288 33 Powerpoint Slides Chapter 20 Ethics Social Responsibility

7/30/2019 288 33 Powerpoint Slides Chapter 20 Ethics Social Responsibility

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Copyright @ Oxford University PressInternational Business R. M. Joshi Chapter 20: Ethics and SocialResponsibility

International BusinessRakesh Mohan Joshi

Professor & Chairperson, IIFT New Delhi

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ETHICS AND

SOCIALRESPONSIBILITY

Chapter 20


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Learn ing Object ives To delineate the significance of ethical

practices in business

To explain the concept of ethics

To elucidate unethical business practices

To explicate corporate social responsibility


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Sign i f icance of Ethics & Social

Responsib i li ty for Bus inesses

It is in the larger interest of businesses to

carry out their activities ethically and in asocially responsible manner, not for the

sake of charity but for their own survival

and sustainability in the long-run.


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Ethics

Ethics: The study of moral conduct and itsevaluation.

Ethics are a societys concept of fairness and

justice whereas morality refers toindividual virtues.

Business ethics: The study anddetermination of what is right and good inbusiness settings. Something which is legalneed not necessarily be ethical.

Oxford International Business

Joshi, R.M


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Unethical Business Pract ices

Businesses resort to a wide range of unethicalpractices which are not only detrimental tocustomers but also to the civil society at large,such as

Corruption and bribery,

Financial misappropriations, Circumventing law enforcement,

Evading taxes and duties,

Dumping,

Making exaggerated and even false claims,

Exploiting customers, Flouting basic norms of civil decency, and

Even manufacturing and distributing pirated andfake products.


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Corrupt ion

Abuse of entrusted power for private gain. It

is a form of behaviour, which departs from

ethics, morality, tradition, law, and civic

virtue.


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Detr imen tal Effects of Corrup t Pract ices

on Bus iness Legal risks

Reputational risks

Financial costs

Repeat bribery demands

Blackmail and security risks

Risk of getting cheated

Undermines businesses vested interest insustainable development


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Br ibeAn offer or receipt of any gift, loan, fee,

reward, or other advantage to or from any

person as an inducement to do something

which is dishonest, illegal, or a breach of

trust, in the conduct of the enterprises

business.


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Smuggl ingSurreptitious trade across the borders aimedat circumventing enforcement of regulatoryprohibitions and restrictions and evading

payment of legitimate customs duties.

Products with higher prohibition andrestrictions, such as liquor, cigarettes,drugs, arms and ammunitions are generallyappealing to smugglers.


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HawalaAn informal channel for transferring funds

from one location to another through service

providers, known as hawaladars. It is used

as a major remittance system around the

world.


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Money Laundering

Conversion or laundering of money obtained

through illegal means so as to make it appear to

originate from a legal source. It is often used

worldwide to transform monetary proceeds

derived from illegal means or criminal activitiesinto funds with apparently legal sources. The

money laundering process has three

independent stages:

Placement

Layering

Integration


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Copyright @ Oxford University PressInternational Business R. M. Joshi

Chapter 20: Ethics and SocialResponsibility

Tax HavensA country which levies taxes either at a very

low rate or no taxes at all.To assign a country tax-haven status, OECDconsiders four criteria:

Insignificant or non-existent tax levels

Absence of transparency in tax matters

Absence of fiscal data exchange with other

countries

Attractiveness for straw companies with

fictitious activities


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Modus Operand i of Rou t ing Money to Tax

Havens Round tripping: Transactions aimed at

converting unaccounted or black-money

into legitimate wealth.

Treaty shopping: Aims at reducing total

tax incidence on capital gains made in

countries with high tax incidence.


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Unethical Market ing Pract ices

Businesses often adopts both fair and unfair

marketing practices to entice customers and

establish their supremacy in the

marketplace.


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Grey Market ingImport or export of goods and their

distribution through unauthorized channels.

International brands with high price

differentials and low cost of arbitrage

constitute typical grey market goods.


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Types o f Grey Market ing Channels

Parallel importing: Selling a product at ahigher price to the authorized importer in the

overseas market than the price at which the

product is available in the home market.

Re-importing: Re-importing takes place whena product is priced lower in overseas market as

compared to home market.

Lateral re-importing: Products are sold from

one export market to another through parallel

importing when the price differences exist in

different export markets.


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Counterfe i t ingImitating something with intent todeceive or defraud.

A wide range of products, such as

consumer goods, currency, and

documents are counterfeited

internationally. Customers often find it

difficult to differentiate between a

genuine and counterfeit products.


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PiracyUse of illegal and unauthorized means to obtain

goods. Piracy activities are directly influenced by

the intellectual property regime within a country.

It includes use or reproduction of patented or

copyrighted matter, such as software, music,

movies, computer games, etc.


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Transfer PricingThe price between related parties in an

international transaction.

It is used to optimize profitability in low-tax

regimes at the expense of high-tax regimes.


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Types o f Trans fer Pric ing

Market-based / arms length transferpricing: Pricing between two unrelated(arms length) parties.

Non-market pricing : Pricing policiesthat deviate from market-based armslength pricing.

Pricing at direct manufacturing costs:The intra-firm transactions that take placeat the manufacturing costs.


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DumpingSelling of a product or commodity below the

cost of production or at a lower price in

overseas markets compared to domestic

markets that causes injury to domestic

industry in the importing country.


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Forms of Dumping Sporadic dumping : Occasionally selling

excess goods or surplus stock at lower pricesin overseas markets than the domestic priceor below the cost.

Predatory dumping: Aimed to force

competitors to leave the market, thus enablingthe predator to raise the price in the long-run.

Persistent dumping: It involves a consistenttendency of a firm to sell the goods at lower

prices in foreign markets compared todomestic markets.


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Unethical Market ing Commun icat ions

In quest to entice customers, advertisers

often make exaggerated and sometimesfalse claims and exploits customers

emotions.

The ICC code on Advertising is the majorrule-setter for international marketing

and advertising whereas Advertising

Standards Council of India (ASCI), a

voluntary organization, brings out a code

for self-regulations in advertising in India

and decides upon the complaints.


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Corporate Social Respons ibi l i ty (CSR)Carrying out business activities in a socially

responsible manner. It is the process of

assuming responsibility by a businessenterprise across its entire supply chain for

the social, ecological, and economic

consequences of the companys activities,

reports on these consequences, and

constructively engage with stakeholders.


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Multi lateral CSR In it iativesOECD Guidelines for MNEs:

It presents the worlds foremost CSR

instrument and an important international

benchmark. The guidelines aim to promote

MNEs positive contributions to economic,

environmental, and social progress and

contains voluntary principles and standards

for conduct of responsible business.


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Global Repo rt ing In it iat ive (GRI)It sets out the principles and indicators that

organizations can use to measure and

report their economic, environmental, and

social performance. This standardized

approach to reporting help stimulate

demand for sustainability information.


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