Multinational Enterprise

Multinational Corporations have always been and are currently now under harsh criticism. They are mainly condemned for exploiting resources and workers of third world countries, taking jobs away from the US industry, and destroying local cultures. Although there are negatives of multinational corporations, there are also positives. Business done overseas provides jobs for the people of the host country, improving the standard of living, and transfers technology. Richard T. De George explains moral standards, in five basic theses, that multinational corporations must adhere to in order to maintain corporate ethics.

De George argues in his first thesis that using US standards as moral standards is not right and creates false dilemmas for MNCs. Critics of MNCs argue American corporations should adhere to the same living, social, and business standards of the US, regardless of where they conduct business. Setting high standards is commendable, but they are not morally required. This means that rules and regulations are not part of a MNCs moral responsibility. I agree with this De George’s first thesis because morality concerns human welfare.

Although the American standard of living is much higher than a third world, as long as MNCs don’t hurt human life, they should be able to open a corporation that holds the same standard of that host country even if it is significantly lower than America. However, there is an exception to this thesis concerning MNCs dealing with the drug and food industry. Those type of businesses should apply America’s FDA and OSHA standards, “with respect to hazardous occupations? with respect to pay, with respect to internalizing the costs of externalities, and with respect to foreign corrupt practices,” (DeGeorge, p. 264).

This is because drugs and foods directly affect human welfare. De George explains that regardless of differences in culture and values, there are seven moral norms that can be applied to MNCs to ensure they are conducting their business ethically. The first is the basic norm which is to do no intentional direct harm. The second utilizes the utilitarian principal, to produce more good than bad for the host country. Third is to contribute activities to the host country’s development meaning that if the MNC is not helping the host country and only benefiting themselves, they are exploiting that country.

The fourth norm is to respect the human rights of employees even if the local businesses do not. Fifth is to pay fair share of taxes. This gives a guideline to MNCs, suggesting that to do business overseas just for the benefit of tax breaks is not moral. The sixth norm is to respect local cultures and work with, not against it, meaning that MNCs should understand the host land’s values and culture norms and incorporate it within their organization. Lastly, MNCs should cooperate with the local host country in the development and enforcement of just background institutions for example, health and safety standards.

I agree that if MNCs understand and follow these moral norms, they will not be criticized for exploiting the host country. De George’s third thesis explains that critics should use the seven moral norms as a criterion to judge MNCs individually as a case-by-case study analysis. Financial institutions, agricultural enterprises, drug companies, extractive industries, and other manufacturing industries are the five types of business operations each having its own set of moral issues.

I agree that each industry is different, and MNCs should not be grouped as a unit and should be judged separately based on the seven moral norms. De George’s fourth thesis argues that MNCs because Third World countries are short of sufficient just background institutions, the use of clear moral norms are even more necessary. He also argues that because MNCs are capable of unifying mankind by providing the economic base MNCs have a special responsibility to support just background institutions to increase the standard of living for the host country and those around it.

I partially agree with this thesis. Just because MNCs are capable of changing a country, they have no obligation to do so. It is not their moral responsibility to do so either. Although they should support just background institutions, they do not have to. De George’s fifth and final thesis explains that responsibility is linked to ownership. Whatever portion one owns of the MNC one must take that amount of accountability. This means that “what host countries cannot expect is that they can demand control without accepting correlative responsibility,” (DeGeorge, p. 266).

I agree with this thesis. Whoever is in charge of something must become aware that it is them who must take the liability. Part Two: Review Question #2 Today, American MNCs operating overseas face many moral dilemmas. I feel the most important dilemma regards not only the exploitation of resources and employees, but how the MNC affects the host economy. MNCs affect their employees’ welfare directly, but also affect the host country’s citizens indirectly.

By providing jobs the spending capital within the host economy increases, and creates a better standard of living. Personally, I believe that MNCs operating in Third World countries do more good than harm. I agree with Ian Maitland, author of In Defense of International Sweatshops. Maitland’s article “examines and rejects the idea that sweatshops pay unconscionable wages, that they impoverish local workers and widen the gap between the rich and poor, and that American companies collude with repressive regimes that stifle dissent and repress workers” (p. 198).

One can use Maitland’s facts and compare that with the five types of business operations that raise moral issues differentiated by De George. The first is banks and financial institutions. According to De George, financial institutions have a small number of employees, their “function is to provide loans for various types of development” (p. 265). His main argument is that MNCs do more harm than good because by looking at the case in Africa, “by lending to the government they usually strengthen the government’s policy of apartheid” (p. 265).

However, this is not the case for the majority of MNCs. Although repression does exist, “economic development appears to be relaxing that repression rather than strengthening its grip” (p. 203). Wages match or exceed local wages. Therefore there isn’t even a need for unions to form. Lastly, government policies are intended to help create jobs for the unemployed and underemployed. The second business operation are the agriculture enterprises. De George says that MNCs “buy the best lands and use them for export crops while insufficient arable land is left for the local population to grow” (p. 265).