Any business entity has a prescribed code of conduct that it must follow. These prescribed codes of conduct are generally referred to as business ethics. Business ethics in turn are rooted in the corporate social responsibility of Business Corporation, which is a major commerce unity in the world today. There has been debate in recent times about the social responsibility MNC’s that ply their trade in a global context. There are those commentators, who argue that corporations are obligated to adhere to the laws of the host country, some argue that corporations have further negative obligations to respect the rights of people, while others think that corporations have positive obligations to promote institutions that have just backgrounds. In this paper, I will argue along the line that corporations should be obligated to promote just institutions.
Corporations should be Just Institutions
Corporations having transnational business operations are bound to encounter many issues in their business dealings when compared to those restricted to one country or a certain legal jurisdiction. All these issues are addressed by business ethics. Different cultural practices can bring about conflicts in the ethical norms. This posses the question, which ethical norms should guide a company’s business conduct while in a different country and culture? This is where you will get divided opinions. There are those who strongly believe that corporations should adopt the norms of their host country. They stand by the idea that when you are in Rome, do what the Romans do. Others are of the idea that when the norms of a host country are morally gross, then corporations have no business adhering to them.
The Need for Just Moral Obligations
Moral obligations should not just be viewed through the legal eyes. Many legal systems follow what is universally accepted as the Western moral principles which may not be found in other places. This therefore means that there are other moral principles that may be abused simply because they are beyond the requirements of the law. Such morals will appear to be optional to some corporations. This presents a problem especially when determining what counts as a moral social responsibility. Corporations and host countries will therefore have opposing views on such issues and this will strain their business relationships. In such a situation, it will be unreasonable to expect corporations and businesses to follow laws that are surrounded by disagreement.
Consider for instance countries and cultures that have strong moral principles. Take for instance Islamic cultures that follow strict and rigid laws, countries with these cultures may not necessarily have the Islamic laws in their legal system. Muslim business will however, be bound a strong Islamic morality. This means that without a strongly embedded system of ethics, there will be morals that will appear optional to those who do not have such moral attachments. It will therefore be highly unlikely to expect business corporations to be obligated to follow principles that are not stipulated by the law simply because they are being followed by the people in the host nation (George 1).
There is also another disturbing notion about following the rules and regulations of a host country. The notion that, ‘when in Rome do what the Romans do’ is misleading. In essence, it requires corporations to follow business practices that may not be morally acceptable. This concept derives its strength from cultural relativism that suggests that morals values are dictated by cultural contexts. It claims that the world can not have a universal standard of morality that applies to all people. A corporation varying out its operations in a developing country cannot justify underpaying its employees just because the host nation is underdeveloped. A corporation can not for example, engage in slavery just because such a practice is lawful in the host country. This concept does not take into consideration the moral responsibility of corporations because it tramples on the rights of workers (Marcoux 1).
Those who advocate for the respect of human rights are not entirely wrong, because it is a requirement that all employers respect the rights of their workers. The only problem with this rule comes in a situation whereby domestic laws in some countries do not cover the human rights of workers. This rule is mostly violated by multinationals operating in less developed countries due to the prevailing conditions of poverty and unemployment. Such countries also lack proper legislations that can protect the rights of their workers.
As already alluded to, human rights can be violated in this case under the pretext of ‘when in Rome, do what the Romans do’. Corporations have a moral obligation to make sure that they avoid severe exploitation of the workers in countries that do not have worker protection laws. This also presents a moral dilemma to multinational corporations where by paying more than what is paid locally may be seen as luring away workers from the local firms. It may also force the local firms to raise their wage, something that may not be received positively (Marcoux 1).
Those advocating for this concept force businesses working in foreign markets to weigh between these issues. What is sure though, is that none of the issues justifies a business from violating human rights. A corporation can not violate human rights just because the situation demands. This may seem ethically right in view of keeping the other business in operation, but it is not the ultimate right decision. If rights are violated and a business cannot favorably compete without engaging in such kind of malpractice, then there are only two options; “to stop competing altogether or, fight for the establishment of just institutions that will ensure that the rights of all are respected” (Frederick 361).
Companies in the US are required by law to pay enough to their employees to enable them have a comfortable live and must allow workers the right to form unions. All these are not an end in themselves; they do not specify what a just wage is and what a safe working environment is. The rights therefore, have different interpretations and applications in different firms and cultures. What this means is that human rights are open to different interpretations in different environment and therefore, can not entirely be trusted to the laws of host nations or to the corporations alone. They need to be monitored by strong institutions that uphold the role of law (Frederick 361).
