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Wednesday, May 9, 2012

Business Ethics

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Business Ethics


Essay one


Genadijs Cvetkovs


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November 00.


Globalisations integration and its effects on developing countries.


Globalisation is one of the most debated issues of the day. It is everywhere on TV, on websites, learning journals, labour meeting rooms and in organizations boardrooms. Remarkably, for so widely a used term, there does not appear to have a precisely agreed definition. One of the frequently used definitions is that globalisation refers to the growing integration of societies across the world, it has taken many forms and it is difficult to discuss it in a general way. However most of the times the term is used is to refer to the economic integration of the world markets. Therefore our main discussion will be on the economic integration of the world and what are the positive and negative effects of globalisation. We will also consider the dilemmas involved, supported by examples and what happens when globalisation is implemented to different countries.


Palast (00) argues that globalisation impoverishes the world’s poor, enriching the rich and devastating the environment, while few supporters see it as a fast way to universal peace and prosperity. Most economists would agree that globalisation is inevitable and is the most likely key to continued growth; the process of shifting and resources to meet new opportunities takes time and is costly. It could be said that greater openness of markets will lead to greater manufacturing employment in developed countries and a better standard of living.


Many developed countries started to liberalise in the 180’s following the imposition of World Bank and IMF structural adjustment policies. Advocates would argue that this liberalisation would help economic growth, which will reduce poverty and that countries with more open markets will have experienced higher growth rates that those with protectionist policies [Ades &Glaeser 1]. As we can see this is clearly demonstrated in table below.





However Manenji (18) argues that unregulated free trade, driven solely by market forces, in that while it has raised standards of living for many people, especially in developed countries, it has not done so for the poorest. After 0 years of trade liberalisation, poverty in many countries has not fallen. For example in agriculture where the poorest make most of their living, food imports are partly responsible for destruction of small farmers, for example Malawi which produces rice which it sold in most South African countries now has to contend with rice which is sold at much cheaper rates, which is imported from Asia.


International trade in foodstuffs is increasing much faster than food production; it took off as a result of trade liberalisation under the IMF, WTO and World Bank. As a consequence more land in developing countries is being used by large multinational companies to grow food for the export market, which has implications for food production for local people. The price of many agricultural commodities, such as coffee and tea are at near all-time lows. This has a large detrimental impact on poor farmers, for the reason that buying imported food prices are so low that there is no point to grow them. Therefore some of the farmers are now abandoning coffee and tea growing in favour of drug cultivation and these drugs are being illegally transported to the West and ruining the lives of thousands of people, which causes the western governments to spend vast amount of money to combat this problem and accusing developing countries of immoral behaviour by not doing enough to prevent drug cultivation. Within the developed world we can say that the cultivation of drug producing plants such as the opium poppy is not an acceptable thing to do, yet criticising those countries of immoral behaviour and punishing them financially and politically will not solve the existing problem. Therefore the Governments must think through differences in social circumstances, strategy and why it has happened and get to the root of the problem, when this will be done it will be clear to see that there is nothing to do with morals but with circumstances those countries are being pushed into. For organisations and countries not tackling the problems in democratic ways is simply accessing their choice for one set of actions over another set of actions. The fact that different parts of the world have different moral practices shows neither that they are all equally good nor that any of them is necessarily immoral [De George, 178]. There is nothing wrong with that, but there is nothing right with that either.


There have been many cases where multinational organizations have locate their factories in countries where wages are low, with weak environmental protection laws, were people work long hours and receive low pay, to make some of the world’s most expensive consumer goods. This kind of behaviour from multinational firms is not as common these days as it use to be, because of the fact that moral disapproval of the company activities can convert into political pressures, legal controls and customer boycotts. Resulting in an attitude that will harm the company’s image [Chryssides 15] therefore we could say that worldwide media has given greater importance for businesses to be more ethical. A good example of this is Shell. In15 Shell suffered a blow to its reputation by attempting to dispose of the Brent Spar oilrig in the North Sea because of this action, the company’s shares plummeted, and consumers were boycotting the organization. Since then Shell has rewritten its business ethics, creating complex system to implement them and working harder to improve its relations with NGOs. More and more resources are being invested in companies according to their moral criteria. These include the structure of business activities, environmental performance and product portfolio and business dealings with developing countries since multinationals have great influence on socio-economic conditions in their countries. Unfortunately some of the firms get negative publicity because they are perceived as bad industries and not getting positive publicity even though they have effective corporate business ethics.


