The Major Principles of International Ethics and CSR Practices - Essay Example

?Table of Contents Executive Summary Introduction 2 Findings 3 MNC’s Operations: Exploitation or Cooperation? 3 Working in Foreign Culture: Ethicalrelativism vs. Ethical absolutism 5 Importance of CSR 7 Conclusions and Recommendations 8 References 10 Executive Summary The report provides an analysis of some IHRM issues related to ethics and corporate social responsibility. In particular, it defines the major principles of international ethics and CSR practices. The findings suggest that conducting international business in an ethical and socially responsible manner involves working in compliance with human rights protection principles, designing and following a corporate code of ethics to be used internationally, as well as launching or supporting CSR initiatives that correspond to the needs of host and global communities. Though there is not universal solution to the problem of cultural differences in ethical concepts, it is recommended that certain elements of both ethical absolutism and ethical relativism approaches, as well as the principle of considering the context of each particular situation should be the basis of the code of ethics and of IHRM decision-making processes. Introduction The HR system of any organization has to perform a complex set of interrelated and interdependent tasks that ensure effective functioning of the organization. Among the roles of HR departments are, according to Mote (2011), “planning, implementing, and managing recruitment, as well as selection, training, career and organizational development initiatives within an organization.” Furthermore, HR management involves aligning the goals and needs of an employer with those of the employees so that the parties cooperate with the same objectives and goals in mind. These tasks become even more complicated in relation to international HRM, since in this case the organization has to also take into consideration peculiarities of working in multiple locations and in different cultures. On this matter John R. Deckop and John Raymond Deckop outline that these days human resource management and development are becoming “an integral part of national initiatives to develop competitive workforces” (Deckop and Deckop 2006, 91) in the countries the company operates in. Furthermore, HRM also involves dealing with ethics and corporate social responsibility (CSR) issues. Therefore, the purpose of this report is to identify and analyze some of the major IHRM challenges an MNC may face operating worldwide. In particular, such issues as core human values, local cultures and decision-making context in international environment will be analyzed form the perspective of corporate and human ethics. These specific areas of international business have been chosen for deeper analysis since they appear to be some of the most critical for development and success of company’s operations overseas. Furthermore, in the international context ethics, according to Donaldson, means following the three basic principles for international ethics: Respect of core human values, Respect for local traditions, Believing that context matters when determining the right and the wrong (Donaldson 1996). In addition, the key principles and advantages of effective CSR practices will be outlined with the purpose of clarifying the role of CSR in corporate culture and operations, as well as determining the financial benefits of completing well-designed CSR initiatives. Findings MNC’s Operations: Exploitation or Cooperation? Multinational corporations, being large and influential organizations, attract much attention of governments, local authorities, interest groups and other representatives of the communities they operate in. This is especially true in relation to the ethical concepts an organization brings into the society, and employment-related practices in particular (Briscoe, Schuler and Claus 2008,136). Briscoe, Schuler and Claus (2008, 136) mention that, while companies entering foreign markets claim bringing great advantages to the county, in reality their operations are viewed by some as exploitation of foreign citizens and increasing inequities in the host countries. This point of view is also supported by sociologists Margaret L. Andersen and Howard Francis Taylor, who present a view that operations of some MNCs involves exploitation of the developing countries’ workforce, and has even lead to an increase in the number of third world migrants to the richer countries, thus having destroyed worker solidarity (Andersen and Taylor 2007, 251). Stephen Lendman (2010) refers to the reports by National Labor Committee and the estimates of International Labor Organization (ILO) stating that about 250 million children from 5 to 14 years old are working in developing countries. Furthermore, Chinese workers, for instance, work 12-hour shifts seven days a week for 64 cents an hour (Lendman 2010). On the basis of NLC Reports on China, India, Bangladesh, Vietnam, Indonesia, Nicaragua and Haiti factories Lendman (2010) gives a great number of workforce exploitation examples accompanied by such violations of human rights at the workplace as child labor, excessive working hours, absence of a living wage, absence of health and safety hazards, verbal and physical abuse. However, there exists another point of view. Aswathappa and Dash (2007, 9), for instance, view globalization, MNCs and their international HRM practices as positive things. They present India as an example of a county, the population of which is continuously growing and, thus, able to contribute to the global economy by means of providing a surplus of employees to compensate the shortage of them in developed countries (Aswathappa and Dash 2007, 3). They outline that countries that transfer their manufacturing to the developing countries save much on the cost of performing those jobs in the parent country. Furthermore, employing foreign citizens companies increase the income of the host country. As for paying less to the host country’s workforce, Aswathappa and Dash support this strategy stating that “low labor costs constitute a competitive advantage for a poor country, attract investment, and provide jobs that can lead to greater development” (Aswathappa and Dash 2007, 10). This argument is supported by examples of Korea, Taiwan and Malaysia, which used this strategy for creating higher paying jobs for their citizens. Surely, the arguments of Aswathappa and Dash do make sense: working in a market of a less developed country a company benefits from lower spending with equal or higher output, while the country gets additional jobs for its citizens and additional income from taxes. At the same time, an MNC should be aware of the risk of even unintentional or indirect contribution into human rights violation. Knowingly or not, but such multinational companies as Nike, The Gap, Wal-mart, Disney and others, have already had a regrettable experience using the services of third world factories or suppliers and experiencing a great decline in credibility, consumer loyalty and respect as a result (Woolf 2011). Working in Foreign Culture: Ethical relativism vs. Ethical absolutism Another risk that international HRM may undergo is that of difference in cultures and, consequently, values of domestic and host communities. There exist two approaches to dealing with this IHRM issue. The first one is ethical relativism which, according to Briscoe, Schuler and Claus, “suggests that what is right is whatever a society defines as right” (Briscoe, Schuler and Claus 2008, 137). Under this approach a right decision is the one that is considered right by the host society unless it is prohibited by the law. Consequently, an HR manager, who attempts to introduce the company’s standards and values into the local division, may be found at risk of being blamed for ethical imperialism or ethical chauvinism in case those standards and values are different from the society’s ones. So, such conflicting of cultural norms and values will complicate the company’s operations abroad (Logue 2005, 1). At the same time, Logue (2005, 2) cites Donaldson and De George who argue that “no culture’s ethics are better than any other’s; therefore, there are no international rights and wrongs.” What this means is that it is not necessarily an ethically correct behavior to bribe officials only because the locals have a custom of doing so. Another approach to this issue is ethical absolutism. This approach, as Briscoe, Schuler and Claus state, involves using “a single set of universal ethical principles, which apply at all times, in all circumstances, in all cultures” (2008, 138). Applied to IHRM, this approach might be represented by a corporate code of ethics, which should not be violated under any circumstances. However, such an opinion contradicts to the mentioned above principle of Donaldson for managing multinational workforce that requires considering the context of each situation when determining the right and the wrong. Therefore, regarding this issue of IHRM it can be concluded that neither approach is perfect. Strictly following either of them may create problems with managing HR and raise ethical dilemmas. It might especially true in relation to international assignees who have to work at foreign branches of a company. So, in order for an MNC to avoid ethical issues related to the difference in cultures, values and traditions, a company might develop a corporate code of ethics that would both reflect the values of the organization and consider local peculiarities of major host societies. Still, HR staff should have clear guidelines as to how to deal with certain situations. Importance of CSR Though as a concept corporate social responsibility appeared long ago, only after the industrial revolution, and especially after 1960s, it became an important issue of organizational behavior (van der Hoeven 2004, v). Today, in the era of globalization, such concerns as “living standards, exploitation, poverty, unemployment and how to promote social development in general” (ibid) are appearing on the agendas of multinational