Running Head: How Ethically Responsible Should Companies Be For the Adverse Affects They Have On Countries They Enter To Do Business How Ethically Responsible Should Companies Be For the Adverse Affects They Have On Countries They Enter to Do Business Name of Student Name of University/College Name of Professor Course Abstract Changes in the business environment have presented a number of challenges to establish ways of doing business. Thus, managers realized that the survival and growth of firms today and in the future relies on their aptitude to operate globally.
Third world countries seek to attract American MNCs for the jobs they provide and for the technological transfers they promise. However, when these MNCs entered into countries to do business particularly in the third World Countries, many American condemn them (Hofffman & Frederick, 1995) for exploiting the resources and workers of the Third World. MNCs are blamed for the poverty and starvation. How ethically responsible should these companies be for the adverse affects they have on countries they enter to do business is the question being posed.
The Multinational Companies shall be used as a model on this study to help provide an analysis as to what, how, and why these companies should be ethically responsible. Introduction The premise of this discussion begin in an ethical question how (ethically) responsible should companies be for the adverse affects they have on countries they do business (Donaldson, 1989). This argument will run through a series of rationalization using the knowledge drawn on the aspect of multinational corporations operating in various nations particularly in the Third World. Barnet & Muller, 1974). For we knew the fact that the Third World needs multinational companies to provide the much needed jobs, technologies, and a means to improve the life of its people. Nevertheless, while the First World multinational Corporations (MNCs) considered the hope of the third World, it is also considered as the menace of the third World, and poses moral dilemmas on the inconsistency of the issues with regards to exploitation of labor force and resources of the Third World. De George, 1986) While MNCs are a means for improving the standard of living of the underdeveloped countries, they were also accused for the poverty and starvation such countries suffer, they were even criticized for draining and transferring jobs from the United States to the third world which led to global economic crisis last 2008. American MNCs usually pay at least as high wages as local industries, yet critics blame them for paying workers in underdeveloped countries less than the pay Americans workers for comparable work.
When American MNCs pay higher than local wages, local companies criticise them for skimming off all the best workers and for creating an internal brain-drain. Multinationals are presently the most effective means available for the Third World growth, although, it has also demean local cultures and led to the tinsel of American life and the nastiest aspects of its culture. MNCs locate their enterprise in a safe environment to protect them from destruction such as upheavals and exclusions by socialist regimes, thus, being criticised that MNCs thrive in countries with strong, and often rightwing governments. Barnet & Muller, 1974. p. 502). These ideologically based standpoints are the conflicting dilemmas American MNCs faces brought by differing views. Though not all claims that lead to these dilemmas are equally justifiable, neither are they all morally mandatory. According to De George (1986) we can separate those MNCs that behave immorally and reprehensibly from those that do not elucidate the true moral responsibility. The term ‘social responsibility’ embraces a multitude of internal and external relationship of the corporation’s. Encyclopaedia of Professional Management, Vol. 2, p. 848) Discussion It has been an issue of debate that American multinational should advocate and perform the same standard of doing business in the Third World as what they do in the United States. United States wages are the highest in the world, but should not be construed to be the moral and necessary norms for the whole world or for the U. S. firms abroad. This thing should not be confused either with standard appropriate to the United States or with standards set by the United States government.
Some of the dilemmas of United States multinationals come from detractors such as false equations. (De George, 1986) In his book ‘ Ethics and the Multinational Enterprise ‘ De George (1986) outlined seven moral guidelines that generally apply to multinationals operating in third World countries: 1. MNCs should do no intentional harm. This restriction is clearly not unusual to multinational corporations. Yet is a basic norm that can be usefully applied in evaluating the conduct of MNCs. Any company that create intentional direct harm clearly violates a basic moral standard. . MNCs should produce more good than bad for the host country. This is an implementation of a general utilitarian principle. But this standard limits the extent of that principle. Generally, more goodwill is done by helping the greater needs rather than helping those that need less. Thus the functional analysis on this case does not consider that more harm than good might justifiably be done to the host country if the harm offset the greater benefits in developed countries. MNCs will do more good only if they help the host country more than they harm it. . MNC should contribute by their activities to the host country’s development. The MNC can be charged of exploitation, or using the host country for its own purposes if the presence of MNC does not help the host country’s development. 4. MNC should respect the human rights of its employees. To prevent MNC worker’s gross exploitation in terms of minimum pay standard, MNCs should respect the rights of its employees, and prescribe minimum standards not only for pay but likewise for health and safety measures. 5. MNCs should pay their fair share of taxes.
