The Obligations of Multinational Corporations Conducting Business - Coursework Example

The Obligations of Multinational Corporations Conducting Business in Global Context Introduction As a result of globalization, most corporations in developed countries are spreading their business to other parts of the world. The potential markets in most developing countries mainly influence this. However, while MNCs are moving to the developing world, it is important to recognize that these countries subscribe to different standards of conducting business. While the MNCs would like to conduct their business in the host country by adapting the global business standards, the home countries have a preference for standards established domestically. This often brings conflict when MNCs establish their businesses in new regions. The standards that MNCs use when conducting business in global perspective is mostly influenced by the stakeholder interests. Stakeholders in this respect, involves the government hosting the MNCs, employees and to extent the community. The government hosting MNCs has an important role in establish the rules of engagement for MNCs operating in the host countries. This in some instances might be in favor of the MNCs or for the benefit of both entities in general. In essence, this paper examines the obligations of multinational corporations doing business in a global context. The trend of MNCs in global context Concerning conducting business in a global context, a key consideration in this sense entails establishment of ethical standards for conducting business. This in essence needs to be universal to eliminate chances of unfair competition between MNCs. However, since the global business environment is competitive, most MNCs engage in malpractices to generate more revenue. Such malpractices involve bribing the host country in order to obtain favorable business conditions at the expense of homegrown businesses. The employment practices used by most MNCs in developing countries do not reflect on the universal labor standards. This is because, MNCs engage in bribing rogue governments. The result in this case, is the poor working conditions for local workers and exploitation through child labor. Many multinational corporations have made their money by exploiting children; an example in this sense includes the use of child labor in the cocoa farms of Ivory Coast. In this example, a lack of universal ethical standards to guide global business leads to MNCs using illegal practices to generate more profits. On another note, most MNCs are moving to developing countries because of access to raw materials and cheap labor. This allows the MNCs to cut on production costs and to generate more profits. However, ethical issues arise in the sense that while MNCs shift to developing economies, the benefits often tilts towards MNCs. In this sense, conditions needs to be created where both the MNCs and the host country benefIts. However, this is not often the case since most MNCs often leave their host countries depleted of resources. This is evident through government contracts with oil corporations in developing countries. The share of these resources is often higher for the MNCs operating in the host country. The domestic business ethics does not synchronize with the standards set for global business. As such, it is important for the business world to establish a universal business ethics that guides the engagement between MNCs and host countries. This will help in streamlining the level playing ground for all MNCs with interest in conducting business in a foreign country. In the world today, global capitalism is the order of the day where MNCs use any means on the table to generate more revenues. This does not take into consideration the impact of MNCs malpractices in host countries. While home countries often ensure that these MNCs follow the legal standards for conducting business, such standards are often disregard while operating abroad where these MNCs engage in paying a lower wage and often tend to disrupt local labor markets by hiring expatriates. The developing countries are poor and MNCs takes advantage of the situation to pay workers low wages. In this regard, the existence of universal ethical and labor standards would ensure that MNCs pay living wage in the similar manner they pay in home country. However, there is need of a balance when raising living wage for workers in MNCs. This is because higher wages may require skilled labor and this means, most workers in developing countries will lack employment because of a high illiteracy rate (Maitland, 1997). On another note, multinational corporations in the present times are also outsourcing their services to other contractors. This is more common among MNCs from western countries who are outsourcing contracts to companies in Asia. One area that outsourcing is common is the industry of footwear and apparels. However, critics argue that these contracted companies often exploit laborers. The idea in this sense for MNCs involves accessing cheap labor at the expense of ignorant workers. From global context, these sweatshops used by MNCs have continued to exploit workers without proper pay poor working conditions and other violations of human rights. This situation because of being rampant in developing countries, require the establishment of universal codes that protects laborers from exploitation by companies operating on behalf of MNCs (Maitland, 1997). As explained by Donaldson (1996), when people leave home to operate businesses abroad, they tend to lose their moral values. This is because they move to countries were they are unfamiliar laws or business ethics that guide the conducts of business operatives. Questions that often arise in global business ventures entails whether it is appropriate for MNCs to invest where violations of human rights is rampant. Indeed, there are host countries who still use employment practices that are discriminatory. The MNCs often face situations where they are welcomed in a host nation where there are no proper regulations concerning health and safety of employees; however, MNCs keen on making a profit often forget to consider health and safety of workers in the host country. These are some of the issues that often prevail where there is lack of universal regulations guiding trade agreements between the host country and MNCs. Business practices in global context, still needs improvement compared to domestic business settings where