Ht international business deals. The report describes a case of bribery involving the { contract for a power-generating plant in Central Europe as follows: A European company was awarded the multimillion-dollar contract even though the Central European government's own review board had recommenced the contract be awarded to a US. firm. The report says there was clear evidence that a power-company official had been given acash bribe by the European company that won the contract. The company used the same practice to win other contracts in Eastern and Central Europe, according to the report” | These recent experiences reveal that bribery continues to be a problem for US. MNCs. At the same time, to comply with the provisions of the FCPA, US. firms tmust be careful nat to follow suit and resort to bribery themselves. This advice also is useful for multinational managers doing business in the United States. The US. government has been vigorous in its prosecution of bribery and kickback schemes, and one example would be the recent case of Honda employees who ‘were officals of American Honda. They were involved in an illegal program to so- licit bribes from Honda auto dealers in exchange for ensuring thatthe dealers had a steady supply of cars. The scheme, which lasted from the late 1970s until 1992, \ involved American Honda executives who received cash, Rolex watches, and swimming pools in exchange for their awarding franchises or larger allotments of hot-selling Accords and other cars. The highest-ranking executive in the scheme wwas given 5 years in federal prison and fined $364,000; other convicted employees received lesser, but still significant, sentences" International Assistance Besides fighting corruption, another way to meet social responsibilities has been to provide assistance to underdeveloped countries. For many years, this foreign aid has taken the form of food, machinery, and equipment to help feed the people of Third World countries and stimulate their economies. During the 1970s in par- ticular, many less-developed countries attempted to improve their conditions by borrowing large sums of money for economic development. In most cases, the tmonies were not wisely spent, and the countries now are having difficulty meet- ing their debt obligations. Poland, for example, has foreign debis in double-digit, i billions and very little hope of paying back this money. Mexico and South Amer- ican countries such as Peru, Argentina, and Brazil are no better off. As a result, 1, some of the economic superpowers recently have been calling for assistance to these countries. Two primary avenues are under investigation: (1) debt reduction or renegotiation; and (2) direct grants. ‘The United States and Japan are the two leading proponents of international aid, Some Americans have called for a Third World debt reduction plan, and the i Japanese government has proposed a package worth $43 billion designed to im- Prove the global environment and spur economic growth in countries suffering, Under the burden of poverty and indebtediness.* Some specific parts of the Japa- nese package include: (1) low-interest loans to other countries; (2) grants to spe- sitic nations in sub-Saharan Africa; and (3) a 3-year program of grants and credits for environmental needs, including tree planting and helping poor people to find alternatives to cutting down trees for fuel and fodder.* These decisions will affect498 PARTS: INTERNATIONAL MANAGEMENT HORIZONS: MNCS, because they will help to stimulate world economies and open up market for more goods and services. ‘Another form of ad is being carried out by MNCs themselves. Multinationals are beginning to realize that they must take steps to ingratiate themselves ints countries where they do business. A philanthropic role can pragmaticaly hel protect their investments, improve their corporate image, and help meet theirs cial responsibilities, The Japanese are a good example. When Prime Minist Nokasone made derogatory remarks about U'S, Aftican-Americans and Hispary ies, Japanese foundations and companies in the United States tried to minimize the damage by increasing their donations to funds that help to promote Alriear: American college students and similar groups. Honda, which was the target of 4 racial discrimination suit over hiring practices in Ohio, became a big donor toon ganizations such as the Clara Hale House in Harlem and has provided a scholan ship for minority students at Duke University. Mazda has been giving $70,000 an. nally to the United Way, and Hitachi America has given $30,000 to a local library Quite clearly, these Japanese MNCs understand the long-run benefits of phn thropy. As one observer pointed out: “In coming years, Japan's role as philan: thropist in the U;S. is destined to grow, perhaps even to explode. Cleatly, the tracks needed to roll ut major fundraising drives and manage large projects have been laid down, American institutions are certain to benefit, and Corporate Japan should, too.” US. and European multinationals follow similar philanthropy patterns. Quite clearly, MNC assistance directed at host countries is a two-way street. Each side stands to benefit economically through MNCs’ meeting their social responsi. bilities ‘SUMMARY OF KEY POINTS 1. Ethics isthe study of morality and standards of conduct. Iti important in the study of international management because ethical behavior often varies from one county 0 a ‘other: For example, in recent years in Japan, political and business scandals and appar ent cases of avoiding minority hiring have drawn attention to the need for another look ; at ethical and socially responsible behavior. Japan’s lobbying efforts in Washington also : have been questioned from an ethical standpoint. 