Low-Cost Labour Outsourcing - Research Proposal Example

Business and Professional Ethics Essay Contents Contents 2 Introduction 3 Critical Evaluative Discussion 3 Challenges to Friedman’s argument posed bylow-cost labour outsourcing 5 How far these challenges undermine Friedman’s argument 6 Example of Nike Sweatshop practice 6 Conclusion 7 References 9 Introduction Milton Friedman argues in his work Capitalism and Freedom the key social responsibility of a business is to generate high profits. According to his arguments, a business should take up a shareholder oriented approach for social responsibility management. This approach encompasses the strategy of viewing the shareholder groups of a company as the economic engine that drives the organisation and thus, the shareholder group of a company is considered to be the only group towards which the company must show social responsibility. As such, the primary goal of a company should be to maximise its profits and consequently return a part of these profits to the shareholder group as the reward and return for the risks that they have borne by investing their money in the company. Milton Friedman’s view advocates that the shareholders of a company can decide what social responsibilities they want to take part in. This report is prepared with the aim of evaluating the pros and cons of these arguments by referring to the theoretical works presented by different scholars and practitioners in this domain. The report is concluded by presenting a view as to whether the arguments presented by Friedman still hold ground in the current corporate world. Critical Evaluative Discussion The arguments proposed by Milton Friedman suggest that a company does not have to have any kind of social responsibility towards the community and society because the only concern of the company should be to increase its financial gains and returns for the shareholders who have invested in the company (Friedman, 1970). Nevertheless, as per the contemporary theories of business ethics and corporate social responsibility, focusing on giving back to the societies and communities in which the companies operate is a necessity for achieving sustainable competitive advantage. Also, the use of suitable corporate social responsibility initiatives is mandatory for ensuring that the company remains ethically, morally as well as socially compliant (Kerr, Janda and Pitts, 2009, pp. 22-25). As per the theory proposed by Friedman, the focus of the profit oriented businesses on adding value to the society may lead to totalitarianism which is a particular type of political system in which the federal or state authorities have total control over the community and society and thus, seeks to control all the relevant aspects of both private and public lives whenever and wherever possible. But, it can be seen in the global corporate environment that totalitarianism as a political system does not prevail in the current contemporary world. Also, the views of Friedman related to the creation of economic profits and shareholder value being the only social responsibility of an enterprise has been widely challenged by economists and scholars. As per the views of many economists, a company which does not serve the community, public or society is likely to experience high degrees of unsustainably in operating and generating profits in the future years. Following the idea of Friedman is likely to lead to the elite corporate becoming more wealthy and powerful whereas certain other section of the society and the rest of the stakeholder groups of a company become impoverished in the process (Bhattacharya, Sankar and Korschun, 2011, pp. 72-74). The basic idea on which the shareholder theory is developed on is inconsistent as per the concept of corporate social responsibility which is done at the cost of the shareholder value creation (Carroll, 2000, pp. 44-47). For example, an enterprise donating goods or services for helping people who have been adversely impacted by a natural disaster may be good example of Corporate Social Responsibility on the part of the company but it may, in more than one way not act in the best interest of the company’s shareholder groups. Thus, Friedman states that the shareholders themselves should have the power and authority to take key decisions regarding how much and to whom they are willing to give donations. This may be in line with the stockholder theory in which the best interest of the shareholders of a company are focused on, but in an ethically susceptible corporate environment, these kinds of practices are viewed as highly irresponsible on the part of the enterprise and may lead to derogatory results for the company, the repercussions may include monetary and non monetary impacts including legal issues, non compliance issues and tarnishing of the image of the company as a socially responsible and dependable corporate entity (Dunn and Burton, 2012). Challenges to Friedman’s argument posed by low-cost labour outsourcing Low cost labour outsourcing is a practice that has been taken up by many multinational companies operating across the globe. The strategy of low labour cost outsourcing sued by contemporary businesses denounces the arguments put forward by Milton Friedman because this practice of overshooting is guided by stringent internationally accepted labour policies (Visser, Matten, Pohl and Tolhurst, 2008, pp. 152-155). When any company takes up the low cost labour outsourcing strategy, then it has to take many factors into consideration for conducting its operations in a sustainable and ethically complaint manner . The ethical issues in international businesses are highly focused on low cost labour usage problems including sweatshop practices, exploitation of cheap labour and unfair labour wage systems. Thus, when an enterprise uses the strategy of off shoring its labour for achieving lower operational