Business Ethics and CSR Quiz

Course Information

• Course name: Business I
• Course code: ENNEG310
• Instructor: Alejandra Vasquez Delama
• Email: [email protected]
• Schedule: Monday & Wednesday, 11:00 – 12:20 / 12:30 – 13:50

Ethics and Corporate Social Responsibility

• Topics covered: Introduction and Case, Stakeholder theory, Corporate Social Responsibility (CSR), Ethics and moral dilemmas, Legal foundations of ethical behavior, What MNEs can do: Codes of Conduct

Introduction & Case

• Key questions:
  • To what extent are multinational corporations responsible for ensuring that workers' rights are respected?
  • To what extent must multinational corporations stick to environmental protection?
  • To which extent are MNCs responsible for their suppliers?

CSR at Apple

• Source: Myers, C. (2012). Corporate Social Responsibility in the Consumer Electronics Industry: A Case Study of Apple Inc.
• Apple's products are manufactured in 748 locations, more than 600 in Asia, 331 in Mainland China
• China production allows Apple to minimize labor costs
• According to estimates by the University of Manchester, assembling iPhones in China reduces costs to 47% of the cost in the United States
• Major suppliers: Asustek and Foxconn

The Stark Reality of iPod's Chinese Factories

• In 2006, Apple suppliers maintained dormitories on factory grounds enabling quick mobilization of workers and adjustments to assembly lines.

The Foxconn Case

• First scandal: Child labor, legal working age in China is 16, but Foxconn employed children under 16. Student interns were paid about $244 a month and were forced to work overtime.
• Second scandal: Suicides, between January and November 2010, 17 Foxconn workers attempted suicide, of whom 13 were successful. China's legal limit for overtime is 36 hours a month, but some workers were forced to work 80-100 hours per month, sometimes without pay.

The Foxconn Case (Fast-Paced Assembly)

• Fast-paced assembly process required workers to finish each procedure within two seconds.
• Workers were not allowed to make unnecessary movements.
• Workers reported passing out during work.
• 24 percent of female workers experienced menstrual disorders due to stress.

Apple's Reactions

• Establishment of a "Supplier Code of Conduct" in 2005
• Workers and Manager Training (communication, anti-harassment, worker protections)
• Elimination of Safety Hazards, Excessive overtime and Child Labor
• Training for supplier personnel (PPE, chemical safety, hazardous energy control)
• Apple began tracking working hours in 2011, contacting suppliers on code of conduct violations
• Third-Party Oversight (Fair Labor Association, 2012) to oversee factories in China

Criticisms of Apple's FLA Involvement

• Critics argue that the FLA has done little to improve working conditions, and that Apple’s membership merely serves as window dressing for image.
• Example: FLA required Foxconn to increase the number of workers in a union leadership committee to at least three, but did not specify any requirements for the ratio of workers to management or how the workers were elected.

Overview

• Introduction and Case
• Stakeholder theory
• Corporate Social Responsibility (CSR)
• Ethics and moral dilemmas
• Legal foundations of ethical behavior
• What MNEs can do: Codes of Conduct

Shareholder vs. Stakeholder

• Shareholders are individuals, companies, or institutions that own at least one share, having a financial interest in profitability.
• Stakeholders are parties with an interest in a company's success or failure; they can affect or be affected by policies and objectives

Stakeholder Theory

• Companies must create value for all stakeholders, not just shareholders.
• Stresses the network character and interconnectedness of stakeholders.
• Stakeholders (sometimes) pursue different goals and have different interests.
• Examples: Shareholders (additional sales, increased productivity), Employees (safer workplaces, higher compensation), Customers (higher-quality products, lower prices), Society (more jobs, increased corporate taxes).

Cause-and-Effect Relationships (MNEs and Foreign Countries)

• MNEs can harm foreign countries by perpetrating inequitable income distribution, political corruption, environmental debasement, and social deprivation
• MNEs can benefit foreign countries by creating higher tax revenues, increasing employment, increasing trade and exports, and fostering greater innovation

Corporate Social Responsibility (CSR)

• CSR is the idea that businesses have a responsibility to the society around them.
• Includes several measures and practices to respond to this responsibility on multiple levels.
• No uniform definition.
• Relies mostly on the triple bottom line (social, environmental, financial).

