Private Industry and Its Multinational Corporation in the Economic - Essay Example

The role of the private industry and its multinational corporation (MNC) in the economic and progress in a region are part of a new corporate objective of blending with the general public to establish a strategic focus aligned with the common objectives of both the general public and the corporation. The environment must be protected in order to save the natural resources needed for the well being of the world’s population. In both developed and developing countries there are conflicting ethical issues about finding the balance between corporate profits and good ethical conduct. Technology is playing a big factor in the advances made by countries and corporation to achieve sustainable development and regulations enacted to protect the environment and the best interest of the citizens. The objective of the report is to analyze the statement “MNC social responsibility is as much an ethical issue as an economic one” by Stiglith. The statement will be critically analyzed to describe various conflicting issues as well as offering different perspectives on the subject. Corporation are legal entities run by human being which develop a unique corporate culture which takes a position on how the company should approach matters such as corporate responsibility. It is difficult for a company to achieve its goals and benefit the surrounding community which provides the majority of the workers doing the work and generating income for their families while at the same time providing a valuable service for an enterprise. In the early 1980’s a tragic event cause by unethical behavior and a lack of corporate responsibility. In Bhopal, India a company knows as Union Carbide due to its negligence did not keep up with regulations and maintenance safety protocols which caused a gas leak which killed thousands of people and has victimized hundreds of thousands of India residents (Bhopal, 2007). The nation is India is still a developing nation and in such countries regulation are soft in many business aspects which provides opportunity for cost conscious and profit seeking organization to abide by a lower standard of business ethics to gain advantage by utilizing lower overall quality standards in every aspect of the organization in comparison with the protocols at corporate headquarter. For example if the country environmental low do not protect its air against carbon monoxide pollution a company can act unethically and lower their standards to increase corporate profits. Temptation to not comply with the highest business ethics occurs as well in developed nations. One of the most successful American companies in the apparel industry is Nike Corporation has been associated with the creation of sweetshops in developing nation in South America and Asia. In these apparel factories the company violated the human rights of its employees as well as safety and environmental standards exposing its employees to unnecessary dangers in order to save money in upgrading the facilities to meet basic standards that comply with the law. The governmental sector as well as private profit and non-profit sector must get involved to upgrade the working standards of its people by not allowing corporate entities to act in unethical ways that violate the dignity of its residents. In Australia a public company is utilizing innovation to achieve global objectives of protecting the environment with a renewable earth friendly green product called banana ply paper. Banana ply paper is paper produced with the primary raw material being the truck on the banana tree. The product helps the environment by using a manufacturing production method which reduces energy consumption by 99%, water expense by 100% and produces a pollution and chemical free product. Along with its energy reduction the company fosters the agricultural sector and provides ways for farmers in underdeveloped nation which are highly dependant of agriculture for economic growth. More than half the world’s banana supply resides in the continent of Africa (Country Insight, 2007). Another technology driven innovation in Australia is the Electric Bus Tindo. The Tindo is an electric bus utilized in Australia’s public transportation system powered by solar PV systems located in the central bus station of the system. The beauty of this eco-friendly ground transportation model which is a great example of social responsibility is that it can travel 200 kilometers between stations with one charge utilizing cero carbon and with virtually no poise pollution. In the United States companies such as Starbuck and AMD are setting standards in the agricultural and computer industry of corporate leaders in socially responsible behavior. Starbucks which has risen to become the nation’s largest beverage retail chain establishment. Its success has come from an organic business growth model and a corporate responsible strategy and a warm relationship with its human capital which provide the highest level of service and a product based on top quality standards and sustainable practices to ensure the protection of earth’s ecosystem. Starbuck’s buys “fair trade” coffee from at above market prices not because it taste better, but because it helps out poor farmers an action aligned with the company’s corporate responsibility commitment (Geoff, 2007). The company is so committed to its corporate responsibility strategy that in 2006 the firm described its efforts separate from the annual report called 2006 Starbucks Corporate Social Responsibility Report. Starbucks executives believe that its corporate responsibility efforts are a huge factor that helped the company achieve its success and does not visualize it as a by-product of the company initiatives as many other companies do (Schultz, 2006). AMD Corporation a giant in the semiconductor industry is well aware of the effect the consumption of earth’s resource by enterprises, thus in order to protect the environment the company has the most energy efficient microprocessor in the industry. Ethics is a system of moral values that determines right from wrong behavior (Schermerhorn & Hunt & Osborn, 2003). There are four different types of ethical perspectives that can be applied ethical dilemmas in business situation: utilitarian, relativism, deontology, and virtue. Each ethical perspective judges situations in which ethics plays a role in complete different ways. The deontology ethical perspective stipulates that goodness resides in making decisions recognizing and keeping moral obligations such that the actual consequences of the action are a secondary concern (Webster’s II, 1984). Managers sometimes pressures from stakeholders to deliver results fast. At times unethical accountants are asked to cook up the numbers by creating false entries into the accounting system. Unethical accounting behavior occurred