Ethics And Social Responsibility In International Business Commerce Essay Example
Ethics And Social Responsibility In International Business Commerce Essay Example

Ethics And Social Responsibility In International Business Commerce Essay Example

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  • Pages: 13 (3457 words)
  • Published: July 20, 2017
  • Type: Research Paper
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In order to be successful, enterprises need to understand their clients' problems and how they align with their needs. In today's global economy, clients consist of both international and domestic consumers. Recognizing this global demand, companies like Apple, Merck, and Microsoft have risen to the challenge. According to the World Bank, it is projected that global GDP will increase by 2.7% in 2010 and 3.2% in 2011. As a result, companies strive to gain a competitive advantage by offering products or services that meet the requirements of international consumers. To effectively develop and market internationally, these companies must have a clear understanding of their social and ethical responsibilities towards all stakeholders.

The objective of this research paper is to investigate the following inquiries with the aim of assisting companies in establishing ethical and societal guidance for successful entry into the international market:

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- Do countries with lower ethical standards attract businesses?
- Can ethical business practices be applied globally?
- Which organizations are safeguarding ethical practices and is it effective?
- How will ethics and social responsibility impact the future world?

Definition of Ethics and Social Responsibility: As per the Webster dictionary, ethics pertains to the discipline that deals with determining what is good, bad, right, wrong, or one's moral duty and responsibility. Social responsibility encompasses moral, legal, or mental accountability. These concepts together form the basis for principles and character that drive decisions at both individual and organizational levels. It's important to note that ethics should not be confused with personal emotions as what may be ethically correct can differ from one's feelings. In reality, ethics and social responsibility involve studying and governing one's morals based on accepted standards. Th

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corporate values of a company are shaped through the combination of these two concepts.

Can States with Lower Ethical Views Attract Businesses?
There is evidence that some states will offer pay and benefit provisions, workplace safety ordinances, or maximum workweek provisions to make employment competitive attractive to multinational corporations (Shearer pg542). If we accept our definition of ethics, then we can conclude that these actions reflect low ethical values. The question is, do these low ethical values attract business? In some aspects, the answer is yes, but overall, the answer is no. The increase in competition among developing states for foreign investments can lead to a "race to the bottom" where states compete by offering an environment with the least amount of regulations (Winston pg73).

While most transnational corporations generally do not commit intentional human rights violations, they are often indirectly involved in such abuses. For example, Chinese companies have entered into deals in Myanmar to produce rubber trees, due to the current and projected increasing demand for rubber. According to the FAO, Myanmar experiences severe localized food insecurity (Daniel pg4). It appears that farmers are being forcefully displaced to make room for Chinese investments, without any objections from the Chinese companies involved (Daniel pg4). The United Fruit Company relied heavily on land usage rights manipulation in Central America to maintain its dominant position in banana production.

To maintain their unequal land holdings, the company had to obtain government grants, which often came at the expense of local communities (Daniel pg11). The United Fruit Company also felt the need to involve themselves in local politics, despite being an American company. The term "banana democracy" refers to a

politically unstable country reliant on limited agriculture and governed by a corrupt elite heavily influenced by multinational corporations. This term originated from the exploitation of countries with low ethical standards by multinational companies (Daniels pg11).

Despite the aforementioned reasons, there are additional significant reasons why countries with lower ethical positions do not attract businesses. There is little evidence that corporations direct their investments to countries that have lower labor or environmental standards. Multiple international organizations, such as the OECD and the World Bank, have conducted studies investigating the claims that trade liberalization reduces regulatory standards and have found no support for this proposition (Kucera pg33). Contrary to conventional wisdom, the majority of evidence suggests that foreign direct investment tends to be higher in countries with stronger worker rights. A strong rationale for this is that countries with higher labor standards also tend to achieve greater economic growth, which is a primary attraction for foreign direct investment (Kucera pg34).

In a recent study, several hundred troughs of multi-national corporations and international experts were asked to rank the importance of certain standards for foreign direct investing locations. The rankings ranged from 0 to 5, with 0 indicating non-importance and 5 indicating high importance (Kucera pg35). Market potential received the highest ranking, political and social stability ranked fourth, and the cost of labor was ranked ninth (Kucera pg36). The complete rankings can be found in Appendix A. Additionally, there is evidence suggesting that U.S.

