Informative Essay Example on Multinational Corporations and its Behavioral Issues and Ethics

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Vanderbilt University
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Ethics has been defined as a system of moral principles which dictate how people make their decisions in a working environment ("BBC, 2017). Behavioral values are important in that they guide individuals and corporations on how to lead their lives and allow them to be cautious on how they treat and interact with other people and also what impact their decisions have on the lives of those directly or indirectly affected. In the article, "Importance of Ethics," (2017) suggests that employing the right code of ethics in management and businesses; organizations can enjoy certain benefits such as credibility and respect from customers and peers, real customer loyalty, long-term gains and improves decision making. For any management to achieve success, he must ensure that all employees follow the ethical rules and obligations in the workplace. Good ethics and behavior in the workplace are important aspects that assist the company in upgrading their performance, creating moral to the workers and the guidelines they will use in achieving organizational goals. Some of the best work ethics in a working environment include accountability for work done, integrity, acceptable behavior, commitment, and teamwork. These qualities are crucial to the enterprise as it shows employees necessary skills and a strong effort in performing their duties to achieve success.

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Purpose of Multinational Corporations

Due to the emergence of globalization today, multinational corporations have been formed to control and monitor the bordering trading activities within the border to ensure that the products exported or imported are of high quality. Before the 1970s, most countries had expressed their skepticism when it comes matters regarding foreign direct investments (FDI) in entities such as MNC. They formed overseas offices in developing nations and manufacturing firms in the well-developed economy in the smooth production and distribution of products to the market within a given period. The aim of such corporations is to reduce the proximity of raw materials and reduce labor costs. The foreign direct investment (FDI) through the MNC despite having limited liability in fulfilling their duties as per the national government requirement, they still act as the primary source of funds for international trading. Multinational Corporations (MNCs) have for quite some time existed and operated in less developed countries with their impact questioned from time to time. MNCs have positively affected the lives of the citizens in the third world countries they operate through the provision of jobs and also higher income to their workers ("Impact Of Multinational Corporations On Developing Countries," 2017). In some instances, they have opened up the areas to infrastructure and growth by attracting investors ("Multinational Corporations in the Third World: Predators or Allies in Economic Development? Acton Institute", 2017). However, it is worth to note with the principal interest that these gains brought by MNCs have come at a cost, a moral and ethical cost.

By including multinationals in economic plans, it is important for most countries because their presence usually translates to greater investment and revenue for the host nation. For example, Brazil realized about $64 billion in revenues earned from such companies. In the pursuit of profits by these MNCs, ethics have not been followed, leading to violation of human rights by these corporations as well as an endangerment of human lives in the process. One of the cases that portray this ethical violation concerns Nestle, the largest food company. In the 1970s, it was accused of getting mothers from third world countries hooked on baby formula (Krasny, 2017). It should be noted that infant formula is more expensive and less nutritious than a mothers milk to the baby. The result of the uptake in baby formula was to cause a rise in the profits of the company at the expense of the developing children in third world countries. Another major incident was in 1984 in Bhopal, India, where one of the largest disasters happened. Union Carbide India Limited was a pesticide manufacturing company whose gas leaked exposing 500,000 people to toxic gasses and chemicals (Shrivastava, 1987). Dhara, & Dhara, (2002) posit that this disaster led to the deaths of 2,259 people in India. The management of the company cries foul play and sabotage, but the people of India and their government claim that slack management was to blame for the disaster.These are just but a few examples of unethical behavior by MNCs in less developed countries and their lack of care for the lives or safety of the citizens of the countries they operate. The charge that multinational corporations compete unfairly in less developed countries to the detriment of the host country stands and holds merit.

