Globalization has played a significant role in the world of business by allowing organizations to transact with little regard to national borders. This is so due to declining international trade barriers together with other international legal barriers that are opening the world to interact through trade more frequently.
One such international trade organization is Union Carbide Limited, an American-based firm that established and operated a subsidiary plant in India for many years before a tragedy known as Bhopal disaster scuttled its operation in the country.
However, what came out of that disaster were several ethical issues that the government of India, agencies of the government, the state government of Madhya Pradesh and the company abrogated. The disaster showed that companies could relax in key critical issues to do with the safety of the people, environment, and employees; however, such laxity may lead the firm to incur huge losses.
Therefore, the ethical issues prompted the need for corporations to adopt corporate social responsibility policies to guide their operations. This paper looks at the Bhopal disaster ethical issues resulting from the disaster, the concept of corporate social responsibility, and the way it has come to dictate operations of multinational corporations in their international business.
Corporate social responsibility, compensation systems
As international barriers of trade become loose, MNCs presence in other nations, especially developing nations, became inevitable. As many praised activities of these international companies, it must not be forgotten that their negative effects continue to impact developing societies greatly.
For example, one of the numerous criticisms leveled against MNCs in developing nations is that the inflow of FDI has contributed to the reduction in efficiency while at the same time stifling growth in the host country (Spero and Hart, 2009).
The argument is that most MNCs tend to be oligopolistic, predating the local firms and limiting their production, maintaining artificially high prices and as such, earns enormous oligopoly rents (Spero and Hart, 2009).
Despite earning a lot of oligopoly rents, the MNCs mostly fail to reinvest back in the particular nation but extract the rents through profit repatriation and straddling the growth of the developing country (Spero and Hart, 2009).
Another argument is that most MNCs participate in blocking the national growth and economic prosperity by absorbing local capital instead of providing new capital.
Also, they usually adopt inappropriate technology, create ‘bad’ jobs for the locals, conduct research in their home countries instead of the host countries, and mostly employ expatriates instead of the indigenous people of the host country (Spero and Hart, 2009).
Lata and Kumar, investigating and writing about the impact of MNCs in Indian society, noted that MNCs had the responsibility to abide by the laws and rules of the host country, but most MNCs had ignored this fact.
The position of the writers is that most MNCs had failed to suit to the needs of the local people and were totally disregarding the values of the people instead facilitating and promoting the values of their foreign companies (Lata and Kumar, 2010).
The author believes that MNCs have moral obligations to fulfill in the host society in which they are operating. Further, MNCs are described to be only interested in the low cost of factors of production available in the developing nations where they pay low wages to local employees despite massively exploiting the resources found in those regions.
As such, Lata and Kumar note that MNCs are only directed by their vested interests. Wayans, on another perspective, is convinced that MNCs have provided the developing nations with the necessary and vital financial infrastructures that they have used to develop both financially and socially.
But at the same time, the MNCs have also brought in, “relaxed codes of ethical conduct that serve to exploit the neediness of developing nations, rather than to provide the critical support necessary for countrywide economic and social development” (Wyans, 2008, p.1).
Maybe it is the work of Germany sociologist, Ulrich that captured the role of MNCs in the global trade and transactions when the author explored the concept of risk society. Ulrich observed that, due to globalization and modernization of the world, there were new forms of changes taking place characterized mainly in mass production and technological advancement (Gennip, 2005, p.1).
These processes in their form were changing the nature of risks. For instance, as companies strived to produce goods and services in large quantities and at the same time, advance in technology, immeasurable risks were being created in form of “nuclear, chemical, defense and genetic sectors and also from the generalized use of carbon-based fuels” (cited in Gennip, 2005, p.1).
At the same time, widespread industrialization in its totality was exposing the climate of the whole world to more risks that in turn could results in catastrophic changes contributing immeasurable cost to the human society.
Ulrich further noted that as these corporate risks intensified, the institutions charged with the responsibilities of managing the risks and protecting the lives of the people on overall were becoming unable to carry out their duties (cited in Gennip, 2005, p.1).
This made the author note that, “threats have begun to outweigh socially agreed safety norms, and there seem to be no rational means at hand to achieve a rebalancing” (Gennip, 2005, p.1).
