Ethics and social responsibility in management

Ethics and Social Responsibility

Companies, like people, are bound by ethical requirements -- a responsibility to consumers and customers. Companies are expected to do follow up on the promises of their advertisers. All companies make ethical declarations as part of their vision and operational philosophy, but quite a few to do little to live up these declarations. Recently, Enron's bankruptcy has brought to light some actions that appear to be at least unethical, if not actually illegal. The effect of the Enron fallout has affected not only the employees of Enron but also the shareholders and many of its offshore plants around the world (India).

Foreign Corrupt Practices Act (FCPA) was enacted in 1977. An investigation by the Securities and Exchange Commission (SEC) in the mid-1970's showed that over 400 U.S. companies admitted to making questionable or illegal payments in excess of $300 million to foreign government officials, politicians, and political parties. Congress enacted the FCPA to bring a halt to the bribery of foreign officials and to restore public confidence in the integrity of the American business system. The act was bipartite: (1) a prohibition on bribery to any foreign officials, political parties or and records and sufficient internal controls, and bribery of candidates for public office for the purpose of obtaining or retaining business; and (2) requirements of companies with registered securities and companies to file periodic reports with the SEC and maintain accurate books was passed there were many reports that U.S. businesses were making large payments to foreign officials to secure business and the involvement of the companies in local corruption issues.

Most companies define their ethical principles as: honesty, integrity, responsibility, trust, and respecting of the laws in the country where they operate. Violations of the FCPA laws can lead to severe civil and criminal penalties and can disqualify a company from participating in Government programs. The penalties for the violation can be both monetary fines and imprisonment. There are also various other offences such as: money laundering, which is an offense that violates the Racketeer Influenced and Corrupt Organization Act (RICO), which may provide the basis for further criminal charges.

There are many organized crime agencies in Asia and many of them have strong links to the business communities operating in the region: for example, the Chinese Triads and the Japanese Yakuza. While U.S. businesses may not be directly connected with these criminal organizations, they often are indirectly involved -- through agents and middlemen.

There have been a number of reports in recent times of U.S. firms using sweatshop labor for manufacturing purposes. There were also reports in 1976 that companies like Lockheed Martin had trade relation with the Japanese Yakuza. The book "Yakuza" by Dubro and Kaplan, gives a lot of information about the effect of the Japanese mafia in the U.S. Yoshio Kodama the yakuza's first 20th-century godfather was a pivotal figure in the notorious Lockheed Scandal of 1976. It was revealed that the aircraft giant had paid the godfather more than two million dollars to influence the Japanese market away from McDonnell-Douglas and Boeing, toward Lockheed. (Yakuza Godfathers, 2001; Yakuza Influence, 2001)

Big brand-name marketers like Nike and Mattel and retailers like Wal-Mart and The Gap deal solely with their own operations like design and marketing. They subcontract or license production to small manufacturers, mainly in Asia; these manufacturers may, in turn, subcontract to even smaller shops, home workers and other independent contractors. Thus, due to no fault of their own, many U.S. companies may get involved these operations.