MNCs do not fairly bear the burden of operating in a country when used to transfer pricing aim of taking advantage different countries tax laws purposely to deceive the host country and to avoid legitimate taxes, and then it is immoral and exploitative. 6. To the extent that local culture does not violate moral norms, MNCs should respect the local culture and work with it, not against it. Rather than simply transferring American way of life into other lands, they can consider changes in operating procedures, plant planning, and the like, which take into account local needs and customs. . MNCS should cooperate with the local government in the development and enforcement of just background institutions. MNCs should be supportive of tax measures that aim on appropriate redistribution of incomes, instead of preventing the organization of labor, and resisting attempts at improving the health and safety standards of the host country. The ‘What’ The Multinational Corporations. According to Velasquez (1992), the following well-known features of MNCs’are: ) MNCs are businesses and as such they are organized primarily to increase their profits within at competitive environments. Virtually all of the activities of a multinational corporation can be explained as more or less rational attempts to achieve this dominant end. 2) MNCs are bureaucratic organizations. The implication of this is that the identity, the fundamental structure, and the dominant objectives of the corporation endure while many individual human beings who fill the various offices and positions within the corporations come and go.
As a consequence the particular values and aspirations of individual members of the corporations have relatively minimal as well as the transitory impact on the organizations as a whole. 3) Characteristically most MNCs operate in several nations, and this has several implications. First, because the MNCs are not confined to a single nation, it can easily escape the reach of the laws of any particular nation by simply moving its resources or operation out of one nation and transferring them to another nation.
Second, because MNCs is not confined to a single nation, its interest is not aligned with the interest of any single nation. The ability of the multinational to achieve its profit objectives does not depend upon the ability of any particular nation to achieve its own domestic objectives. The ‘Why’ The Multinational Corporations Issues. There is a tirade of argument that says that all MNCs exploits underdeveloped countries or obliterate their culture, are too blurred to determine their accuracy. (Gabriel, 1978).
We can distinguish five types of moral issues on this according to De George (1986), such as the following: 1) Banks and financial institutions; 2) Agricultural enterprises; 3) Drug companies and hazardous industries; 4) Extractive industries; and 5) Other manufacturing and service industries. If we were to apply the seven general criteria outlined by De George (1986) in each type of the case, we would notice some of the differences among them, that; Financial institutions do not generally employ many people. Their function is to provide loans for various types of development.
In the case of South Africa they do not do much anything to challenge apartheid, instead they strengthen the government’s policy of apartheid by lending to the government. In this case, an argument can be made that they do more harm than good, an argument that several banks have seen to be valid, causing them to discontinue lending money to that government. Financial institutions can help and have help development tremendously. Yet the servicing debts that many Third World countries face condemn them to impoverishment for the foreseeable future.
The role of financial institutions in this situation is crucial and raises special and difficult problems if not dilemmas. (De George, 1986) Likewise, problems that face agricultural enterprises is, whenever the agricultural multinationals buy the best lands for their industry use, insufficient arable land is left for the local population to produce enough for their own, then according to De George (1986) MNCs do more harm than good to the host country, and suggest a violation of one of the norms. Drug companies and dangerous industries similarly pose different and special problems.
This should not be taken to mean that drug companies are bound only by local laws, for the local laws may require less than morality requires in the way of supplying adequate information and of not producing intentional, direct harm (De George, 1986, pp. 363-367) the same types of observation applies to hazardous industries. While an asbestos company will probably not be morally required to take all the measures mandated by OSHA (Occupational Safety and Health Administration) regulations, and thus, it cannot morally leave its workers completely unprotected.