On the positive side ethical behaviour not only can avoid bad publicity but it can even lead to consumer support, which will benefit the company’s image e.g. Virgin, Body Shop. It has been proven that in the long run ‘ethics pays’ and there is little evidence that ethics will have influence on firms wealth.


Recent research done by OECD (1) found little evidence that multinational organizations place their factories on purpose in the countries with week social policies in order to take greater advantage of their business environment, for most large corporations the good context for doing business, is one where democracy and the rule of law provide economic and social stability. This could be explained that business could not function in the long term in an environment with poor ethical constraints. If fraud and dishonesty would be the norm rather than the exception in business dealings, then those dealings would eventually become impossible to continue and for most of businesses that would not be worth in engaging. Plato supports this argument by saying that “ there must be a measure of trust, even between thieves.”


In recent years globalisation received major criticism on issues such as labour standards and fair wage, while labour standards in developing countries are still lower then in the industrialized countries, they are rising. Moore (1) points out that multinational organisations pay higher wages than local firms, create jobs at a faster rate and spend more on R&D. Wages will continue to differ between rich and poor countries as this is influenced by factors, such as the level of qualifications of workers and their relative productivity. Chryssides (15) notes that the levels of supply and demand set the levels of pay, although it seems low for the efforts of the work force in developing countries. Dusty Kidd CEO of Nike argues that by paying too high wages to workers by their standards can have big impact on social environment, for example Nike pays more to their workers in Vietnam than their Government pays to the doctors, therefore its been noted that doctors leave their practice to work for Nike. To prevent this happening most of the corporations set wages above minimum wage and do increase them on yearly basis, however if the country does not have a minimum wage law then its been noted that most of the organizations pay slightly higher wage then the industry they are operating in. which is a good strategy to avoid negative publicity that the company is underpaying its employees.


Also to increase wages generously could well be devastating in commercial terms, any company who would do this would suffer a cost disadvantage to the competitor company which would not increase the wages of their workers this would lead to fall in sales and profits. There is a limit to the degree to which morality and commercial self-interest can meet. In one way self-interest is integral to morality; in another, wholly antithetical [Chryssides & Kaler, 15].


By negative criticism received in the past on companies unethical behaviour organizations have begun to see as part of their mission, to raise standards, not just within the company but also in the countries where they work. However Friedman (170) argues that business social responsibility has to be in the shareholders long-term interests, which in other words is to get as much money as possible for their shares and by taking on social responsibilities there can only be financial loss, due to the fact that someone must pay for it, either shareholders or customers, by paying higher prices. This argument is supported by Smith (1776) that common good is best served by people pursuing their own interests rather by the doing good, which social responsibilities require. Still we could argue that what shareholders want is not in their best interests and is that really true what they want? Chryssides (15) argues that shareholders interests could be best served by living in a society, which has desirable social ends like reduction of unemployment, pollution and discrimination even though it means reduction in their profits. Then again we could say that business people are not specialists to decide on social needs and priorities for the reason that when they decide to impose their preferences, that this can have bad consequences on society in whole.


Unfortunately this is happening to the extent that multinational companies have been able to finance elections and have their candidates elected, they have been able to penetrate very powerfully into the Western political system. As a result economic globalisation is criticised in that it lacks an ethical framework and political control to ensure that economic performance is subordinated to essential human and social needs, because of this many of the developing countries have shown negative effects and attitude towards globalisation for example rich countries want the developing countries to open up their markets by lowering import tariffs. By doing this developing countries fear that quality products at cheaper rates will make their fragile industries go out of business. In Tanzania the leather and textile industry have almost collapsed affecting lots of peoples lives in negative way. We could argue and say this is what happens in a global economy and that countries should concentrate in producing things, which they are good at and that every country has the same opportunities. Is this really true? Not necessarily considering that the West have superior technology, better skills and more resources to spend, also it would be hard to say that every country has the same opportunities. Fair opportunities would be if all countries or organizations have equally good technology and skills. Therefore it could be said that commercial self-interest for multinational firms can extend beyond the common good that ‘good business’ not always follow ‘good ethics’. Better it would be said, if these large organizations would work together with foreign infant industries and invest in them and raise standards that way. Good example is the Japanese firms who work closely together with other organisations to improve productivity and quality and help each other out in difficult times.