According to Kagan (pg1), capital escape seems to be influenced by the high costs of lifting ordinances, and the recipients of investment are states with similarly strict environmental criteria. Kagan (pg 2) provides data showing that U.S.

companies invested a larger percentage of pollution-intensive industries in countries that have stricter environmental standards. Kahler (pg19) points out that due to the significance of markets in industrialized countries, many multinational corporations choose to operate globally based on the most rigorous standards, implying that in the future, most developing countries will also adopt these criteria.

Additionally, there is an issue with the race to the bottom hypothesis. This hypothesis assumes certain things about the political economic system of a nation-state in a world where capital can move freely (Kahler pg7). One of the main assumptions of the race to the bottom hypothesis is that corporations will always favor lower regulatory standards. However, corporate preferences are more complex and not just about desiring less regulation. Firms also advocate for strict regulations to safeguard their corporate assets.

For illustration, U.S. multinationals - particularly amusement, computing machine, pharmaceutical, and chemical companies - strongly supported the constitution of an rational belongings rights government within the WTO. There was strong corporate support for a important rachet uping up of planetary criterions in this issue country because U.S. Firms faced a loss of net incomes from 3rd universe houses bring forthing unaccredited knock-offs of patented ware.

Can Ethical Business Practices be Applied Globally? Due to a scope of social values, be they spiritual, philosophical, or cultural, a universally recognized codification of ethical criterions is hard, if non impossible, to make. Even though certain ethical norms such as honestness, unity, and trueness are built-in parts of most societies, the strength of attachment to these norms can change well from individual to individual across cultural boundaries.

Dealing with international ethical concerns is becoming more challenging for multinational

corporations. Scholars have recently urged these corporations to establish precise and explicit codes of conduct that define their goals, obligations, and responsibilities in the international markets they function in. It is crucial that these codes are enforced throughout the entire company, encompassing all divisions and departments. To be truly impactful, the ethical code should consider both the host country's interests and its population. Furthermore, ethics constitutes a framework that develops gradually over extended periods. As cultures evolve, values, ethics, and morals also change.

In the Roman Empire, Gladiator games were a popular form of entertainment that involved deadly combat. These games held great significance in Roman culture and the gladiators themselves were highly regarded, much like modern-day 'Rock Stars'. However, if similar events were organized in today's society, they would be considered morally unacceptable and unethical. Therefore, when considering ethics, it is important to examine the specific circumstances surrounding a situation rather than solely focusing on an individual event or action. When evaluating ethics globally, we must consider the facts and conditions present.

However, the complexity of the task increases due to human behavior. Each individual possesses their own distinct set of values, much like our DNA. Moreover, we have personalized lists of prioritized values and diverse approaches in comprehending and implementing them (Cormier, 2009). In addition to this, conflicts arise from the varying values among countries since there is no universally accepted ethical framework for all global citizens to follow. To tackle this challenge, multinational companies are incorporating a preamble into their company's charter or policies.

Policies may differ among companies, but it is crucial that every employee understands their duty to uphold and demonstrate ethical behavior.

By consistently refusing to participate in unethical actions, you reinforce the concept of what is considered ethical.

Which organizations are effectively promoting ethical practices? Is their effort yielding results?

Acknowledgment of corporations' social responsibilities has significantly improved. Prior to the 1970s, businesses were believed to be accountable solely to their stockholders (Winston pg 75). However, various scandals and reported abuses have altered the traditional mindset regarding corporate social responsibility.

Various voluntary codifications, such as the Global Sullivan Principles, Caux Principles, and Ceres Principles, have been established to define responsible business practices in society (Winston pg75). The UN-Sub committee on the Protection and Promotion of Human Rights has also set rules outlining ethical and legal obligations for multinational companies. Additionally, numerous non-government organizations (NGOs) have emerged to monitor and report on abuses by multinational corporations. For example, the Fair Labor Association and Social Accountability International have developed SA8000, a comprehensive social responsibility standard for retail manufacturing businesses (Winston pg 80). NGOs act as catalysts among stakeholders of a company to raise awareness about ethical behavior.

NGOs play a crucial role in unveiling unethical behavior by houses and facilitating information exchange among stakeholders. They act as intermediaries, connecting houses and stakeholders by initiating this flow of information. Companies are now realizing that even though compliance with NGOs may entail higher actual costs, the increase in revenues resulting from aligning with societal interests more than compensates for them. Many of the companies highly regarded in Fortune Magazine's list of most admired companies also appear in Forbes list of most reputable companies (Gunay pg274).

