Growth of globalization has brought forth a new question for business – how can they ensure ethical business practices round the world? Globalization has led to an explosive growth of multinational corporations (MNCs) over international settings that have led to concerns regarding global business ethics, which ahs gained highest priority over the next decade. Data has shown that of 100 largest “economies” in the world, 47 are nation states, and rest is MNCs (Carroll, 2004). An MNC must consider its stakeholders such as the government, environment, society, and the competitors while talking business decisions. Consequently, ethical considerations in business decision making are necessary for multinationals. However, cultural differences and culture related difference in ethics discourse, makes ethical decision making problematic in the global economy (Ferrell, Ferrell, & Fraedrich, 2009). Increased complexities in business decision-making by MNCs, ethical concerns have become secondary for businesses. Further, in order to sustain their competitiveness, MNCs have to take varied decisions, which may or may not be ethical in nature (Buller & McEvoy, 1999). The thesis of the essay is that increased number of MNCs has detracted to global ethical business practices.
A report presented 10 most unethical multinational corporations in the world that comprised of names like Abbott, Wal-Mart, Phillips-Morris, Boeing etc. (Mokhiber & Weissman, 2006). Companies like Mattel Inc. that operate in China for their manufacturing had to undertake product recall due to dangerous lead paint or small magnet in toys that could be harmful to children (Palmeri, 2007). The problem of sweatshop for multinational companies like Nike, Adidas, and Wal-Mart has shown that multinational ethics are blurred between their aim of sustainable competitive advantage and ethical values:
“Disputes concerning global labor practices are at the core of contemporary debates regarding globalization. Attention frequently focuses on the real or alleged unjust exploitation of workers in developing economies by multinational corporations (MNCs) and their suppliers. Critics charge MNCs with the unjust exploitation of workers in developing nations and seek laws restricting the use of sweatshop labor.” (Arnold & Hartmann, 2005, p. 206)
The story of sweatshops and the bad labor conditions have been all over the media that demonstrated the rampant exploitation of multinational companies operating in countries like China and Mexico. In an incident reported by the New York Times, sweatshops operating in China refused to move out and continuing their operations in the country following a code of conduct signed by the companies involved: “Under the code, apparel workers could not be required to work more than 60 hours a week and factories could not hire children under age 14. The code says a factory must pay at least the minimum wage of the country where it is situated” (Greenhouse, 1997).
Many organizations like Shell are trying to recreate its image as an ethical company (Carroll, 2004). However, Carroll (2004) points out that “it is difficult to think of a more important basic business ethical commitment than to be a good citizen in the world of your business—with real involvement of your people, as well as your money” (p. 115). Companies like Wal-Mart have been facing public rage due to its business model and its operations, which are considered by many to be unethical (Mokhiber & Weissman, 2006). One such instance is proved through the company’s acceptance of the accusations on the company:
“Wal-Mart acknowledges that less than half of its workers receive insurance through the company, but says that its surveys show 90 percent of employees get coverage from Wal-Mart or another source such as a spouse, Medicare, a parent, another employer, the Department of Veterans Affairs (VA) or other government programs.” (Mokhiber & Weissman, 2006, p. 26)
In pharmaceutical industry, companies like Pfizer are known for their unethical conduct. The company’s business model of monopolizing its drug inventions and marketing them around the world is presumed to be unethical. Such a practice is unethical in case of pharmaceutical as drugs are lifesavers and non-availability or monopolization may lead to death of many ailing patients. Therefore, the practice of drug patent by companies is unethical (Mokhiber & Weissman, 2006).
The companies exemplified above were not involved in illegal activity as they abided by the law completely, however, failed to meet the expectation and the necessities of the society. Ethical conduct of companies must be such that even through divergent view of cultures and economies, they must remain same and unaltered, and may suit all (Carroll, 2004).
It is evident that many multinational companies have been accused of being involved in unethical practices while operating in other countries. However, creation of ethical and sustainable business practices is important in maintaining the organization’s ethical practices. In order to maintain the image of an ethical company, training of employees of the cross-cultural variation in ethical understanding must be done. One such method has been adopted by Motorola, which establishes an Ethics Renewal Process to establish a coherent work process. As MNCs operate in diverse and at times conflicting moral values, it is important for the companies to be sensitive to differences in cross-cultural ethical values and applying appropriate ethical practices, which can become a sustainable source of advantage for the company.
Arnold, D. G., & Hartmann, L. P. (2005). Beyond sweatshops: positive deviancy and global labour practices. Business Ethics: A European Review, Vol. 14, no. 3 , 206-222.
Buller, P. F., & McEvoy, G. M. (1999). Creating and Sustaining Ethical Capability in the Multi-National Corporation. Journal of World Business, Vol. 34, No. 4 , 326-343.
Carroll, A. B. (2004). Managing ethically with global stakeholders: A present and future challenge. Academy of Management Executive, Vol. 18, No. 2 , 114-120.
Ferrell, O., Ferrell, L., & Fraedrich, J. (2009). Business Ethics: Ethical Decision Making and Cases. Boston, MA: Prentice Hall.
Greenhouse, S. (1997). Accord To Combat Sweatshop Labor Faces Obstacles. Web.
Mokhiber, R., & Weissman, R. (2006). J’Accuse: The 10 Worst Corporations of 2006. Multinational Monitor , pp. 11-26.
Palmeri, C. (2007). What Went Wrong at Mattel. Retrieved March 5, 2010, from BusinessWeek Online: Web.