Ulrich observed that there was increased intensification of transnational interdependence and what is evident is that there is establishment and growth in large-scale of “economic, cultural, political and societal globalization in which the dividing lines among states and even among Western and non-Western societies are ever less valid” (cited in Gennip, 2005, p.1).
Due to increasing technological advancement and the inevitability of global interconnectedness, risks were becoming largely unforeseen where at the same time, “many of these risks were eluding national control because truly they are global in character and because they can be the totally unforeseen consequence of rapid innovation and technological change” (Gennip, 2005, p.1).
This scenario prompted Ulrich Beck to describe the modern and transnational market as a form of, “organized irresponsibility” and that there was no existence of global governance hence managing transnational corporations had become difficult (Gennip, 2005, p.1).
Bhopal Gas Disaster of 1984
Union Carbide Corporation, in its internationalization prospects, established a constituent plant in Bhopal India that manufactured pesticide chemicals, but the night of December 3, 1984, remains as one particular indelible history in the world and specifically to the people and inhabitants of Bhopal region.
That night, an industrial catastrophe took place at the Union Carbide Indian chemical plant where there was a leak emanating from one of three tanks that were used in storage of highly toxic chemicals that the company used as raw materials to manufacture pesticides (Fadil, 1998).
Immediately the leak took place, the entire city of Bhopal was engulfed in a shroud of toxic gas resulting in death of about ten thousands people, about 200, 000 injured with other tens of thousands orphaned and rendered homeless (Shrivastava, n.d, p.1; Fadil, 1998).
The parent company, Union Carbide Company, located in USA controlled majority of the share in the Indian plant (Fadil, 1998, p.1); and when the Indian disaster took place, not only deaths and injuries lingered in the minds of many but also the economic consequences. Many families were rendered with no viable financial source to depend on as more and more jobs became scuttled (Fadil, 1998, p.2).
The Indian government spending on the needs of the affected people amounted to over $40 million (Hartley, 1993 cited in Fadil, 1998, p.2) while the parent company UCL became legally responsible for the disaster and had to pay $470 million as compensation for the incurred damages (Hartley, 1993 cited in Fadil, 1998, p.2).
As a result of the accident, many questions revolving around the safety precautions and code of conduct by UCL are still being asked. The conviction among many analysts is that if the company had adhered strictly to its safety standards and code of conduct, then the accident would have been averted.
The tragedy brought to limelight the complexities of morality of international and other big corporations in their business transactions, specifically in developing nations (Fadil, 1998, p.2). Analyzed from the cultural standpoint, the disaster took place because of cultural differences between India and UCL with American roots on how to carry out activities of a corporation in a safer way.
For instance, the Indian government bestowed all responsibilities to the American managers and trusted their ability to operate within appropriate safety measures.
Once they were faced with budgetary pressures, the expatriates from America appeared to relax on the safety standards of the company exploiting the vacuum that existed due to lack of India’s government to legislate and enforce any meaningful protective law or regulations (Fadil, 1998, p.2); and as such, the disaster found opportune environment to take place.
The legal responsibility bestowed upon the parent company indicates how corporations are being viewed and regarded as ethical institutions where their activities need to be regulated by some minimum moral aspects.
As to what resulted in the accident, many factors have been cited. First, there is an almost consensus that the plant location was unfit since it was placed in a densely populated region (Fadil, 1998, p.4; Shrivastava, n.d). in addition, the UCL India management failed in its responsibility to provide early warning to the people of the region about the likely risks of the chemical plant.
Moreover, there was notably poor communication connections between the Indian branch and the UCL main headquarter located in the city of Connecticut, USA and many of those employed at the Indian department had inferior training as far as the plant’s matters of technology were concerned especially with regard to appropriate storage of the pesticide chemicals (Fadil, 1998).
Also, the Indian government has been held responsible for it lacked ‘tight’ safety standards for the company a compared to those of USA and operations at the Bhopal plant utilized sub-standard measures (Jackson, 1984 cited in Fadil, 1998).
Lastly, employee-management problems have also been cited as a probable contributory factor where workers were highly demoralized and their ultimate output and concern for the company became reduced.
To what extend can majority of ownership be used to ascertain the liability of various parties in case of major industrial accidents
Subsidiary plants are seen to be playing an increasing and vital role especially in providing a competitive advantage but what is becoming clear is the fact that the division of decision making authority between the headquarter and the subsidiary responds to the institutional contexts of both the parent company and the subsidiary (Jong and Vo, 2010).