Incessant protest by environmental activist against exploitative activities of MNCs extractive industries such as mining in the third World countries shows that MNCs are correctly open to the charge of exploitation unless they can show that they achieve better than harm to the host country. Other manufacturing industries vary greatly, but as a group they have come in for sustained charges of exploitation of workers and the undermining of the host country’s culture.
During the last few years an increasing number of voices have urged that we pay more attention to ethics in international business, on the grounds that not only are large corporations now internationally structured and thus engaging in international transactions, but even the smallest domestic firm is increasingly buffeted by the pressures of international competition (Hoffman, Lange, & Fedo, 1986) . This phenomenon led to the growth of ethicists who have begun to address issues in this field. The Realist Opposition
The realist objection is the standard objection to the view that agents whether corporations, government, or individuals have moral obligations on the international level. However, the realist holds that it is a mistake: morality has no place in international affairs. The classical statement of this view according to Velasquez (1992) is attributed to Thomas Hobbes. It is in Hobbsian form, as traditionally interpreted, the realist objection holds that moral concepts have no meaning in the absence of an agency powerful enough to guarantee that other agents stick to the tenets of orality. Hobbes (1958) discoursed that in the absence of a sovereign power to force men to behave civilly with each other, men are in “the state of nature” a state he characterizes as “war . . . of every man, against every man”, and conclude that in such state of war, moral concepts have no meaning. (Hobbes, 1958, p. 108). Moral concepts are meaningless then, when applied to state of nature situations. And so, Hobbes held that the international arena is a state of nature, since there is no international sovereign that can force agents to adhere to the tenets of morality. Hobbes, 1958) There are two (2) premises that Hobbsian objection are based when talking about morality in international affairs; (1) an ethical premise about the applicability of moral terms and (2) apparently empirical premise about how agents behave under certain conditions. The ethical premise holds that there is a connection between the meaningfulness of moral terms and the extent to which agents adhere to the tenets of morality: if in a given situation agents do not adhere to the tenets of morality then in that situation moral terms have no meanings.
The apparently empirical premise holds that in the absence of sovereign power, agents will not adhere to the tenets of morality; they will be in a state of war. This appears to be an empirical generalization about the extent to which the agents adhere to the tenets of morality in the absence of third party enforcer. Taken together, the two premises imply that in situations that lack a sovereign authority, such as one finds in many international exchanges, moral terms have no meaning and so moral obligations are nonexistent. Velasquez, 1992, pp. 27-40) However, there are number of reasons for thinking that the two Hobbsian premises are deficient as they stand according to Velasquez (1992). If one is in the situation which do not adhere to any moral restraints, it simply does not logically follow that in that situation one’s action are no longer subject to moral evaluation. At most what follows is that since such an extreme situation is different from the more normal situation in which we usually act, the moral requirements placed on us in such extreme are ifferent from the moral requirements that obtain in more normal circumstances. For instance, morality dictates that that somebody has to defend himself or herself by counterattacking or killing that assassin when someone attacks somebody. It is a truism according to Velasquez (1992) that what moral principles require in one set of circumstances is different from what they require in other circumstances. And in extreme circumstances, the requirements of morality may become correspondingly extreme.
But there is no reason to think that they vanish altogether. Hobbsian or realist arguments then are summarized as follows; ‘In situations in which other agents do not adhere to certain tenets of morality, it is not immoral for one to do likewise when one would otherwise be putting oneself at a significant competitive disadvantage’. (Velasquez, 1992). The assertion that in the absence of sovereign power, the agents will be in a state of war. Hobbes gives a little bit of empirical evidence for this claim.
He cites several examples of situations in which there is no third party to enforce civility and where, as result, individuals are in “state of war”(Hobbes, 1958) Generalizing from these examples, too little evidence Hobbes provides and too slim to support his big empirical generalization. Numerous empirical counterexamples can be cited of people living in peace in the absence of third party enforcer’s it is difficult to accept Hobbes’ claim as an empirical generalization. Nevertheless, on the basis of some of the theoretical claims of game theory, the Hobbsian claim however has been defended recently particularly of the prisoners’ dilemma.