2 Research in France and Germany reveals that European and US. MNCs seem to have different standards of ethics that result in different types of decisions and business prac- tices. For example, U.S. MNCs do not believe in bribing businesspeople or politicians to sain favors, while some studies find that more respondents in samples of both German and French managers were not as concerned with bribes as being unethical and instead felt payolfs were merely a cost of doing business. Inthe area of equal opportunity for ‘women, the Europeans have goals for fully integrating women into the work force and even recent EU legislation to ensure equal pay and equal treatment in employment However, similar to US. women, European women are still being deprived af equal op- portunities and are underrepresented in the managerial ranks of European firms, a though some progress is being made. 3. Ethics also is a problem in countries such as China, Since the violent crackdown at ‘Tiananmen Square, many MNCs have questioned whether they should do any business with the Chinese. Those that found the low labor cost atractive 100 often overlooked the fact that the Chinese factory employees work long hours for very low pay and that some of these workers are political prisoners. These types of exploitive practices have ethical implications, $0, to0, does the status of women managers. As in many other countries,CHAPTER 17: ETHICS AND SOCIAL RESPONSIBILITY 499° women managers in China face a “glass ceiling” blocking their advancement into top ranagement. Three of the main reasons are cultural stereotypes, restricted opportuni- ties, and discrimination. ‘4, Amore indirect area of ethics and social responsibility deals with the regulation of for- ign investment, In the United States, for example, the interagency Committee on For ign Investment, which involves eight agencies headed by the Treasury Department, ‘eabset up to curb the indiscriminant buying of US. firms by foreign investors. The com rnittee regulates the acquisition of U.S. companies by foreign multinationals. A similar, {indirect area of ethics and social responsibilty is reciprocal trade and the desire of coun tries such as the United States to get trading partners such as Japan to open their mar kets to US. goods. During the 1990s, multinationals likely will become more concerned about being socially responsive, and legislation such as the US. Foreign Corrupt Practices Act is forcing the issue. Other countries also ate passing laws to regulate the ethical practices of their MNCs, MNCS are being more proactive (often because they realize it makes good busi- ress sense) in providing international assistance in the form of philanthropy and direct involvement as wel. KEY TERMS ethics Foreign Corrupt Practices Act (FCPA) nonreciprocal trade partners REVIEW AND DISCUSSION QUESTIONS i 1. What lessons can U.S. multinationals learn fom the political and bribery scandals in Japan that can be of value to them in doing business in this country? Discuss two. 2 Inrecent years, some prominent spokespeople have argued that those who work for the US. government in trade negotiations should be prohibited for a period of 5 years from. hy ‘accepting jobs as lobbyists for foreign firms. Is this a good idea? Why? 1 3. How do ethical practices differ among the United States and European countries such as France and Germany? What implications does your answer have for U.S. multinationals ‘operating in Europe? 4. Why are many MNCS reluctant to produce or sell their goods in China? What role can. the Chinese government play in helping to resolve this problers? 5. In what way is trade reciprocity an ethics or social responsibility issue? How important i is this issue likely to become during the current decade? 6 Why are MNCs getting involved in philanthropy and local communities? Are they dis 1 playing a sense of social responsibility, or is this merely a matter of good business? De- fond your answer. PRACTICAL INTERNATIONAL MANAGEMENT ASSIGNMENT ‘Choose any ethical or social responsibilty-related topic from this chapter, then go tothe lic <) brary and update the topie by finding out what has taken place in recent months. Weite a brief essay deseribing your findings, and share them with the other students in the class. What conclusions can you draw as a result of your investigation?