The autonomy of the subsidiary plants is still a contested issue, although the autonomy of the subsidiary plants has gained momentum. But the variations that still exist in the home and host country environments next to and on top of a parent company and subsidiary characteristics constitute the main yardsticks used to determine variations in the autonomy of the subsidiary plants (Jong and Vo, 2010).
Currently depending with the particular environments they operate in, MNCs are seen to be different in that, some MNCs give measurable autonomy to their subsidiaries in terms of decision-making while others still hold tight the activities and operations of their subsidiary plants.
What is evident is that the relationship between the parent company and its subsidiary plants has become important while at the same time appear complicated, confusing and even conflicting (Jong and Vo, 2010). In some instances, the size of the parent company and the level of the diversification of its products have played a key role in autonomy of the subsidiary plants.
As a matter of fact, determining the majority of ownership in an effort to ascertain liability in case of major industrial accidents has been hampered by relatively weak international institutions in providing clear guidelines about the operation and autonomy of subsidiary plants.
Arguments over which is the best criterion or extent of putting liability responsibility to the parent company or subsidiary company has been a challenge due to loopholes in international systems guiding MNCs. Hence MNCs have been able to put liability of responsibility to their subsidiary plants knowing well the weak institutional environment in the host countries.
What is needed is a clear insight into the role and extent of institutional environment in the autonomy of subsidiary plants both in the host and parent countries in which the MNCs operates.
Such an understanding will make it possible to ascertain the level and extent of MNCs involvement in the operations of the subsidiary plants and also the level and extent of subsidiary autonomy so that in case of an industrial accident it becomes easier to identify whether it is the parent company or the subsidiary plant has the responsibility for the liabilities.
Both national and international institutional framework for the parent and host country will be necessary for realizing this goal.
To what extent should be the government responsibility in ensuring MNCs operate within safety frameworks?
Pendleton (2004) argues that multinationals cannot just operate on voluntary actions to guarantee the safety upon which they need to carry out their actions. At the same time, Christian Aid organization argues that “voluntary action by multinational companies is not enough to guarantee the human rights and the environment of poor communities in developing countries is protected” (cited in Pendleton, 2004, p.1).
As such the author together with the Christian Aid organization are of the views that there should be international regulatory standards in place with appropriate powers to ensure MNCs operate truthfully within CSR policies, they adopt (Pendleton, 2004, p.1).
The convictions of these two categories of people are that while there are some companies that may operate responsibly there are others at the same time that may operate irresponsibly and CSR as the only policy to guide the social responsibility of companies demonstrate numerous loopholes.
As such the responsibility of, “safeguarding the social and environmental rights of poor people as they come into contact with multinational corporations cannot be left solely to the discretion of those corporations” (Pendleton, 2004,p.6).
Pendleton observes that in both the developed and developing worlds there exists numerous rules and regulations that companies have to abide to but there is variation from one nation to another with regard to how the controls are enforced.
Consensus among many policymakers is that there is a broad agreement that the government has a significant role in formulating and facilitating the most appropriate mechanisms that can result in holding corporations to account for their actions.
In its report titled, “Beyond Voluntarism” the international body concerned with human rights, International Council on Human Rights Policy noted that “If self-regulation and market forces were the best way to ensure respect for human rights, one might expect since this has been done the dominant paradigm, the number of abuses attributed to companies to have diminished.
In fact, in many parts of the world, the experience of workers and communities is precisely the opposite” (Pendleton, 2004, p.5). The human rights watch group content that, MNCs activities in developing countries need to be regulated and the specific governments in developing countries can play an essential role in ensuring these regulation takes place.
The government is given the responsibility to incorporate international law to regulate MNCs in their regions and MNCs powers should be limited by having in place a prevention code governing their conduct (Pendleton, 2004, p.5; Tripathi, 2010).
An Implementation Plan presented at the 2002 World Summit on Sustainable Development in South Africa, shows that various governments should move with speed to, “actively promote corporate responsibility and accountability, including through the full development and effective implementation of intergovernmental agreements and measures, international initiatives and public-private partnerships and appropriate national regulation regulations” (Pendleton, 2004, p.6).
On its report, the Government of India’s industrial safety report noted that the government has a significant role to play towards ensuring the safety of plants, especially those operated by the MNCs.
