Tuesday, June 7, 2011

Multinational Corporations and Ethics

Multinational corporations (MNC) do business in countries all over the world and have to deal with different beliefs of what is ethical and what is not ethical. In the United States it is considered unethical to treat women differently in the workplace, but in many Arab countries women do not even have the right to drive let alone manage a man. Many Asian countries work on a system where gifts are given as a relationship builder. These gifts could be considered bribes in the United States. The problem is, how do MNC operate in an ethical and legal environment in these different countries?
            To answer this question, two very different theories on ethics must be considered. First is the belief in universal ethical standards, and then ethical relativism. A universal ethical standard would incorporate beliefs that are considered universal to all societies. Examples are ethical norms forbidding killing each other, being truthful and not stealing from each other (Velasquez, pg 20). However, consideration must also be given to ethical relativism. While it is ok to bribe in some Asian and Arab cultures, it is not all right to do so in the United States of America. The question becomes: is it ok for an American NMC doing business in an Arab country to bribe? According to ethical relativism, it is ok.
“The MNC or businessperson who operates in several different countries, then, and who encounters societies with many different moral standards is advised by the theory of ethical relativism in this way: In one’s moral reasoning, one should always follow the moral standards prevalent in whatever society one finds oneself” (Valasquez, pg 19).
The old adage “When in Rome do as the Romans” is a simplified explanation of ethical relativism.
            Consideration must also be made when the ethical norms are in contrast with laws in the home country of the MNC. As an example, factory workers between the ages of 10 and 15 may not be considered unethical or illegal in some developing nations, but is both illegal considered unethical in the United States.  According to Ethical Relativism, if it is not illegal, and it is not unethical, then it is permissible. However, in the United States there are laws that state “if it is illegal in the United States, then you can be prosecuted for doing it in other countries even if it is not illegal there”. The Foreign Corrupt Policies Act of 1977 addresses some of these issues. It states that it is illegal to bribe foreign officials regardless of the ethical or legal status of the host country.
When a MNC decides to do business in a foreign country, it needs to look not just at the applicable laws, but at the social norms and the ethical standards if the country. While following the law is important so is operating in an ethical manor. Both the ethical standard of the United States and the standard of the foreign country need to be studied and understood. The highest ethical standard needs to be the standard that is followed.

Works Cited

Boutelle, J. (2004, May 6). Understanding Organizational Stakeholders for Design Success. Retrieved May 23, 2011, from http://www.boxesandarrows.com/view/understanding_organizational_stakeholders_for_design_success
Kubasek, N. &. (2009). The legal environment of business. A critical thinking approach (5th ed). Upper Saddle River, NJ: Pearson.
Lawler, J. (2008). US firms a role model for fair hiring standards, study says. Retrieved May 23, 2011, from http://esciencenews.com/articles/2008/07/07/us.firms.a.role.model.fair.hiring.standards.study.says
Velasquez, M. (2006). Business Ethics (6th ed). Uper Saddle River, NJ: Pearson.

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