Multinational corporations have existed since the beginning of overseas trade; thus it remained a part of the business scene throughout history. During the 17th and 18th centuries with the creation of large, monopolistic concerns, multinationals were viewed as agent of civilization and played a vital role in the commercial and industrial development of Asia, South America and
It retained its favorable image as agents of improved global relations through commercial ties by the end of the 19th century since advances in communications closely linked the world markets. However, the existence of close international trading relations did not prevent the occurrence of two world wars in the first half of twentieth century. But, after the period of conflict, an even more closely bound world economy emerged. (Eldrigde n.d.)
Multinational corporations have grown in power and visibility in recent years. Both governments and the consumers worldwide have come to viewed it more ambivalently. Indeed, multinationals today are viewed with more suspicion given its perceived lack of concern for the economic well-being of particular geographic regions and the public impression that multinationals are gaining power in relation to international trade federations and organizations, national government agencies and local, national and international labor organizations. However, as barriers to international trade continue to be removed; multinational corporations continue to expand its power and influence despite such concerns. (Eldrigde n.d.)
With this regard, business enterprise particularly multinational corporations received a very different review from the ethicists of this era (Cotton, 1998). In the 80s, there was very little concern for ethics in the world of business. Because of the many scandals that were beginning to erupt within the world of business and finance, an awakening to the need for ethics is considered. The problem is that in the 90s, the concern for ethics has not returned us to any absolute standard of ethics, but rather to a search for relative balance between ethics and the bottom line or personal values (Cotton, 1998).
"Ethics is the study of moral obligation involving the distinction between right and wrong" (Kreitner, 1998: 142). Business ethics tightens the definition to only productive organizations. However, business ethics is still a complex issue. Highly publicized incidents of corporate misbehavior in recent years have led to extensive discouragement about business ethics (Kreitner, 1998). In 1996 alone,
Business and Ethics
Successful international managers today claim their primary purpose is not to maximize profits (Suderman, 1999). Without virtues such as trust, cooperation, honesty and fairness upon which society and business firms rest, long-term success and growth of the firm is impossible; increases in productivity and product quality depend upon them (Suderman, 1999). A corporation's ethical reputation is very important to its workers. In a survey by Walker Research of
A business firm not only in international setting needs to ask itself three questions before proceeding with any activity: is the action profitable, is it legal, and is it ethical? If an action is not profitable, it will not be undertaken. If it would be profitable, then the decision-makers need to evaluate whether it also would be legal and ethical. On the other hand, Suderman (1999) believed that the need for business to act more socially responsible is increasing. Technology, international markets, and new social problems have magnified the awareness of what the function of business should be. Half a century ago, the mission was clear - profits. In the modern world, society has placed a great emphasis on social issues and because business touches every aspect of society, strict demands are placed on it. The controversy between business and social issues has long been debated, but is starting to meet level ground. Out of this understanding come some guidelines for every institution to ideally follow.
The first proposition is that "social responsibility arises from social power" (Davis, 1990: 166). This suggests that if a business has power, it should take responsibility for its actions. Business is anchored to an iron law of responsibility which states "in the long run, those who do not use power in a way that society considers responsible will tend to lose it" (Kreitner, 1998: 137). The business should take into account the effect its acts have on others and promote the quality of life as a whole (Suderman, 1999).
The second guideline is that "business shall operate as a two-way open system with open receipt of inputs from society and open disclosure of its operations to the public" (Davis, 1990: 166). This guideline indicates that business should listen to social needs and wants (Suderman, 1999). The communication between business and society demands improvement. It is claimed that business only reveals the good aspects, but rarely the bad aspects in its public relations. Business should undergo a social audit in much of the same way as it undergoes an accounting audit to accomplish this objective (Davis, 1990: 167).
The third proposition states that "social costs including the benefits of an activity, service and products shall be systematically computed and measured in order to choose whether to go on with it" (Davis, 1990: 167); which means that business should consider the long-term effects of its activities on society as well as short-term effects. A product may be considered beneficial today, but the long-term use of the product may be harmful to the environment (Suderman, 1999).
The fourth guideline is that the "social costs of each activity, product, or service shall be priced into it so that the consumer pays for the effects of his consumption" (Davis, 1960: 168). The consumer will pay for all costs involved in goods and services, including social costs. Usually, "society or someone else has had to bear these social costs while the consumer benefited from the reduced product price" (Davis, 1990: 168). The goal behind this proposition is the social costs are caused by the consumption of a good or service, so the consumer should be responsible for as much of it as possible. If the higher price deters consumers from buying a product or service, it is still beneficial to society because the social costs of consumption are averted.