For instance, the report establishes that the government should accomplish the following: build and maintain an overall safety and health culture in all plants that operate in the country; design appropriate and suitable control systems of compliance, enforcement and incentives for better compliance; provide administrative and necessary technical support services; and establish and develop the research and development capability in emerging areas of risks and provide for effective control measures.
In addition, it should focus on prevention strategies and monitoring performance through improved data collection system on plant accidents and other related activities in industries; development and provision of the necessary technical manpower and knowledge in the critical areas of industrial safety and environment; and continue to establish effective mechanisms that can be used to enhance community awareness regarding industrial safety and the environment.
Moreover, it plays a part in designing and providing in advance effective enforcement machinery as well as suitable provision for compensation and rehabilitation of affected persons; effectively putting into application laws and regulations concerning industrial safety, health and the general environment through adequate and elaborative inspection system.
Other aspects worth noting include ensuring employers and employees and other people affected by the particular industry have distinctive and separate but complementary responsibilities and rights particularly to achieving safe industrial working environment; making changes to the existing laws and regulations related to industrial safety and align them with relevant international instruments; and lastly by monitoring the adoption of national standards through regulatory authorities (Government of India, n.d).
Government agencies have a responsibility to ensure policies of the government concerning safety are observed. For instance, agencies are given powers to issue permits, licenses, carry out feasibility studies, conduct monitoring, and evaluation of various plants and as an overall duty, ensure industries or plants adhere to total quality assurance practices.
Bhopal disaster indicated how the government agencies relaxed on their duty if not a requirement. When industries flout in their safety policies without government agencies sounding alarm, then in great measure they are abrogating in their duties.
Agencies, unlike the government, are full of technocrats in their specific area and their role is to see implementation of the government policies with any failure. When the agencies fail in their duty then according to the law, they have acted out of negligence which they should bear legal responsibility for such negligence.
Which criteria should be used in determining compensation for the Victims?
Compensation for the Bhopal disaster victims has been a long and bitter battle for justice both in Indian and American courts (Engel and Martin, 2006).
Five methods have been suggested by Engel and Martin which the company can use to ease the tension or go over the case: “covering the evidence, devaluing the victims, reinterpreting the events, utilizing official investigations in response to the event and intimidating and bribing the victims” (Engel and Martin, 2006). However, which is the appropriate compensation scheme for the victims?
There exist principal methods of compensating victims of any particular accident and these methods include the common law action for damages; workmen’s compensation; medical benefits insurance; other forms of personal accident insurance and social welfare payment.
Looking at the Bhopal disaster and how compensation was facilitated, it became evident that the compensation scheme was individual-based, where the criterion mainly put into consideration the: deaths, and injuries the victims suffed. In its nature, the system shows numerous loopholes, for instance, determining to extend and magnitude of individual injury and equating it with ‘appropriate’ amount of money largely appear impossible.
Also, an individualistic system is mostly economically oriented postulating that perfect compensation in terms of money for the victim will bring out total healing.
The suggestion is that for a total and more comprehensive compensation scheme to be realized then there is a need for a holistic investigation, analysis and determination of the emotional, psychological, physical, environmental and societal injury the victim has undergone and the broad consequences the injury has affected the victim in terms of these aspects.
The Indian government took the responsibility of carrying out compensation to the victims using “a multi-tier grievance redressal system” (Mahapatra, 2010, p.1) a conservative system of compensation that even when some victims went to court to challenge it, the supreme Indian Court did little to subvert the government policy it had adopted on the victim compensation(Mahapatra, 2010).
This compensation scheme was primarily based on specific individuals for death or injury; therefore, it was an individual-based distribution scheme. It failed to respond to the severe medical and social consequences of the Bhopal disaster (Kibel, 1999). As such, this individual-based scheme needs to be integrated with community-based distributions for it to be appropriate (Kibel, 1999).
The community-based distributions will be essential in providing funds to the institutions, programs, and services that are involved in serving the larger collective group of persons poisoned and injured especially those of Bhopal accident (Kibel, 1999). This, in turn, will contribute to long-term relief of the survivors.
Under the community-model of compensation, Indian government instead of individually compensating the individuals can invest in modern hospitals, staff and facilities, invest in programs and services to address soil detoxification and family relocation, invest in schools, programs for job retraining and new housing construction with aim of improving long-term social security benefits for the victims of the disaster(Kibel, 1999).
