Global Marketing Management

Social Responsibility & Ethics in Global Marketing

DR THAN ZAW TALENT HIGHWAYKAMAYUT, 01500027,504911

Social Responsibility & Ethics in Global Marketing

Preparation for this class: Find a news item from any 2010

media source (print or internet) regarding Social Responsibility and/or Ethics in the global arena.

• Be prepared to discuss your article in class.

Homework:• Give the name and source of your news item, and write

a brief précis of your article.

Ethics is• a branch of philosophy that studies morals & values;• a study of differences between right & wrong;• often shaped by religion.History of Ethics• Aristotle called character “ethos” = most potent means of

persuasion • Roman Emperor Justinian was 1st to incorporate ethics into

legal system; established schools to educate lawyers concerning ethics, morality & law

• Napoleon established code of 36 statutes based on concept that all citizens, regardless of circumstances of birth or social stature, should be treated fairly and equally

Social Responsibility is • an ethical or ideological theory that • an entity - whether it is a government, corporation,

organization or individual -• has a responsibility to society.

This responsibility can be "negative", meaning there is a responsibility to refrain from acting (resistance stance) or it can be "positive“, meaning there is a responsibility to act (proactive stance).

Social Responsibility is an aspect of CHARACTER = what you do when no-one is watching, or when you think no-one is watching

more

E T H I C S1950 – 2000: • world trade expanded 20 X• world output grew by 6½ X (WTO,2001)

• exports + foreign direct investment play increasing role in global economy

As markets globalize and an increasing proportion of business activity transcends national borders, institutions need to help manage, regulate, and police the global marketplace and to promote the establishment of multinational treaties to govern the global business system.

E T H I C S

Vary from culture to culture

Ethical issues in cross-cultural settings

IMF “asserts that as globalization has progressed, living conditions have improved significantly in virtually all countries. However, the strongest gains have been made by the advanced countries and only some of developing countries.”¹

• Global institutions:– GATT and its successor, WTO - police world trading system– IMF– World Bank– United Nations

Universal Declaration of Human Rights (Article 23)

Everyone has the right to:

1. work, free choice of employment, just and favorable conditions of work, protection against unemployment;

2. equal pay for equal work;

3. just and favorable remuneration ensuring … an existence worthy of human dignity;

4. form and to join trade unions to protect his interests.

Ethical & Socially Responsible Decisions

• 5 decision-making areas:1. employment practices & policies2. consumer protection3. environmental protection4. political payments & involvement in political affairs of country5. basic human rights & fundamental freedoms

• Laws are markers of past behavior that society has deemed unethical or socially irresponsible

• Ethical principles help marketer distinguish between right & wrong, determine what ought to be done, & justify actions

– Utilitarian Ethics (optimize common good? benefit all constituents?)

– Rights of the Parties – Justice or Fairness

Corporate Social Responsibility= corporate citizenship / responsible business / sustainable

responsible business / corporate social performance

• form of corporate self-regulation integrated into a business model

• ideally functions as built-in, self-regulating mechanism whereby business monitors and ensures adherence to law, ethical standards, and international norms. Business would embrace responsibility for impact of their activities on environment, consumers, employees, communities, stakeholders and all other members of public sphere

• “CSR is about how companies manage the business processes to produce an overall positive impact on society.” ¹

In Defense of Globalization by Jagdish Bhagwati

• examining globalization's impact on children, women, the poor, democracy, labor rights, the environment, and culture.

• "Poor parents, no less than rich parents, generally want the best for their children. Poverty is what drives many to put their children to work rather than into school. Parents will choose to feed their children instead of schooling them if forced to make a choice. When incomes improve, poor parents can generally be expected to respond by putting children back in school."

• “… simply demanding that poor countries eliminate child labor can easily backfire. Bhagwati cites the case of the Bangladeshi textile industry in 1993. That year, Congress seemed poised to pass Sen. Tom Harkin's Child Labor Deterrence Act, which would have banned imports of textiles made by child workers. Anticipating its passage, the Bangladeshi industry dismissed 50,000 children from factories. Most of those children did not end up in school but instead fell into prostitution and other "occupations" far more degrading than weaving cloth in a factory.”

Social Responsibility & Environmental Management

• “Environmental protection not an optional extra”¹• Pollution on verge of being completely out of

control - clean up decades of neglect; e.g. EU laws re amount & types of potentially toxic substances companies required to take back to recycle

• China has 16 of world’s 20 most polluted cities 21% waters - toxic; 16% rivers - excrement

• Critical issue: disposal of hazardous waste

+/- 300 million tons collected annually

• Sustainable development = joint approach toward economic growth; cooperative effort among businesses, environmentalists & others to seek growth with “wise resource management, equitable distribution of benefits, and reduction of negative efforts on people and the environment from the process of economic growth.” Win-win opportunity.

Major International Marketing Ethical Problems

1. Traditional Small Scale Bribery - small sums to foreign official in exchange for violating some official duty or to speed routine gov’t actions (grease payments, kickbacks, lubrication).

2. Large Scale Bribery - to allow a violation of law or to influence policy directly or indirectly (e.g. political contribution; subornation).

3. Gifts/Favors/Entertainment - includes lavish gifts, call girls, personal travel at co`s expense, gifts received after completion of transaction, other extravagant expensive entertainment.

4. Pricing - unfair differential pricing, questionable invoicing (buyer requests written invoice showing price other than actual price paid, pricing to force out local competition, dumping products at prices well below that in home country, pricing practices illegal in home country but legal in host country (e.g. price fixing agreements).

