International Businesses, Social Responsibility and Ethical Principles Essay

Trade has been known to the world since the existence of humans. Trade has helped spread ideologies, culture, religion and many other things around the world. Ethics is one of the major shared issues that trade has helped spread also which is why international business (which is a broader form of international trade) is interrelated with ethics and ethics is associated with responsibility therefore linking international business with social responsibility. Globalisation which a much discussed topic academically and elsewhere is not new to the world; multinational corporations have been operating all over the world for decades now and have been selling their products and services to everyone from the poorest to the richest. What is new however is the recent mass media attention that these enormous multinational corporations have attracted lately, thus a shrewd attempt from them to paint a new image or orchestrate a beautiful symphony to cover the real intentions of globalisation.

Ethics and social responsibility will always be a debate when international business is process. Issues such as human rights, labour issues, bribery/corruption and environmental protection are some of the most delicate. This also brings up questions about ‘Realism’, and ‘Cultural Relativism’. “I apply the label realist to anyone opposed to the application of moral concepts to international policy, whether in business or elsewhere”1 This could be dangerous and futile for international business, dangerous because it will cause legal disputes if not more aggressive and futile because it will not help market research to asses and study the market of the foreign country. Cultural Relativism asserts that words such as ‘right’, ‘wrong’, ‘justice’ and injustice’ are gained from cultures and only according to the culture surrounding them and therefore moral concepts gain legitimacy only through habits and attitudes of a given or concerned culture; in turn, all intercultural comparisons of values are meaningless. If these ideologies are taken into practice with international business they will create a series of problems from both host countries, multi-national corporations and the home country of the multi-national corporation. The problems may differ from a wide range of complexities such as legal disputes, international legal disputes, a bad name or reputation for the multi-national, political disputes between either countries or sometimes even more.

Human rights are on the top of the list with ethical responsibility towards the society of which the multi-national operates in. It is a generally accepted principle that MNEs (Multi-National Enterprises) should not engage in direct infringement of human rights. The UDHR (UN Universal Declaration of human Rights) is commonly taken as the appropriate benchmark. Also some people would further prefer companies to refrain from doing business in countries known to infringe human rights on a systematic basis. However, some argue that if an MNE abstains from conducting business in a country with an ethically dubious regime, it will only hand over business opportunities to companies without such reservations ‘human rights’. This is true but still is better than funding or circulating investment in a country that infringes on human rights on a regular basis, if other businesses do decide to invest in it, that is the ethical and moral responsibility that they are ignoring. Consequently if a MNE argues that it is investing or doing business with a country that is infringing on human rights in order to cut out other businesses that do not have respect for human rights, it is obvious that there aims is to compete with these businesses and to gain as much profit as possible.

Both globalisation and corruption are the words that have been used frequently in public debates all over the world in the last few years, and they are both complex concept. Globalisation is relatively new while corruption is an old one. Corruption can be defined as the abuse of public power for private gain.2 Inefficient MNEs are both more likely to bribe, and to bribe more than sufficient MNEs and it often means governance problems that hurt economic development.

Moreover, an ethical behaviour can be costly, but if ignoring the ethics, it can cost more. Private companies have to consider profit maximization and have the responsibilities to satisfying stakeholders such as employees and local communities; however global companies are beginning to accept a broader range of responsibilities. Bribery which goes along side with corruption also latterly effect the economy negatively, it is a grey area though which can differ from one country to another which is something MNEs must be aware of. In some cultures it is regarded perfectly normal to give an official or host a gift. In others, only minimal value token gifts or no gifts at all are allowed. The problems arise when it is the norm for a contract to be signed only after the payment of a ‘commission’ to key officials or any officials. Such circumstances place MNEs in a dilemma; without payment of these commissions, the contract will not materialize and if they do not make the payment, many other companies will be wiling to compete in an auction of who can pay more to get the contract.

International labour issues are also a problem that MNEs must deal with; they are usually linked with human rights especially with cases such as forced labour and child labour. The main issue with MNEs with labour rights is; does is it maximise its profits and competitive advantage by locating in a low-cost/low-regulating country and adopt local practices or does it refrain from making use of all the labour cost benefits by adopting higher standards and more ethical practices than strict compliance with local and international legal requires ? It is possible for an MNE to choose the more moral or ethical path and still experience significant profits.

Environmental protection is an issue which is usually neglected. One reason is the fact that MNEs are capable of concealing their lack of respect or degradation to the environment because of their size, power and influence. Also many governments are too worried about other economic issues in their countries that they do not understand the problems that might arise from exhausting the environment. The large forests and the pollution that is let out into the atmosphere is not noticeable by many and takes time and money to investigate on. There is also the fact that raw materials are always scarce in relation to human demand, recycling is expensive and if one MNE decides to follow the more expensive and time consuming method, the other might take advantage and abuse the environment giving it competition advantage.

