Business Ethics

Essay Assignment: Multinational Corporations

Submitted to:
Prof. H. Aronovitch
University of Ottawa

Submitted by:
David Hamilton
Student # 5322750
PHI 2397 C
Thursday November 29, 2011

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__________HAMILTON, DAVID______ _________5322750___
Name, Capital letters Student number

_______________________________ ________11/29/2011_____
Signature Date

Ethics in business must start at the top of a company and work its way down to every employee involved in an organization. In today’s world, corporations feel a moral obligation to practice business fairly while treating their employees with respect, so shouldn’t a company keep the same ethical approach if they expand their operations abroad? Over the last century or so, the global economy has changed drastically, with less barriers and a greater flow of goods and services between countries. A multinational corporation is any business that has productive activities in two or more countries. Although there are many benefits to the changing world economy, a majority of these multinational corporations are harming their host countries in a variety of ways. The three main ethical issues that multinational corporations are involved in when operating in host countries include environmental pollution, unethical employment practices, and even corruption. The purpose of this paper will be to analyze these three ethical issues, and also consider policies that currently exist and some that should be adopted in order to maximize the benefits, and minimize the harms of these multinational corporations in their host countries.
A significant ethical issue for multinational corporations in host countries is environmental pollution. This issue arises when environmental regulations in host countries are inferior to those of the multinational corporation’s home country. Many developed nations have substantial regulations governing the emissions of pollutants, the dumping of toxic chemicals, the use of toxic materials in the workplace, and so on. Those regulations are often lacking in developing nations, and the result can be higher levels of pollution from the operations of multinationals than would be allowed at home. Many multinational corporations move operations to a developing host nation specifically to avoid costly pollution controls, where they in turn add increased pollution to the surrounding environment simply for the reason of lowering costs of production in order to gain an advantage. Pollution can endanger plant life, wildlife, human life, and water in host countries. Multinationals can also help contribute to the phenomenon known as the tragedy of the commons, which occurs when a resource held in common by all, but owned by no one, is overused by individuals, resulting in its degradation. They can contribute to the tragedy of the commons by moving productions to locations where they are free to pump pollutants into the atmosphere or dump them in oceans or rivers, thereby harming these valuable global resources. Although environmental pollution is an ethical issue alone, another ethical issue branching off from this is the fact that the health of the people in the host country is being put into jeopardy as well. Although businesses do not have an obligation to protect the environment above what the law requires, they must realize that the severity of the pollution, and the problems that arise from it, in order to fully understand that their actions are ethically wrong. For example, if businesses showed more concern for the environment above what the law requires, they would be able to significantly cut pollution and the harm that it brings to the environment of host nations. Consumers are also at fault here as they tend to shy away from the environmentally friendly companies products since their price tags may be slightly higher than that of the company that is able to cut production costs by polluting the environments of host nations. Consumers can do their part in attempting to solve this ethical issue by purchasing more environmentally friendly products. Environment requirements, like those in developed countries, must be implemented in countries that are popular with multinational corporations. This will restrict these companies from polluting and dumping toxic chemicals into these environments that could result in consequences both locally and worldwide. The Kyoto Protocol is an international agreement between thirty-seven countries to reduce greenhouse gas emissions. Greenhouse gases are caused by carbon emissions going into the atmosphere from things such as car gas pipes and other fuels such as natural and diesel gasoline. The protocol commits countries to cut back on the percentage of emission per capita they release into the atmosphere every year. However, there are not many countries in the world that are part of the agreement. It would be very advantageous if more countries that host a lot of multinational corporations joined.
One of the most significant ethical issues at hand when thinking about the host country is the unethical employment practices that might be in place. When work conditions in a host country are clearly inferior to those in a multinationals home country, what standards should be applied? The Cultural Relativism approach to ethic believes that ethics are culturally determined and that a corporation should adopt the beliefs of the nation in which they operate. This approach can benefit the corporations that operate in these nations, but it will only hurt the workers. Questionable employment practices include poor working conditions such as low wages, long hours, and lack of proper employee safety precautions. These types of factories are most commonly known as “sweatshops”. An example of this can be seen in an article by BBC News that talks about, Nike, who faced highly publicized criticisms about their plants in other countries. Child labor was uncovered at their plants in Cambodia and Pakistan, not only were these children below the legal working age, some as young as twelve, but also worked seven days a week, sometimes for as long at sixteen hours. This treatment is inhumane and brings negative association to Nike’s brand name, tarnishing their image. Since these factory employees are the ones who are manufacturing the products, Nike should treat them with the same respect as their frontline employees that sell their products to the public. This is just one example of a high