Ethical relativism means that doing business in a country by following strictly to its culture or ethics for example if bribery is a culture or ethics of doing business in a specific host country then in order to survive the multinational companies have to follow the local culture or ethics for example if a company wants to do business in a Muslim entry then the business they do must be hall. For our purposes, companies must address issues in at least two of these categories to be considered to be engaging in CSR. There should be a vast opening for fair employee opportunities in training and promotion, timely payment of salaries and a decent working environment. Price discrimination, price skimming, and price fixation. The concept of ethics to business decisions encompasses all aspects of business management and operations in a business organisation. Integrity means to be of sound moral principle, to have1732 Dinah Payne et al.the characteristics of honesty, sincerity, and candor. In a business organisation, investors should always get their moneys on time. As an organisation, Wal-Mart needs to avoid certain unlawful situations such as making employees free to talk to union representatives. If you continue browsing the site, you agree to the use of cookies on this website. Ethical Values and Business Ethics in Multinational Companies in India in Context of Globalization: An Empirical Study Hardeep Singh1+ and Bikram Pal Singh 2 1 Ferozepur College of Engineering and Technology (FCET), Ferozepur (Punjab) INDIA 2 Global Institutes, Amritsar (Punjab) INDIA Abstract. According to PBS, “Wal-Mart employs more people than any other company in the United States outside of the Federal government, yet the majority of its employees with children live below the poverty line.”(, They have also added that the company claims to sell goods manufactured in the U.S only but their products are goods and serviced produced abroad or in overseas and at debated workshops. Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. Many may suggest that pay and work conditions need to be similar across nations, but no one actually cares about the quantum of this divergence. The Multinational organisation that would be discussed in the course of this essay would be Wal-Mart. However, Wal-Mart failed to recognise prospective problems and as a result they are probably going to pay for it. Labour Union Opposition: Wal-Mart is an organisation without unions. Wal-Mart disallows employees from discussing with union representatives. The unprecedented globalisation that has taken place over the past century has spurred a massive increase in FDI via The issues are broadly understood to be within the social, environmental, economic (Elkington, 1997), and ethical categories. Downloadable! Is the prisoner's dilemma relevant to business ethics… MNCs should also give licenses, in terms of realistic terms and conditions, for using properties and rights. As part of our 25th Birthday celebrations Ethical Consumer asked its readers to vote for who they thought was the least ethical company over the last 25 years.. Nestlé 'won' with 15% of the vote, finishing just above Monsanto (14%) and the UK's number one tax avoider Amazon (12%). Finally, the relationship between MNCs and people rotates around consumer guidance, human rights issues and employment practices. There has been a serious allegation of Wal-Mart discriminating against women within its organisation. Every company has got problems and the companies that thrive are usually organisations that detect ethical problems early enough and create a solution for them. There was a complaint filed from United Food and Commercial Workers Union filed a complaint with the National Labour Relations Board against Wal-Mart. Raiborn and Payne developed a model code of ethics that, at the time, was not specifically envisioned as being applicable for nondomestic as well as domestic operations. It should be: clear and understandable to the average person; comprehensive in indicating the extent of its provisions; and enforceable by specifying the ramifications of improper actions (Raiborn and Payne, 1990). . Child and/or Forced Labor "MNCs may directly employ children (legally or illegally) and theyare usually employed in labor-intensive low-skill jobs. Recognising the relationship between the economic, cultural and political aspects facing multinationals is, however a firm ground from which to identify the necessity for international codes for organisations carrying out international business. Ability to mislead and confuse a sister firm or company or even the general public. As this help the safeguard of money movements and interests accrued over time are expected on time. On the contrary, the positive ethical practices of an organisation are highly important (Etzioni, 1988 Kotter and Heskett, 1992) this would normally boost the image of such an organisation as they tend to have an edge over others in a very competitive market. “In June 2001 a group of six current and former female Wal-Mart employees filed a sex discrimination lawsuit (seeking to represent up to 500,000 current and former Wal-Mart workers) against the company.”(Hoover’s Handbook, pg.907). For example, Social ethics, political ethics. Getz suggests that control of the host is the basic right that must be recognized and respected by the MNC. Company Registration No: 4964706. 