The Multinational corporations(MNC), have been widely used by leaders in allocating firms that have greater involvement in engaging in foreign direct investment and international business. The role of the MNC is controlling the value-added activities in different countries through a decentralized system from the regional headquarters of the corporation. In the developing countries, investments have significantly improved due to the increased globalization and identification of new larger markets for the firms products. Current statistics shows that developing countries such as Thailand and Singapore have the most multinational investment indicating higher growth potentiality in their economic growth. In international trade, the core countries import their raw materials from the firm and export them back to enhance the technology used in the production through the exchange in the market. The new technology is widely used by the corporation to improve on the commodity efficiency and production of natural resources by the enterprise further creating employment to the local individuals. The use of skilled labor is a requirement for a company to be a part of the MNC as many commodities must be manufactured to increase the domestic savings and rates upon selling of the products to buyers. The MNC is responsible in the contribution of national planning matters such as economic policies and trade among other important business activities done within the society for economic development. The aim of maximizing profits and regulate their wealth through international law that allows them to practice their jurisdictional rights.

According to Backer (2015), the MNC was an adaptable entity that was formed to benefit from the neo-liberal economic doctrine acting as the home and host in the regional trading and the transaction of business activities. It uses a decentralized form to make a neutral decision and have double standards in promoting trade to take place internationally. The organizations such as the World Trade Organization have allowed the MNC to acquire a position that it will use in influencing the national government to take part in social agendas of the country. In turn, it will make the country more competitive in the international business market, though in the long-run there society might experience a reduction in the socioeconomic reforms of trading activities within the region. Furthermore, due to the influential and powerful position of this corporation in the international community, they have the mandate undermine or promoted economic and social rights of sellers or buyers in the market depending on the financial status of the society. The MNC is considered as having unfair commercial trade regulations, especially to the public such as consumers and shareholders as their increasing involvement in public activities reduces environmental operations due to the deregulation few policies are given to the government. Conversely, the development of export promotion strategy that created the labor supply to be inelastic has made the MNC have more bargaining power in the society over choices they make and determining the wages of the workers.It challenged the labor practices mostly in the developing countries as their export industries were integrated and channeled to one supply chain in the economy leading to decreased job security and wages in these developing countries. Additionally, the MNC has prevented some of the less developed countries from exercising an equitable d just development on their human rights by ignoring the social needs of the country they are conducting their operations. It led to insufficient freight investment, technology less specialization in the worker's activities. The MNC also developed accounting teams that were assigned the duty of conducting the inflows and outflows of cash within the economy to reduce level of tax burden to the local communities in the developing world.

Critiques on Responsibilities of the Multinational Corporations

Furthermore, as stated by Crane & Matten (2016), there has been several critiques by some companies on the responsibilities of the multinational corporations accusing them of biased labor laws in developing nations and continual of unethical labor-environmental practices. For example, consumption of national resources, waste material disposal and business practice adoption creating difficult for independent companies to compete in the market. Further, the argument was that the corporations overseas in most cases, they paid excess wages on total income for the employees working with the firms of host nations. Additionally, their managers reported that they had to seek for lowest cost of production from the corporation a method that made their companies manufacture uneconomical products to their customers due to the legal restrictions. However, it was evident that the MNC also exploit the marginalized societies a factor that led some of the companies to demonstrate, boycott and conduct a protest on the corporation biased restrictions on trading laws and operations. Later, the anti-global activists helped in solving the matter by b ruling that all the firms design their aggressive, labor and environmental policies. It was to enhance the security and safety of the global business environment through economic incentives and the creation of political ties between the trading nations.

On the other hand, multinational corporation can also affect the developing countries in a negative way. For example, imposing a stiff competition to local companies forcing them to close some of their business branches due to the political and economic power that the corporation has in ruling the country. They perform such an act through the local government by having an additional advantage of local companies by offering less bureaucracy leadership, lower taxation on products to attract foreign investment among others. The practice in the long run led to unemployment, unfair business competition and development of monopoly firms such as the Oil company. They are also associated with bribery and corporate corruption because of the higher political influence they receive from the local government.

However, there has been a lot of criticism that trading countries should be left to pass through an independent process of cultural evolution that will ensure the rules and beliefs of one country are not applied to other nations within the global market. Due to the globalized economy and trading operations, the multinational corporations face a lot of challenges because of the difference in local cultures and moral views for each nation must employ personnel in their local countries. The reason for this idea is for interpreting and translating local custom on their future expectations of products they produce to satisfy the needs of the society. Modern globalization is important as it transforms the developing countries have more capability of improving their efficiency in the manufacturing industry (Hood & Birkinshaw, 2016).

It also creates new opp...

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