In Hobbes state of nature, the defence goes, in a case of a Prisoner Dilemma. And rational agents in Prisoner’s Dilemma necessarily would choose not to adhere to a set of moral norms. Rationality here is construed in the sense that is standard in social theory; having a coherent set of preferences among the objects of choice, and selecting the one that has the greatest probability of satisfying more of one’s preferences rather than fewer. (Sen, 1970, pp. 2-5)). A prisoner’s dilemma is a situation involving at least two individuals.
Each individual is faced with two choices: Either to cooperate with the other individual or choose not to cooperate. If he cooperates and the other individual also cooperates, then he gets a certain payoff. If however, he changes not to cooperate while the other individual trustingly cooperates; the noncooperation gets a larger payoff while the operator suffers a loss, and if choose not to cooperate, then both get nothing. It is common that in a Prisoner’s Dilemma situation, the most rational strategy for a participant is to choose not to cooperate.
If the other party cooperates, then it is better for one not to cooperate and thereby get the larger payoff. On the other hand, if the other party does not cooperate then it is also better for one not to cooperate and thereby avoid a loss. Either of the two, it is better for one not to cooperate. In Hobbes’ state of nature each individual must choose either to cooperate with others by adhering to the rules of morality or not to cooperate by disregarding the rules of morality and attempting to take advantage of those who are adhering to the rules.
In such situation it is more rational to choose not to cooperate. (Velasquez, 1992). Thus, the realist can argue that in a state of nature, where there is no one to enforce compliance with the rules of morality, it is more rational from the individual point of view to choose not to comply with morality than to choose to comply. Velasquez (1992) summarizes the second argument as follows: “In the absence of an international sovereign, all rational agents will choose not comply with the tenets of ordinary morality, when doing so will put one at a serious competitive disadvantage”.
The defence of the Hobbsian realist states that in the absence of a third party enforcer, the adherence to the tenets of morality shall be the choice of the individuals in relations with each other. And when human is in disadvantageous situation should not be interpreted as an empirical claim but rather it is a claim about how most human actually behave when they are put at a competitive disadvantage.
More so, it is also a claim about whether agents that are logical will adopt to certain behaviours when doing otherwise would place them at a serious competitive advantage. For our purpose it is very important the claims that all if not at least significant number of Multinational Corporations is the logical agents in the required sense: for achieving the dominant end of increasing profits. MNCs therefore are precisely the kind of rational agents foreseen by the realist. (Velasquez, 1992) The ‘How’
How does this apply to multinationals and the common good? Can we clearly state that MNCs have a moral obligation to pursue the global common good in spite of the objections of the realist? Hobbsian claim about the commonness of being not concern on moral obligation in the international sphere is false when (1) interactions among the international agents are repetitive in such a way that agents can retaliate against those who fail to cooperate, and (2) agents can determine the trustworthiness of other international agents.
Unfortunately, MNC activities often take place in a highly competitive arena in which these two conditions do not obtain. Moreover, these conditions are noticeably absent in the arena of activities that concerns the global ‘common good’. Common goods according to Velasquez (1992) consider goods that indivisible and accessible to all. This means that such goods are susceptible to all, and are also susceptible to the free rider problem. Anybody has a means to such goods so that anybody is tempted to a free ride on the generosity of others.
The government therefore can compel domestic companies to cooperate in preserving the national common good. Truly, it is one of the functions of government to solve the free rider problem by compelling them to contribute to the domestic common good to which all have the way in. Moreover, all companies have to work together time and time again with their host government and adopt a cooperative stance towards their government’s objective of achieving the domestic common good.
Though we cannot conclude that the governments can effectively compel MNCs to do their part to maintain the global common good (TNCE), the government of individual nation in contrast can be the free riders, and join forces with multinational seeking to take competitive advantages over others. It is clear that a global environment worth living is part of the global common good, and it is clear that the making and use of chlorofluorocarbons is destroying that good. Members of concerned nations n global change such as the so-called “Annex I” of Kyoto Protocol, have responded by requiring their domestic companies to cease from using chlorofluorocarbons. But other nations have refused to the do same particularly those that belongs to the First World to limit the cap of toxic gases being pumped and destroying the earth’s ‘greenhouse”, since they will share in any benefits that accrue from the restraints others practice and reap the benefits of continued use and production of chlorofluorocarbons.
