Discussion on CSR and ethical issues for international companies

1. Report K: The organisation’s CSR
and ethical behaviour
Contemporary Business

2. Business Ethics

3. Noam Chomsky:
American linguist, philosopher, political activist, author & lecturer
“One of the elementary of
moral principles is that of
universality, that is, if
something's right for me,
it's right for you; if it's
wrong for you, it's wrong
for me. Any moral code
that is even worth looking
at has that at its core
somehow.”

4. Example: Enron
• Enron Fraud
– In just 15 years, Enron grew from nowhere to be
America's seventh largest company, employing 21,000
staff in more than 40 countries.
– But the firm's success turned out to have involved an
elaborate scam.
– Enron lied about its profits and stands accused of a
range of shady dealings, including concealing debts so
they didn't show up in the company's accounts.

5. Example Pfizer
• Pfizer Fraud
– Pfizer had the largest fine ever (of $2.3bn) levied on a
corporation for improper sales tactics.
– It comes after the firm was found to have illegally
promoted four drugs for uses for which they had not
been approved by medical regulators.
– Pfizer's 3,000 sales representatives were told to
promote the drug Bextra in areas of medicine where
the use of the drug had not been studied.

6. Example: Walmart
• Walmart Dispute
• GMB's dispute with Asda over the company's refusal
to allow it to negotiate nationally for its staff at all
Asda depots.
• Asda - whose owner, US supermarket giant Wal-
Mart, has long resisted union rights in its home
operations - says that local collective bargaining takes
place at nine of its 24 UK depots.
• The two sides also disagree about profit-related
bonus pay

7. Amazon generated
sales of more than
£3.3bn in the UK in
2011, but paid no
corporation tax.
(Guardian).
Example: Amazon, Starbucks
and Google
Starbucks' UK sales in 2011 were
£400m but much of its earnings
are paid as royalties to another
part of the company.
Google's UK unit paid
£6m to the Treasury
in 2011 on UK
turnover of £395m
(Telegraph)

8. Example: Barclays
• In June 2012 Barclays
Bank fined by US Dept of
Justice and UK FSA for
‘rigging’ the ‘London
Interbank Offered Rate’
(Libor)
• The Libor is a means of
arranging the lending
rates between banks
• Barclays lied to make the
bank look healthier than
it was and to increase
their profits

9. Ethical Erosion
• Ethical erosion has been delineated into five
distinct stages:
1. What’s illegal
2. What’s legal but unethical,
3. Ethical but against company policy,
4. Not against policy but not in the client’s best
interests, and finally
5. What’s not really contrary to the client’s best
interests but isn’t really going to benefit them
either.

10. Ethical Erosion
Where do these companies fit into the Five
Stages?

11. Corporate Social Responsibility

12. Economist, Milton Friedman says:
“The social responsibility of business is to
increase its profits.”
“What does it mean to say that "business"
has responsibilities? Only people can have
responsibilities.”
“…in a free society there is one and only one social
responsibility of business – to use its resources and engage in
activities designed to increase its profits so long as it stays
within the rules of the game, which is to say, engages in open
and free competition without deception or fraud."

13. Definition:
“Specifically, we see CSR as the voluntary
actions that business can take, over and
above compliance with minimum legal
requirements, to address both its own
competitive interests and the interests of
wider society.”
Source: www.csr.gov.uk

14. Some of the most common ways in which
CSR is demonstrated:
• Specialist ‘adopted’ projects
• Corporate charitable
donations
• Voluntary schemes for staff
• Staff fundraising activities
• Changes to organisational
operations

