Ethical Obligations of Multinational Corporations to Developing Countries
Ethics refers to the study of concept and principles of decent people in the society. It is focused on evaluating the difference between good and evil, right and wrong and different characteristics of people. Understanding ethics in any business is important as it promotes a good relationship between employees and employers which is based on trust and respect. Ethical issues are a set of challenges that requires a person or a company to choose between solutions which are evaluated to be wrong or right. Many businesses face ethical issues which if not well evaluated, may cause a lot of damage to the organization. This paper will analyze how giving out to the poverty-stricken countries bring more benefits than losses to Multinational corporations despite the fact that a lot of non-refundable money is spent helping those countries.
An important ethical issue is social responsibility. This is where a company balances profitable activities with society’s problem-solving activities. It is more of giving back to the society. Corporate social responsibility helps to create a good relationship between investors and the society they invest in. This relationship is necessary for successful operation of a business and measures its performance. Social responsibility is more effective when the company does it voluntarily rather than being forced by the government.
Some skeptics may argue that helping the needy would bring financial instability in an organization. Companies view giving out as draining their profits which could be used to expand the companies. A company’s money belongs to shareholders and any attempts by the manager to give out through corporate social responsibility is considered as theft. They believe that these losses are passed on to the consumer through the final price of the product because if managers maintain the same cost of selling products, it may lead to reduction of the employees’ wages. If wages are stabilized, profits would be lowered and this will reduce the manager’s desire to further engage in corporate social responsibility. These companies believe that the government and other non-governmental organizations are responsible for solving the society’s problems. A company’s responsibility is to make more profit and grow in itself. However, these claims are not true as being socially responsible would save the corporations from government wrath and environmental regulations on pollution caused by those companies (Soule, 2009).
Secondly, some people argue that a business is an economic activity and is meant to create products and provide services and not handle peoples’ welfare. Companies do not have the knowledge to handle social issues and problems. Also, professionally trained managers lack social skills and competence on social problems. If they focus on social responsibilities, they lack the full potential to perform their duties. However, these claims are invalid as a company can still prosper and build shareholder’s value when helping the society. According to Moran (1974), organizations have a social responsibility to give back to the communities they operate in because many of their problems are caused by these organizations, for example, pollution.
Thirdly, some corporates argue that it is difficult to measure the quantity of social benefits. This is in terms of what measures the social responsibilities and how the company should be involved. Companies invest a lot of money on non-profitable projects, their time and resources which, if not well analyzed may lead to a company’s failure. The owners of a company want returns on their businesses and if this is not met, they may fire the manager. However, if companies put aside some money from the profits made, even a little, it may help the society in one way or another. This charitable act would attract more consumer in the company (Alvesson & Berg, 1992).
Despite the skeptical views about corporate social responsibility, social responsibility is important to the society and the organizations in general. First, Multinational Corporation should create employment opportunities to people in developing countries for their long-run survival. The company’s ignorance of the peoples’ unemployment problems would lead to society’s denial. The local people should be given a priority when new job positions are created. Working conditions should be good and they should avoid paying low wages to their employees. In addition, these corporations should provide the poor countries with ideas on how to run similar businesses and the technology used. In as much they create employment, they should consider doing more. Teaching poor countries on how to start businesses would promote economic growth and create more employment thus leading to less dependency on the Corporations and the third world countries for financial aids and donations. An ancient Chinese proverb once said, that giving a man fish is good but showing him how to fish is better because he will never go hungry (Alvesson & Berg, 1992). Also, these corporations should focus on promoting gender equality and women empowerment in the society. The job opportunities given should be for both men and women and their wages should be equal as some women in those countries are single mothers. In addition, these corporations should fulfill their social responsibilities in order to gain fame and attract more customers. Workers also feel proud to work for such organizations. According to Donaldson, et al (1983), consumers are willing to pay more for a product based on its sustainability factors including environmental conservation, organic products and social values. Businesses should be committed to their sustainability factors and advertise those factors on social media in order to attract more consumers. Businesses should be committed to their sustainability factors and advertise those factors on social media in order to attract more consumers. Posts related to corporate social responsibility will attract more attention as people will be interested in the story thus advertising your product in the post. Also, corporate social responsibility makes a company unique and different. People get to see it as real and human. This reduces competition in the industry because it displays your sense of responsibility as compared to other companies. For example, Coca-Cola Company gives out caps which are used for something else apart from refreshments.
