Ethical difficulties faced by multinational companies in today's business world

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1.0 Introduction

Multinational corporations (MNCs) are corporations that "own or control production or service facilities outside the country in which they are based."(United Nations, 1973, P. 23) The rise of Globalisation has forced and enabled more companies to venture abroad in order to thrive for more profitability: bigger market, cheaper raw materials, and lower labour costs. However, MNCs have also noticed that the more countries they enter, the more ethical issues appear. At best, even when MNCs are dealing with one only one culture, they are already facing ethical difficulties; as they encounter two or more different cultures, it would become extremely problematical. Hence, multi-national corporations (MNCs) face more challenges than ever before in the cultural contexts and different countries they operate due to different ethical and moral standards among different countries. Hence, MNCs are often under a dilemma with ethical difficulties when operating in different countries. Successful MNCs require stability for development, and to resolve ethical difficulties is one of the key issues that could affect such stability, this is the focus of this assignment: first, it will explain the ethical difficulties multinational business encounter while operating in several countries; followed by the general principles required to resolve such ethical problems; lastly, an example of such a problem to illustrate the application of principles to resolve problems in real situations.

2.0 Ethical difficulties faced by multinational companies in other countries

According to Robert Solomon (Solomon in Hartman, 2005, P.171), "Ethics is a matter of ethos, participation in a community, a practice, a way of life. Business ethics is a function of the business ethos." McNeil and Pedigo (2001) suggested that business ethics is the fundamental part of the decision-making process within an organisation. In reality, we could observe that the ethical problems seem to be fewer in developed countries compared with underdeveloped, less developed or developing countries because "these countries are at earlier stages of economic development". (Carroll & Buchholtz, 2003, P.278) Thus, when MNCs from developed countries venture to these host countries, it becomes more difficult to justify what is right or wrong as ethical perception differs from country to country. That is, MNCs would face more difficulties and complexities in making sound ethical business decisions: should they follow the ethics of the host countries, or should they follow the code of ethics from their home county which might then result in disobedience to the ethical system of the host country? Below are some of the ethical difficulties MNCs could encounter when operating in different countries:

2.1 The remuneration practices -Wages and Benefits

When MNCs venture to other countries (underdeveloped, less developed, & developing), question of fair remuneration practices has been always the issue. Arguments about ethically acceptable or appropriate levels of wages and labour standards for the host country's labourers are intensive. Even famous multinational companies, such as Nike, Wal-Mart, Kmart, Reebok, Disney, etc. have been addressed for these issues: (Maitland, 1997; Carroll & Buchholtz, 2003) In 1998, when an investigation launched into Nike's subcontracted factories in Vietnam for allegations of worker abuse, the report found that its employees were paid $1.84 a day, with average monthly salary of $48 while the minimum wage in Vietnam was $45 at that time. (Lyutse S., 2004) A pair of Nike shoes sold in US marketed for $100 or more, but a worker from Vietnam factory works six days a week and earns about $600 a year, which is "half the average income in Ho Chi Minh City, but about four times the annual earnings in more remote rural regions of Vietnam" (Lyutse S., 2004) On the other hand, shipments of Nike shoes accounted for 5% of Vietnam's total exports in 1998,...
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