Should Ethical Principles Be Applied Globally By Multinational Companies
If you live in a developing country you probably feel that multinational have brought jobs and many other opportunities for your country and perhaps its true but what’s also true is that the same amount of jobs would have been generated by small new business started in the same countries over a long term period. And better yet small businesses which are bound to stay in the counties even when they expand. The same is not necessarily true for multinationals, because they move across borders to get cheaper labour, taxes and raw materials to name a few.
There are many definitions of ethics, common sense simply tells us that it’s a sense of doing the right thing. When discussing ethics many rules and regulations come t mind because different people have different ethics and one mans view of ethics does not suit another man.
The following are the three simple definitions of business ethics as per The American Heritage Dictionary defines ethics as:
(1) A set of principles of right conduct. A theory or a system of moral values.
(2) The study of the general nature of morals and of the specific moral choices to be made by a person; moral philosophy.
(3) The rules or standards governing the conduct of a person or the members of a profession.
The Ethical Principle of Business:
The interfaith studies (n.d) website states the following as key business principles of modern business today.
1. The Responsibilities Of Businesses: Beyond Shareholders toward Stakeholders The value of a business to society is the wealth and employment it creates and the marketable products and services it provides to consumers at a reasonable price commensurate with quality. To create such value, a business must maintain its own economic health and viability, but survival is not a sufficient goal. Businesses have a role to play in improving the lives of all their customers, employees, and shareholders by sharing with them the wealth they have created. Suppliers and competitors as well should expect businesses to honour their obligations in a spirit of honesty and fairness. As responsible citizens of the local, national, regional and global communities in which they operate, businesses share a part in shaping the future of those communities.
2. The Economic and Social Impact of Business: Toward Innovation, Justice and World Community. Businesses established in foreign countries to develop, produce or sell should contribute to the social advancement of those countries by creating productive employment and helping to raise the purchasing power of its citizens. Businesses also should contribute to human rights, education, welfare, and vitalization of the countries in which they operate. Businesses should contribute to economic and social development not only in the countries in which they operate, but also in the world community at large, through effective and prudent use of resources, free and fair competition, and emphasis upon innovation in technology, production methods, marketing and communications.
3. Business Behaviour: Beyond the Letter of Law Toward a Spirit of Trust. While accepting the legitimacy of trade secrets, businesses should recognize that sincerity, candour, truthfulness, the keeping of promises, and transparency contribute not only to their own credibility and stability but also to the smoothness and efficiency of business transactions, particularly on the international level.
4. Respect for Rules: To avoid trade frictions and to promote freer trade, equal conditions for competition, and fair and equitable treatment for all participants, businesses should respect international and domestic rules. In addition, they should recognize that some behaviour, although legal, may still have adverse consequences.
5. Support for Multilateral Trade: Businesses should support the multilateral trade systems of the GATT/World Trade Organization and similar international agreements. They should cooperate in efforts to promote the progressive and judicious liberalization of trade and to relax those domestic measures that unreasonably hinder global commerce, while giving due respect to national policy objectives.
6. Respect for the Environment: A business should protect and, where possible, improve the environment, promote sustainable development, and prevent the wasteful use of natural resources.
7. Avoidance of Illicit Operations: A business should not participate in or condone bribery, money laundering, or other corrupt practices: indeed, it should seek cooperation with others to eliminate them. It should not trade in arms or other materials used for terrorist activities, drug traffic or other organized crime.
Multinational companies should apply ethical principles globally. Principles one above states that the should extend there responsibility form shareholders alone and also focus on the stakeholders. This means that a business is geared toward the customers wellbeing by providing a good product and selling it at a fair cost. And the company should also cater to the employees and shareholders by sharing its wealth with them. Microsoft (n.d) website provides benefits for its employees which include investment benefits where by the employees are offered discounted financial services as well as the companies stock options; health benefits which include vision care, dental care, life insurance , disability, and confidential counselling for its employees; family and parenting benefits such as paid maternity leave, adoption assistance, and child care discounts.
Google’s (n.d) website gives an example is Google company as one which offers a wide range of facilities for its employees including free lunches, stock option; maternity and paternity leave, on-site doctor and dentist; massage and yoga; professional development opportunities; on-site day care; shoreline running trails; and plenty of snacks to get you through the day.
The second principle emphasis that multinational and other international businesses should contribute towards social advancement to foreign countries by providing employment to locals and as aim to raise the purchasing power of citizens furthermore, they should aim to human rights education and welfare in the countries in which they operate. An example of such a company is as provided by Celtel kenya (n.d) website, Celtel International mobile company Kenya. The Celtel ‘Chakaza Ushinde Nyumba’ (scratch and win a home) promotion came to a close in July 2007 giving birth to seven new millionaires in the country. The excitement, however, was not limited to the seven lucky winners alone; during the house handover ceremonies across the country, the occasions were marked with pomp and colour by the entire Celtel family as several exciting prizes including dairy cows, generators and water tanks were rolled out. Celtel is also responsible for sinking wells in the dry are of Lamu, as well as buying desks and school materials for schools in Taita Taveta district, Kenya. Though the main resons for Celtel is profits, it is also making a great effort towards an impact on the social wellbeing of the people of kenya.
A second example is Shell Kenya company. As provided of Shell Kenya (n.d) website, Shell is a multinational company whish has many subsidiaries in the world. In kenya it is well know for its Kenya Shell Education Excellence Awards Scheme which awards the top KCSE(Kenya certificate of secondary education) and KCPE( Kenya certificate of primary education) candidates and schools from all over the country for achieving excellence in the national examinations. All public schools in the country are eligible. The awards go towards paying the top students’ fees and towards the acquisition of equipment/text books for the winners’ schools. To-date, the company has given over Kshs.10.4 million towards the scheme.
