With the globalisation of world business, China has become an appealing market for foreign investors (Zhang, 2004); a large number of these entered the Chinese market by forming joint ventures or participating in mergers and acquisitions. The development of cross-national business, on one hand, has created tremendous opportunities for global collaboration among different countries; on the other hand, however, it has also created a unique set of ethical problems.
“As one expert estimates that about two-third of the 500 largest American corporations have been involved in one form of illegal behaviour or another” (Gellerman, 1986). Many large multinational companies are more likely to treat Chinese market as a mechanism to save money rather than a strategic business partner. It is obvious to see from recent news that many large companies have conducted unethical practices in China. For instance, Nike’s alleged sweatshops in China: “in 2005 and 2006, Nike ‘secured’ more than 6.53 million yuan ($911,000 Canadian) in back wages owed to workers in China.” (Reuters News Agency, 2008)
This paper analyses how large multinational companies overcome the challenge of managing its diverse stakeholders ethically when they doing business in China. I have intended, in my analysis, to accomplish four goals in discussing diverse stakeholder challenges. First, I will discuss how to judge unethical practices in pan-national business operations and the risks which are incurred. Secondly, I will explain how large multinational companies and individuals within the companies need to behave to avoid unethical behaviours. Finally, the paper presents some self-reflection on theory and how issues of business ethics can be addressed in the future.
Business ethics and the challenge of ethical behaviour
The term “business ethics” is often in the news these days. By definition, “Business ethics is the study of business situations, activities, and decisions where issues of right and wrong are addressed” (Crane and Matten, 2004:8). However, it is difficult to judge what is as an unethical practice for an organisation since ethical issues are not necessarily covered by law or there may be no consensus of whether something is wrong or right. For example, we cannot easily say Nike set out to open sweatshops in China as an purely un-ethical venture since their operations also provide many job opportunity for Chinese workers who might otherwise be economically very disadvantaged without the work.
In order to distinguish the difference between ethical and unethical practices more properly, Daniel J.Brass et al (1998) defined unethical behaviour as “behaviour that has a harmful effect upon others and is ‘either illegal or morally unacceptable to the larger community” (1991:367). In Nike’s case, we have seen that although those 'sweatshops' provide job opportunities to Chinese employees, the company also 'harms' Chinese employees by paying salary under the minimum wage levels. Moreover, as result of recent anti-sweatshop protests around the world and the establishment of anti-sweatshop related legislation, Nike's previous business activities were deemed unacceptable to the larger community. Therefore, we can conclude that those sweatshop activities of which Nike were accused constiute unethical practice..
It is not only the sweatshop business model which harms the interest of Chinese labour, unethical behaviour can also generate much negative impact on the company as well. The company’s reputation may be affected since their pracgices are not seen as acceptable to the widercommunity; customers may be reluctant to buy their products. The government may well refuse those companies which a bad reputation entry into the Chinese market. Therefore, the management of the diverse stakeholders in an ethical and balanced way becomes, more than ever, an essential challenge for modern...