The final proposition is that "beyond social costs, business institutions as citizens have responsibilities for social involvement in areas of their competence where major social needs exist" (
According to Kreitner (1998), there are several ways to encourage ethical conduct within the organization, as simply telling managers and other employees to be good will not work. Ethics training, ethical advocates, ethics codes, and whistle blowing are examples of how to encourage ethical conduct. Some managers have been called amoral. Kreitner (1998) states that amoral managers are neither moral nor immoral, but indifferent to the ethical implications of their actions. Ethics training may help this problem. Others feel that ethics training is just a façade. They argue that ethics are thrown out of the window in the battle of competition. Kreitner (1998) adds that hard evidence that ethics training actually improves behavior is lacking. Still yet, well-designed and administered ethics training programs can make an effective contribution (Suderman, 1999).
Adopting a code of ethics is another way to combat unethical behavior (Suderman, 1999). Kreitner (1998) states that codes of ethics is a step in the right direction, but not a cure all. In order for the code of ethics to be effective, it must refer to particular incidents and have the support of top management.
Today most professional organizations have a code of ethics (Cotton, 1998). The problem is that their codes are often ignored or not made known. Making a profit is a necessary goal, but there are things more important than surviving in this world. In fact, there are a lot of businesses that should shut down, for their only legitimate goal is that they do make a profit.
The media is soaked with reports of defective business ethics: manipulations, frauds, thefts, business spying, bribery, kickbacks, conspiracy, thefts, tax evasion, stealing, and unfair contest type (Cotton, 1998). Covey (1989) addresses the issue pertaining to the principle-centered individuals; there are some principles that are more significant than the success or even the existence of a certain business. Those who let their business fall rather than set aside their ethical standards can go back to do business again sometime, since they were able to keep their veracity and their name (Cotton, 1998). Those who give up in to the strains to keep the business active may be wedged and end up behind their reputation and thus remove themselves of a stand from which to reconstruct their businesses (Cotton, 1998).
As part of the ethical practices of International Businesses, the issue of globalization is one of their focuses since it offers great competition. Businesses are the engines of globalization and the key actors in international business. Business practices play a vital role in globalization through worldwide investments, global business transactions and exchange of skills and knowledge across national boundaries.
Since businesses conduct transactions in several countries through its headquarters and subsidiaries, its operation faces complex issues. Cross cultures, government laws, human resource management policies, politics are just some of the entities that businesses have to deal with in its operation and sustainability. According to Kanugo (2006) government policy and the integration of cross cultures and values through the impact of global communication are two of the more specific drivers of globalization. These two factors also have their implications in many facets of business practices including its human resource management activities.
When businesses internationalize, cross cultural concerns, such as staffing, executive development, compensation, and labor relations require globally savvy professionals to facilitate international business success. Kanugo identifies some internationalization concerns faced by a business which include how to merge the cross cultures, languages, and general work expectations of employees from different countries, and how to respond to employees who bring to their new work situations sometimes very different attitudes toward supervision and have very different expectations related to the practice of management. The different communication and business practice styles, motivation philosophies, and organizational structures and frequent lack of understanding of the cross-country cultures, markets, employment laws and practices, and language, by the parent company, can cause difficulty for the local human resource manager.
The article of Kanugo (2006) suggests that many people managing businesses lack knowledge or sensitivity to cross cultural differences which often results in mistakes during interactions on the job and privately. The cross cultural issue makes the interaction with people from other cultures a challenge for those working abroad. It is therefore important to learn about other cultures or at least understand and pay attention to the fact that there exist different cultures. Learning languages is also very helpful. Kanugo (2006) suggests that businesses need to learn to cope internationally with issues like selecting and preparing people for working and managing in other countries, negotiating and conducting business in cross cultural settings, and capitalizing on and absorbing that learning throughout their international operations. At the core of success in these endeavors is the need for cross cultural awareness and understanding of effects of cross culture on day-to-day business operations.
Inescapable as it may seem, Kanugo (2006) believes that dilemmas on business practices brought about by cross cultures are unavoidable and should be expected at work especially in business firms owned or controlled by individuals from a different cultural orientation especially when they employ the local citizens in their international operations. Dealing properly with situations such as instances of principled power struggle between supervisors and subordinates from different cultural orientations, will be of much help in running a business firm properly and successfully. Addressing conflicts and working out understanding by compromising for the good of all will pave the way to maintain smooth working relationships among the employees, staff, supervisors and subordinates.