regulations for conducting businesses are clear. However, MNCs should not assume that the standards working in home country also apply to the host country. This is a problem that should be solved through a constructive engagement between the host country and the MNCs to come up with ethical standards agreeable to both parties, and reflects on the universal principles guiding ethics related to global business (Donaldson, 1996). The society is defined by different cultures and as such, cultural ethics tend to differ, this leads to a problem in defining unethical practices in the sphere of global business. It is possible to find that in one corner of the world acceptance of bribery among public officials to give favors to foreign investors is something that is a normal practice. This leads to the development of an attitude of doing things according to how different cultures dictate the situation. For example, a company from U.S investing in Indonesia will conform by bribing officials because that is the established trend in Indonesian society. Donaldson (1996) looks at these cultural trends by giving an example of western companies that looked for a cheap location to use as a waste dumping site. They sought help from most African countries, and eventually Nigeria accepted to provide a site to be used to dump highly toxic substances. This is because of a highly entrenched culture of corruption among the public officials. In this sense, ethical issues arise in terms of lack of a universal standard to safeguard on health and safety of workers. In the case of dumping toxic waste in a foreign country, it is the health and safety of workers and the community that is affected. While most governments across the globe disagree with such practices, it is difficult to check on the malpractices carried out by MNCs. In this sense, most countries fall prey of MNC’s malpractices because of lacking proper regulations to check on unscrupulous companies and investors. For example, a contract for the removal of asbestos from an ocean liner is priced at $100million, but since there is another company offering to remove the same at a very low price, standards are ignored in order to cut on costs. However, this does not take into consideration the safety measures concerning the workers who are to remove the asbestos. In this regard, it is important for countries to establish proper regulations to protect health and safety of workers from unscrupulous companies taking advantage of ignorant government structures to make substantial profits. Fundamental values need to be universal across cultures and it is important for MNCs to hold these values (Donaldson, 1996). The obligations of multinational corporations operating in global context As a result of MNCS shifting their businesses to other parts of the world, it is important that they consider certain responsibilities critical in conducting business of a global nature. Such responsibility includes economic, ethical considerations, following legal procedure and becoming corporate citizens. Economic responsibility MNCs often expand their business ventures abroad with the main aim of generating sales revenue; however, most firms employ illegal measures to maximize their profits. In this sense, it is important for MNCs investing abroad to consider a venture where it is a win-win situation for the host country and the MNC. The government of the host country inviting MNCs should enhance this. Their purpose, involves creating a business environment where both the foreign companies and the local community can gain. For example, while the foreign companies invest and make profits from the host country, they should in turn, create employment opportunity for the local community. This is important in improving the host country’s economy. The main goal for most host countries inviting foreign investors is guided by the need to improve economic development of a country. To achieve this, the governments of host countries need to put in place regulations that guide foreign investment in order to seal any loopholes for exploitation by unscrupulous foreign investors. Ethical responsibility Ethical responsibility denotes doing what is expected according to the established standards. Some companies normally deviate from the established standards for their own personal gains. Consequently, abiding by the ethical rules of business require the executives of business firms to establish ethical standards. This ensures that employees are protected from exploitation and are provided with better working conditions. Companies with proper ethical conducts help to ensure that the business environment embrace moral standards. As such, the MNCs should establish a universal code to improve the ethical standards of businesses by MNCs abroad. Legal responsibility It is important that MNCs should obey the laws of the host country that they operate. It would be improper for MNCs to circumvent the laws of the host country in their favor. Business from a global perspective appears competitive and most MNCs are tempted to engage in illegal measures to gain advantage over competitors. In this sense, organisations such as WTO should liaise with governments to establish laws that check on international trade. Philanthropic responsibility It is the responsibility of MNCs to give back to the society where they invest and make their profits. As a good practices, MNCs should act as corporate citizens in the countries they are hosted. This involves initiating community projects aimed at improving the lives of the local community. In essence, global corporate social responsibility is a trend that forms part of MNCs operating in different parts of the world. This ensures that multinational companies engage in noble practices and building on their reputation by involving the community in their operations. Conclusion In a globalized business environment, it is important for corporations to establish universal regulations to check on transnational business ventures. Having different rules tends to create confusion and sometimes lead to exploitation of workers. In this sense, a universal code of conduct will ensure that MNCs embrace moral standards while conducting businesses abroad. References Donaldson, T. (1996). Values in Tension: Ethics Away from Home. Watertown, MA: Harvard Business Publishing. Maitland, I. (1997). “The Great Non-Debate Over International Sweatshops.” British Academy of Management Annual Conference Proceedings, pp. 240-265. Read More