profile multinational that has come under scrutiny in the last decade. The International Labor Organization estimates that around 250 million children around the globe between the ages of five and fourteen work, where about 120 million of them work fulltime. Corporate facilities could also expose employees to hazardous materials or they may be told to handle toxins without proper training. Also, they could be working in unsanitary conditions, with excessive noise, and be operating dangerous machinery without a proper training or license. Minimum wage pay also brings controversy concerning multinational practices as well as their locations. Although these multinational corporations are providing jobs with the intention of helping host country’s economy, this does not justify the mistreatment of employees. Policies should be put into place that go beyond the basic human rights of these workers to protect them against cruel employment practices. The International Labour Organization is the closest to an international body focused on enforcing provisions of its international business code of ethics by banning certain clearly and definitively unethical practices. The International Labour Organization determines the International Labour Code, which is a compiled set of conventions and recommendations regarding labor and associated subjects. This code is not an international code of ethics which must be formally obeyed by all of the countries who choose to take part in international business. This means that ultimately the choice is up to these multinational companies to determine whether or not they want to practice ethical or unethical employment practices in their host countries. In many developed countries there are national occupational health and safety acts that ensure that employees are put into working environments that are safe and hazard free. A policy should exist that would require a country to follow their health and safety act in all aspects of their corporations, regardless of if they have activities abroad. This way a multinational corporation could not take advantage of a developing countries lack of regulations.
The third and final ethical issue for multinational corporations is corruption. Corruption in governments has been a problem in societies for an extremely long time. Multinational corporations have gained economic advantages in the past by paying corrupt government officials, and will continue to do so in the future in order to gain an advantage in host countries. Also, bribery could harm competing multinational corporations in the same host country as well as local businesses. Officials could be paid off to not complete inspections of one facility and hinder a competing company that is not willing to engage in such practices by not allowing them to pass a health of safety inspection. In 1977 the Foreign Corrupt Practices Act was put into place and in 1999 the Organization for Economic Cooperation and Development adopted the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Both policies state that bribing foreign public officials is a criminal offence. For these two acts to be truly effective, local law enforcement must implement them and both corporations and officials must be aware of the consequences of engaging in corrupt activities. Although there are laws restricting bribery in host countries, many unethical multinational corporations still choose to engage in these types of transactions. This gives an unfair playing field for all of the other businesses who choose to make the ethical choice and avoid making deals with these corrupt government officials. By reducing bribery and corruption in the governments of host countries, the business world would be significantly more equal in terms of success or failure for any business. It is ethically wrong to pay a bribe to a government official in order to get the upper hand on other businesses. Although I have just gone over some major ethical issues with multinationals in their host countries, I just want to take a moment to briefly go over the other side of the argument and state some benefits that the host nations derive from multinational corporations. Two main benefits are the resource transfer effects and the employment effects. The multinational enterprise may be able to provide capital, technology, management skills to the host country. These resources could be scarce and thus help boost the economy. Another benefit is that a multinational corporation brings jobs to a host country that would otherwise not exist. Jobs can be created directly through the corporation and indirectly in the form of suppliers. These are just two benefits that could arise from a multinational corporation in a host country. Although there are several benefits, I think that the ethical issues and disadvantages are much more serious. In conclusion, multinational corporations harm their host countries in a variety of ways which include environmental pollution, unfair employment practices, and corruption. Although there are several policies in place to help combat some of the issues in some countries, not enough is being done by the multinationals to be ethically sound in their practices. Another philosophical approach to ethics is the righteous moralist approach that claims that a multinational’s home-country standards of ethics should be the ones followed in a foreign country. I think that when a multinational, with a developed country as its home country, enters a host country that is a developing country, it should use its home country’s ethical standards when it comes to pollution, employment practices, and corruption. If corporations followed the same moral obligations in their host country as they did in their home nation, more focus could be put on employees and less on obtaining the highest profit. This, combined with the adoption of new policies for doing business in host nations, would eliminate many of the issues that come with expanding across borders. . Though some multinational corporations slightly attempt to avoid these ethical issues, they are ultimately inevitable due to the increase in profits that could be seen as a result, and the host countries are suffering because of this. These ethical issues are extremely significant in the world today due to the fast moving pace of the world economy, where many developed nations are continuing to advance and increase ethical standards in business, while at the same time leaving developing countries behind.