5. Products/Technology - includes products and technology banned for use in home country but permitted in host country and/or appear unsuitable or inappropriate for use in host country.

Major International Marketing Ethical Problems (cont.)

6. Tax Evasion Practices - such as transfer pricing (i.e. where prices paid between affiliates and/or parent company adjusted to affect profit allocation) including use of tax havens, where profit made is in low tax jurisdiction; adjusted interest payments on intra-firm loans; questionable mgt and service fees charged between affiliates and/or parent co.

7. Illegal/Immoral Activities in Host Country - e.g. polluting environment; maintaining unsafe working conditions; product/technology copying where intellectual property rights not enforced; short-weighting overseas shipments.

8. Questionable Commissions to Channel Members - unreasonably large commissions of fees paid to channel members, e.g. sales agents, middlemen, consultants, dealers and importers.

9. Cultural Differences - potential misunderstandings related to traditional requirements of exchange process regarded by one culture as bribes but acceptable business practices in another culture, e.g. gifts, monetary payments, favors, entertainment, political contributions.

10.Involvement in Political Affairs - combination of marketing activities and politics including: exertion of political influence by multinationals; engaging in marketing activities when either home or host countries are at war; illegal technology transfers.

DEFINITION: CorruptionValue judgments differ widely among culturally

diverse groups.

Types of Corruption– profits (former communist countries)– individualism (Japan) “The nail that sticks up gets hammered down.”

– rampant consumerism (India)– missionaries (China)

– intellectual property laws (Sub-Sahara Africa)

prevents treatment of AIDS for millions of people

– currency speculation (SE Asia) during 1997-98 financial crisis

Bribery – Variations on a

Theme• Bribery = voluntary payment offered by someone seeking

unlawful advantage • Extortion = payments extracted under duress from

person seeking only what is within the law

• Lubrication = relatively small sum of cash, gift, or service given to low-ranking official in country where such offerings are not prohibited by law

• Subornation = giving large sums of money, frequently not properly accounted for, designed to entice official to commit an illegal act on behalf of payer

Bribery – MORE Variations on a

ThemeAgent’s Fees = businessperson, uncertain

of country’s rules and regulations, hires agent to represent company in that country

Foreign Corrupt Practices Act

CHANGE from more ethically and socially responsible decisions by both buyers and sellers, and by gov’ts willing to take stand.

Western Focus on Bribery• 1970s, bribery became a national issue with

public disclosure of political payoffs to foreign recipients by U.S. firms

• Decision to pay bribe creates major conflict between what is ethical & proper, & what is profitable & sometimes necessary for business

• OECD Convention on combating bribery

of foreign public officials in int’l business

transactions

November 11, 2009

“Frederic Bourke Jr, co-founder of the Dooney & Bourke handbag company, was sentenced to one year and one day in prison after he was convicted of criminal charges in July in an alleged scheme to bribe Azerbaijan government officials.”

“… a jury found Mr. Bourke guilty of conspiracy to violate the Foreign Corrupt Practices Act …”

Prison + $1 million fine + 3 years supervised release after prison

Transparency International: Corruption Perception Index (CPI)

TOP 25 BOTTOM 25

Transparency International: Bribe Payer’s

IndexBased on questions like:

In business sectors with which you are most familiar, how likely are companies from the following countries to pay or offer bribes to win or retain business in this country?

Why IKEA Is Fed Up with Russia

Bureaucracy + red tape have Swedish furniture giant holding back on further investment

Wayward organizations …

Recent scandals at Enron, Worldcom, Tyco, Arthur Anderson and others are in part

due to executives

trying to increase

shareholder value

in opposition to

accounting rules

and laws.

Keys to success in Social Responsibility & Ethics

• “To behave in an ethically and socially responsible way should be a hallmark of every marketer's behavior, domestic or international.” ¹

• Milton Friedman: responsibility of the executive is to make profits subject to law and ethical custom

Next class: Case # 2: Nestlé

Preparation: Read Cateora, Gilly & Graham Case 1-2 Nestlé pp 598 - 601 (14th ed.)Prepare for class discussion & hand inVisit Nestlé web site www.nestle.com

Case #2: Nestlé due Oct.21

Requirements for each Individual Case Write-up:• 4 - 6 pages, typed & double-spaced• Case discussion questions are provided in text

book to help you identify key issues of cases.• Review: “Case Studies: HOW TO do a great

write-up” (on my web site)Pay attention to grading sheet.

Use headings.

Visit the writing center in Fretwell

student max.

Executive Summary - You have to write this paragraph AFTER you've finished the rest of the analysis, but present it FIRST in your report. 10

Background - Brief summary of case as you've read it. Include relevant facts from other sources if you like. Include positive aspects of company/ situation. 15

Problems - This is the meat of your analysis. Write down ALL problems you can get out of the case, whether they're important or not. 25

Courses of Action - Write solutions to the problems. Be creative. Use outside material if relevant. 25

Recommendations - This is the time to choose the problem(s) you regard as most important and expand on your suggested remedies. 10

Conclusion - Wind up discussion, be positive and concise. 5

Use of charts, tables, other appendices - Acknowledge resources, books, web sites, interviews. 5

Presentation - Does your paper look neat and organized? Is it within the required length? Double-spaced? Is it properly identified? Page numbers? 5

Hand in on time - Late assignments penalties, as detailed in COURSE OUTLINE: Not at beginning of class -10%; Next day -20%; Any time after that 0. - 0

TOTAL 100

Case Study Grading Sheet