The best obligation that Multinational Corporations have is to work in cooperation with host governments in establishing just background institutions. In this concept, MNCs have the obligation not to interfere or meddle in the internal affairs of the host nation and will also respect its values and culture. For instance, American companies working abroad are obligated not to interfere in the internal affairs of host governments. Establishment of just background institutions is done with the sole aim of promoting fair competition, protecting human rights, and preserving the resources of host nations. This concept, unlike the other two concepts, does not interfere nor promote a company’s self interest, but instead, it prioritizes the good of the host nation and its people (Frederick 361).
Many Multinational Corporations were accused for many years of using their immense economic power to influence the decisions of their host nations especially the less developed countries. They were accused of opposing the establishment of laws for minimum wage limit, and opposing strongly the empowerment of their employees. This concept makes sure that this is not done because it prevents multinational corporations from opposing such initiatives. Under this concept, multinational corporations have even a greater responsibility of establishing just institutions on the global scale. Their influence can help in the unification of people in the world and the eventual formation of a global community. Just background institutions provide a foundation on which genuine international corporation can established (George 1).
The proponents of the other two concepts would argue that this concept seems to ask MNCs to work against their self interest by putting in place institutions that may come back to haunt them. This of course, is misguided thinking. They fail to understand that the absence of just background institutions to oversee that there is efficiency and fairness; corrupt business will seize the chance to exploit the unsuspecting countries and their people. Absence of these institutions will encourage bribery and extortion and environments where business succeed not because they deserve the success, but because they manage to take advantage of the prevailing conditions in which they operate.
Just background institutions that are distributed equitably will prohibit companies from unfairly taking advantage of others by practicing unlawfully. Multinational corporations that value business integrity will always strive to work in a level playing field governed by market dynamics. Such a field can only be established if there are enough national and international institutions that are just. By helping in the formulation of global business codes such as the UN human rights codes, corporation gain a lot from them. Only firms which are not driven by self interest will do that because they see it as their ethical obligations. They are not driven by laws, or the cultures of host nations, they do what they are supposed to do, the right thing (Fieser 1).
In short, this concept advocates for just background institutions that will see to it the corporations follow business ethics. It does not suffice for corporations to follow the practices of host nations nor to respect human rights. It involves more that that, formation of institutions that will not only benefit the host nation but the corporation as well. In this concept we have seen that multinational have moral responsibilities that are not just confined within the borders of the host nation, but those stretch across cultural boundaries. Multinationals should therefore adhere to moral values that are not too extreme and those that favor all parties. They should be guided by trust and honesty to succeed in the global market. They should strive to uphold human rights to the extent of avoiding if necessary, those countries with human rights violations (Fieser 1).
According to George (n.d.) it is worth that:
That multinationals should not engage in any activity that will harm the host nation; should strive to generate more good than bad in their operations in the host nation; their operations should contribute to the development of the host nation; their operations should be guided by respect to human rights of the workers in the host nation; they should pay their fair share of taxes; respect and work with the local culture of the host nation; and finally, should work closely with local governments in reforming the social institutions. (George, n.d., 1)
Without just institutions, moral principles may never be upheld. In olden days, it is believed that moral principles were only followed by those who believed in God and therefore, were afraid that God might punish, otherwise principles were not followed. It is the same today, without the fear that some institution is watching them; corporations may just go ahead and violate these moral principles. That is why there are moral guidelines established by organizations such as the United Nations, in collaboration with business corporations to guide business practices. It is on these grounds that I feel that corporations should be obligated to champion the establishment of just background institutions (Carroll 5).
Corporations have the moral responsibility to the people they serve. This has raised disagreements in many quarters of the business world with those who claim that corporations should follow the ‘ when in Rome, do what Romans do’ concept while others standing with the position that corporations have negative obligations to respect human rights. Well, I am of the opinion that besides working within the laws of host nations and respecting human rights, corporations have an obligation to promote just background institutions. Their size and scope gives them enormous power that they can use to influence events in the mainstream society not just economically, but also socially and politically, to the benefit of all.
Carroll, Archie. Managing ethically with global stakeholders: A present and future challenge. Google Documents, 2004. Web.
Fieser, James. Business ethics. UTM Education. n.d. Web.
Frederick, Robert. A companion to business ethics. New York: Wiley-Blackwell, 2002. Print.
George. Multinationals and Less Developed Countries. Seven Guidelines. n.d. Web.
Marcoux, Alexei. Business ethics. Plato Stanford. 2008. Web.