Many of these companies use a strategy of maintaining a positive relationship with important NGOs that closely monitor their business

activities. Companies are discovering the benefits of having a close relationship with an NGO, possibly due to the public's perception of NGOs. NGOs are increasingly adopting a more strategic approach to dealing with corporations. In general, there are three ways for NGOs to engage with corporations: they can be confrontational, engaging, or a combination of both (Winston pg71).

While confrontational attacks are still prevalent, they are declining overall. NGOs are shifting away from confrontational strategies and adopting more collaborative approaches such as engagement (Kong pg111). An exemplification of this collaboration between an NGO and a multinational corporation is the establishment of the Marine Stewardship Council or MSC (Kong pg118). MSC was initiated by the NGO World Wide Fund for Nature and Unilever, a leading producer of fish sticks.

MSC was created to address the issue of overfishing and worked closely with industry experts and conservationists to develop sustainable fishing standards (Kong pg118). The ethical and social responsibilities of outsourcing have become a widely debated topic. Questions arise about whether it is fair for a company to prioritize their financial interests by outsourcing. However, what often goes overlooked is the company's obligations towards its employees in the foreign market. Social and ethical responsibility should extend beyond a company's home country.

The integration of societal and ethical responsibility in outsourcing practices is crucial, especially when venturing into foreign markets. Some may question the necessity of integrating a foreign market's ethical and societal practices, arguing that it is acceptable only if these practices align with or exceed those of the company's home country. However, if they fall below, the company must assume some responsibility. Outsourcing can greatly benefit a company's bottom

line, but once it enters the foreign market, it must always acknowledge and incorporate a certain level of societal and ethical responsibility. So, what exactly is outsourcing? It is the procurement of services or products, such as vehicle parts in manufacturing, from an external provider or manufacturer to reduce costs (Definition of Outsourcing).

Due to the constant demand for companies to be competitive in both domestic and foreign markets, many are searching for markets with low labor costs and high production. "Outsourcing the outsourced is definitely one of the effective trends in the business world today, benefiting both employers and employees worldwide" (Editor, A).

Outsourcing is Beneficial

In recent decades, many companies have been outsourcing jobs to foreign markets. "Outsourcing has expanded the business scene in terms of employment. Resources are now available globally as companies can hire service providers from almost anywhere in the world, as desired and required" (Editor, A).

The ability to outsource has made trading and other business activities much faster for companies of all sizes. The emergence of technology has further supported this trend, allowing companies to fully maximize their outsourcing resources (Editor, A). India has benefited the most from outsourcing. It is no longer seen as just a competitor, but also as a catalyst for industry growth in other regions. Indian companies are becoming major players in the global market as clients seek support in multiple regions (Shivapriya, N). The US outsourcing jobs to India has stimulated their economy, and with the rapid growth of a middle class, experts predict that India will soon become one of the top global economies.

According to Goldman and Sacs, India is predicted to become a top-five global

economy by 2030 and is currently a significant economic power. India participates in global economic decisions as part of the G-20 and the G-8 + 5, and there is a possibility of it gaining a permanent position on the United Nations Security Council (Feigenbaum, 2010).


What Are the Facts Regarding Child Labor?

Child labor has been a major issue worldwide and continues to be a significant problem. While it was once a major concern within the United States during the 19th and early 20th centuries, the implementation of Child Labor Laws has largely eliminated this issue. However, child labor now primarily involves children from developing countries who work in factories producing goods like clothing, toys, shoes, and even chocolate that are then sold to consumers in the United States.

Children in developing countries are unfortunately being exploited in various ways for the sole purpose of increasing net income. They are receiving extremely low wages, or in some cases no wages at all, and are subjected to harsh working conditions. This issue of child labor is still prevalent worldwide, but it has seen an increase in Asia, a major producer of goods for the US, in the past decade. The development of China's private economy has contributed to a growing problem of child labor, with workers as young as 16 being affected.

The figure of child labourers was estimated at between 2 and 3 million at the terminal of 1999 '' ( China Daily ) .

Which corporation is still employing child labour?

It is distressing that corporations who make a huge profit from US consumers are participating in the act of child labor, considering all the hardships children face. Although the

US has laws against child labor, unfortunately, Nestle Corporation has recently made headlines for using child labor in their factories to produce their products. When one thinks of Nestle Corporation, the first thing that comes to mind is sweet chocolate. Their products have become a staple in the US.