Issues on Business Ethics
In a globalized economy let say in international setting where tough competitions occur among businesses, multinational companies are exploiting the benefits of social responsibility. These social activities: include charitable contributions, discounts to senior citizens, expenditures on employee alcoholism and substance abuse treatment, responses to customer complaints, product warranties, processes for exchanging purchases, community service in volunteer or governance capacities, employee education, child care or flexible hours for employees with children, advertising or promoting community events, sponsoring sports teams, recycling, special services to the handicapped, and so forth (Smith, Thompson & Kenner, 1991).
Multinational corporations view social responsibility as a corporate investment that will result in a long-run corporate profit and not a corporate expense. Businesses supporting social responsibility activities claim that it is in the best long-run interest of the business to become intimately involved in and to promote and improve the communities in which it does its business. Moreover, it can and should improve the corporate and local image of the company, and it is in the stockholders best interest. Further, companies believe that by making communities a better place to live in, it can entice superior and happier workers to the company who in turn will put out better products and increase profits.
However, it is important to point out that the primary reason why businesses turn into socially responsible activities is to maximize their profits; public interests comes in second.
Again, in maximizing their profits, companies are increasing their employee satisfaction by providing rewards and incentives and implementing employee-friendly training. Companies consider the need to address workers' increasingly demand for change, choice, flexibility, and variety in their work. According to Seidler (1996), in a business organization, the value of the individual is developed as human capital (Seidler, 1996).
Making a situation in the office that results in employees feeling improved about themselves when they are in it, than when they are not, results in similar "love" of their work. People do more of what they enjoy and less of what they don't enjoy. The results also show that people who enjoy working are more productive.
Companies build an environment where there is increased employee satisfaction. As a result, job satisfaction is high, thus there is an increase in employees' productivity. Further this leads to rewards for an impressive performance. Consequently, the employees' trust and loyalty with the company also increases. Companies who value their employees gain maximum profit.
In today's business world, the value and importance of customers is not something that should be set aside by companies. Marketing plans and strategies would be incomplete without paying much consideration to the customers. Customers will always be a part of the agenda in any marketing plan of any company. Because of the implications for profitability and growth, customer retention is potentially one of the most powerful weapons that companies can employ in their fight to gain a strategic advantage and survive in today's ever increasing competitive environment (Lindenmann, 1999).
Another ethical issue on business ethics is the behavior towards a competitor. In order to collect secret information from their competitors, companies are practicing industrial espionage. Industrial espionage of all varieties is an elusive and secretive field that must be given careful attention by industrial managers and corporate executives worldwide (Madsen, 2003). Meyer (1987) contends that throughout the world of commerce and industry, intelligence is on its way to becoming a key management tool for the corporate executive. Meyer (1987) suggests that the emergence of business intelligence systems is the most striking and potentially significant business trend of our time. Here, intelligence becomes the means by which companies chart their future course (Joyal, 1996). Because of the intensifying economic the importance of acquiring information concerning economic plans and intentions becomes more acute (Joyal, 1996). According to Michalos (1995), the best argument for business ethics include:
1. In order for business or a market economy to exist, there must be some sort of community of potential buyers and sellers.
2. In order for a community of potential buyers and sellers to exist, there must be morality.
3. Anyone with an interest in preserving business or a market economy should help maintain those conditions, like morality, that are necessary for its preservation.
4. Business people have such an interest.
The worst argument is said to be that it is profitable to conduct business in accordance with principles of morality. This is bad according to Michalos' (1995) because it dangerously combines "one's interest in sustaining a market economy" and "one's interest in increasing one's own profits," so that if profits in fact fall while one is trying to be moral, one may be tempted to abandon morality.
For multinational corporations, the problems that they need to evaluate in accordance to business ethics are social responsibility, employee developments, customers and competitors. Actually, multinational corporations only needs to follow the certain culture and practices in the place of their business operation. They only need to follow the governing laws and culture in a certain country.
From the previous discussion, it seems that business and ethics is indeed impossible to mix. Although international businesses respond to the needs of the society, its end is to gain profit. Public good is only secondary. Before proceeding with any activity, a business firm usually considers three questions: is the action profitable, is it legal, and is it ethical? If an action is not profitable, it will not be undertaken. If it would be profitable, then the decision-makers need to evaluate whether it also would be legal and ethical. Thus, multinational corporations, considers first the profitability of a certain business before evaluating the governing ethics. However, for multinational corporations to become successful, it is still vital for them to consider the business ethics.
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