References
Business Laws. Monitoring Foreign Employment of International Companies. 2010. Retrieved November 27, 2011 from < http://business.laws.com/business-ethics/monitoring-foreign-employment-of-international-companies>
Charles W. L. Hill and Thomas McKaig, Global Business Today (Canada: McGraw Hill, 2006) Pg. 22
Charles W. L. Hill and Thomas McKaig, Global Business Today (Canada: McGraw Hill, 2006) Pg. 130
Charles W. L. Hill and Thomas McKaig, Global Business Today (Canada: McGraw Hill, 2006) Pg. 131
Charles W. L. Hill and Thomas McKaig, Global Business Today (Canada: McGraw Hill, 2006) Pg. 141
Charles W. L. Hill and Thomas McKaig, Global Business Today (Canada: McGraw Hill, 2006) Pg. 142
Paul Kenyon, “Gap and Nike: No Sweat?”, BBC News (2000), Retrieved November 27, 2011 from <http://news.bbc.co.uk/2/hi/programmes/panorama/970385.stm>
S.L. Bachman. "The Political Economy of Child Labor and Its Impact on International Business." BNET. (2010).Retrieved November 27, 2011 from <http://findarticles.com/p/articles/mi_m1094/is_3_35/ai_64396571/>
United Nations Framwork Convention on Climate Change, UNFCC: The Kyoto Protocol, Retrieved November 27, 2011 from: <http://unfccc.int/kyoto_protocol/items/2830.php>

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[ 1 ]. Charles W. L. Hill and Thomas McKaig, Global Business Today (Canada: McGraw Hill, 2006) Pg. 22
[ 2 ]. Charles W. L. Hill and Thomas McKaig, Global Business Today (Canada: McGraw Hill, 2006) Pg. 130
[ 3 ]. Charles W. L. Hill and Thomas McKaig, Global Business Today (Canada: McGraw Hill, 2006) Pg. 131
[ 4 ]. United Nations Framwork Convention on Climate Change, UNFCC: The Kyoto Protocol, Retrieved November 27, 2011 from:

[ 5 ]. Charles W. L. Hill and Thomas McKaig, Global Business Today (Canada: McGraw Hill, 2006) Pg. 141
[ 6 ]. Paul Kenyon, “Gap and Nike: No Sweat?”, BBC News (2000), Retrieved November 27, 2011 from [ 7 ]. Bachman, S. L. "The Political Economy of Child Labor and Its Impact on International Business." BNET. (2010).Retrieved November 27, 2011 from

[ 8 ]. Business Laws. Monitoring Foreign Employment of International Companies. 2010. Retrieved November 27, 2011 from
< http://business.laws.com/business-ethics/monitoring-foreign-employment-of-international-companies>
[ 9 ]. Charles W. L. Hill and Thomas McKaig, Global Business Today (Canada: McGraw Hill, 2006) Pg. 131
[ 10 ]. Charles W. L. Hill and Thomas McKaig, Global Business Today (Canada: McGraw Hill, 2006) Pg. 142