“Multinational companies have an obligation to assist the citizens in poverty-stricken countries in which they do business (Knowledge.wharton.upenn.edu, 2018).”
The above quote implies that multinational organizations have the obligatory duty to help citizens in countries struck with poverty where they operate. However, debates have occurred across the globe regarding the obligatory boundary of such organizations in helping the people or the community in need (Hah & Freeman, 2014).
The primary aim of this essay is to present a detailed argument on the above quote. It will begin with the background of the argument followed by the ethical issues surrounding it. Further, the essay will present arguments in favor of the point succeeded by arguments against it.
Multinational organizations earn huge profits doing business in countries with poverty-stricken population. It is therefore logical to assert that these organizations must endeavor to help citizens of these countries. The essay will provide arguments that prove the obligation of multinational organizations towards poverty-stricken nations.
At the World Economic Forum held at Davos, Switzerland in 2005, the topic gained unexpectedly strong support from the members (Knowledge.wharton.upenn.edu, 2018). The topic was directed majorly at corporations the resources of whom are seen as essential to address specific issues like the AIDS crisis in Africa or the lack of vaccines for children across the developing nations. Nien-he-Hsieh, a Wharton professor of legal studies made a good point regarding the social responsibility of multinational corporations. Hsieh put forth two principles – rescue and fairness – that supposedly justify the CSR in certain situations.
Hsieh further points out that manager at MNCs often face the dilemma of either assisting people in distress or maintaining the for-profit nature of the company. In this dilemma, it becomes difficult to heed calls for help without undermining the interest of the business. The professor provided three instances of pharmaceutical companies helping people in trouble across countries. Pfizer distributed Diflucan, the antifungal medicine to HIV/AIDS infected citizens in nations where the prevalence of the illness is one percent or higher. GlaxoSmithKline collaborated with Center for African Family Studies that aimed at increasing involvement of persons with HIV/AIDS in policy discussions at national and international level. Merck donated 50 million dollars through distribution of Cirxivan and Stocrin in Botswana by collaborating with Gates Foundation. These instances comply with the rescue principle discussed by Hsieh. In all these cases, the corporations inflicted upon themselves a minor damage of finance in order to assist the greater community.
The principle of fairness as described by Hsieh does not involve rescuing by corporations. He provided the instance of Ikea’s establishment of hundred “bridge schools” in India enabling children in remote areas to be involved in the mainstream education. The assistance was given because Ikea sources its carpets from India. This instance clearly shows the case of fairness as a principle of corporate social responsibility.
When a company indulges in business with citizens of another country, it focuses mainly on providing services or products in exchange of revenue and profit. The firm does not hold any obligatory duty towards assisting that country’s citizens. In order to make companies accountable to the community where it conducts its business, ethical codes were formulated. Integrity and trust are the two most important ethical issues facing businesses. However, these issues concern the company’s responsibility towards its clients and customers.
Ethical issues concerning the community received prominence mainly during the early years of the 21st century. According to Kennedy, Welch and Monshipouri (2017), multinational corporations function in a global environment that leads to the dramatic increase the ethical dilemmas facing the MNCs. The ethical dilemma involves balancing the need for consistency in CSR globally and ethical standards across organization with the requirement to fulfill demands of diverse stakeholders across the globe. Prior to that, corporations were mostly concerned with their duty towards the shareholders and stakeholders in terms of business. With the advent of globalization, businesses started to expand to areas beyond their own nations. This allowed them to achieve more profit and subsequent successes. However, the increase in opportunities resulted in increased stress on ethical responsibility. Companies, especially the MNCs that had business operations in other countries were deemed as accountable to the people with whom they did business. Chan (2014) point out the relationship between a company’s CSR policy and social change by asking the question whether corporations should serve as agents of social change as well or not. The authors further argue that CSR can be utilized by organizations to ethically and effectively “serve as vehicles of social change”.
In the ever-growing competitive market, corporations have the responsibility to manage their business operations in different parts of the globe successfully. In order to do so, managers look to extract maximum profit from countries where conducting business is relatively easy. Developing nations provide an ideal opportunity for managers to operate business successfully. Maintaining all areas of business and in addition, complying by the CSR policies sometimes becomes difficult for organizations. De Bakker (2016) argues that corporations are only responsible to the stakeholders that comprise shareholders and stakeholders. The responsibility expands only to the citizens of the native country, the author further states. Filatotchev and Stahl (2015) while supporting this view give the justification that in the phase of cutthroat competition and constant demand to slash costs, it is difficult for MNCs to assist people in need. Critics of this view also argue that MNCs take undue advantage of the CSR to project a positive image while it might not be so. In addition, companies earn huge profits through CSR campaigns but hardly contribute to the wellbeing of the larger community. Therefore, to assert that MNCs should have the obligation to help poverty-stricken citizens in countries where they do business would be invalid.
