As illustrated in the opening profile, multinational corporations have been and-to a lesser extent-continue to be at the center of debate regarding social responsibility, particularly the benefits versus harm wrought by their operations around the world, especially in less developed countries. The criticisms of MNCs have been lessened in recent years by the decreasing economic differences among countries, by the emergence of LDC multinationals, and by the greater emphasis on social responsibility by MNCs. However, concerns still remain about the exploitation of LDCs, fueled by such incidents as the Union Carbide gas leak in Bhopal, India, in December 1984, which killed 2,500 people and injured over 200,000 others. Such incidents raise questions about the use of hazardous technology in developing economies.
Issues of social responsibility continue to center on thepoverty and lack of equal opportunity around the world, the environment, consumer concerns, and employees' safety and welfare. Many argue that, since MNCs operate ina global context, they should use their capital, skills, and power to play a proactive role in handling worldwide social and economic problems and that, at the least, they should be concrned with host-country welfare. Others argue that MNCs already have a positive impact on LDCs by providing managerial training, investment capital, and new technology as well as by creating jobs and improving the infrastructure. Certainly, multinational corporations (now often called transnational corporations [TNCs]) constitute a powerful presence in the world economy and often have a greater capacity than local governments to induce change. The sales, debts, and resources of the largest multinationals exceed the gross national product, the public and private debt, and the resources, respectively, of some nations.4
The concept of international social responsibility includes the expectation that MNCs concern themselves with the social and economic effects of their decisions. The issue is how far that concern should go and what level of planning and control that concern should take. Such dilemmas are common for MNC managers. Del Monte managers, for example, realize that growing pineapples in the rich coastal lands of Kenya brings mixed results there. While badly needed foreign exchange earnings are generated for Kenya, there are adverse effects for poor Kenyans living in the region because less land is available for subsistence agriculture to support them.
Opinions on the level of social responsibility that a domestic firm should demonstrate range from one extreme-the only responsibility of a business is to make a profit, within the confines of the law, in order to produce goods and services and serve its shareholders' interests6-to another extreme-companies should anticipate and try to solve problems in society. In between these extremes are varying positions described as socially reactive, in which companies respond, to some degree of currently prevailing social expectations, to the environmental and social costs of their actions.7 Carroll's classic model illustrates the relationships among the social issues involved, the categories of social responsibilities, and the four levels of the philosophy of reaction, or responsiveness: reaction, defense, accommodation, and proaction.8 Carroll's model is shown in Exhibit 2-1. The levels of philosophy (proaction, accommodation, etc.), at the top, correspond to the levels of social responsibility on the side in the same order as shown (from top to bottom). Thus, usually a company with a proactive philosophy will put in the extra effort to fulfill discretionary responsibilities, whereas a company with a defensive philosophy will not be concerned beyond its legal responsibilities. In applying those dimensions to the typical social issues facing a corporation, the model suggests that a company with a defensive philosophy toward the social issue of discrimination typically meets its legal responsibilities only when compelled to by outside forces, as compared with a company with a proactive philosophy, which would meet its ethical and discretionary responsibilities by setting up positive programs to value diversity in the company. For example, the Denny's chain of restaurants in the United States was forced by lawsuits in 1997-98 to diversify its management structure; a more proactive stance would have called for that change to be made much earlier, perhaps as the growing diversity of its clientele was noted.
The stance toward social responsibility that a firm should take in its international operations, however, is much more complex-ranging perhaps from assuming some responsibility for economic development in a subsidiary's host country to taking an active role in identifying and solving world problems. The increased complexity regarding social responsibility and ethical behavior of firms across borders is brought about by the additional stakeholders in the firm's activities through operating overseas. As illustrated in Exhibit 2-2, managers are faced not only with considering stakeholders in the host country, but also with weighing their rights against the rights of their domestic stakeholders. Most managerial decisions will have a trade-off of the rights of these stakeholders-at least in the short term. For example, a decision to discontinue the use of children in Pakistan to sew soccer balls means the company will pay more for adult employees, and therefore reduce the profitability to its owners. That same decision-while taking a stand for human rights according to the social and ethical expectations in the home country, and bowing to consumers' demands-may mean that those children and their families go hungry or are forced into worse working situations. Another decision to keep jobs at home to satisfy local employees and unions will mean higher prices for consumers and less profit for stakeholders. Moreover, if competitors take their jobs to cheaper overseas factories, then your company may go out of business, which will mean no jobs at all for the domestic employees and a loss for the owners.
With the growing awareness of the world's socioeconomic interdependence, global organizations are beginning to recognize the need to reach a consensus on what should constitute moral and ethical behavior. Some think that such consensus is emerging because of the development of a global corporate culture-an integration
of the business environments in which firms currently operate.9 This integration results from the gradual dissolution of traditional boundaries and from the many intricate interconnections among MNCs, internationally linked securities markets, and communication networks.10
Although it is very difficult to implement a generalized code of morality and ethics in individual countries, such guidelines do provide a basis of judgment regarding specific situations. Bowie uses the term moral universalism to address the need for a moral standard that is accepted by all cultures. He says that this approach to doing business across cultures is far preferable to other approaches, such as ethnocentrism or ethical relativism. With an ethnocentric approach, a company applies the morality used in its home country, regardless of the host country's system of ethics.
A company subscribing to ethical relativism, on the other hand, simply adopts the local moral code in whatever country it is operating. With this approach, companies run into value conflicts, such as continuing to do business in China despite home-country objections to China's continued violation of human rights. In addition, public pressure in the home country often forces the MNC to act in accordance with ethnocentric value systems anyway. In one instance, public outcry in the United States and most of the world resulted in major companies (IBM, General Motors, Coca-Cola, and Eastman Kodak) either selling or discontinuing their operations in South Africa during the 1980s to protest that country's apartheid policies. More recently, the FDA has been pressuring U.S. manufacturers of silicone-filled breast implants (prohibited in the United States for cosmetic surgery because of health hazards) to adopt a voluntary moratorium on exports. While Dow Corning has ceased its foreign sales-citing its responsibility to apply the same standards internationally as it does domestically-the other three major manufacturers continue to export the implants, often from their factories in other countries.
The difficulty, even in adopting a stance of moral universalism, is in deciding faced where to draw the line. Which kinds of conflicts of values, asks Wicks, are con veigh versation stoppers or cooperation enders? Individual managers must at some rial point decide, based on their own morality, when they feel a situation is simply not right and withdraw their involvement.
There are practical limitations on our ability to act in the modern world,. . . but a systematic infringement of basic personal rights is generally grounds for ending cooperation. Less blatant violations, or practices which are not abhorrent to our basic values, are treated as items which are negotiable
The Social Responsibility of MNCs : Economic article from Global Management Catagory The Social Responsibility of MNCs
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