1) Some Ethical Issues Confronting MNCs Child and/or Forced Labor Safety and Security Concerns Duration of Work Week 2. Human rights responsibilities require that MNCs not discriminate on the basis of religion, gender or race and that these organisations respect the cultural and social objectives, traditions and values of the countries in which they function (Getz, 1990), The relationship between MNCs and the public has two major categories: technology transfer and environmental protection issues (Getz, 1990). Wal-Mart has accused a different body for this alleged allegation as it maintains the contractors who were given the job to hire employees on behalf of the company did not do their home work properly before employing. It is wise to handle all issues in an ethical manner. A company operating in the international business arena is subject to a multiplicity of ethics codes. Ethics is said to be “that branch of philosophy dealing with values relating to human conduct, with respect to the rightness and wrongness of certain actions and to the goodness and badness of the motives and ends of such actions”. Multinational companies are sometimes faced with issues that tend to present challenge to them between balancing their interest in profit-making and expectations and interests … There are procedural and substantive aspects of building such a code. (, Wal-Mart says they are under a lot of pressure to change the business chain and the way the organisation is ran from top to bottom. It is Wal-Mart’s moral responsibility to provide employee’s with health care that they could afford so that they do not wait for the state to rectify their problems for them. In response to such concerns, MNCs have increasingly taken steps aimed at demonstrating their social responsibility as business organisations. 1) Some Ethical Issues Confronting MNCs Child and/or Forced Labor Safety and Security ConcernsDuration of Work Week. Advantage and Disadvantage of MNE Criticism of MNE. To export a reference to this article please select a referencing stye below: If you are the original writer of this essay and no longer wish to have your work published on then please: Our academic writing and marking services can help you! Additionally, codes should be positive in tone. History and Evolution of MNE MNE Structure. However, by acknowledging that the lowest end of the continuum is adherence to the letter of the law, MNCs would agree to accept a defined minimal ethical stance. If you need assistance with writing your essay, our professional essay writing service is here to help! 1-888-302-2840 1-888-422-8036 Globalization, Multinational Corporations, and Corruption. “The complaint, filed with the National Labour Relations Board, alleges that Wal-Mart violated federal labour law by “bribing” employees to report on co-workers who favoured a union.” ( There should be more job opportunities for women to grow and climb up the ladder as there are in many other organisations. Vines and Napier (1992) define culture as “. Multinational Corporations (MNCs), have raised questions about the role of business in global governance. In the area of environmental protection, MNCs should collaborate with the host country in producing and increasing national and international environmental security standards, as well as notifying the host of any possible environmental impact of the goods manufactured, services executed, and/or processes made use of. Corporations must not seek to selfishly influence the policy making process at whatever cost as long as such policies are aimed at the good of all people and the environment in general. While the breadth or depth of these values could differ from society to society, the core values themselves are still present. On the contrary, the positive ethical practices of an organisation are highly important (Etzioni, 1988 Kotter and Heskett, 1992) this would normally boost the image of such an organisation as they tend to have an edge over others in a very competitive market. Wal-Mart, a gigantic company retain a lot of customers, both home and away are widely known for their enormous variety of goods and services at low prices. Industries that exhibit a huge pollution should comply with the governments’ rules and regulations regarding water, air and noise pollution. This poses significant ethical dilemmas over MNCs. Companies may buy products from factories employing children.Eg. Arise when a manager makes decisions consistent with differing national environments Political systems Legal systems Economic development levels Culture What is ethical and normal in one environment may not be so in another February 20, 2016. Lastly, the basic standard demands adherence only to the letter of the law and, thus, reflects minimally acceptable behavior. It is corrupt for Wal-Mart to ban employees to talk to union representatives given that according to the National Labour Relations Act, employers should not be allowed to put off employees from creating a union for it is their right and should be enforced if need be. If the country is a developing country, it could be helpful if some research is carried out by the host country and it would save a lot of costs as well if local personnel are and local resources to every reasonable extent. Apart from protecting the image of the company, it is a multinational organisation and so should live up to standard and expectation. Looking for a flexible role? As suggested by the Theory Y management style, treat the actors as though they naturally would do the right thing. 