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Multinationals and Ethically Sound Business Practice Essay

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Updated: Oct 8th, 2021

Introduction

Every democratic country in the world has some set norms that guide its business operations and practice. In many countries, these normative sets are entrenched in laws and trade agreements governing how business is undertaken. In the same vein, some countries adhere strictly to the accepted norms of business practice while others abuse the norms in favor of personal or corporate enrichment. In such countries, instances of business bribery and child labour are rampant, while women are treated unequally to men in their places of work. This is done regardless of set rules and trade agreements that denounce such vices in business circles. The question of following the set norms of business practice becomes almost unbearable when one reflects on Multinational Corporations (MNC’s). In a layman’s language, a multinational corporation is a large money-making organization with subsidiaries operating in a number of other different nations (“Multinational Corporation,” 2008). These subsidiaries are the subject of my discussion. Should ethically sound business practice require multinational corporations to respect the norms of the host country or the norms of the corporation’s home country?

Discussion

According to Kolk and Tulder (2004), many budgets of the MNC’s are comparatively large to the national incomes of the host countries. This therefore means that it is never easy for the host nations to enforce their national laws and trade agreements on the MNC’s. Many governments, especially African, Asian, and Latin American governments rubbish or turns a blind eye to the accepted norms of business practice in favor of the MNC’s. The situation becomes worse when the said governments becomes facilitators in bending the laws of international business best practices in favor of the investments brought by these large corporations (Donald & Werhane, 1969). The argument used by many governments is that the corporations are instrumental in supporting their economies through taxation, creation of employment, training of local employees in new and probably transferable expertise, and technological transfer. As such, governments surrender their authority and regulatory powers to the MNC’s.

The results are there for all to see. Hardly does a month pass by without hearing the news of a certain MNC abusing its workers in a certain country, with those in power too afraid or too ‘powerless’ to intervene. Some governments have been known to protect the interests and business norms of the MNC’s over the interests of their fellow citizens. The results are always disastrous. We have heard of deaths caused by fires in toy factories in Thailand, pesticide intoxication in banana estates in Central America, and the utter intimidation of the trade union officials who tried to expose such business malpractices in the hands of MNC’s (Woodroffe, 2001). Not so long ago, a British Multinational mining company known as Cape plc exposed South African miners to asbestos dust, 30 times what is known to be the legally safe limit in the UK. To avoid paying compensation to the injured workers, the MNC is employed every trick in the book.

To better understand the ethical dilemma of whether to allow multinationals to practice their own norms or respect the norms of the host countries, let me use some philosophical ethical theories. The first is Utilitarianism, which denotes that the moral worth of an action is individually determined by its contribution to the overall utility, or precisely its contribution to the pleasure or happiness as summed up among all persons. The proponents of utilitarianism believe that the moral worth of any action must be determined by its outcomes and that, the end justifies the means. The good of any action must be maximized (Kemerling, 2002). This seems to give the MNC’s some reprieve to practice their normative values which may be incongruent with those held by the host countries. This theory also gives strength to governments which allow the multinationals to practice their own normative values regardless of whether such practices are harmful to the citizens. An action’s contribution to overall utility determines its moral worth. In other words, the theory means that it is beneficial for some few South African workers to choke in asbestos dust because the South African government is being paid huge taxes by Cape plc, and the company is making huge profits for its shareholders. If the corporation has a thousand employees under its payroll, it is ethical for a few to suffer for the overall success and satisfaction of many.

To know whether the above is right, let me compare it with deontological ethical approach which focuses on the moral rightness or wrongness of an action as opposed to the rightness or wrongness of the action’s consequences. It is an obligation or duty based ethics (Gaus, 2007). Deontologists theorists cannot in any way be driven by malice to harm others. They cannot also be driven by profits to the extent of harming others. If Cape plc was using the deontological approach in handling its workers, it couldn’t have harmed them by exposing them to asbestos dust which was 30 times the level required by both the South African and the British law.

Informed by the above two theories, I would argue that MNC’s should be required to adhere and respect the norms of their host countries other than implementing their own norms or norms from their parent countries. My reasons for sticking with this line of argument are very clear. First, large MNC’s are known to have a powerful influence on local and international relations due to their large capital base. Their influence has been known to permeate even the political leaders of a country (Kolk and Tulder, 2004). As such, if they are allowed to lay their own normative values and business best practices, some people, mostly the workers will be bound to suffer. Just like the case of Cape plc, the interests of the corporations are likely to be put before the interests of the local workers. In such a scenario, the workers suffer in silence basically because the governments which are supposed to protect them are also interested parties, eyeing huge taxes from the MNC’s to drive their operations. We don’t have to look further for evidence. The Shell’s inhumane handling of the local Ogoni people in Nigeria is a stark reminder that MNC’s can harm the local population if they are allowed to follow their own ethical and normative standards (Woodroffe, 2001). Governments must therefore establish ethically sound business practices to be followed and adhered to by the MNC’s. Such practices must be given some form of legal backing to make sure that all MNC’s operating in a country implements them without favor.

Secondly, The MNC’s have proved to all and sundry that they are incapable of governing themselves in the interest of the public. They operate with rules that put the interest of their shareholders supreme to the interests of the locals. If governments do not come up with their own ethically sound business practices, the MNC’s will rampage through the locals in the hope of earning more profits for their shareholders (Woodroffe, 2001) because making profits is their core objective. They will be more likely to follow the Kantian capitalism and utilitarianism more than doing actions that are morally right for both themselves and the local population (Beauchamp & Bowie, 2005).

Conclusion

A country needs to have a clear framework of rules to govern the MNC’s and ensure that they respect the normative values of the host country. The prospect of a MNC setting up shop in a nation where there is cheap labour is attractive both to the host country’s government as well to the corporation. But to guard against abuse of workers and other derogatory norms of business practice used by some MNC’s, the host government must come up with homegrown norms that guarantees respect for the workers.

Most MNC’s have a global outlook. Due to their massive capital base and influence, MNC’s are much more likely to disrespect the host nation’s business practices in favor of their own. It is with this consideration that I suggest that global regulations need also to be developed to guard against such abuses. Mechanisms for dealing with the MNC’s operations must be designed to restrain the corporations from undermining the host countries (Woodroffe 2001). Currently, national laws are being by-passed by these global corporations. Global regulations would ensure that states as well as corporations bear the accountability of complying with the standards, and can be sanctioned if they abuse or fail to implement them to the letter.

Works cited

Beauchamp, T.L., & Bowie, N.E. Ethical Theory and Business. Prentice Hall Professional Technical Ref, 2005. ISBN 0132904527.

Donaldson, T., & Werhane P.H. Ethical Issues in Business: A Philosophical Approach – Thomas Donaldson. Prentice hall Professional Technical Ref, 1969. ISBN 0132901722.

Gaus, G.F. What is deontology? Part two: Reasons to act. 2008. Web.

Kamering, G. 2002. Philosophy pages. 2008. Web.

Kolk, A., & Tulder, R.V. “Journal of World Business, Vol. 39 (2004) pp 49-60. 2008. Web.

MiMi.Hu. Multinational Corporation. 2008. Web.

Woodroffe, J. The regulation of Multinational Corporations. 2001. Berne Declaration. 2008. Web.

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