While developing countries allowed in more food and manufacturing imports the West have not done so. For example western farmers receive large handouts in subsidies and increasing their share of global markets at the expense of world’s poor where as the West is slow in lowering their quotas on imports. Legrain (1) points out that rich countries need to return the compliment and open up their markets so poor countries can sell their goods to the West too. More needs to be done to restructure liberalization, so that a larger share of population benefits from the process. It is imperative that developments of globalisation are measured not just in profits but also in social quality, for example better education and health.


The best way to deal with globalisation is to be honest about it. Globalisation brings opportunities but it also brings risks, even when poverty falling overall there can be regional increases about which society needs to be concentred. Especially for the developing countries, with their potential lack of recourses for up to date legislation, it is important to remember that not everything that is legal is right. Legality is often only the ethical minimum. Therefore where national standards are inadequate, the company would need to enforce their own higher standards and not take advantage of them. Many aspects of our system have not caught up with our social needs and not many organizations and managers faced up to the social responsibilities of business. It is easier to produce the product and then think what social impact it will have. Business is part of our society and ethics has place in business as in any other part of social life [De George, 178].





Bibliography and references


Chryssides, G and Kaler, J (15) An introduction to Business Ethics, London Chapman & Hall


Freeman, R (184) Strategic Management a stakeholder approach, Marshfield Pitman.


Smith, A (1776) The Wealth of Nations, London.


De George, R (178) Ethics, free enterprise and Public policy, Oxford Oxford University Press.


Aupperle, K (185) An empirical examination of the relationship between Corporate Social Responsibility and Profitability, Academy of Management Journal, vol.8, no., pp. 446-6.


Palast, G (00) The best democracy money can buy, London Pluto Press.


World Bank (17) Global Economic Prospects and the Developing Countries.


World Bank (000) Global Economic Prospects and the Developing Countries.


Ades, A and Glaeser, E (1) Evidence on Growth, Increasing Returns and the extent of the Market, Quarterly Journal of Economics 114(), pp.105-1046


Manenji, F (18) the effects of globalization on culture in Africa in the eyes of an African woman, www.wcc-coe.org/wcc/what/jpc/effglob.html [accessed /10/0].


Mohamad, M (00) Globalization and Developing Countries, www.globalpolicy.org/globaliz/define/100malaysiamp.htm [accessed 17/10/0]


Bibliography and references


Chryssides, G and Kaler, J (15) An introduction to Business Ethics, London Chapman & Hall


Freeman, R (184) Strategic Management a stakeholder approach, Marshfield Pitman.


Smith, A (1776) The Wealth of Nations, London.


De George, R (178) Ethics, free enterprise and Public policy, Oxford Oxford University Press.


Aupperle, K (185) An empirical examination of the relationship between Corporate Social Responsibility and Profitability, Academy of Management Journal, vol.8, no., pp. 446-6.


Palast, G (00) The best democracy money can buy, London Pluto Press.


World Bank (17) Global Economic Prospects and the Developing Countries.


World Bank (000) Global Economic Prospects and the Developing Countries.


Ades, A and Glaeser, E (1) Evidence on Growth, Increasing Returns and the extent of the Market, Quarterly Journal of Economics 114(), pp.105-1046


Manenji, F (18) the effects of globalization on culture in Africa in the eyes of an African woman, www.wcc-coe.org/wcc/what/jpc/effglob.html [accessed /10/0].


Mohamad, M (00) Globalization and Developing Countries, www.globalpolicy.org/globaliz/define/100malaysiamp.htm [accessed 17/10/0]


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