Moral Obligations of Multinational Corporations Essay

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Updated: Feb 26th, 2024

Introduction

Majority believe that Multinational Corporations (MNCs) have the moral obligations to support poor countries because of their financial capabilities. However, most of the firms have been subjected to ethical examination concerning their conduct of exploiting the resources in hosting nations.

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In fact, libertarian theorists supported the notion that multinational corporations have the moral responsibility of giving back to the society in any form that is deemed beneficial. The reason is that the resources multinational corporations continue to exploit should benefit the whole society.

On the contrary, critics argue that the major aim of such organizations is to exploit the resources of host nations for economic, social and ecological expansion. Further, multinational corporations participate in criminal activities that undermine the human dignity (Donaldson 70).

The paper argues for the case basing the arguments on various theoretical framework, including libertarianism as well as Avoid, Protect and Aid rules of MNCs toward the society.

In other words, the paper will focus on the Avoid, Protect and Aid rules of MNCs toward the society to bring out clearly the reasons why multinational corporations have ethical obligation to fulfill.

However, the paper will utilize the rights in the global market concept to criticize the views held by libertarian theories to analyze the benefits of MNCs considering treatment of native employees, foreign ventures, transfer of modern expertise and management techniques.

The rights in the global market concept examine the need for multinational corporations to uphold individual rights particularly in host countries.

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Libertarian theories

According to libertarian theories of the corporate and global capitalism, multinational enterprises have moral obligations of returning proceeds to stakeholders within the bounds of moral side-constraints that are grounded in the rules of the game (Arnold 158).

In addition, the return of profits should be within the precincts of societal anticipations, including promotion of background institutions, legal obligations, morals as well as social corporate responsibility. Core to the benefits multinational institutions offer to the society is the economic aid that is geared towards alleviating societal tribulations.

Avoid, Protect and Aid rules of MNCs

The realization of social and economic rights

Multinational corporations have inserted a lot of social and economic influence in the affairs of the host countries.

In fact, with decreased influence of government agencies on the public affairs, multinational corporations are part of the private entities that have increasingly gained a lot of influence on the public affairs. Benefits the public is likely to get from the MNCs are part of the economic rights of an individual.

In fact, multinational corporations realize their goals to the community through many ways. The first important avenue is the societal institutions. Strengthening such institutions provides a sure means through which multinational organizations can be utilized to provide aid to the needy people in poor countries (Hsieh 270).

The fundamental units of the society, such as education, health, economic institutions and governments are critical concerning the operations of business organizations. Multinational corporations have to collaborate with these institutions in order to attain the main role of returning part of their proceeds to the society.

In fact, multinational corporations should recognize the importance of various institutions of society and understand that firms cannot operate in a void (Hsieh 170). In other words, multinational corporations are part of the economic institutions of society and should benefit the communities in which they operate.

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In principle, the multinational enterprises operate in multifaceted circumstances and have moral obligations to meet the demands of various societal institutions, including governments, as well as the community hosting their operations.

Corporate accountability

Besides, the concept of Corporate Social Responsibility (CSR) currently being applied in a corporate world has been derived from the principles of libertarianism. In fact, the idea of corporate social responsibility has been practiced over the last decades.

The notion coins the importance of corporations to the communities surrounding areas where such enterprises operate. In fact, the principle behind CSR is that large corporations are responsible for individual actions. Besides, the benefits of the corporations should be shared by the communities, which are considered as part of the stakeholders.

Actually, there is a growing concern among international groups, particularly Non-Governmental Organizations (NGOs) urging global enterprises to balance proceeds with community residency.

In other words, multinational corporations have moral obligations to meet the economic, legal and ethical as well as charitable anticipations of the society (Falkenberg 32).

In the current global context where market determines the survivability of firms, multinational corporations should include the components of global CSR in operations in order to continue existing. The elements of international CSR entail economic, legal and ethical roles.

Further, international enterprises are also expected to be good corporate citizens through philanthropic responsibilities (Arnold, 158). In reality, multinational corporations should be socially responsible through the provision of financial, as well as any other aid the communities may need.

In other words, they should be supportive of the needy communities particularly through direct financial aid or contributing hugely towards activities that alleviate social problems afflicting the society.