12-hour workdays, minimal pay, and indifference in protecting workers from toxic chemicals are common in some developing nations. Multinational corporations (MNCs) have provoked considerable debate about the issues of "efficiency" and "social justice." Ethical Issues in MNCs. Ethical relativism means that doing business in a country by following strictly to its culture or ethics for example if bribery is a culture or ethics of doing business in a specific host country then in order to survive the multinational companies have to follow the local culture or ethics for example if a company wants to do business in a muslim country then the business they do must be halal. , “Wal-Mart’s ultimate defence is that it offers lower prices and somehow that justifies all sins.” ( .Wal-Mart also has got an expensive health insurance care and again Wal-Mart employees cannot manage to pay for its health insurance. Free resources to assist you with your university studies! There is always the question of what the ultimate structure of an organisation would be, this is vital as it would help aid the smooth running in the production of goods and services. What are arguments in favor of doing so? Our academic experts are ready and waiting to assist with any writing project you may have. There is always a tendency for ethical issues to arise in a global market and multinational organisations are no exceptions. Wal-Mart has been accused of being very selfish as the organisation has claimed that they were worried that they would have more than enough product for customers in the future but it was discovered that it was for their own bias interest as they claimed it was something they did as company’s obligation. Utility indicates the quality of being useful and, philosophically, providing the greatest good for the greatest number (or the least harm for the greatest number) (Raiborn and Payne, 1990). As Wal-Mart faces unethical business practices, they have also been said to have encouraged goods produced outside the U.S. ( ethics in organizations, and conceptual aspects addressed by some field specialists, at the end of the paper we presented a study conducted to identify specific issues of ethics in multinational organizations. *You can also browse our support articles here >. Information personal to customers should be kept sacred and not be used for personal gain. These standards reflect Donaldson’s languages of avoidance of human harm, rights/duties, and the social contract in that the standards encompass not only minimal responsibilities owed by MNCs and compliance to legal constraints, but also mutual agreement between the MNC and societal concerns. Wal-Mart has been accused of using illegal immigrants to work in the United States. Multinational organisations must realize that, the culture of an organisation could have an effect on the behaviour of an employee within an organisation. So, men are holding more management positions than women. ( Ethical issues may be related to employment practices in many nations. George Ritzer Host country may get heavily depend on MNCs for its economic growth. They claim that ethics should be based on character or behaviour. A lot of things that could limit profit could be worked around if things like environmental standards, production costs, taxes, safety at the work place, production costs (Desjardins and McCall, 1990). MNCS should avoid interfering with improper political activities, intergovernmental issues nor pay bribes to public servants. By 1995 October, approximately 45 billion dollars of international business was eliminated according to congress (Greenberger, 1995). Ethics is one of those terms when mentions, a lot of things come to mind so as a result, Ethics could be define in various ways. Looks like you’ve clipped this slide to already. There has been an example of women who has been deprived of promotion and training opportunities that have been put forward to men. Employees rendering over time services to the company have not enjoyed the fruit of their labour as they were not paid for their overtime services rendered. Encouraging ethical behaviour in multinational corporations. ETHICAL ISSUES IN MULTINATIONAL CORPORATIONS Introduction A multinational is defined as an enterprise operating in several countries but managed from its home country. VAT Registration No: 842417633. Do not automatically assume the worst behavior and insult the actors by addressing them only with a sense of “don’t do this; don’t do that.” Lastly, as indicated by Ferrell and Fraedrich (1994), the code should help the MNC achieve its objectives while benefitting the countries in which production facilities are located or products/services are sold. They are trying seriously to prove that they are a green organisation as when strawberries are purchased from Wal-Mart, they are despatched in plastic packages. One Ethical Issues Associated With Multinational Corporations and other kinds of academic papers in our essays database at Many Essays. However, upon review of the other model codes, the guidelines are suitable for operating in the international arena. Acting in accordance with ethical and cultural values is crucial for a multinational company to win clients’ support and business and to achieve a competitive advantage in a particular market. Study for free with our range of university lectures! How can Multinationals perform in an ethical and socially responsible way? Ethics as a philosophy is defined as the discipline concerned with what is morally good and bad, right and