15. The four components of CSR:
• Economic
• Legal
• Ethical
• Discretionary

16. Source: Revisiting Carroll’s CSR Pyramid – The Copenhagen Centre

17. Sustainable
Business
The Triple Bottom Line:

18. John Elkington (1994) suggests reporting frameworks should be
expanded to include the ‘Triple Bottom Line’:
Sustainability issue Broad considerations
Ecological sustainability
Planet
• Renewable v. non-renewable energy sources
• Carbon and water footprints
• Responsible exploitation of natural resources,
replenishment of natural resources
• Impact of man-made materials, pollution, long-
term well-being of the natural environment
Social sustainability
People
• Social equity - community relationships and the
well-being of individuals and the community
(local / global)
• Ethics - ethical treatment of all stakeholders
including channel members and supply chains
Financial sustainability
Profit
• Long-term economic stability, sustainable and
fair financial reward for all stakeholders
• Profit for business to continue to reinvest
• Longer-term ROI, full cost accounting

19. 1: Employees

20. In most developed economies,
employees are protected by:
• Employment Legislation
– Hours and terms of employment, resolution of
disputes, minimum pay rates.
• Equality Legislation
– Equality of opportunity based on gender, age,
disability and gender orientation. Freedom from
bullying and harassment in the work place.
• Health and Safety Legislation
– Protection against accidents, hazardous substances
and unsafe working conditions.

21. Company policies and ‘value
statements’

22. Example: Employee Focus
Johnson and Johnson

23. CSR guidelines:
A set of employment principles originally
developed in 1977 by the Rev Leon Sullivan
who was a civil rights activist and a director
of General Motors.
As a major employer in South Africa,
Sullivan was concerned that US industry
should make a stand against the apartheid
regime.
After the fall of apartheid, his Principles,
with the support of the UN, were reformed
in 1999 as the Global Sullivan Principles, as
a means of increasing corporate support for
social justice and human rights at an
international level.

24. CSR guidelines:
1. Support for human rights for our
employees and their communities.
2. Promote equal opportunity and fair
treatment for all our employees.
3. Respect our employees’ voluntary
freedom of association.
4. Pay salaries which enable
employees to meet basic needs and
improve their economic opportunities.
5. Provide a safe and healthy
workplace; and promote sustainable
development.
6. Promote fair competition, and not
offer or accept bribes.
7. Work with governments and
communities improve the quality of
life.
8. Promote these principles with our
business partners.
www.thesullivanfoundation.org

25. Ford Motor Company, 2009
• Ford apologised and
paid compensation to
ethnic minority
employees who were
‘photoshopped’ out of
corporate brochures for
overseas markets

26. Fair employment issues:
• Fair pay – above minimum wage
• Unfair dismissal disputes
• Work-life balance policies
• ‘Glass ceiling’:
– Proportion of female / ethnic minorities in
positions of responsibility (Board level?)
• Best practice HRM
– Training, career progression, pensions and
benefits

27. 2: Customers

28. Ralph Nader: Father of ‘Consumerism’
• In 1965 Ralph Nader
published ‘Unsafe at Any
Speed’
• This was a forceful
critique of the US car
industry
• Car design was unsafe
• Companies put profit
before safety
• It changed car design and
ideas of customer service
http://nader.org/

29. In most economies, ‘customer service’ is
subject to voluntary ‘Codes of Practice’.
‘Codes of Practice’ are usually formulated
by sector-specific trade associations.
‘Codes of Practice’ may also form the
basis of legislation and regulation.

30. Value Statement: Customer Focus
Home Depot

31. Mitsubishi 2005
• Mitsubishi Motors sue
seven former executives
for $12 million
• Executives – including
three presidents – had
covered up
manufacturing defects
for 20 years
• Also faced charges by
safety authorities
Mitsuo Hashimoto, Osamu Masuko,
and Yoshikazu Nakamura offer
apologies for problems at Mitsubishi.

32. International Standards Organisation
Certification
ISO 10002:2004 Quality Management:
Customer Satisfaction Guidelines for
Organisations
(www.iso.org)
‘ISO 10002:2004 provides guidance on the process of
complaints handling related to products within an
organization, including planning, design, operation,
maintenance and improvement. The complaints-handling
process described is suitable for use as one of the processes of
an overall quality management system.’ - ISO

33. Customer Service issues:
• Proper, recognisable policies and procedures for
handling customer complaints
• Full participation in trade / sector customer
service programmes
• Going beyond legal requirements
• Anticipating customers needs and safety in
product and service design, pricing, and
fulfilment
• Rapid and flexible approach to handling problems
when they occur

