ETHICS

MULTINATIONAL CORPORATIONS

It doesn't matter whether it's a white cat or a black, I think; a cat that catches mice is a good cat.
1961 by Deng Xiao Ping

Most famous quotation in

A reformist leader of the communist party of China who led China towards a market economy. The philosophy of his unleashed the creativity for numerous businesses people. Even though it is so encourage, it allows many malpractices in the economy. Business people in the past did not concern whether the business is legal or illegal, ethic or unethical

THE ARGUMENT
1. The multinational corporations is a Business NOT a Social Service.

2. So MNCs can be considered ethical if:

(i) (ii) They obey the laws of the countries in which they operate They pay their taxes. Its up to government to do the rest.

We absolutely DISAGREE with the statement

AGENDA
1. What is a Multinational Corporation 2. Three fundamental reasons why we absolutely disagree to the statement 1. Environmental sustainability concerns 2. Corporations reputation and accountability issues 3. Corporate citizenships responsibility 3. Conclusion

4. Recommendations

WHAT IS A MULTINATIONAL CORPORATION

A corporation is defined in terms of legal status and the ownership of assets. There are 3 main characters: 1. Corporations are typically regarded as Artificial Persons in the eyes of the law

2.
3.

Corporations are notionally owned by shareholders, but exist independently of them and from the people working in them
Managers and directors have a Fiduciary responsibility to protect the investment of shareholders.

Therefore it is usually argued that:

1. 2. 3. Only human beings have a moral responsibility for their actions It is managers responsibility to act solely in the interest of shareholders Social issues and problems are the proper province of the state rather than corporate managers.

WHAT IS A MULTINATIONAL CORPORATION

But nowadays, if any MNCs argues with this statement, it would be like suicide!!

Although MNCs are not a social service, they exist and are bounded by the society as a whole; hence, they have a moral responsibility to be ethical beyond the laws set by the government.

THREE
FUNDAMENTAL REASONS WHY WE ABSOLUTELY DISAGREE TO THE STATEMENT
ENVIRONMENTAL SUSTAINABILITY CONCERNS

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ENVIRONMENTAL SUSTAINABILITY CONCERNS

In 2011: World population is at 7 billion and Growing (est. over 9 bill in 2050)
As more people compete for the Earths resources, there is need to become more efficient The imperative to stretch resources ever further will make sustainability a central design principle for the winning corporations of the future.

MNCs have impacts on environmental sustainability:

MNCs cause social problems such as pollution and have a responsibility to solve those they have caused and to prevent further social problems All MNCs activities will have social impacts of one sort or another. MNCs cannot escape responsibility for those impacts, whether they are positive, negative, or neutral

ENVIRONMENTAL SUSTAINABILITY CONCERNS

CASE 1: MCDONALDS

McDonald's spend over $1.8 billion every year worldwide on advertising and promotions, trying to cultivate an image of being a CARING' and GREEN' company.
In reality McDonalds is just an MNC who's interest is to make profit McDonald's used beef reared on ex-rainforest land, preventing its regeneration.

McDonald's are the world's largest user of beef. Methane emitted by cattle reared for the beef industry is a major contributor to the 'global warming' crisis.
Modern intensive agriculture is based on the heavy use of chemicals which are damaging to the environment. Every year McDonald's use thousands of tons of unnecessary packaging, most of which ends up littering our streets or polluting the land buried in landfill sites.

ENVIRONMENTAL SUSTAINABILITY CONCERNS

CASE 3: BHOPAL GAS TRAGEDY

NIGHT OF THE TRAGEDY
During the early hours of December 3, 1984 methyl isocyanate gas leaked from a storage tank sited at a pesticide manufacturing facility in Bhopal. As it escaped , the gas drifted across the neighbouring communities with devastating consequences. The cloud of gas enveloped the city like an arc of over 20 square kms before the residents could run away. No stock of antidote was available. The composition of the poisonous cloud was not known. Up to 10,000 people may have died.

CONTRIBUTING FACTORS
Overconfidence in the production technology, leading to the choice of a dangerous process; Overcapacity of the plant, leading to excess storage of a dangerous product; Bad economic performance, leading to disinterest and disinvestment; Bad management, leading to dangerous cost reductions; Insufficient safety training and standards, leading to unskilled behaviour

CONSEQUENCES OF THIS DISASTER

ENVIRONMENTAL
Union Carbide abandoned the factory and left behind large quantities of dangerous poisons. Today, the site is heavily contaminated with mercury and pesticides and other toxic products. Communities in the neighbourhood are consuming heavily contaminated water.

