Ethical Issues in International BusinessMost Common Ethical Issues Employment practices Human rights Environmental regulations Corruption Moral

obligation of multinational firms

EMPLOYMENT PRACTICES
When work conditions in a host nation are clearly inferior to those in a multinationals home nation, companies must decide which standards should beapplied, those of the home nation, those of the host nation, or something in between When work conditions in a host nation are clearly inferior to those in amultinational's home nation, what standards should be applied? Those of the home nation? Those of the host nation? Or something in between? Firms should establish minimal acceptable standards that safeguard thebasic rights and dignity of employees and audit the foreign subsidiaries andsubcontractors on a regular basis

HUMAN RIGHTS
Basic human rights taken for granted in the developed world such as f r e e d o m o f association, freedom of speech, freedom of assembly, freedom of movement, andso on, are by no means universally accepted
Basic human rights are still not respected in many nations Many rights are not universally accepted such as freedom of:

association speech assembly movement political expression

ROLE OF THE MULTINATIONAL FIRM

It is often argued that inward investment by a multinational firm can be aforce for economic, political, and social progress that ultimately improves therights of people But there is a limit to this argument because some governments are sorepressive that investment cannot be justified on ethical grounds

ENVIRONMENTAL POLLUTION
When environmental regulations thehome nation, ethical issues arise in host nations are far inferior to those in

T h e tragedy of the commons occurs when a resource held in common by all, butowned by no one, is overused by individuals resulting in its degradation Ethical issues arise when environmental regulations and/or enforcement areinferior to those in the home nation This might result in higher levels of pollution from the operations of multinationals than would be allowed at home Should a multinational feel free to pollute in a developing nation and is it theright and moral thing to do?

CORRUPTION
In the United States, the Foreign Corrupt Practices Act outlawed the practiceof paying bribes to foreign government officials in order to gain business T h e O r g a n i z a t i o n f o r E c o n o m i c C o o p e r a t i o n a n d D e v e l o p m e n t (OECD) adopteda Convention on Combating Bribery of Foreign Public Officials inInternational Business Transactions in 1997 which obliges member states tomake the bribery of foreign public officials a criminal offenseSome economists suggest that the practice of giving bribes might be the price thatmust be paid to do a greater good These economists believe that in a country where preexisting political structuresdistort or limit the workings of the market mechanism, corruption in the form of black-marketeering, smuggling, and side payments to government bureaucrats tospeed up approval for business investments may actually enhance welfare Other economists have argued that corruption reduces the returns on b u s i n e s s investment and leads to low economic growth

Corruption has a been a problem in almost every society in history and itcontinues to be one today Some international businesses can and have gained economic advantages bymaking payments to government officials TWO LAWS ADDRESSES THIS ISSUE 1977 U.S. Foreign Corrupt Practices Act 1997 OECD Convention on Combating Bribery or Foreign PublicOfficials in International Business Transactions