With the incessant globalization, multinational corporations (MNCs) continue to expand to numerous countries, and consequently acquire significant control and influence in the host countries. According to Ast (2018), about 63,000 multinational companies with more than 690,000 foreign subsidiaries made up 25% of world production by the year 2,000. Most of these corporations have increasingly become powerful, leading to some countries unable to regulate them. It is also important to note that these corporations operate in different countries with diverse modes of operations, rules and systems of governance. For instance, while the United States and most European countries are democratic, some countries in Asia such as China practice communism, while others in developing countries have dictatorship regime. The most prominent question relates to whether these MNCs have the moral responsibility to take active involvement in shaping the political discourse in host countries, especially those which violate human rights. Kline’s Doing business in South Africa: Seeking ethical parameters for business and governmental responsibilities highlights various ethical issues and dilemmas for MNCS conducting business in countries with oppressive regimes. The objective of this paper is to highlight several instances of ethical issues in South Africa’s case study and analyze them.
Investment in Countries with Human Rights Violations
The first instance of an ethical issue concerns whether MNCs should invest in countries with human rights violations. From the case study, ethical issues began to emerge in South Africa during the 1960s and 1970s with the expansion of foreign direct investment in the country. Direct investment in the country by various U.S and European countries meant more taxes to the government, which was oppressing its people. The argument is that with more direct investment, South Africa’s economy would boom, and the oppressive government would even use some of its financial muscles to continue edging out the disadvantaged groups, mainly the black South African majorities. Additionally, mostly the white minorities were still the only group that would benefit immensely from the investments. The image portrayed in this case was that MNCs were sustaining a system that discriminated South Africans on the basis of their color or race. According to Yiannaros and Nyombi (2016), multinationals can take part in alleged human rights violations indirectly and directly, especially when they delve in making profits at the expense of disadvantaged groups.
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In the case of South Africa, when MNCS began to invest in the country during apartheid, they were helping perpetuate the system directly and indirectly because they had fewer black employees who earned significantly lower wages than the white employees. Apartheid was a system that gave special privileges to the whites and forbade blacks from using similar facilities and resources with the whites. For instance, black people had separate schools and were not allowed to go to beaches used by the whites. This system was also enforced by the government. Therefore, essentially, supporting the government at the time was akin to helping it acquire resources to enforce its racist and discriminatory policies to the letter. Nevertheless, this instance also creates an ethical dilemma; whether MNCs need to solely focus on the business aspect or become proactive in bigger issues affecting host countries.
MNCs Involvement in Political Action
From the South African case, another important ethical issue that arises concerns whether MNCs have a role in using their influence to agitate for progressive political action. While the primary role of MNCs is to explore opportunities in different countries and invest, it turns out they also have a responsibility to influence policies and political agenda especially to promote equality and progressiveness. It would be imprudent for MNCs in South Africa to be oblivious to the plight of the majority black South Africans, whose voices had been silenced. In the modern world MNCs are even taking radical steps to address some political issues. For instance, in the just concluded U.S. and Uganda presidential elections, Facebook banned President Trump’s Facebook account and suspended those of Ugandan officials who were thought to be infringing against the rights of their citizens. While such a move has been criticized as tantamount to interfering into countries’ internal issues, it also shows MNCs moral position on important political issues. Nevertheless, some MNCs have also been criticized for showing preferential treatment in their bid to expand their operations to significant markets. For instance, quite recently, Google obliged to the Chinese government’s request to censor keywords like Dalai Lama and Tiananmen Square in its search engine. In defense of the decision, Google’s CEO Eric Schmidt stated that it would be perceived as arrogant to enter a country where the company was starting its operations and tell the country how to govern itself (Ast, 2018).
Google’s action, for instance, presents a case of conflict of interests; while the public, and in this case, most of the global audience from democratic countries wants China to be compelled to uphold human rights, Google, a large corporation, eyes China as a significant market for its products. China has a large population, which represents a lucrative market for many MNCs. An ethical question that arises concerns whether companies need to uphold integrity regardless of economic consequences. Google’s acceptance to accept China’s request could be compared to some companies’ refusal to withdraw from South Africa or compel the government to reform its political system during the apartheid regime. Additionally, MNCs seem to have limited ability when enforcing ethical policies in some countries compared to others. Multinational business entities seem to enforce ethical policies only selectively depending on their interests.
MNCs Engagement with Countries with Lower Ethical Standards
South Africa had lower ethical standards in the case study during the apartheid regime, especially in relation to diversity in its workforce structure and compensation. In such scenarios, a question that can be asked is, should MNCs apply standards of the host countries or their home countries? During the apartheid regime in South Africa, most countries in Africa had gained independence and initiated reforms that promoted diversity and inclusivity. Europe and the United States were also rapidly becoming progressive societies in areas of diversity and equal rights and opportunities for people of different racial backgrounds. However, South Africa still had not initiated progressive measures for its African population, and much of the pressure was coming from outside. The fact the Reverend Sullivan, an African American, was on the forefront of agitating for the South African case shows that conditions in the United States had improved for the minority communities while it was not the case with South Africa. Nevertheless, MNCs have the responsibility to ensure that they adhere to high ethical standards even when there is abuse in host countries.