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Core to the libertarian principles are the economic responsibilities of multinational corporations. The main argument is that multinational corporations should indulge in activities that benefit the society.

Actually, the foundation of global business processes is to produce goods and services that provide solutions to problems afflicting the society (Falkenberg 20). In other words, profit-making, which is always the ultimate objective of multinational enterprises should meet requirements of the global society.

Essentially, firms should adhere to global strategic management principles that provide ethical guidance on the achievement of production and profit. Through profits, multinational corporations have the capability of providing financial aid or contributing to the actions geared towards meeting the needs of society (Arnold 159).

Besides, multinational corporations can engage in the production of goods and services that directly benefit the society. For instance, multinationals in the pharmaceutical industry can engage in producing anti-retroviral (ARV) drugs that can directly be used to alleviate deaths resulting from HIV/AIDS in poor countries instead of contributing to financial aid.

Further, multinational organizations must abide by the specified acceptable rates of return in host nations. The reason is that MNCs operate in countries that are in dire need of aid. Besides, total annual earnings of MNCs equal the host countries’ Gross Domestic Product (GDP). As such, it would be natural for these countries to ask for higher rates of return from the global corporations (Hsieh 266).

Nonetheless, one major issue in the current policy is whether multinational corporations have greater responsibilities to the wider society. As observed by libertarian theorists, most scholarly works support the argument that multinational corporations have greater responsibilities to respond to societal needs.

However, critics of the view argue that the sole responsibility of multinational enterprises is to guarantee that shareholders obtain their due. In other words, the multinational corporations are responsible to the shareholders and not the society.

Activities of MNCs geared towards the society should be considered philanthropic and not a moral duty. In essence, the shareholders should decide whether to share their dividends with the society.

Moreover, multinational corporations should respond to the needs of society without hurting the businesses, as well as main objective of maximizing profit. As indicated, calls for multinational corporations to contribute to the needs of society are not only limited to NGOs but also world leaders, activists and scholars.

The reason is that considering the financial capabilities, MNCs are in better positions to offer assistance. However, assistances from multinational corporations should not go against the main purpose of making profits.

The principle of providing aid underlies actions that would prevent an occurrence of a problem. According to this perspective, multinational corporations should take actions geared towards preventing the societal problems by incurring little costs.

In fact, costs involved in the social responsibility should be less than the corporate returns. In addition, multinational corporations should act when presented with situations where the costs of preventing major problems afflicting society are relatively small.

In other words, MNCs have moral responsibilities of preventing major problems afflicting society at small costs. Essentially, the libertarian principles justify moral actions of the MNCs.

Government regulation

Multinational corporations often undermine the government regulations in their endeavors in host nations (Donaldson 68). Actually, in the global context, numerous states lack well-defined regulatory frameworks that standardize the ethical obligations of multinational enterprises.

Besides, in foreign countries, the operations of multinational corporations are smoothened by the failure of host states to come up with set of laws that protect the civil liberties of workers. In other words, local government officials normally have financial interests in the actions of MNCs thereby opening space for corruption to thrive.

Generally, multinational enterprises have moral duties to recognize workers’ freedom of physical movement (Donaldson 70). In other words, workers should not be subjected to strict rules disallowing movements from positions of duty.

Additionally, fair trials, freedom from torture as well as ownership of property are significant liberties that workers in multinational enterprises should enjoy. Over the past years, many multinational corporations embraced nepotism by discriminating individuals based on race, sexual orientation, religion, family affiliation as well as social class.

Further, labor unions play significant roles to ensure that workers’ rights are upheld and honored (Donaldson, 77). As such, multinational corporations are duty-bound to desist from coercive campaigns and strategies that restrict the surfacing of workers’ unions through lobbying host states to prevent emergence of labor movements.

Additionally, multinational corporations have in the past aided in overthrowing governments and states as well as offering support for authoritarian heads of governments in order to carry on with unethical activities (Donaldson 79).

For example, the overthrow of Honduras government in the 1950s was aided by an MNC. Besides, MNCs have moral obligations to refrain from supporting autocratic regimes in emerging democracies as well as bribing public officials.