wrong. Disclaimer: This work has been submitted by a university student. The United States has made it unlawful to bribe high level foreign officials to acquire or retain businesses in overseas. For Wal-Mart to survive, they would have to prove that they care about their employees by treating every employee ethically right, this would help control and probably stop the criticism and encourage even more customers globally. It takes a long time for company to build a reputable name, so care should be taken to abide by cooperate social responsibility. Wal-Mart intends to keep its prices low as it hopes to sell carbon dioxide credits for millions of dollars in a bid to save energy to companies other companies that can’t. What special ethical issues face multinational corporations? ( Authors from different parts of the world have also defined ethics in a lot of different ways. Also the company need to manage its employees in a rather decent way in other to avoid law suits from them as well. Are they demonstrating a sense of social responsibility? Corruption scandals that sometimes make headline news in Western media can often be worse in developing countries. Wal-Mart is an organisation that should take sole responsibility of their ethical status. Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of The open door policy actually helps employees experiencing problems within the organisation to go beyond management. Meanwhile they need to develop and enforce their own codes of ethics specifically directed at the issues related to a multicultural, multinational business environment. The boost of world trade in the midst of global partners and the rise of foreign direct investment mandate that everyone works in the direction of a better understanding and a regular ground of precepts upon which to base choices can help promote and advance a number of businesses and social contacts worldwide. See our User Agreement and Privacy Policy. Government Rules and regulations in regards to duties, taxes restrictive and monopolistic trade practices and unlawful activities like bribing and corruption should be adhered to. . Ethical Dilemmas for Multinational Enterprise: A Philosophical Overview Part One: Review Question #1 Multinational Corporations have always been and are currently now under harsh criticism. They have noticed that by selling trash that has been recycled, millions could be saved, costs wise like transportation costs etc ( Wal-Mart is said to be fully promoting the group of companies that want to trade carbon dioxide credits. Given these fundamental standards, a code of ethics should address the following five major issues, consolidated from the various international codes previously discussed organizational relations (including competition, strategic alliances, and local sourcing), economic relations (including financing, taxation, transfer prices, local reinvestment, equity participation, and fiscal policies), employee relations (including compensation, safety, human rights, non-discrimination, collective bargaining, whistleblowing, training, and sexual harassment), customer relations (including pricing, quality, and advertising), industrial relations (including technology transfer, research and development, infrastructure development, an organizational stability/longevity), and political relations (including legal compliance, bribery and other corrupt activities, subsidies, tax incentives, environmental protection, and political involvement). Cite this chapter as: Dhanarajan S. (2002) Multinational Companies and Ethical Issues. Discriminating between gender, disabilities age and sex. Copyright © 2003 - 2020 - UKEssays is a trading name of All Answers Ltd, a company registered in England and Wales. The ethical responsibility of a stakeholder is to make known his or her preferences to the companies he or she purchases from or relies on. Laws governing certain businesses within an organisation in an individual country could have its variances and inconsistencies, nevertheless when other counties are internationally concerned, the intensity of inconsistency is even more diverse. In fact, there are over 70 percent of women working at Wal-Mart, but only a small amount of those women are managers. Multinational organisations undergo a dynamic and complex global market, where right and wrong could be interpreted as widely different (Donaldson 1985, 1989). MNE in India. If you continue browsing the site, you agree to the use of cookies on this website. Wal- Mart failed to offer equal employment opportunity to women, even though there are more than seventy percent of women working at Wal-Mart, only a few of these women are mangers, as a result the men are on the frontline within the company. Brooks (1989) showed that a Canadian corporation might be affected by a total of twelve codes of ethics, all of which exist within the legal environment. The model code envisioned four specified standards (derived from a set of standards developed in accounting) of behavior in four areas of values. … Global corporations must recognize the need for a uniform code of business ethics for protecting their citizens, their national interests, and the global environment. The question is how have they figured this? In addition, Wal-Mart likes to portray itself as a seller of U.S. manufactured goods but in reality the company has products on its shelves made in foreign countries and at questionable workshops. 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