Lower ethical standards in aspects such as oppression of particular groups, discrimination in the workplace, use of child labor, and other vices should not be condoned by MNCs. While MNCs should not necessarily interfere with the internal affairs of countries, addressing such standards should begin internally (Olaru & Gurgu, 2019). MNCs should lead by example by hiring on merit other than through discrimination, pay equal wages for equal work done, and promote diversity and inclusivity in the workplace. MNCs can also engage in corporate social responsibility projects such as promoting education for disadvantaged groups, as well as helping to provide some social amenities to communities. Therefore, lower ethical standards in host countries especially in developing countries should not be the basis for complacency and abuse. However, some MNCs have continuously taken advantage of the laxity of some countries and the lower ethical standards to get cheap labor, perpetuate corruption, and exploit the local citizens.
Taking Advantage of Lack of Standard Regulations
Some MNCs take advantage of the lack of standard regulations to engage in unethical practices. For example in the case study of South Africa, some companies which publicly announced to have withdrawn from the country to compel the government to initiate some political reforms simply transferred their ownership to their associates. For instance, General Motors struck a deal with Delta Motors, who still had a majority white employees and managers. Some other U.S multinationals with subsidiaries in Europe still sold their products to South Africa because European countries did not have tough policies against South Africa. Such scenarios present the case of companies using loopholes to try and make profit while duping people to believe they have upheld ethical standards. Many companies still use loopholes to avoid paying taxes even in the contemporary times or read public statements portraying a positive image but still use underhand methods to survive. Clearly, using loopholes to avoid complying to regulations is an ethical issue, and it shows that most MNCs are always trying to satisfy their avaricious interests rather than upholding transparency and the rule of law (Olaru & Gurgu, 2019).
Responsibility for Actions of Partners and Third Parties
The Polaroid controversy in 1970 in South Africa presents another ethical instance; the responsibilities for companies to monitor and even take responsibility for actions of partners and third parties. A distributor in this case, was supplying Polaroid’s cameras to the government, which used the cameras to take ID pictures for surveillance of South Africa’s dissidents. Although Polaroid took some measures such as promoting inclusivity and diversity in its workforce, they did not stop the distributor from supplying the cameras to the government until later when criticism had mounted. Such an action shows that MNCs have the ethical and moral responsibility to control and regulate the actions of their partners and third parties. For instance Apple Inc. has an ethical code that applies to all the company’s distributors and suppliers and forbids them from engaging in actions such as using child labor, discrimination on the basis of sex or gender, unfair working terms, and involvement in environmental degradation activities (Torres et al., 2012). Violation of these terms stipulated under the ethical code usually results into Apple’s termination of its engagement with the involved partner(s).
Conclusion
In conclusion, Kline’s Doing business in South Africa: Seeking ethical parameters for business and governmental responsibilities article provides numerous ethical instances that MNCs face particularly in host countries. While MNCs prominent strategy is to evaluate diverse markets and expand, they also face different ethical dilemmas to address. Particularly, MNCs are usually under massive pressure to use their influence to compel oppressive regimes to initiate progressive reforms. While critics argue that MNCs actions could amount to interference with internal affairs of countries, it is also essential for MNCs to uphold high ethical standards by promoting internal equality and better working conditions as well as using their influence to compel oppressive regimes to respect human rights.
References
Ast, F. (2018). The moral dilemmas of global business. In Globalization . IntechOpen. https://www.intechopen.com/books/globalization/the-moral-dilemmas-of-global-business
Kline, J. M. (1991). Doing business in South Africa: Seeking ethical parameters for business and government responsibilities . Georgetown University. School of Foreign Service. Institute for the Study of Diplomacy.
Olaru, S. D., & Gurgu, E. (2019). Ethics and integrity in multinational companies. The Review of International Comparative Management, The Bucharest Academy of Economic Studies, The Elitist Society of Management from Romania, Excellence Romanian Center for Comparative Management Studies , 50 , 10. https://www.researchgate.net/publication/46567681_Ethics_and_integrity_in_multinational_companies/link/53eb444c0cf2fb1b9b6b076a/download
Torres, C. A. C., Garcia-French, M., Hordijk, R., & Nguyen, K. (2012). Four case studies on corporate social responsibility: Does conflict affect a company's corporate social responsibility policy. Utrecht L. Rev. , 8 , 51.
Yiannaros, A. C., & Nyombi, C. (2016). Corporate personality, human rights and multinational corporations. International Company and Commercial Law Review . https://www.researchgate.net/publication/305400083_Corporate_personality_human_rights_and_multinational_corporations