To ensure speedy and fair compensation for the victims, a transparency report analysis of the victims is necessary and also coordination of crucial government agencies need to work in harmony and transparent manner. The most critical agencies that should oversee their activities related to victim compensation include health, legal, and the treasury.
A fair compensation criterion is only viable when the agencies facilitating the compensation process are able to design the scheme purely by considering the various and interrelated factors that are perceived to be associated with the injured victim.
In this regard, factors of social, economic, emotional, psychological, environmental, and physical need to be incorporated in designing an effective, fair compensation scheme. Therefore, the proposition is that assessment of damages on the part of the victim should be thorough, transparent, efficient, and non-bias for fair and fulfilling compensation to be realized.
Courts responsible for handling the Bhopal victims’ case
MNCs for a long time have operated within the legal principles of “separation of corporate identity and ‘forum non-conveniens,’ and the effects of these principles has been that MNCs operate with double standards” (Meeran, 1999, p.1).
As it will be evident from the developing countries, the legal justice systems are relatively weak and loopholed an opportunity MNCs will want to exploit especially in liability cases (Strike, Gao and Bansal, 2006).
Bhopal disaster offers a candid example whereby UCL fought for the case to be facilitated by the Indian courts claiming that the accident took place in India, involving Indians and therefore it was ‘rightful’ for the Indian courts to carry out the case instead of the American courts.
The corporate veil law gives the parent company owning subsidiary plant in another region a break from being held responsible in legal terms for any behaviors regarded as unlawful by the subsidiary plant and the MNCs are only seen and recognized to be shareholders (Meeran, 1999, p.1).
Therefore, citing the Bhopal case and considering the law in place, it becomes clear that the Indian country is the custodian to Bhopal disaster case and not America, although ultimate justice may be a pipe-dream. When MNCs escapes responsibilities of their subsidiary plants the victims who suffer become difficult for them to achieve meaningful justice redress (Meeran, 1999, p.1).
Therefore, what is needed is the development of commercial law in relation to MNCs to ensure that significant cases involving MNCs are tried and litigated in a country that appear and demonstrate the ability of being cost-effective especially relieving the burden of the defendant and also in a country that seems to be, “clearly and distinctly more appropriate forum in which the victim is assured to receive genuine justice” (Meeran, 1999, p.1; Anon, 2010).
International law framework is growing at a commendable speed and the interesting but encouraging thing about the law is its ability to institute effective mechanisms of holding corporations accountable for their actions (Association for Women’s Rights in Development, 2008, p.1).
The modern world operates on the conviction that political, social and environmental policy and an effective human rights model is critical and essential in establishing a fair, just and equal society (Association for Women’s Rights in Development, 2008, p.1). Today both the government and corporation are bestowed with legal responsibility, especially with regard to violation of human rights.
The International Criminal Court has in its structures established a legal mechanism that tries to see government and corporations operate in the best interests with aim to promote and enhance human rights.
Although corporations have resisted these attempts of regulation by the international law enforcement agents claiming that their voluntary initiatives coupled with codes of conduct are enough to ensure sufficient protection of human rights, the international law agencies have remained steadfast and argued that corporations need to bear economic and legal obligations and accountability for their actions (Association for Women’s Rights in Development, 2008, p.1).
In ensuring the adherence to principles of human rights the international criminal court has emphasized that corporations that violate human rights in any nature should be accountable and compensate in terms of indemnification, restitution and rehabilitation for the accident incurred to an individual when violation of such individual’s rights takes place.
When Bhopal disaster took place, there was gross violation of human rights by the parent and subsidiary companies involved. People lost lives, others were seriously injured and impaired while others deformed, and the overall environment of the region was destroyed.
Hence these events account for gross violation of human rights which in turn prompts the international court to hold both the government of India and UCL Company for failure to ensure security of people and the environment and thus be accountable both legally and economically to the victims of the disaster.
To what extent are courts appropriate in resolving international liability cases?
International liability cases exhibit more competing interests between the parties interested in the case and therefore, any forum apart from court is likely to be influenced or biased by the weighty issue of the matter. The court system appears to have well defined procedural conduct and code of carrying out its operation that manifests no or less bias.