in Enron Corporation which led to the demise of this company. There were employees within the accounting staff of this company that did not fall into the unethical trap. The application of the deontology perspective for the accountants helped them not be involved in any type of cooking up the number accounting scheme because the consequences of these actions are criminal charges, lost of reputation, civil litigation, and lost of professional licenses among others. Relativism ethical perspective says that there are no moral absolutes or moral rights or wrong, instead these types of decision are based on social norms (NesSmith, 1995). This perspective is extremely troubling since is subject to interpretation and ambiguity and provides the opportunity for companies to misbehave based on social norms. The only way to battle against such a perspective is for a corporation to have an establish code of ethics which supersedes the action of local managers in international subsidiaries. An establish code of ethics will set the actual standards the company should abide by and any opportunity to enter into a behavior that might be ethical based on the relativism perspective can not be accepted under the corporate by-rules. At that time if the manager decides to enter into scrupulous behavior the person is acting knowing that their actions are wrong and are not supported by the company. Relativism and its ambiguity can also become a non factor if a corporation has a full commitment towards corporate social responsibility. A company that utilizes corporate social responsibility as a major strategy can not afford to get involved in any type of corporate scandal associated with unethical behavior since the image of the corporation must be protected at all times. Profits are enhanced in such corporation by behaving well and acting ethically and socially responsibly. Companies with green products, altruism initiatives and business generating high volume of jobs in regions with high unemployment are firms whose reputation and global value is only going up due to its ethical behavior. Another ethical perspective is called virtue ethics. The virtual ethical perspective places less emphasis on which rules should be followed and instead focuses on helping people and developing good character traits such as kindness and generosity (Cline, 2007). This ethical perspective is aligned with the corporate social responsibility. CSR is all about helping others just because it is the right thing to do. When a high school teacher donates their time in after school activities free of charge to help out the alumni student body they are doing so out of the kindness of their heart. In the corporate world companies that based their decision on virtue ethics can accomplish great things. Any corporation that has plans of developing a physical presence in the continent of Africa somewhere along the line is basing their decision on virtue ethics. This firm knows that in order to establish operation a high investment in infrastructure that goes beyond the norm in a developed nation will be required. The commitment to do so is based on the good intentions of the company to create jobs and help the African community which is in dying need for more help from the private sector in order to make progress in its war against hunger and poverty. Motorola Corporation is a great example of a company that utilized virtue ethics in its early penetration of the Chinese market. The company was one of the first foreign companies to establish themselves in China in the 1980’s. Motorola had a very generous corporate social responsibility commitment which included getting involved in the educational system, the nation R&D infrastructure, donations to farmers to help their food producing capacity for the people, and investment in energy infrastructure projects to improve the production capacity of the community. There social responsibility strategy paid off in increased profits in the long run as Motorola is one of the biggest merchants in the Chinese empire. Good ethical behavior pays off dividends by building up a company’s reputation which leads to customer loyalty once the public recognizes the efforts the company is making to help out the region in which they operate. The business world has come to realization that ethics is an important trait and element that must be followed in order to succeed in the corporate world. There have been many mishaps in the past of corporate cases violating ethical standards to increase profits. The reputation of Nike Corporation was hurt when the company sweetshops were revealed, a situation they have tried to put in the past by instilling a strong corporate social responsibility policy to make of for their mistakes. Following ethics can help companies build brand recognition and customer retention in the long run if the firms follow a strategy based on philosophical ethical theories such as virtue ethics. Corporate tyrants will always be temped to abide by unethical behavior in order to increase short term profits, but typically these strategies exhaust themselves fast and eventually if they unethical behavior continues the truth will be reveal either by the press, governmental agencies or by a whistleblower if the unethical practices continue. The best action and policy a company can follow is to create a strong code of ethics and to follow a corporate social responsibility strategy. The entire world will become a better place for everyone if more companies follow the philosophies of enterprises such as Starbucks and Motorola which are committed to investing in the communities they operate in. The extra capital that is injected into a region’s economy by private institution by private entities into social projects is money that the government does not have to collect from taxpayers. Ethics is the foundation of a civilized society and following high ethical standards ensures the protection of human and natural resources and helps out companies by building up a company’s image which is worth millions of dollars. References Bhopal.com (2007). Bhopal Information Center. Available from [Accessed 30 December 2007]. Cline, A. (2007). Virtue Ethics: Morality and character. Available from [Accessed 29 December 2007]. Country Insight (2007). Country Profile: Africa. Available from [Accessed 30 December 2007]. Geoff, C. (2007). The 500 Gets Religion. Fortune 155.8. Available from [Accessed 29 December 2007]. NesSmith, W. (1995). Social Sciences: An Introduction. Fort Worth: Harcourt Brace College Publications. Schermernhorn, J.R. and James H. and Richard O. (2003). Organizational Behavior (8th). New York: John Wiley & Sons. Schultz, H. (2006). Chapter 12: Patronizing Corporate Responsibility and Green Initiatives. Consumer Behavior. Available from [Accessed 29 December 2007]. Webster’s II (1984). New Riverside Dictionary (Office Edition). Read More