costs, then it has to pay particular attention to comply with the local regulations of the foreign country where the off shoring is done as well as to comply with the internationally established labour market policies and rules. This is a vital part of business ethics and professional ethics maintenance. How far these challenges undermine Friedman’s argument These challenges definitely undermine the arguments presented by Friedman, stating that the only corporate social responsibility of an enterprise being generating economic profits and values for its shareholders. The challenges of international labour markets have made it necessary for transnational and mutational companies to focus on maintaining adequate levels of ethical compliance in the processes of cheap labour outsourcing. Significant international regulatory bodies, like the International Labour Organization (ILO) as well as the country specific labour market controllers have specified stringent policies regarding the off shoring and outsourcing of labours. This is done to avoid the exploitation of the labours in lesser developed countries by the highly powerful corporate entities (Carty, 2002, pp. 129–146). Due to these factors, if a company continues to focus on creating value for its shareholders without considering the interest and benefits of the societies and communities in which they are outsourcing the labours and drawing the resources from, are likely to face severe criticisms and also lose on its corporate value on the minds of the global citizen groups. Example of Nike Sweatshop practice The sweatshop practices used by Nike can be cited as a relevant example of how the irresponsible and overlooking behaviours of a company in employing low cost labour outsourcing practices can lead to major problems for an enterprise including loss of brand reputation, legal issues, monetary losses and development of unsustainable conditions for the company in its industry of operations. Nike was one of the largest corporate entities which outsourced tits factory works to the third world countries, especially in the Asian pacific region. In the year 1997, the human rights activists identified major issues in the labour outsourcing processes of the company. These included the exploitation of cheap labour in the then underdeveloped countries like Vietnam, China and India. The exploitation of labour resources in these countries immediately drew high degrees of media attention which led to a global scale of outrage and criticism of the company for its unfair and unethical labour practices like sweatshop establishment, low payment of wages, long durations of working hours for the labours, child labour practices and the creation of unhealthy and unsafe places of work for the labours of the company in the offshore units (Fox, 2012). The fact that the activities of Nike in this case were driven on the guidelines of the creation of shareholder value and generation of economic profits suggest, that in this era, the focus on shareholder value creation has become an obsolete process of conducting business. Instead, the pressing need for taking up sustainable and socially responsible policies of working like the triple bottom line concept and fair pay systems is further established through the example of the Nike Sweatshop practices and the repercussions of these activities for the company (Rachael, 2002, pp. 93-96). Conclusion It can be identified from the critical evaluation that in the present situation of the global corporate world, the theory of Friedman seems to have lost its importance. The significance of Corporate Social Responsibility has become more prominent with the evolution of the modern corporate environment. The need for catering to the interests and well being of the societies and communities has become imminent because of the strict ethical and moral guidelines imposed by national and international authorities for controlling and regulating the labour markets and labour economics. Thus, it can also be clearly inferred that a business functioning in the contemporary corporate environment cannot sustain by focusing merely on economic or financial gains. Instead, it also has to promote adequate levels of social conscience and take social responsibilities by creating employment opportunities, avoiding environmental impacts, and eliminating discrimination and promoting fair labour practices so that the socially conscious and ethically compliant image of the business can be established in a sustainable and value adding manner. References Bhattacharya, C.B., Sankar, S. & Korschun, D., 2011. Leveraging Corporate Social Responsibility: The Stakeholder Route to Business and Social Value. Cambridge: Cambridge University Press. Carroll, A. B., 2000. The Four Faces of Corporate Citizenship. New Jersey: McGraw-Hill.  Carty, V., 2002. Technology and the Counter-hegemonic Movements: the Case of Nike Corruption. Social Movement Studies, 1, 2, pp. 129–146. Dunn, C. G. & Burton, B. K., 2012. Friedman’s “the social responsibility of business is to increase its profits”: a critique for the classroom. [Pdf]. Available at http://faculty.wwu.edu/dunnc3/present.friedman.pdf. [Accessed on 28 May 2015]. Fox, J., 2012. The Social Responsibility of Business Is to Increase … What Exactly? [Online]. Available at https://hbr.org/2012/04/you-might-disagree-with-milton/. [Accessed on 28 May 2014]. Friedman, M., 1970. The Social Responsibility of Business is to Increase Its Profits. [Online]. Available at http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html. [Accessed on 28 May 2015]. Kerr, M., Janda, R. & Pitts, C., 2009.  Corporate Social Responsibility: A Legal Analysis. Toronto: LexisNexis. Rachael, J., 2002. The elements of moral philosophy (4th Ed.). New York: McGraw-Hill. Visser, W., Matten, D., Pohl, M. & Tolhurst, N., 2008. The A to Z of Corporate Social Responsibility. New Jersey: Wiley. Read More