The ethical obligations of a multinational corporation toward employment conditions, human rights, corruption, environmental pollution, and the use of power are not always clear cut. From an international business perspective- for MNE- with supply chain components spread across the globe, it becomes important to establish a moral compass to guide an organization to profit its stakeholders. One important factor (albeit a challenging one) in determining that moral compass is the culture. For example- an American company’s managers goes to a developing country and finds out that 40% of its sub-contractors’ labor consists of children under the age of 12. The sub-contractor has hired them because
a) Children are cheaper than an adult, which results in reduced costs and higher profit for the American company
b) A part of the process can be handled efficiently by a child (say making carpets)
c) If the child was not allowed to work, consequences will be worse than employing that child for example prostitution or slavery
D) it’s a “culturally established and acceptable practice” in that country
e) Competition is also employing children – so abandoning that would result in the loss of a competitive advantage.
What should the American manager do? Should he allow the status quo and agree with his sub-contractor? Should the sub-contractor succumb to the pressure from the parent company to meet unrealistic performance goals that can be attained only by cutting corners or acting in an unethical manner? Probably not, because that would violate the reasonable prohibition against child labor in the country of sub-contractor and company’s own ethical code. What then is the right thing to do? How far is the company ethically and legally liable for the actions of its sub-contractors? From one end of spectrum there is Enron- which was morally bankrupt to Hershey’s which are dealing with ethical issues with a view to enhancing global partnerships at community level....