Ethics in Global Business 4.4 Global industries and companies (multinational corporations)

What you need to know a) Stakeholder conflicts b) Pay and working conditions c) Environmental considerations: emissions waste disposal d) Supply chain considerations: exploitation of labour child labour e) Marketing considerations: misleading product labelling inappropriate promotional activities

Moral guidelines which govern acceptable behaviour What Are “ethics”? Moral guidelines which govern acceptable behaviour

Ethical behaviour is doing what is morally right

Should MNCs Support the Shareholder Concept “…the only one responsibility of business towards the society is the maximisation of profits to the shareholders, within the legal framework and the ethical custom of the country” Milton Friedman

Acting Only in the Interests of Shareholders Only concern is to create shareholder wealth MNCs should not be restricted in terms of how they act Not the job of MNCs to decide what is best for society Around 1,300 companies control 80 per cent of global operating revenues, with 40 per cent of this controlled by only 147 organisations

Benefits and drawbacks of behaving ethically Higher revenues – demand from positive consumer support Improved brand and business awareness and recognition Better employee motivation and recruitment New sources of finance – e.g. ethical investors Possible Drawbacks Higher costs – e.g. sourcing from Fairtrade suppliers rather than lowest price Higher overheads – e.g. training & communication of ethical policy A danger of building up false expectations

Common Ethical Issues with MNCs Pay & Working Conditions Environmental Impact Supply Chain Management Marketing

MNCs, Ethics, Pay & Rewards The ways that employees and management are rewarded can create significant ethical issues The strong “bonus culture” in financial services is a good example of this Driven by the incentive of large bonuses, do management cut corners or break the rules? “Fat cats” – is it ethical that CEOs should be paid hundreds of more times better than the average for employees in their businesses?

Exploring the Alleged Use of Sweatshop & Migrant Labour by MNCs

Exploring the Damaging Impact of MNCs on the Environment

Some Examples of how Multinationals are Responding Positively

Global Business Ethics and the Supply Chain A multinational business cannot claim to be ethical firm if it ignores unethical practices by its suppliers – e.g. Use of child labour and forced labour Production in sweatshops Violation of the basic rights of workers Ignoring health, safety and environmental standards An ethical business has to be concerned with the behaviour of all businesses that operate in the supply chain – i.e. Suppliers Contractors Distributors Sales agents

An example of an unethical supply chain?

Brands that have been caught out using child labour or sweatshops

Some Multinationals Who Have Raised Ethical Issues with their Marketing