The panel of judges is largely guided by strict code of ethics and therefore, their decisions are likely to be impartial and less influenced by the interested parties. But at the same time, there are other avenues that the court can refer the parties to in an outside-court resolution of the dispute.
Such forums include conflict resolution institutions, board committees, citizen dispute settlement programs, and multi-door tribunal. To ensure fairness the court can keep some relative form of involvement in the alternative dispute resolution mechanism.
What corporate and business policies should firms’ adopt in order to minimize occurrence of major accidents?
With increasing competition, there is likelihood that firms may engage in activities that may compromise the safety of employees, community, and environment (Fatima, 2007). It is against this background that corporate social responsibility policies and business code of conducts are becoming popular as frameworks that guide the various operations of the firms (Economist Intelligence Unit, 2005).
In 2004, Economic Intelligence Unit carried out a research that established that there is increasing emphasis on corporate responsibility and this was having an effect on how various companies related with their stakeholders such as investors, customers, suppliers, employees, communities and governments (Economist Intelligence Unit, 2005).
In another survey conducted the same year involving 166 executives of the various companies and 65 investors, it was observed that: CSR was becoming a central and critical consideration in investments decisions (85%). The three vital aspects of CSR identified by the respondents were ethical behavior of staff, good corporate government, and transparency of corporate dealings.
Finally, the respondents also identified the importance of CSR to enhance firm’s brand (Economist Intelligence Unit, 2005).
The risks presented by forces of globalization, competition, increasing technology coupled with growing business ‘misbehavior’ for the stakeholders and the environment have necessitated need for corporate social responsibility programs to ensure businesses create and improve their ability to function within the precepts of sustainable development (Rooyen, 2007).
In return, CSR has provided continuous benefits to the business and its stakeholders despite the size of the business and once a business operate within well-defined guidelines, and the business entity becomes more competitive because of enforcing a workable CSR policy (Rooyen, 2007).
As a result, Rooyen notes that “the attraction of corporate social responsibility for many businesses is that it can help to increase sustainability without creating negative effects” (Rooyen, 2007, p.1).
Activities of MNCs have “prompted international organizations, the media, human rights groups, social investors and consumers, as well as some corporate executives, to discuss the responsibility MNCs share” in promoting social safety and stability of the society (Bennett, 2002).
Social responsibility includes both the economic and legal obligation but also reflects, “Ethical standards or judgments of social desirability” (Boatright, 2003 cited in Bacher, 2007, p.9).
In its broadest definition and operation, social responsibility is further seen to include the environmental responsibility and the concern for sustainability, whereby these, “additional behaviors and activities are not necessarily codified into law but are expected of business by society’s members” (Carroll, 1979 cited in Bacher, 2007, p.9).
As such, corporate social responsibility (CSR) has come to characterize MNCs operations in the developing countries.
Although it constitutes varying meanings, CSR definition is adopted to indicate that: private sector firms have a responsibility to ensure that they do not contribute to the violations of human rights and that they promote and respect of these rights and respect needs to be observed in terms of employee core labor standards.
Besides, MNCs have to ensure that local communities benefit from larger company’s operations in the developing nations; that there is responsible management of environmental impacts of a company’s operations, including emissions, waste and use of sustainable resources, as well as avoid cases of corruption and increase transparency in their business practices.
Moreover, there is need for incorporation of social and environmental criteria in procurement decisions (Unden, 2007).
The concept of corporate social responsibility gained momentum during the period of intense globalization between the 1950s and 1970s (Bacher, 2007). These periods saw post-war investments by the America companies in Europe and Japan intensify and as a result, most of the USA companies put a lot of their capital in these nations; consequently, the corporation grew in size and power (Bacher, 2007).
As MNCs activities intensified abroad, social issues such as poverty, racism and unemployment together with environmental degradation became the focal issues that attracted numerous requests for the companies to modify their roles and take more significant part in community involvement and activities (Bacher, 2007).
The initial corporate social responsibility outlines were concerned with how to secure and maximize profits for the shareholders, but as time elapsed, social and ethical responsibilities started to attract attention especially after acceleration in some big-scale corporate wrongdoing such as tax evasion and exploitation of foreign governments by the manipulation of transfer prices (Bacher, 2007).
CSR and business ethics advocates postulate, “Corporations have an interest in leveraging their skills and impact to promote stability in their areas of operation, not only because it is the right thing to do, but also because it makes good business sense” (Bennett, 2002).
