Question

CHAPTER 9 OF YOUR TEXTBOOK DISCUSSES ETHICAL ISSUES IN THE GLOBAL BUSINESS ENVIRONMENT. PLEASE DESCRIBE IN DETAIL AT LEAST 3 QUESTIONABLE PRACTICES THAT MNC’S HAVE TO BE CAREFUL NOT TO ENGAGE IN WHEN DOING BUSINESS ABROAD, SPECIALLY IN LESS DEVELOPED COUNTRIES. WHY IS IT IMPORTANT FOR MNC’S TO MAINTAIN ETHICAL STANDARDS IN A GLOBAL SETTING? WHAT STRATEGIES CAN BE USED TO IMPROVE GLOBAL BUSINESS ETHICS?

Answer 1

Multi-national companies operate in different countries around the world. Several factors have informed their decision to operate in different localities and especially moving into the less developed countries. Their movement into and operation in those countries has raised several ethical issues related to their impact on environment, culture issues, labour relations, and quality production.

The management of such companies are experiencing difficult situations due to increased ethical awareness in the less developed countries.

Corporate Ethics

Ethics refers to tenets that assist rational beings to choose between what is right or wrong and as such, an ethical behaviour gets universal acceptance in a particular community. Ethics refers to “the set of standards used to judge the rightness or wrongness of a person’s interaction with others in terms of truth and justice”.

This definition implies a code that people consult to judge the actions of a person in a given society. Further, corporate ethics, inferring from individual ethics, refers to regulations that regulates business operations and the behaviour of employees as well as the corporation .

Corporate ethics and ethics in general concern moral issues of both an individual employee and of the corporation at large. When businesses operate within given laws and regulations, they are termed ethical. Over and above, ethics extends to the expectation of the community.

The community expects the corporation to be ethical and in addition, be able to assist them in ways outside the corporation’s core business of the company. This is where ethics goes beyond normal operations to taking care of the surrounding community in a concept known as corporate social responsibility.

The development of multi-national corporations has necessitated the development of global ethics, which have become a way of enhancing a corporation’s competitive advantage.

As such, ethics becomes an added capability that compliments the strategic, technological, financial and organizational capabilities of an organization . However, global ethics is a product of negotiations between different stakeholders in a particular business environment and as such, it is neither absolute nor relative but consensus based ethics .

This does not mean that broad tenets do not exist where global ethics is concerned. Generally, “respect for human dignity, respect for basic rights and good citizenship” inform global ethics.

The questionable practices that MNC's have to be careful not to engage in when doing business abroad,specially in less developed countries are:-

1.Child Labor

The main cause of child labor in less developed countries is because of the economic status of the household family.In less developed countries family seldom do birth control and they might have 5 to 7 children.This will bring a big economic burden to the family that they become unable to feed their children daily meal. So the children are pushed to stop their studies and to start their working life as to reduce the burden of the family.

Others causes of child labor are employers selfish attitude and public decision on encouraging child labor.In less developed countries,some of the employers demand for child labor just to reduce their labor cost due to the longer working hours of children and relatively lower pay.Some less developed countries boost their economic growth by encouraging child labour and involving children in economic activities as earlier as possible just to increase the GDP and produce level of the country.

2 Low Wages and Unfair Treatment to Employees:

Many MNC's are being accused of paying their employees very low wages, with the average employee earning between $12,000 and $17,000 per year which is not a lot at all. A lot of employees are therefore not able to make ends meet.MNC's claims that in a bid to keep operating costs down, employees’ wages can only be so much.

Employees rendering over time services to companies have not enjoyed the fruits of their labour as they were not paid for their overtime services rendered. This is an unethical practice that MNC's has been accused of getting away with.The working conditions and facilities provided are below par level and other monetary and npn-monetary benefits are also denied.

3.Environmental degradation exploitation and pollution

Natural resources exploitation, exploration, mining and processing have caused different types of environmental damages which include ecological disturbances, destruction of natural flora and fauna, pollution of air, water and land, instability of soil and rock masses, landscape degradation, desertification and global warming. The environmental damage has in turn resulted in waste of arable land as well as economic crops and trees.

In less developed countries, government regulations are not strictly adhered to by the MNC's and waste management is not effective at all.

Importance of maintaining ethical standards in a global setting

Global corporations are increasingly trying to market their products based not only on the desirability of the goods but also on their social and environmental merits. Companies whose practices are considered unethical may find their global performance impacted when people boycott their products. Most corporations understand this risk. However, ethical questions have grown increasingly complicated, and the “correct” or ethical choice has, in some cases, become difficult to define.

The importance of business ethics reaches far beyond employee loyalty and morale or the strength of a management team bond. As with all business initiatives, the ethical operation of a company is directly related to profitability in both the short and long term. The reputation of a business in the surrounding community, other businesses, and individual investors is paramount in determining whether a company is a worthwhile investment. If a company is perceived to not operate ethically, investors are less inclined to buy stock or otherwise support its operations.

Companies have more and more of an incentive to be ethical as the area of socially responsible and ethical investing keeps growing. The increasing number of investors seeking out ethically operating companies to invest in is driving more firms to take this issue more seriously.

With consistent ethical behavior comes an increasingly positive public image, and there are few other considerations as important to potential investors and current shareholders. To retain a positive image, businesses must be committed to operating on an ethical foundation as it relates to the treatment of employees, respecting the surrounding environment and fair market practices in terms of price and consumer treatment.

Strategies to improve global business ethics

Strategic Leadership

Strategic leadership acts as a compass to guide decisions, a chart to map progress, and an anchor to keep grounded in times of turbulence. Strategic leadership in business means having an over-riding vision or mission which provides a clear sense of purpose and direction. It provides clarity of purpose and positioning, consistency of positioning and improves performance, enhances responsiveness, flexibility and foresight. Strategic leadership places responsibility and accountability for performance at the top. There is an expectation that corporate executives will have prior strategic leadership experience and relevant track records for their senior roles.

Performance-oriented managament

An organization that allows for innovation and encourages trust based transparency. To achieve growth, a business must be both able and willing to grow. The ability to grow necessitates capacities that can be freed up quickly, access to capital resources, a clear strategy and a market-oriented approach to innovation. Here, structural organization plays a crucial role. Decentralized organizational structures decisively boost a company's ability for growth, as these facilitate entrepreneurial advances and guarantee a greater proximity to the markets addressed.

High market share and High quality

It is analyzed that high market share and high quality tend to go together. There are some debates about whether (1) high market share drives high quality or (2) high quality drives high market share, it is not surprising that in a well functioning capitalist economy, better products drive out worse products.

Corporate social Responsibility

Corporate social responsibility (CSR) promotes a vision of business accountability to a wide range of stakeholders, besides shareholders and investors. Key areas of concern are environmental protection and the well-being of employees, the community and civil society in general, both now and in the future. The concept of CSR is underpinned by the idea that corporations can no longer act as isolated economic entities operating in detachment from broader society. Traditional views about competitiveness, survival and profitability are being swept away.

Other Strategies

• Total Customer focus.
• Highly committed and motivated people.
• Strict adherence to Quality Standards.
• Strong contacts with other R&D institutions.
• Continuous learning is an imbibed natural practice.
• Leadership and responsibility.
• Risk Management Skills.
• Internal Training Programs.  
• Up-to-date E-Business technologies.
• By adopting value system and principles into being.