Can a multinational firm adopt varying ethical standards [such as with regard to product safety (Pinto), employee benefits (Nike) and “kickbacks” to win business (Siemens)] in its global operations? Why or Why Not? Discuss in depth based on the goals of multinational corporations? (Be sure to identify the merits and demerits for both options).
(Read: Class notes and discussions)
A multinational corporation (MNC) is a business firm incorporated in one country that has production and sales operations in several other countries. -
Multinational corporation’s main goals are to improve revenue and profits by keeping the costs down, and to maximize profits for its shareholders. -
Additionally, these companies are also networks of parties and people working together towards a common goal. -
Employees, suppliers, government agencies, and customers represent a major part of the value of the company. -
In order to motivate employees to work hard for a company, a level of trust must be built. As it is important to develop trust between companies and their external environment (customers, suppliers, government, and interest groups). Such trust can only grow from the perceived security that the interests of all individual stakeholders are taken into account. -
As such, the means utilized by corporations to maximize profits should be such that they not only comply with applicable laws, but that they also adhere to social responsible behavior that includes preservation of human capital, the environment, and the relationship with their stakeholders. -
Social responsibility should not be limited to countries where there are strict laws to protect against bribery, child labor, environmental protection, and the like. In the age of the Internet, information flows very rapidly across the world and sooner or later people from around the world will find out about inappropriate behavior of corporations. Violating stakeholder’s rights will only tarnish the company’s image and reputation and prevent them from achieving their goals of profit maximization. -
According to MNCs description, a multinational firm is a business incorporated in one country and that has production and operations in several other countries. Therefore, it is logical and consistent for the company to have the same ethical standards, throughout the countries it operates. Even so, the company should ensure that its suppliers are also following their ethical standards. -
If the work methods of the company work for the different countries in which it is working, why wouldn’t the ethical standards be included in those working methods? -
From my point of view, a multinational firm cannot adopt varying ethical standards. -
By having just one ethical standard, the company could be sure that they are doing the right thing. Take Johnson & Johnson. Johnson & Johnson has a high reputation with good revenues. Although there was a Tylenol scare a few years back, the way the company acted and how fast they took the responsibility allowed them to stand tall and continue to have the trust and the confidence of its customers. Therefore, this did not affect its revenue and profits. -
In the case of Nike, the fact that they were paying their employees overseas a low rate of pay and overlooking poor working conditions, could have been avoided earlier by looking at their suppliers and analyzing where the labor was coming from. This also affected the company’s reputation, and consequently, their revenues and profits. -
For example, in the case of the Ford Pinto, engineers warned management about a defect in the car that could an explosion and consequently loss of human life. However, since the car met all applicable federal laws and a cost/benefit analysis indicated that the social cost of $121 billion (fixing car) outweighed the social benefit of $36 billion (paying law suits), they decided to go with the latter. In the end, Ford lost,...
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