In order to ‘police’ the operations of the MNCs, traditional human groups have utilized international law to ensure these corporations are not complicit in human rights abuses and the overall general consensus has been that MNCs operating across borders need to take responsibility for the effects of their operations on the local environment and population (Bennett, 2002).
Multinational corporations have been seen to challenge the ability of sovereign nations to control corporate operations and impacts where they appear to be too big and powerful (Boatright, 2003 cited in Bacher, 2007).
At the same time, unregulated operations of the MNCs have thrived due to poor enforcement of the international law which has led to vacuum that only self-imposed, enforced and monitored standards can fill, making it a risky undertaking (Bacher, 2007). When these MNCs show laxity in their corporate operation, the public concern heightens due to lack of a representative to champion the interests of the society.
Generally, what becomes evident among these MNCs is the lack of social and environmental responsibility, where social responsibility arises from social power that MNCs possess (Bacher, 2007). In some cases, self-imposed standards have existed, but they have been limited to addressing only the interests of the corporation and the avenues where the corporation function-market (Bacher, 2007).
CSR has been viewed by others to be costly, and therefore reduce the profitability of the firm. However, the basis here can be that business as an entity has responsibility to numerous and diverse groups in society and not just owners of the business (Corporate social responsibility, n.d).
The responsibility further extends to the natural environment and the community. With the growing awareness among the people and increasing risks created or initiated by businesses, it becomes costly to a company if it does not act responsibly or if the general perception believes, the business is not being responsible to its stakeholders.
Therefore any meaningful balance between well created CSR policies and guidelines and the cost associated in implementing them have a chance to re-brand the image of the business, increase stakeholders confidence in the business and also reduces legal costs for the business and in the long-run the benefits for the business will outweigh the initial costs of implementation.
Critical ethical issues from the Bhopal disaster
The Bhopal disaster is an event that revealed how ethical behavior can elapse at full watch by key stakeholders such as the government, organs of the government and the companies involved.
Therefore, because of the disaster, critical ethical issues emerged specifically from the tragedy itself, the conduct, and reaction of the UCL Company, the government’s role, the company’s failure to ensure appropriate safety measures and standards and lastly the agony of the victims due to delayed justice.
When the tragedy took place, the first reaction of the UCL Company was to deny and distance itself from drama claiming the Indian plant was fully responsible. Further, the company accused one of its employees to have carried out ‘a sabotage mission’ in a ‘revenge’ attack.
Ethically how can UCL, with majority shares in Indian plant, deny its responsibility to the tragedy? How is the current law concerning MNCs contribute to MNCs evasion of duties due to the inappropriate behaviors of the subsidiary plants and hence is it ethical for such law to continue operating in such form?
Further is it ethically for MNCs continue controlling their subsidiary plants in terms of daily operations but in an event of accident leave the responsibilities to the plant in an effort to evade duties and if so, what should be the extend of MNCs involvement in activities of their subsidiary plants?
On its part, was it ethical for the Indian government to grant the company land in a densely populated region even after studies showing the dangers of such undertaking was carried out? Was it ethical for the same government to entrust the company with full responsibilities of enacting safety standards without regulation or monitoring mechanisms in place?
Why was the government reluctant to inspect the equipment of the company to ensure its safety and sustainability? Was it ethical for the state government of Madhya Pradesh to deny the citizens of Bhopal critical safety information that would have enlightened them on the possibility of disaster occurring (Frewen, 2010)? For UCL Company, how was there reaction? Why did they not alert people?
Why were the alarms not functioning? After the tragedy, UCL CEO came to India but was arrested by the state of Madhya Pradesh police before the New Delhi government intervened and secretly deported him, therefore, was it ethical for the company to deport the CEO when charges against him were abundant (Frewen, 2010)?
And up to now, the CEO is still free and comfortable, while victims loathe in suffering and despair, hence is it ethical for the legal and government institutions to continue with their laxity in ensuring justice is done?
Then lastly on the compensation of the victims, was it done in an ethical manner of fairness and justice, putting in place numerous factors as a result of the disaster?
Did the compensation meet the emotional, psychological, and physical torture of the victims, how ethical should the compensation system be carried out? Is it moral for justice to victims to continue being delayed? And how ethical can the government, agencies of government, and the company ensure future business operations do not pose risks to the citizen?
