ETHICAL ISSUES IN INTERNATIONAL BUSINESS
Multinational corporations enter the various international markets to increase their revenues and market shares. However, they encounter multiple ethical issues in the host countries that may differ from their home country. Therefore, they face a dilemma on whether to follow the ethics of their home country, their host country, the approach that is most profitable, or the approach that is morally best. They need to decide the right approach to use to ensure that they succeed in the market. The essay will discuss the ethical issues that multinational corporations encounter when conducting business in other countries.
Labor issues that a multinational corporation experiences include the working conditions of workers, wages, and human rights. The labor issues in a host country could be inferior to the organization’s home country. The working conditions relate to workplace practices and environment that ensure that employees carry out their duties effectively. They include protecting employees from workplace hazards such as frequent motion injuries, exposure to toxic chemicals, malfunctioning machinery, and wearing protective equipment. There have been instances in which multinational corporations have been failed to provide a conducive working environment, resulting in the injuries and deaths of workers. For example, BBC reported that Apple was unable to observe proper working conditions of employees in factories that manufactured iPhones (Bilton, 2014). There were instances of tired employees falling asleep in their 12-hour shifts, working eighteen days without a day off, and suicides from the stressful working environment (Bilton, 2014). The labor issues have adverse effects on the reputation of an organization.
Companies can implement labor practices that provide decent wages and suitable working conditions for workers in the factories. Decent wages may include incomes that allow the employees to attain minimum dietary requirements and other basic needs. Paying fair wages will ensure that workers are independent, have opportunities for moral development, and have self-esteem.
Multinational corporations also encounter corruption in their countries of operation. It may involve the company paying government officials for favors such as eliminating the bureaucratic barriers to the corporation’s investments. Bribery is undesirable in the economy and leads to reduced economic development. Beauchamp, Bowie, and Arnold (2013) state that corruption serves as an indirect tax on foreign direct investment and lowers such investments. It also diverts critical public resources to private hands and leads to abuse of human rights.
The United States passed the Foreign Corrupt Practices Act (FCPA) to prohibit American companies from bribing foreign officials to do business. However, there have been instances where U.S. companies have bribed foreign officials to do business. For example, HP admitted that its Russian unit bribed Russian government officials to get a contract with the Office of the Prosecutor General of Russia in 1999 (Carroll, 2014). It means that the company violated FCPA and was liable for penalties.
Multinational organizational need to align their core values with the universal ethical norms. They could develop policies and procedures that promote transparency and anti-corruption practices. For instance, they could have internal controls that ensure tracking of payments, auditing employees and third parties to ensure compliance with the no bribes policy, and providing communication channels for reporting corruption incidents. The corporations could also train their employees who are based in high-risk areas, carry out due diligence of suppliers and contractors to ensure they do not have a record of corruption, and investigate allegations of corruption.
Environmental issues include the activities of multinational corporations that have adverse impacts on the environment. The natural environment may suffer from the actions of a company, for example, in the form of extraction of scarce resources and environmental degradation. The companies need to respect the host country’s environmental regulations and the international regulations. However, the environmental laws in the host country may be inferior to the laws of the home countries. It may be tempting for the corporation to break the environmental regulations of the host countries with little consequences and costs. Also, the desire to maximize profits and minimize costs may serve as an incentive to violate the environmental regulations.
Failing to observe environmental protection may have adverse effects on the environment and the multinational corporation. For example, BP caused an oil spill that is considered as the worst environmental disaster in the United States (Griffin, Black, & Devine, 2015). It involved an oil spill of about 4.2 million barrels of oil into the Gulf and caused deaths of people, birds, vegetations, and sea animals (Griffin, Black, & Devine, 2015). Environmental degradation may also result from unethical sourcing of raw materials from organizations that destroy the environment. The effect is a negative brand image when the activities of the companies are revealed.
Multinational corporations can enact policies that conserve the environment. They could sustainable practices that ensure that future generations can utilize the existing environmental resources. For instance, they could engage in responsible sourcing of their raw materials and employ practices that minimize impacts on the environment such as technologies that use fewer petroleum products and emit fewer greenhouse gases.
Multinational corporations face ethical issues when doing business in other countries. The ethical problems include labor issues, environmental issue, and corruption. Labor issues include the working conditions, wages, and human rights of workers, customers, and the community. Environmental issues relate to activities that conserve the environment and ensure it can be utilized by future generations while corruption refers to doing business without bribing foreign officials.
Beauchamp, T. L., Bowie, N. E., & Arnold, D. G. (2013). Ethical theory and business. (9th edition). Pearson
Bilton, R. (2014). Apple failing to protect Chinese factory workers. BBC. 18 December. Online. Retrieved on December 29, 2017 at http://www.bbc.com/news/business-30532463
Carroll, D. (2014). HP’s Russia unit pleads guilty in bribery case. USA TODAY. September 12. Online. Retrieved on December 29, 2017 at https://www.usatoday.com/story/money/business/2014/09/11/hp-russia-poland-mexico-bribery/15479533/
Griffin, D., Black, N., & Devine, C. (2015). 5 years after the Guld oil spill: what we do (and don’t) know. CNN. April 20. Online. Retrieved on December 29, 2017 at http://edition.cnn.com/2015/04/14/us/gulf-oil-spill-unknowns/index.html