Although there are lots of environmental awakening at present, the Third World nations, in particular, have move on to the position of favouring the use of chlorofluorocarbons since their development depends heavily on exploiting the industrial benefits of these substances. Knowing this, multinationals have opted to shift their operations to countries that continue allowing the manufacture and use of chlorofluorocarbons. For MNCs, the outcome of restraints practice by others they will just share and reap the profits of continuing the manufacture and use of chlorofluorocarbons. Velasquez, 1992) The sting of other nations to restraints the use of this chlorofluorocarbon by MNCs is less effective because many multinational can easily escape the reach of their laws. An exact comparison and perhaps even more compelling set of considerations can be seen that at least some multinational will join together with other developing countries to circumvent any global efforts made to control the global warming trends, the so-called “Greenhouse effect”. (Kyoto Protocol) Furthermore, global common good often create effect that cannot be repeated.
This is particularly the case where the global environment is concerned. (Louma, 1978). Preservations of a favourable global climate are clearly part of the global common good. Today, there are failures that we have to give especial attention according to Velasquez (1992) such as: • Global climate will be one-time affair. • The breakdown of the ozone layer, for example will happen once, with the disastrous consequences for us all; and • The heating up of the global climate as a result of the infusion of carbon dioxide will happen nce, with shattering consequences for all of us. Because of these environment disasters are a onetime affair according to Velasquez (1992) they represent a non-iterated prisoner’s dilemma for multinationals. It is irrational from an individual point of view for MNC to choose to refrain from polluting the environment in such cases. Whether others will stop and others will not, then it will be better to have also not to refrain since refraining would have made little difference and would have entailed heavy losses. Conclusion
In conclusion, we learned that financial institutions in broader sense do not employ many people. There functions is to provide loans be it individual or in government. Some multinational banks are responsible in their commitment to induce growth and prosperity in their client countries they are operating such as the Asian Development Bank (ADB) and some banks they do not. Banks were established for profit motive to the delight of their stockholders. It is on this reason that some financial institution do not share to the upliftment of country’s they do business.
The case of South Africa was a classic example of this, they do not do much anything to challenge apartheid, and instead they strengthen the government’s policy of apartheid and ‘ human rights’ (Cranston, 1973) violation by lending to the government of South Africa, although there are some banks that do not subscribed on this policy of racial discrimination. Similarly, the drug companies’ operating in the Third World countries also poses special problems not only in terms of higher product price but in terms of product waste disposal.
We also learned that lot of environmental activist are sending their clear message to different multinational companies to stop its exploitative efforts in terms of cheap human resource but also the natural resources of other nations they are in. The fundamental purpose in all societies’ of business is to produce and to distribute goods and services in such a manner that benefits exceed the costs. The social responsibility of business is a function of the needs of the communities which the business serves and affects.
The questions are; can we hold responsible the multinational companies for the adverse affect in countries they are into business. Is the benefit greater than the cost? These ethical dilemma according to Velasquez (1992) are best explained by the two premises that says ‘In situations that lack a sovereign authority, such as one finds in many international exchanges, moral terms have no meaning and so moral obligations are nonexistent’. (Velasquez, 1992, pp. 7-40). But according to Hobbsian realist arguments which says ‘In situations in which other agents do not adhere to certain tenets of morality, it is not immoral for one to do likewise when one would otherwise be putting oneself at a significant competitive disadvantage’. (Velasquez, 1992). So, how does this apply to multinationals and the common good? Can the MNC stop producing and emitting toxic gases in sky the at the expense of their profit?
Can we clearly state that MNCs have a moral obligation to pursue the global common good in spite of the objections of the realist? Worth noting in the discussion is that the MNCs human resources are in constant change and so what is left behind is the enduring commitment to the pursuit of profit in a competitive environment and is not a signal of an enduring commitment to morality according to Velasquez (1992).
Despite of MNCs clear obligations to share with the global common good, the realist says it is not immoral for these MNCs to fail to contribute for the common good, and so we cannot compel MNCs to contribute for the global good in a competitive environment in the absence of an international authority that will force concerned agents to share to the global common good of protecting the adverse effect of global climate change.
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