In short, Bhopal disaster demonstrate ethical issues that can be seen to originate from a chain of development of technology where the decision to operate a dangerous plant in a densely populated region, which did not have capacity for technical and institutional infrastructure to support it, compromised decisions in terms of giving the facility the necessary safety standards.
This is in addition to failure to properly operate and ensure the facility is well maintained and more sorrowfully and ethically wrong the failed position of the government and industry to look beyond the legal issues and in a humane manner attend to the needs and justice of the victims.
All these questions revolve around the ethicality of events that surrounds the Bhopal disaster, which when investigated, can reveal how corporate social responsibility frameworks and policies are necessary for the business.
How should corporate responsibility toward environmental protection, worker, and community safety change?
Evidence from the developing nations is that MNCs are operating in such countries’ import’ CSR from their home countries with less regard to the varying and interrelated factors that exist and affect the overall existence and operation of business in developing countries. Therefore, when the implementation process starts, it becomes clear that achieving the goals or connecting the CSR policies to critical stakeholders do not succeed.
What is needed in new CSR policies are that the culture, values, norms of the host country regarding work, environment and community need to be studied and incorporated (Waldman, Luque, Washburn and House, n.d; Robertson and Fadil, 1999).
Further community affected by the activities of the company need to be integrated into decision-making processes on what particular responsibilities should the company working in their area be involved in. This will make the CSR policies to reflect the specific societal issues and concerns in which they intend to operate.
At the same time, most stakeholders in developing countries have little understanding of the CSR and therefore, education, training and public awareness need to be incorporated in the CSR designed for these countries. The role of government need not be ignored as a key and powerful institution controlling activities in which MNCs operate (Porter and Kramer, n.d).
The government assumes a principal responsibility in ensuring effective and appropriate CSR work within the established framework.
For the Bhopal tragedy, the voluntary aspects that the company would have done include: public education and awareness on the importance and dangers of MIC, establishing an emergency communication system for efficiency in case of disaster and participating in a continuous environment safety auditing of their facility to ensure defaulters are detected early.
Globalization is a phenomenon that cannot be ignored especially its impacts of internationalization (Bennett, 2002). Corporations’ movement to the developing nations is proving to be profitable, especially with consideration of the reduction in the cost of factors of production available in these regions.
Nevertheless, the presence of big corporation wielding a lot of influence and power has resulted in these corporations participating in numerous ‘misbehaviors’ and later using legal mechanisms to evade the responsibilities.
The corporation’s misbehavior is manifested in the prolonged environmental destruction, overexploitation of resources, poor working conditions for its employees and even endangering the safety of the larger community. As a way of regulating and ensuring appropriate business conduct and behavior is promoted, CSR and codes of conduct are fast-becoming requirements for the corporations to adhere to.
At the same time, existing literature postulates the role the parent MNCs can foster to its subsidiary plants, especially in developing countries.
When compared to the operations in their home countries, MNCs are seen to adhere to the regulatory and law institutions more strictly and this has resulted in stricter corporate social responsibility being observed.
Moreover, beyond complying with the increasingly stringent regulations, most MNCs are determined to preserve their ethical image, avoid serious legal liabilities, satisfy the safety concerns of the employees, consumers and the communities they are working with.
In addition, they need to respond to government regulators and other stakeholders and develop new safer business in order to remain competitive in the world market (Wehrmeyer and Mulugetta, 1999).
Therefore, since most MNCs in their home countries have been able to adopt global standards established by the international trade and investment organizations, the same organizations have to exert influence on their subsidiary plants to adopt global standards of proactive environmental management strategies (Wehrmeyer and Mulugetta, 1999).
International certification such as ISA 9000 also can be adopted by MNCs in their subsidiary plants since such certification ensures firms total quality management (TQM) measures have been met and therefore environmental, social, and economic safety of it is constituent’s plants can be guaranteed (Wehrmeyer and Mulugetta, 1999).
At the same time, the corporations can use international standards such as Eco-Management and Audit Scheme (EMAS) and also ISO 14000 to instruct its constituent plants to adopt and adhere to such global corporate management systems.
Therefore, it will be necessary for the MNCs corporations to adopt and implement sustainable CSR and the role of the government should be to ensure these corporations’ operations are carried out within proper legal framework.
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