Secondly, Multinational Corporations have an obligation to promote community development. This is because the companies have the resources needed to solve the problems in the society. In order to show their social commitments in the areas they operate in, it is fair for the companies to engage in community development projects. These projects may be reformatory institutions, churches, provision of medical services to communities and building of educational institutions. They may also run awareness campaigns on education and health issues. Engaging in such activities helps investors to understand the economic inequality in different parts of the world and promote social justice (May, et al, 2007). These inequalities can be reduced through sponsorship of events that promote public needs. These developments are really important to the community. First, provision of medical services to the disadvantaged prolong their lives as many of those people are in the verge of death due to lack of proper medication. Helping them also gives them hope to live longer because they know that somebody cares. Second, the world today sees education as the only way to eradicate poverty. Building schools helps children from poor backgrounds to attain education which gives them jobs in the future and they eradicate poverty in their homes. In addition, giving out to the society helps to balance power and responsibility. According to Soule (1990), Multinational businesses possess a lot of power in the society and an equally large amount of responsibilities helps to balance it. If a company possesses more power than responsibilities, things might run out of hand and irresponsible behaviors unacceptable to the public might be experienced. Company leaders abuse power because they feel superior to others in the society. The government feels threatened by these organizations and they end up burning companies from the country. Helping the community also creates a good relationship between the company and the people thus creating a conducive environment for the company.
Thirdly, Multinational corporations should help the poor communities by ensuring adequate supply of water, good sewerage drainage, provision of electricity and construction of roads and bridges for compensation. Some companies bring a lot of damages to the community. For example, mining companies use heavy tractors to transport their goods which end up damaging the local roads. If they do not take responsibility, the government might create regulations and heavy fines against the corporations. Construction of infrastructures shows that they appreciate the local community. This helps to improve the living conditions of communities in those areas. Infrastructures also makes it easy for investors to transport their goods from the company to the market (Soule, 1990). It also helps to demonstrate that they are good investment institutions. In addition, they are responsible for environmental pollution in the society. Environmental pollution lead to depletion of ozone layer, acid rain and global warming. Multinational Corporation should give environmental advocacy to the people. For many years, companies used to dispose their waste products on the air, water bodies and land which led to pollution. According to international law, businesses should make it their obligation to preserve the environment. According to Moran (1974), environmental activists have made the organization to realize that making huge profit is not important than the environment. This corporation can advocate for the environment by providing advocacy services to educational institutions and awareness workshops. They can also fund projects that work towards environmental conservation. Stakeholders should have a continuous dialogue on environmental issues. Thus, these organizations should take responsibility of their actions instead of waiting on others to fix them.
Prevention is better than cure. Many Multinational corporations are set up in foreign country where there are rules and regulations that govern the state. Most of these corporations produce harmful products which if pre-disposed to the environment can cause dangerous diseases. It is important for the companies to ensure proper disposal of these waste products. According to Alvesson & Berg (1992), failure to do this may lead to intervention by the government leading to imposition of heavy fines and strict environmental rules. Also, this can lead to a bad relationship between the company and the society because many people fear living in a harmful environment. If a company is rejected by the people, it does not last longer. Therefore, it is important for a company to maintain a good reputation from the beginning if it has to succeed.
Even though some people view corporate social responsibility as a loss to an organization, it is important to a society as it helps to eradicate poverty in poverty-stricken regions and bridge the gap between the developed and developing countries. Corporate social responsibility also help to solve the society’s social problems through building of learning institutions, infrastructure and churches thus improving the living conditions of the needy in developing countries. However, the government should consider putting in place strict regulations on environmental conservation in order to prevent harmful consequences in the future as a result of environmental pollution. For example, global warming, depletion of ozone layer, acid rains among others.
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