In contrast to this view, many scholars believe that most MNCs genuinely endeavor to help the larger community through its business operations but that too falls under the government’s scanner. Husted, Montiel and Christmann (2016) gives instances of certain cases where the need to provide assistance sometimes clashes with the belief or ritual of a particular community. In developing nations in mostly it has been found that an issue of educational or financial crisis might sometimes lead to conflicts between local communities. In such cases, the assistance provided by the companies might not be taken positively. Further, the opposition parties in some developing nations especially in the South East Asian countries criticize the ruling government for helping big MNCs with a chance to hide their so-called bad reputation through social assistance. In light of all these factors, many argue against the view that MNCs are accountable to help poverty-stricken citizens in developing countries.
Numerous reasons can be presented to speak in favor of the argument but three major reasons could be highlighted specifically.
The first and the most important reason is the financial strength the multinational corporations possess by doing business in developing nations. In many reports published over the years, statistics have shown that companies that operate in developing nations have earned more profit. A case in point here could be given of the largest fast food chain in the world McDonald’s that has earned great revenues from the developing countries. It has close to 3,000 outlets in the South Asian developing countries alone (Statista.com, 2018). Anyways, this instance gives an overall picture of the amount of money MNCs generate from doing business in developing countries.
The second reason is capability of MNCs to generate huge employment opportunities for the youth and thus providing indirect assistance. The argument put forth by Visser and Tolhurst (2017) could be used further to argue in favor of the view. According to the authors, the presence of MNCs in developing countries has brought about increased opportunities for employment to the youth in those countries. This has contributed largely towards reducing poverty of the people. However, the main question is the responsibility of MNCs towards the poor citizens of countries where they have their business.
Lastly, MNCs use the natural and human resources of the country where they conduct business. Thus, they have the moral obligation to help the people of the respective country either financially or in any other way that suits them. Although many argue that developing countries must not allow companies from developed nations to involve into their development matters, it is necessary that the companies at least give something to the people (Aguilera-Caracuel, Guerrero-Villegas & García-Sánchez, 2017). As put forth by Jackson and Rathert (2015) governments of developing nations have the responsibility to channelize the help given by MNCs so that it reaches the needy people.
Conclusion
In the end, it is important to note that both arguments in favor and against the view have logical reasoning. Those who oppose the view state that MNCs are not responsible for the problems caused to the people of developing nations and hence they are not accountable for assisting them. In contrast to this, the supporters of the view argue that since MNCs use up a bulk of the resources meant for the poor citizens and hence they must assist in uplifting their socio-economic status. The essay provided a detailed explanation of the quote and then proceeded towards providing its background. Further, the essay delved upon the ethical issues concerning business in today’s world, in particular the MNCs. Arguments in favor of the view and against it was also detailed through opinions put forth by scholars.
References:
Aguilera-Caracuel, J., Guerrero-Villegas, J., &García-Sánchez, E. (2017). Reputation of multinational companies: Corporate social responsibility and internationalization. European Journal of Management and Business Economics, 26(3), 329-346.
Chan, L. Y. (2014). Corporate social responsibility of multinational corporations.
de Bakker, F. (2016). Managing corporate social responsibility in action: talking, doing and measuring. CRC Press.
Filatotchev, I., & Stahl, G. K. (2015). Towards transnational CSR. Corporate social responsibility approaches and governance solutions for multinational corporations. Organizational Dynamics, 44(2), 121-129.
Gaither, B. M., Austin, L., & Schulz, M. (2018). Delineating CSR and social change: Querying corporations as actors for social good. Public Relations Inquiry, 7(1), 45-61.
Hah, K., & Freeman, S. (2014). Multinational enterprise subsidiaries and their CSR: A conceptual framework of the management of CSR in smaller emerging economies. Journal of business ethics, 122(1), 125-136.
Husted, B. W., Montiel, I., &Christmann, P. (2016). Effects of local legitimacy on certification decisions to global and national CSR standards by multinational subsidiaries and domestic firms. Journal of International Business Studies, 47(3), 382-397.
Jackson, G., &Rathert, N. (2015). Multinational Corporations and CSR: Institutional Perspectives on Private Governance. Research in the Sociology of Organizations.
Kennedy, E. T., Welch, C. E., & Monshipouri, M. (2017). Multinational corporations and the ethics of global responsibility: Problems and possibilities. In Human Rights and Corporations (pp. 123-147). Routledge.
Knowledge.wharton.upenn.edu. (2018). Do Multinational Corporations Have an Ethical Obligation to Assist Those in Need? – [email protected] [email protected] Retrieved 21 April 2018, from https://knowledge.wharton.upenn.edu/article/do-multinational-corporations-have-an-ethical-obligation-to-assist-those-in-need/
Statista.com. (2018). McDonald’s: restaurants by country APMEA 2016 | Statistic. Statista. Retrieved 21 April 2018, from https://www.statista.com/statistics/256049/mcdonalds-restaurants-in-the-emea-region/
Visser, W., &Tolhurst, N. (2017). The world guide to CSR: A country-by-country analysis of corporate sustainability and responsibility. Routledge.
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