HUMAN

ETHICAL ISSUES
The pesticide factory was built in the midst of densely populated settlements.
UCIL chose to store and produce MIC, one of the most deadly chemicals (permitted exposure levels in USA and Britain are 0.02 parts per million), in an area where nearly 120,000 people lived The MIC plant was not designed to handle a runaway reaction. When the uncontrolled reaction started, MIC was flowing through the scrubber (meant to neutralize MIC emissions) at more than 200 times its designed capacity. As part of UCC's drive to cut costs, the work force in the Bhopal factory was brought down by half from 1980 to 1984. This had serious consequences on safety and maintenance. The size of the work crew for the MIC plant was cut in half from twelve to six workers. The maintenance supervisor position had been eliminated and there was no maintenance supervisor By withholding medical information on the chemicals, it deprived victims of proper medical care.

WHO IS TO BLAME?
We respect that for some people, responsibility for this accident continues to be an unresolved issue. This doesn't change the facts that we inherited no responsibility. Still, some people would have us take action to resolve their concerns. But, we are aware of potentially significant legal risks associated with such actions and we will not compromise our obligation to protect our shareholder interests. William Stavropoulos, CEO DOW

THREE
FUNDAMENTAL REASONS WHY WE ABSOLUTELY DISAGREE TO THE STATEMENT
CORPORATIONS REPUTATION AND ACCOUNTABILITY ISSUE

CORPORATIONS REPUTATION AND ACCOUNTABILITY ISSUE

The concept of Corporations Reputation and Accountability has become increasingly prevalent since its inception in the late 1970s, especially due to globalization.
Realization of organizations impact on society, it is no longer enough for organizations merely to aim for profit as recommended by Milton Friedman (1970) The world are interconnected through various means (News travels fast) Stakeholders are becoming more aware of critical behavior of MNCs and increasingly require organizations to partake in societies in which they operate in and behaving responsibly if they are to prosper or survive In order for corporations to maintain a healthy reputation, accountability, and relationship with their stakeholders, whose opinions towards the organization determine their survival, they must follow the trend.

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>88%
83% 65% 83% 32%

CORPORATIONS REPUTATION AND ACCOUNTABILITY ISSUE

Some Facts

Consumer and employee views toward companies with big CSR campaign
of consumers think companies should try to achieve their business goals while improving society and the environment
of consumers think companies should support charities and nonprofits with financial donations would seriously consider leaving their job if their company harmed the environment of employees would seriously consider leaving their job if their employer used child labor in sweatshop factories would seriously consider leaving their job if their company gave no / little money to charity

CORPORATIONS REPUTATION AND ACCOUNTABILITY ISSUE

CASE 1: APPAREL INDUSTRY IN BANGLADESH

In Bangladesh, 3.5 million workers work in 4,825 garment factories. They produce goods for export to the global market; principally Europe and North America. The Bangladeshi garment industry generates 80% of the countrys total export revenue. But many of the companies that export their goods from Bangladesh have faced reputational damage due to the factory conditions and supply chain sourcing. Most recent example being the November fire at a Bangladeshi factory that killed more than 100 garment workers due to lack of proper fire exits and safety precautions. Labels from clothing giants like Walmart, The Walt Disney Co., were found,amongst others. This leads us to the question who is accountable for the lives that have been lost?

CORPORATIONS REPUTATION AND ACCOUNTABILITY ISSUE

Ethics can be turned into a profitable investment if done correctly

Some companies have already recognized this. Although it can be agreed that many companies are using it as a marketing tool to improve profits and a smokescreen of their business, the society still benefits from it and should take the most from it. Some benefits are:

Extra satisfied customer Attract good employees The Economist states that more than 50% of global business leaders say that good CSR gives better brand reputation

CORPORATIONS REPUTATION AND ACCOUNTABILITY ISSUE

CASE 2: DUSIT THANI HOTEL

Have signs for placing a towel at a certain place if you want them washed Have a water treatment system where it cleans the used water and use it to water the plants Lights and air cons off when leaving the room saves electricity The hotel laundry is heated by a diesel steam boiler using minimal electricity.

LED (light emitting diode) lights

Sustainable sources and packaging is 100% recyclable

THREE
FUNDAMENTAL REASONS WHY WE ABSOLUTELY DISAGREE TO THE STATEMENT
CORPORATE CITIZENSHIPS RESPONSIBILITY

CORPORATE CITIZENSHIPS RESPONSIBILITY

Corporate citizenships responsibility includes the: Economic

Legal
Ethical Philanthropic Expectations

It is the responsibility of a company for the totality of its impact, with a need to embed societys values into its core operations as well as into its treatment of its social and physical environment.

CORPORATE CITIZENSHIPS RESPONSIBILITY

CASE 1: ALCOHOL ADVERTISEMENTS

What are advertisements?

It is a form of communication for marketing and used to encourage, persuade, or manipulate an audience (viewers, readers or listeners; sometimes a specific group) to continue or take some new action, most commonly sales.