When thinking about Nestle products, many people recall their childhood memories. This may involve using Nestle cocoas to make homemade cookies or watching the Nestle Quick commercials that educate children about the nutritional benefits of their products. However, a study conducted by the Reuters intelligence bureau has revealed disturbing truths about certain Nestle products. According to the International Labor Rights Fund, Nestle was indirectly involved in the trafficking, torture, and forced labor of children from Mali. The case also alleges that these children were subjected to physical abuse, forced to work extremely long hours without pay, and provided with little or no food or rest (Datamonitor NewsWire). While many corporations and governments take advantage of cheap child labor, there are some who are recognizing and taking responsibility for the ethical and social implications of this practice and working towards putting an end to it.

It may be surprising to some that China, responsible for producing much of the consumer goods in the US, has made significant efforts to eradicate child labor practices. In 2002, the Chinese government implemented a strict ban on employing children. Those caught introducing a child to an employer can face a fine of 5,000 kwai ($640), while employers using child laborers can be fined the same amount for each month of employment.

China Daily reported that individuals who repeatedly engage in activities involving children will

have their licenses revoked. Following the Chinese government's actions against child labor, India has also taken steps in the same direction. In 2009, the Delhi Chief Minister Shiela Dikshit launched an anti-child labor campaign, called 'Time for Change.' During the launch event, which coincided with International Children's Day, Dikshit encouraged the police and NGOs to proactively address child labor. After years of speculation and allegations, a profitable US-based corporation has finally taken responsibility for its involvement in child labor.

Although many developing states are taking action against child labour, some US corporations are also starting to take responsibility. Both Wal-Mart and Gap have initiated their own actions. While Wal-Mart denied any wrongdoing, they still paid settlements to many of those who accused them. In 2005, Wal-Mart was ordered to pay $135,540 to settle federal charges related to breaking child labour laws. These charges involved 24 misdemeanors in stores in Arkansas, Connecticut, and New Hampshire, where teenage workers were using dangerous equipment like chain saws, paper balers, and forklifts (Associated Press). The clothing retailer Gap has also faced allegations of exploiting child labour.

However, the Gap corporation terminated the seller and the subcontractor Indian company who decided to use child labor immediately after seeing a photo of Indian children working in a sweatshop in New Delhi (Tran, C). Decision Ethics serve as a framework for ethical behavior and values. These morals are unique to each individual and can be influenced by society and family. When evaluating the ethical nature of a situation, all the circumstances that contribute to it must be considered. The absence of an ethical framework leads to differing values and conflicts among people. To address

this issue, companies are currently striving to establish a preamble or policy within their charters.

Policies vary among different companies, but what is most important is the concern each employee has regarding their own perspective on ethical behavior. Modern multinational corporations grapple with significant decisions that often necessitate trade-offs: prioritizing higher profits or being a responsible corporate citizen (Rudolf 1995). Throughout history, there have been numerous cases in which corporations have chosen the former and inadvertently harmed innocent individuals. Frequently, MNCs are discovered neglecting their social responsibilities.

The question still resonates in the council chambers of multinational corporations (MNCs) across the world: "If it is legal, does that make it ethical?'' One definition of ethics could be the exploration of what contributes to human well-being and the behavior necessary to promote it (Rudolf 1995). Some theorists argue that ethical principles only apply to individuals, not to corporations themselves. They argue that it is nonsensical to hold businesses "responsible'' since businesses are more like machines than people. Critics of the corporate social responsibility movement counter that a company's primary duty is to its shareholders, not society as a whole. They suggest that companies should pay dividends to shareholders and allow them to decide what to do with the money, including donating it to charitable causes. Others argue that corporations behave like individuals, having goals and actions that can be either moral or immoral, just as an individual's actions can be.

Both extremes of the argument may be flawed. It is true that corporate actions rely on individual human beings who should be accountable for their behavior. However, corporations also establish policies and cultures to guide individuals, and thus should

also take responsibility for the outcomes of these corporate elements. Some may argue that when in Rome, one should do as the Romans do. In certain cases, this may be acceptable as long as the ethical and social norms of the foreign country are equal to or slightly higher than those of the company's home country. However, if they fall below these standards, the company must assume some level of responsibility.

Opening mills and concerns in foreign markets, especially in developing countries, has been beneficial for a company's profitability and presence in those markets. Nevertheless, it is crucial for the well-being of all parties involved that corporations recognize their utmost societal and ethical responsibility in their new environment and as representatives of their home country.

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