The third general business principle discusses the importance of developing a spirit of trust, truthfulness, keeping of promises and transparency. With transparency, an exception comes with the protection of trade secret such as the special ingredients of a product. A good example of such a company is coca cola international which is one of the largest manufacturers, distributors and marketers of non-alcoholic beverage concentrates and syrups in the world. According to the wikipedia website, According to the 2005 Annual Report on the United States securities and exchange commission (n.d) website, the company sells beverage products in more than 200 countries or territories. The report further states that of the more than 50 billion beverage servings of all types consumed worldwide every day, beverages bearing the trademarks owned by or licensed to Coca-Cola account for approximately 1.3 billion. Of these, beverages bearing the trademark “Coca Cola” or “Coke” accounted for approximately 55% of the Company’s total gallon sales. Also according to the 2005 Annual Report, Coca-Cola had gallon sales distributed as follows: 27% in the United States, 27% in Mexico, Brazil, Japan and China, 46% in spread throughout the world. This shows that the company is transparent with its business financial records this creates trust with its shareholders and providers of equity.
The fourth principle which talks about respect for rules is very important for any multinational to follow because breaking of rules may force the country its working with to shut it down. Some countries may allow a multinational to come into there country with the understanding that 90% of its employees are from the local country. If the multinational moves into the country and doesn’t follow this agreement, the government will not be happy and may take drastic measures such as removing them from the country. This will create a bad image for the multinational no to mention the heavy losses it will incur for the whole process making it a lot easier to just follow the rules to begin with.
The fifth principle is also very important because it says that companies support multi-trade systems and international trade agreements. A good example is found in WTO (n.d) website. Where WTO is responsible for dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business. WTO achieves its success by having a number of rules and some are, Treating other people equally, under the WTO agreements, countries cannot normally discriminate between their trading partners or grant someone a special favour (such as a lower customs duty rate for one of their products) and you have to do the same for all other WTO members. Secondly, Freer trade: gradually, through negotiation Lowering trade barriers is one of the most obvious means of encouraging trade. The barriers concerned include customs duties and measures such as import bans or quotas that restrict quantities selectively. From time to time other issues such as red tape and exchange rate policies have also been discussed. in addition, Promoting fair competition The WTO is sometimes described as a åree tradeãƒ»institution, but that is not entirely accurate. The system does allow tariffs and, in limited circumstances, other forms of protection. More accurately, it is a system of rules dedicated to open, fair and undistorted competition.
The sixth principle which talks about respecting the environment is also important especially with the world today being keen on protecting the environment to prevent global warming. According to the refrigerants naturally (n.d) website, in 2005, Coca Cola, Unilever, and McDonalds are some of the multinational companies recorded as supporters. The purpose for this is to reduce the amount of energy used by refrigerators. This companies are therefore looked at in good light by consumers and governments alike internationally.
In the Keep Australia Beautiful (n.d.) website, Hungry Jacks’ fast foods is doing its bit to help keep Australia beautiful with a range of environmental initiatives in-store including: adding the “Bag it and Bin it” anti litter message to their packaging; discontinued use of painted or printed fries containers in favour of natural board containers; trialling compacting units for both food waste and cardboard recycling in some Queensland stores; trialling a grease guardian at Flemington in Victoria which removes grease and oil from waste water.
The final principle deals with business steering clear of corruption, money laundering, bribery and other corrupt practices. Mnc’s need to also watch out for discrimination especially when moving in to countries that have different cultural practises from themselves as well as language barriers. This are important aspect because they contribute directly to the performance of the employees as well as the business profits. The company should not be in trade of arms or other materials used for terrorist activities, drug traffic or other organized crime. With the entire world directly or indirectly affected by the effects of terrorism. It would be unfortunate for any company to be associated with it.
In conclusion, Nike is an example of a company that did not follow business ethics globally as see in many newspapers and websites, but notably the excite (n.d) website which reported questionable employment practices at Nike plants in Vietnam, Indonesia, and China which attracted unfavourable notice in recent years. Low wages and poor working conditions at the plants garnered widespread negative press. Bad press is something that most companies try to avoid at all cost because the affect buyer behaviour and consequently overall sales.
From the recommendations given above, it is conclusive that multinationals should practice ethical principles globally.
American Heritage Talking Dictionary (Electronic Edition, The Learning Company, Inc., 1997).
Microsoft .n.d., accesses 27/10/2007, http://members.microsoft.com/careers/mslife /benefits/plan.mspx
Google .n.d., accessed 27/10/2007,http://www.google.com/support/jobs/bin/static. py?page=about.html&about=top10
Celtel kenya n.d., accessed 26/10/2007,http://www.ke.celtel.com/en/about-us/social-projects/index.html
Shell Kenya n.d., accessed 26/10/2007,http://www.shell.com/home/content2/ke-en/community_environment/education_11121245.html
Coca Cola Company Form 10-K 2005. SEC. Accessed 26/102007,http://www.sec.gov/ Archives/edgar/data/21344/000104746906002588/a2167326z10-k.htm
Refrigerants Naturally n.d., accessed 26/10/2007,http://www.refrigerantsnaturally.com/ achievements-cocacola.php
Keep Australia Beautiful n.d., accessed 27/10/2007, http://www.kab.org.au/_dbase_upl /nat.PDF
World Health Organisation n.d., accessed 27/10/2007,http://www.wto.org/english/thewto_e/ whatis_e/tif_e/fact2_e.htm
Excite n.d., accessed 27/10/2007,http://www1.excite.com/home/careers/company _profile/0,15623,1290,00.html