The pharmaceutical industry and the developing world is one of the most debated issues in international business and ethics. Drug prices are determined by a number of factors including the cost of production, exchange rates and the extent of competition, often limited in pharmaceutical markets because of patent regimes.3 However, production costs generally constitute only a minimal proportion of drug costs. Pharmaceutical companies argue that patents are essential to ensure a continuing stream of new products for the marketplace. This also gives pharmaceutical companies a type of monopoly on the drug and a very strong position on determining the price and distribution of the drugs. This makes the company very influential and opens doors for it to operate within countries that may allow it to abuse its natural environment, raw materials and cheap labour. Most pharmaceutical companies justify this by saying that they need the patent because of the cost of the new development of a drug and in order to be able to compete in the market without competition because of the high risks and costs of the research and development process.

Some good things that have arisen from the concern of social responsibility are the adoption of many MNEs of their own code of ethical behaviour with con-junction to world organisations that observe and sometimes have the right to punish negligence of social responsibility. The Sullivan Principles are good examples that were developed in 1977 by Leon Sullivan a director of General Motors. The Sullivan Principles established to be the Global Sullivan Principles:

1. Support for human rights of employees, suppliers and the community in which the firm operates

2. Promotion of equal opportunities in relation to colour, race, gender, age, ethnicity and religion

3. Recognition of freedom of association

4. Provision of training opportunities and minimum basic remuneration

5. Provision of a safe and healthy workplace and a commitment to environmental protection and sustainability

6. Respect for fair competition, including intellectual and other property rights and a commitment not to pay or accept bribes

7. Commitment to work with governments and communities to improve the quality of life

8. Promotion of these Principles to business partners

By March 2002, almost 300 hundred organisations had endorsed the Global Sullivan Principles including major manufacturers like Coca-Cola Company, the Ford Motor Company and Pfizer Inc. also service companies such as British Airways, Entergy Corporation, HSBC Corporation and Kentucky Fried Chicken.

There many routes that MNE sometimes take that lead to unethical actions and disregard of social responsibility. Some are obvious and others are more concealed. The banking industry is the lifeblood of economic development throughout the world. International bank have the enormous potential to do both good and harm. Unregulated and unopposed and without any equally strong international organisation, body or legislation to counter them, they typically seek their own good and pursue their own interests, often at the expense of others. They are a prime type of institution whose power needs to be offset by international background institutions.5 Background institutions with the required power can monitor the movements of money in international banks; they can restrict certain investments preventing things like terrorism, money laundering, drug money and many other monetary and banking advantages that some MNE and individuals use to develop whatever they are doing that is unethical or irresponsible to a society.

The cases about corrupt governments are unlimited and the lists of accusations are too long to discuss and to discover which is valid or sound because of the history of concealing the truth. The question which really puts the heat on the metal is why are some MNEs able to move in these directions? Furthermore, if there are so many world organisations that have purposes only to stop them, why is the gap between rich and poor so big? Why is there still poverty in countries that are the richest in raw materials? These questions cannot be answered with facts. However common sense can be very convincing. One of the most recent examples of international corruptness and unethical behaviour is the war on Iraq, lead by the U.S and U.K. The leaders of both these nations excused themselves to invade Iraq on accusations that Saddam had weapons of mass destruction that he intends to use, that Saddam is a brutal dictating tyrant and they need to free the Iraqi people and give them democracy.

These are very valid points to overthrow a government and to use it as a chance to spread democracy. However, another view is that both the governments needed money to improve the economy of their countries and that the Bush administration was worried that other countries would decide to deal with Saddam’s oil making other currencies such as the Euro an oil currency, this would devastate the American Dollar and economy. Even though this is strictly theoretical, it still does come across to many as common sense, especially when there were no weapons of mass destruction found in Iraq and that democracy is still far away from the country. A bit controversial but a classic example of unethical behaviour and neglect to social responsibility in international business. Several large MNEs are planning to open in Iraq, not only oil companies, which may be a good for the country, but is it worth the lives of the thousands that were killed? Many people believe that it could have been done in other ways which would be less devastating to the country, to its culture and to its religion. Many believe that the war on Iraq was not intended promote democracy in the area or to save the Iraqi people, but was to facilitate and encourage international business as some see it.

The fact that international business and globalisation is going to happen is worrying in many aspects. Poverty and inequality around the globe may increase to a rate that the countries that suffer and will suffer more cannot control it. International organisations and background institutions can decrease the rate of problems or hopefully make globalisation fairer, but it is also the duty of every country and its nationals to work against MNEs that do not respect their culture and the initial needs of the country. It is very easy for everyone to blame the MNEs or certain areas in the world for the disadvantages of globalisation, but it will also be very hard to change the attraction of these problems from within.

Bibliography:

1)Donaldson, Thomas. The Ethics of International Business. pg 11

2) www.worldbank.org

3)Johnson, Debra. Truner, Colin. International Business (case study 10.1)

4)Johnson, Debra. Truner, Colin. International Business (case study 10.2)

5)T. De George, Richard. Competing with integrity in International Business

M. Kline, John. Ethics for International Business

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