34. 3: Supply Chain

35. • Naomi Klein’s 1999
book ‘No Logo’
highlights unethical
behaviour and
contractors’ labour
practices of famous
brands.
http://www.naomiklein.org/main

36. ILO Declaration on Fundamental
Principles and Rights at Work
• Adopted in 1998 –
expresses commitment of
governments, employers'
and workers'
• Covers four principles:
1. Freedom of association
and rights of collective
bargaining
2. Elimination of forced
labour
3. Abolition of child labour
4. Elimination of
discrimination
http://www.ilo.org/global
/lang--en/index.htm

37. Other international CSR guidelines:
SA800 certification developed
by the international human
rights organisation Social
Accountability International.
(www.sa-intl.org)
The United Nations Global
Compact (UNGC) framework and
mechanism designed to
encourage businesses to adopt
CSR policies
(www.unglobalcompact.org)

38. International Standards Organisation
Guidance
ISO 26000:2010 - provides guidance on how
businesses and organizations can operate in a
socially responsible way. This means acting in an
ethical and transparent way that contributes to
the health and welfare of society
(www.iso.org)
‘ISO 26000:2010 provides guidance and helps organizations
translate principles into effective actions and share best
practice globally. The standard was launched in 2010
following five years of negotiations between governments,
NGOs, industry, consumer groups and labour organizations
around the world, which means it represents an international
consensus.’ - ISO

39. A roll of shame:
Women making shirts for Wal-Mart in Bangladesh
work an 87 hour week at 9¢/hr with no maternity
leave.
Women workers in Riese Maglierra, Italy, are told
to arrange marriages to fit in with their shifts.
In the year 2000, CEO Millard Drexler was paid $39 million, while
workers in Cambodia earned 21¢/hr.
Michael Jordan was paid $20 million/year and Tiger Woods
$50,000/day to promote Nike, while a typical factory worker
earned $1.25/day.

40. http://www.unilever.com/sustainable-living/betterlivelihoods/

41. http://www.thebodyshop.co.uk/values/EthicalTrade.aspx

42. Supply Chain issues:
• Taking responsibility for the source of the
materials, products components and services
• Putting humanitarian principles before ‘lowest
cost’ sourcing
• Understanding that customers expect and will
pay for fairly sourced products
• Going beyond the workplace to help build
better communities

43. Conflict diamonds
Conflict diamonds are
diamonds that originate
from areas controlled by
forces or factions opposed to
legitimate and
internationally recognized
governments, and are used
to fund military action in
opposition to those
governments, or in
contravention of the
decisions of the Security
Council. - UNICEF

44. This seventeen-year-
old lost both hands to
rebels’ machetes.
Waterloo camp, Sierra
Leone, 1998. UNICEF /
HQ96-0566 / Giacomo
Pirozzi

46. The Kimberley Process Certification
Scheme (KPCS)
• Adopted by the UN in 2000.
the Kimberley Process is a
joint governments, industry
and civil society initiative to
stem the flow of conflict
diamonds – rough
diamonds used by rebel
movements to finance wars
against legitimate
governments.
• KP members now account
for 99.8% of the global
production of rough
diamonds
http://www.kimberleyprocess.com

47. and now its not just diamonds…

48. Coltan?
• Coltan is a rare mineral used
in mobiles, laptops and
other electronic devices
• A boom in demand has
pushed prices to $400/k
• Proceeds from illegal mining
is being used to fund rebel
forces in the Congo, and
drug cartels in Colombia
• Some manufacturers are
claiming to reject coltan
from central Africa

49. Tantalum-Niobium International Study
Center (TIC)
• At this time the TIC is attempting to gather
international support for a certification scheme
similar to the Kimberley process for coltan
• US and Canadian legislation is in place to
encourage the use of ‘clean’ coltan
• Unfortunately the world’s largest producer of
electronic equipment (China) has not subscribed
to the scheme and continues to accept imports of
‘conflict coltan’.
http://tanb.org/