Triple Bottom Line

• Societal (social)
• Environmental
• Financial

Why companies care about CSR?

• Companies care about their image and reputation.
• They can develop a competitive advantage.
• Avoid negative perceptions (irresponsibility).
• Avoiding sanctions (legal and social).

CSR: Reasons and Pressure

• Companies are motivated to act responsibly due to Institutional Theory (Meyer & Rowan, 1977; DiMaggio & Powell, 1983) that shows companies operate under three types of pressure:
  • Coercive, normative, and mimetic.
• Motivations for CSR: legality, consumer relations, employee considerations, and image.

The Trolley Problem

• A thought experiment in ethics, where an onlooker faces a choice to save five people by diverting a trolley to kill one person.

Teleological Approach (Consequences-Based Decision Making)

• Decisions based on the results of the action.
• Utilitarianism is a theory of moral reasoning that judges actions based on producing the greatest good for the greatest number.

Deontological Approach (Duty-Based Decision Making)

• Actions are right or wrong independent of consequences.

Moral Dilemmas (Examples)

• The Moral Machine experiment: an online platform exploring moral dilemmas faced by autonomous vehicles.

The Moral Machine: Situation

• Engineers design autonomous vehicles, facing dilemmas when programming the cars.
• Sometimes situations are more complex than experiments (e.g., people jaywalking). The ethical programming needs to be considered.

The Moral Machine: Scenarios

• Different scenarios with various factors and ethical considerations, like deciding between elderly people and children, or rich vs poor man.

The Moral Machine: Method

• Online experimental platform designed to explore moral dilemmas faced by autonomous vehicles.
• A multilingual online "serious game" to collect and analyze large-scale data on how citizens prioritize when decisions about accidents have to be made.

The Moral Machine: Results (1)

• Preferences and responses revealed in the machine are correlated with cultural and economic factors between countries.
  • Individualistic vs. collectivistic cultures have differing priorities regarding saving lives.
  • Respect and violation of laws are differently emphasized in nations with higher versus lower levels of prosperity.

The Moral Machine: Results (2)

• Demographic differences regarding preferences and prioritization of lives
• Higher level of inequality between rich and poor in countries correspond to how unequal are the social statuses treated.
• Difference in treatment of gender with more preference toward females in countries with better health and survival prospects for women.

Country Clusters (Western, Southern, Eastern)

• A breakdown of countries based on general similarities in responses and preferences.

Code of Conduct

• Companies use the code of conduct as an ethical guideline for their stakeholders.
• The criteria typically include global policies, compliance communications to stakeholders and suppliers, verification, and reporting.

Corruption and Bribery: The Case of Petrobras

• Petrobras, a Brazilian oil company faced massive corruption, bribery and money laundering scandals.
• Involves executives, other companies, and numerous politicians, leading to high-level political implications.

The Problem of Child Labor

• Arguments for the use of children typically argue for better suitability and necessity.
• Cases of child labor faced pressure, e.g., in Bangladesh, in the 1990s for child workers by the U.S. trade sanctions.

Ethical Dilemma (Child Labor)

• Whether companies should encourage child labor, defined by the ILO as work that deprives children of their childhood and potential, and that may be harmful.
• Factors include child's age, type of work, and associated conditions in the country. The answer largely depends on the specific country and situation.

IKEA and its Indian Rug Provider

• IKEA is a company implicated in a controversial child labor case.
• Response: Successfully improved conditions for workers.

Sustainability and Environmental Issues

• Discussion around the concept of sustainability and its implications in business.

The Mariana and Brumadinho Dam Disasters (Brazil)

• Environmental impact in the 2015/2019 dam breaks and the subsequent environmental damages.

Sustainable Development Goals

• Collection of 17 interlinked global goals to acheive a better and more sustainable future.

Test your knowledge on essential aspects of business ethics, including the Code of Conduct, Corporate Social Responsibility (CSR), and Sustainable Development Goals. This quiz will challenge you to think critically about the ethical frameworks that guide corporate behavior and the role of internal audits in ethical decision-making.