corporations in their attempts to become valuable and trusted structures within the global community. With time more and more attention of the previously purely consumer society is being devoted to the social role of businesses and organizations. Today companies are considered to be not only goods manufacturers or service providers, but also institutions that have the power to influence what is taking place within the society a business operates in. As a result, companies, especially large and famous ones are devoting much time and attention to their CSR initiatives. Michael Hopkins defines CSR as “ethical behavior of business towards its constituencies or stakeholders” (Hopkins 2004). This involves participating in and contributing to certain areas of local community’s life and development. As such, companies become more profitable since their products and services are more attractive for consumers. This is explained by the fact that consumers have become more responsible in their choices of companies to deal with. People avoid what they consider to be socially irresponsible (ibid). Hopkins also refers to United States Social Investment Forum and The Cerulli Edge-Global Edition, 7 published by Cerulli Associates mentioning that in 2001, for instance, the estimated the value of the world’s ethical investment portfolio was US$1.42 trillion. Conclusions and Recommendations A goal of any business is, of course, making profit. That is why international companies frequently choose to work with developing countries. Doing so they may, even unintentionally, get involved, directly or indirectly, in human rights violation, thus showing disrespect to core human values. This risk should be, in all cases, avoided because, being related to CSR, such organizational behavior may lead to a decrease in profit as a result of decreases consumer loyalty and brand prestige. Therefore, MNCs should be always checking what particular organizations they are cooperating with, as well controlling the compliance of own subsidiaries with the globally accepted definitions of decent labor conditions, wages, safety, etc. CSR, in its turn, should be given special attention. It involved doing business in an ethical manner and has a direct influence on the company’s success. This effect is reached by creating positive image and brand with the help of CSR initiatives that reflect the needs of local and global communities. So companies are recommended to participate in and contribute to the lives of local communities via initiating or sponsoring environmental, social cause, human rights protection, educational, or other initiatives (Edwards and Rees 2006, 264). At the same time, dealing with foreign markets involves not only making sure the company does not violate any norms, either legal or ethical, but also deciding how to behave in ethically challenging situations. Either ethical absolutism or ethical relativism is not a perfect solution to the problem that may lead to ethical dilemmas, since context is an important aspect that should be considered in IHRM decision making. For this reason MNS should have a corporate code of ethics developed to meet the decision-making needs of their international employees. References Andersen, Margaret L. and Taylor, Howard Francis. 2007. Sociology: understanding a diverse society. Cengage Learning. Aswathappa, K. and Dash, Sadhna. 2007. International Human Resource Management. Tata McGraw-Hill Education. Briscoe, Dennis R., Schuler, Randall S., and Claus, Lisbeth M. 2008. International Human Resource Management. Routledge: Global HRM Series. Deckop, John R. and Deckop, John Raymond. 2006. Human resource management ethics: Ethics in practice. IAP. Donaldson, Thomas. 1996. “Values in tension: ethics away from home”, Harvard Business Review 74(5): 48-62; Edwards, Tony and Rees, Chris. 2006. International human resource management: globalization, national systems and multinational companies. Pearson Education. Hopkins, Michael. 2004. Corporate social responsibility: an issues paper. Policy Integration Department. World Commission on the Social Dimension of Globalization. ILO. Geneva. Lendman, Stephen. 2010. Global Sweatshop Wage Slavery: Worker exploitation in America and globally. UrbanHabitat.org. Accessed April 10, http://www.urbanhabitat.org/node/5247 Logue, Niles C. 2005. Cultural Relativism or Ethical Imperialism? Dealing with Bribery Across Cultures. Accessed April 10, http://docs.google.com/viewer?a=v&q=cache:-dotiyemDF0J:www.cbfa.org/Logue.pdf Mote, Dave. 2011. Human Resource Management (HRM). Encyclopedia of Business, 2nd ed. Advameg, Inc. Accessed April 10, http://www.referenceforbusiness.com/encyclopedia/Gov-Inc/Human-Resource-Management-HRM.html Van der Hoeven, Rolph. 2004. “Preface.” In Corporate social responsibility: an issues paper, Michael Hopkins. Working Paper No. 27. Policy Integration Department. World Commission on the Social Dimension of Globalization. ILO. Geneva. Woolf, Linda. 2011. Women and Sweatshops. Webster.edu. Accessed April 10, http://www.webster.edu/~woolflm/sweatshops.html Read More