Multinational Corporations Essay, Research Paper

Corporate obligations when operating in Third World countries

Moral challenges for business in the United States are difficult enough when you consider the balancing profit interests against the needs of consumers, employees, governments and special interest groups. Multinational corporations mainly refer to large corporations based in Western Europe, North America, and Japan who operate manufacturing and other business facilities in underdeveloped countries.These large global companies exert enormous economic, technological, political, environmental, and cultural power around the world. The manufacturing company with the largest assets in the year 1994 was General Motors with $198.5 billion in total assets.This figure is larger than the gross domestic product of all but a dozen or so countries of the world. The problems arise when these corporations begin to take advantage of the lax moral expectations of these lesser developed countries. Multinational Corporations are often accused of exploiting resources and taking advantage of labor forces in lesser developed countries. Chemical industries take advantage of lax safety regulations, which can result in a disaster. Mining companies exploit the wealth of the country for a few rich land owners. Financial institutions rarely hire local people, yet they benefit by bringing in local money. Agriculture businesses use the best land to grow crops for export, which reduces the amount of land the locals can use to grow their own crops. The manufacturing and service industries have introduced poverty to many areas by paying wages that don’t even meet a persons “basic needs”.

In 1996 talk show host Kathie Lee Gifford was accused of promoting the use of sweatshops in Honduras with a clothing line she endorsed sold by Wal-Mart. Charges that Gifford supported the abuse of foreign workers led to tearful denials on her television program. She said she had no idea her clothing line was made by sweatshop workers in Honduras. Her Husband Frank Gifford, was seen handing out cash to workers in New York City’s garment district. The handouts were meant to show Gifford’s concern and compassion for textile workers around the world. Gifford was given a promise by Wal-Mart that they would hire human rights monitors at the factories in Honduras. Did conditions get better? According to the National Labor Committee, Wal-Marts Solution was to close the factory in Honduras and move it to Nicaragua. A investigative report by the Cleveland Free Times discovered that Wal-Mart, J.C. Penney and Kmart operating in Nicaragua, were paying workers a base wage of 15 cents an hour, compared to the rate of 31 cents an hour the workers received in the plant in Honduras. It was also documented that workers were exposed to toxic chemicals (bleaches, solvents, and dyes). This scandal led the media to investigate other celebrities who endorse product lines for companies who mistreat their overseas labor force. Michael Jordan’s ties to Nike and allegations of human rights abuses by Nike subcontractors in Indonesia, China and Vietnam is another case in point. Workers in these countries make only China $1.75, Vietnam $1.60 and Indonesia $2.46 per day. Numerous human rights abuses have also been reported at these locations. The average Nike pair of shoes costs $63. It would take a Vietnamese worker 40 days to make enough money to buy the shoes. This assumes they don’t have to spend their money on anything else. Michael Jordan receives $20 million dollars a year to endorse Nike wear. Monica Seles and Tiger Woods receive over $40 million combined. Nike’s marketing and promotion budget for 1997 was $978 million dollars. When a pair of Nike’s is made, only one or two dollars is set aside to pay for labor expenses. Because Nike spends so little on labor, it takes in huge profits.

Another case illustrating exploitation in a third world countries involves the tobacco industry. Because of worldwide health concerns tobacco companies have decreased the tar levels in developed countries. At the same time they have increased them in third world countries. Almost all developed countries have tobacco legislation, and less than half the third world countries do, which is partly the result of cigarette companies heavy lobbying efforts. In Argentine cigarette companies purchase 20 % of all advertising time. Globally cigarette consumption is growing faster than the population. U.S. tobacco companies create strong incentives to local farmers in less developed countries to grow tobacco instead of crops used for domestic food production. The offer farmers startup cost, underwritten loans, and they guarantee purchase of the crop.

In the case of one American textile company operating in Mexico was charged with misconduct trying to do the right thing. It pays its workers the same wages as other local firms do. Critics in the United States charged that the American company with exploiting its Mexican labor force. In response to this charge, the company raised the wages of the employees. The surrounding local firms then accused the company of enticing away their best workers, creating unrest in the industry, and forcing higher wages on the local companies to drive them out of business.

Driven by the profit motive, Multinational corporations will always be tempted to adopt the least costly moral principles that a given cultural context will allow. Corporations are continually seeking sources of competitive advantage. American Multinationals have a good deal of power and can influence a poor country’s decisions in various ways. Multinational companies should have a responsibility to promote the protection of human rights. In an increasingly globalized world economy, their decisions and actions impact directly the government policy and the realization of human rights. There is a universal Declaration of Human Rights that calls on “every individual and every organ of society” to play its part in securing universal observance of human rights. All companies should have some kind of responsibility to respect human rights in their on operations. Their employees and other people who are affected by a companies actions are entitled to rights such as freedom discrimnination, the right to life and security, freedom from slavery, freedom of association, including the right to form trade unions, and fair working conditions.