Specifically, Lockheed Company undermined the democratic gains made in Japan by offering inducements to the nation’s prime minister in order to be awarded jet contracts. Such actions weaken democracy as well as breach the right to national freewill.

Multinational enterprises should also observe the authorized legal systems in host nations. Besides, MNCs have moral obligations to observe international conventions and justice systems that protect the rights of individuals. The major focus of international justice revolves on the rights that individuals are supposed to enjoy (O’Neil 182).

Nonetheless, international justice often ignores the requirements capable of protecting the rights of individuals. Essentially, multinational corporations have moral obligations of abiding by the varying social contracts they have with host nations.

However, multinational enterprises are capable of escaping laws by moving operations from one nation to another (Velasquez 36).

A good reputation is an essential aspect in the operations of international firms. In essence, multinational organizations have to ensure that their operations are based on acceptable societal practices, which are not necessarily within the legal domain.

In fact, no global business would wish to be listed as the worst-performing corporation since such publications lead to loss of good repute (Donaldson 74).

Generally, multinational enterprises have a universal responsibility of recognizing norms, practices and anticipations reflecting beliefs that are considered fair and consistent in relation to values and fortifications of ethical rights of stakeholders. In other words, ethical principles of moral philosophy, including justice and rights should form the bedrock of business operations.

Rights in the global market

Multinational corporations have the moral obligations to honor and protect the squashed civil liberties of workers in the global context (Donaldson 67). Further, freedom of speech, basic nutrition and freedom from torture as well as right to education are major issues of concern in several nations. In fact, most countries around the world still deny citizens basic rights. For instance, wife-beating and child labor are common in Korea and Central America respectively.

Essentially, MNCs have the moral responsibility to decline engaging children in the operations of such firms through employment. Further, the wellbeing of personnel is an important obligation that MNCs must address.

Actually, in situations where multinational enterprises are not obliged to follow morals in operations, firms often act against societal expectations. For instance, in 1988, multinational firms in the US and Britain dumped toxic wastes in West African states such as Ghana, Nigeria, Ivory Coast and Guinea Bissau due to rising costs of waste disposal.

Conclusion

Generally, multinational corporations have a moral obligation to the society. In fact, critics argue that MNCs often trade in products that are unsuitable and harmful to the natives of host nations.

Additionally, critics argue that multinational enterprises normally undermine the guidelines put in place to protect the rights of workers in host nations.

On the other hand, fans of MNCs note that multinational enterprises are significant in the development of host nations through creation of employment opportunities as well as returning earnings within the precincts of societal anticipations to promote background institutions, legal obligations, morals as well as social corporate responsibility.

Essentially, respect for core human values, local traditions and belief in the contemporary context when making decisions are critical in shaping ethical conduct of multinational firms.

Essentially, lack of clear moral obligations is to blame for the unethical behaviors of MNCs ranging from exploitation of resources, lack of respect for core human rights and cultures. Therefore, multinational enterprises have moral obligations to fulfill in global operations, including respecting human values and labor laws.

Works Cited

Arnold, Denis. “Libetarian Theories of the Corporation and Global Capitalism.” Journal of Business Ethics, 48.2 (2003), 155-173. Print.

Donaldson, Thomas. “Rights in Global Market Place.” The Academy of Management Review, 20.1 (1990), 65-91. Print.

Falkenberg, Andreas Wyller. “When in Rome. “Moral Maturity and Ethics for International Economic Organization.” Journal of Business Ethics, 54.1 (2004), 17-32. Print.

Hsieh, Nien-he. “Does Business have a Responsibility to Promote Just Institutions?” Business Ethics Quarterly, 19.2 (2009), 251-273. Print.

O’Neil, Onora. “Agents of Justice.” Metaphilosophy, 32.2 (2001), 180–195. Print.

Velasquez, Manuel. “International Business, Morality and the Common Good.” Business Ethics Quarterly, 2.1 (1992), 27-40. Print.

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IvyPanda. 2024. "Moral Obligations of Multinational Corporations." February 26, 2024. https://ivypanda.com/essays/moral-obligations-of-multinational-corporations-essay/.

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