- Newspaper/Magazines, Catalogues, Leaflets, Online Advertisements, Circulars

CORPORATE CITIZENSHIPS RESPONSIBILITY

CASE 1: ALCOHOL ADVERTISEMENTS

In India
The Federal Alcohol Administration Act does not require alcohol beverage advertisements to be approved prior to appearing in print or broadcast. However, the companies need to follow few regulations on what to show in the advertisements. The standard is that alcohol advertisements can only be placed in media where 70% of the audience is over the legal drinking age Banned all alcohol advertising on television and print media since Sep 2008 However, the alcohol beverage companies have surrogate campaign for their liquors.

In the USA

CORPORATE CITIZENSHIPS RESPONSIBILITY

CASE 1: ALCOHOL ADVERTISEMENTS

In Thailand

CORPORATE CITIZENSHIPS RESPONSIBILITY

CASE 2: CIGARETTES AND SMUGGLING

Big tobacco firms such as British American Tobacco are smuggling cigarettes across the continent. Documents describe billions of sticks shipped by BAT UK to either BAT Hong Kong (BATHK) directly or via Singapore depending on the brand and place of manufacture.

The initial motivations to do so were to take advantage of a highly lucrative trade, and the belief that competing companies would do so if BAT did not.
BAT did so through SUTL (Singapura United Tobacco Limited) who was an established distribution partner of BAT. SUTL got their products from BAT HK to illegally export it to the China, Thailand, Cambodia, Laos, etc. Even if the government knew BAT was smuggling cigarettes, there were no proof of BAT's direct involvement in smuggling

CORPORATE CITIZENSHIPS RESPONSIBILITY

CASE 2: TAX EVASION BY EXXONMOBIL

Exxon tries to limit the tax pain with the help of 20 wholly owned subsidiaries domiciled in the Bahamas, Bermuda and the Cayman Islands that (legally) shelter the cash flow from operations in the likes of Angola, Azerbaijan and Abu Dhabi. ExxonMobil paid non of the $15 billion in income taxes last year Tens of billions in earnings permanently reinvested overseas.

Exxon Paid Zero U.S. Income Tax In 2009

So, oil companies complain about high taxation, while paying no taxes and receiving corporate welfare from the federal government.

CORPORATE CITIZENSHIPS RESPONSIBILITY

CASE 3: PG&E CASE (ERIN BROCKOVICH)

PG&E case was settled in 1996 for US$333 million, the largest settlement ever paid
in a direct action lawsuit in US history The case alleged contamination of drinking water with hexavalent chromium in the southern California town of Hinkley PG&E used hexavalent chromium to fight corrosion in the cooling tower. The wastewater dissolved the hexavalent chromium from the cooling towers and was discharged to unlined ponds at the site. Some of the wastewater percolated into the groundwater, affecting an area near the plant approximately 2 by 1 miles (3.2 by 1.6 km) PG&E ignored to properly dispose of the contaminated water harming 100 of people because it was expensive

CONCLUSION & RECOMMENDATIONS

CONCLUSION Sweat Shops & Experimental

Inhuman activities

Disorder Fish with tow heads Synthetic Chemicals

1.

Cancer The multinational

corporations Boy born with no eyes is a Business NOT a Social Service.

Disorder

2. So MNCs can be considered ethical if:

Dangerous Landfills Dead Animals due to Toxic Waste Pollution (i) They obey the laws of the countries in which they operate Sick Children due to Global Warming Harmful chemicals Toxic waste

(ii)

They pay their taxes. Its up to government to do the rest.

Obesity Dangerous Food

Habitual Destruction Floods

Sick Animals Factory Farming

CONCLUSION
Simply just obeying the law in countries they operate in is not enough. Corporations are sneaky!! With the law there are always loopholes The law
Can be said to be the minimum acceptable standards of behavior. A good system of law does not incorporate many ethical standards. But law can be derived from ethical standard Law can become ethically corrupt to serve certain groups

CONCLUSION
MNCs have a moral obligation to conduct ethical business practices because: MNCs cause social problems such as pollution and have a responsibility to solve those they have caused and to prevent further social problems All MNCs activities have social impacts of one sort or another. MNCs cannot escape responsibility for those impacts, whether they are positive, negative, or neutral As powerful social actors, MNCs should use their power and resources responsibility in society. Therefore, MNCs rely on the contribution of a much wider set of stakeholders (consumer, suppliers, local communities) in society rather than just shareholders and profits.

RECOMMENDATIONS
Although there are many unanswered ethical dilemmas across the globe, as long as MNCs have ethical mindset for their stakeholders and shareholders, an ethical solution shall arise. By right, every culture, religion, etc. teaches you to be good and differentiate what is right and wrong (if not corrupt or blinded by certain groups)

MNCs should all have:

Code of ethics- Done and approved on global scales which should be updated every 2-3 years. Mission statements that also address ethical standards Monitoring processes should be put in place which can be regulated by a representative of the corporation along with a regulatory agency of that particular country to make sure that certain standards are met. There should be rewards and punishments put in place so that officials and management do not get bribed. It should be taken seriously by top management.

THANK YOU FOR YOUR ATTENTION

QUESTIONS??