Ethical Dilemma in Today's Business

Global interdependence is a compelling dimension of the global business environment, creating demands on international managers to take a positive stance on issues of ethical behavior, social responsibility, economic development in host countries, and environmental protection around the world. However, there were still several large multinational companies indulging in ethically questionable practices. If MNCs behave unethically, it soon comes to the notice of the public and the companyís image is tainted. Multinationals are often worse off for having behaved unethically in the interest of short term gains, as the bad publicity generated by unethical practices leads to far greater losses in the long run.

In the challenge of modern society, manager or worker often encounters a situation than challenges oneís ethical beliefs and standards. Managing across border increasingly includes difficult ethical dilemmas. It is less clear where to draw the line between ethical behavior and the corporationís other concerns, or between the conflicting expectations of ethical behavior among different countries. The paper aims to (1) discuss current ethical dilemmas in global environmental ethics, (2) examine how multinational would address conflicting norms and expectations by†illustrating one case study of ethical dilemma and its resolution.

Nestléís Corporate Crimes

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1.0 Nestléís ethical dilemmas

1.1.††††† Unethical marketing practices

Infant formula

In 1977, Nestle got embroiled in a controversy, when it was criticized for using unethical marketing practices endangering consumer health to promote its infant formula in developing nation. A number of aid agencies called for the boycott of Nestle products and this protest continued right into the 1980s, when Nestle agreed to adopt the infant formula marketing code laid down by the World Health Organization and UNICEF. Although Nestle had a charter on infant formula, the company is usually violated the principles laid down in it (Refer to reference3).

Genetically Modified Foods

Nestle was criticized for using genetically modified (GM)[1] ingredients in its food products, and was accused of dumping products rejected in Europe in developing Asian countries where the laws on GM products were either absent or less stringent.

For Kant, the companyís decision makers would have to be willing to advocate marketing the product even if they were themselves in the position of uniformed consumers. Therefore, providing unsafe products standard and ill-informed consumers by Nestle is absolutely wrong.

1.2.††††† Overcharged prices

Nestle launched bottled water, called ďPure LifeĒ in some Asian countries like Pakistan and India (in 1998 and 2001 respectively). Nestle introduced bottled water, which provided safe clean water but priced it so high that it was unaffordable for the lower income groups. It turned water into a luxury by pricing it around $ 0.4 (in Pakistan) for a one liter bottle.

According to utilitarianism, ethical action is evaluated by looking at its consequences, weighing the good effects against the bad effects on all the people affect by it (Shaw & Barry, 2004). Most developing countries laced basic drinking water facilities. A very high water price was charged by Nestle limiting a number of people to buy it. Nestléís action produces the worse for the greatest number of South Asian because people could not afford for water which is basic human needs and is sporadic and contaminated in south Asia countries.

1.3.††††† Unfair labor practices

Nestle was one of the biggest purchasers of cocoa from Ivory Coast, a country in West Africa. UNICEF studies and International Labor Organization (2002) revealed that the workers on these plantation lived and worked in poor conditions. They were paid minimal wages and exploited by the land-owners. Most of the workers had been trafficked by bought and sold, making them practically slave labor. Nestle purchased cocoa from these farms despite its awareness of the conditions of the laborers, thus making it a party to their exploitation.

Child labor was also employed on the plantation. UNICEF and The International Institute of Tropical Agriculture (IITA) studies (2002) revealed that over 200,000 children were shipped to Ivory Coast and other cocoa producing countries in Western Africa from neighboring countries like Mali and Burkina Faso, to work on the plantations, especially during the harvesting of cocoa or coffee beans.

Another unfair labor practice was occurred in Thailand. When a group of 13 workers, wording in a sub-contracting facility of Nestle in Thailand, organized themselves to form a union, Nestle immediately cut the number of orders to that company and asked the company to put the unionized workers on indefinite leave with half pay. The workers were force to quit because of their lowered pay (Manager 2001). In doing so, Nestle had clearly denied these workers their right to organize themselves to better their interests.

1.2.†† Applying De Georgeís principles

International business ethics refers to the conduct of MNCs in their relationships to all individuals and entities with whom they come into contact (Daft, 2002). Ethical behavior is judged and based largely on the cultural value system and the generally accepted ways of doing business in each country or society. MNC Manager must decide whether to base their ethical standards on those of the host country or those of the home country and whether these different standards can be reconciled (Donalson, 1996).

1.2.1.††††† Do no harm

Thompson & Stickerland, (2003, p. 65) asserts that ďa company has ethical duties to owners, employees, customers, suppliers, the communities where it operates, and the public at large.Ē The norm of doing no harm requires Nestléís management to look beyond its own interests (i.e., cheap cocoa, and high market-share). Unethical marketing of infant formula and GM foods in developing countries are example of doing harm knowingly and willingly and of benefiting from the lack of legal restraints to the detriment of the eventual consumers. If business follow Kantís rule, it will provide a quality and safe product to its entire market.Nestle decide to sell unsafe (GM) foods even it knows that the product is unsafe. In addition, Nestléís marketing strategy in developing countries was to distribute free samples to nursing mothers, thus getting the baby used to the formula very early in order to get a hold on its captive market. Unethically, Nestlé promoted the use of infant milk formula as a substitute for motherís milk. This unethical manner causes widespread infant malnutrition and susceptibility to infection, which could even lead to infant death. Following this norm, Nestle should preserve the safety and health of consumers by disclosure of appropriate information, proper labeling and accurate advertising.

Workers on cocoa production from Ivory cost were paid below minimal wages and were practiced as slave labor. Despite its awareness of the conditions of the labors, Nestle continued purchased of cocoa from these suppliers. The company must pressurize its suppliers to change because it is in a position of major buyer. Regarding to Nestléís in Thailand, the company should respect the right of employees to organize for the purpose of collective bargaining. Nestle had better prohibit retaliation to their employees, though disciplinary action, or an anti-harassment policy. In addition to Anti- harassment, companies need to develop policies and procedures to prevent retaliation against individual who file complaints of harassment or discrimination or who participate in their investigation (Zimmerman, 2002).

1.2.2.††††† Do more good

In Ivory Coast, Children worked in hazardous conditions using machetes and spraying pesticides and insecticides without the necessary protective equipments. Such exploitation involves in significant Nestléís profit since the labors received only a very small proportion of the price paid for the Nestle product by the final consumer. According to the norm of doing more good than harm to host country, Nestle must stop buying cocoa from South Africa, which is under apartheid and uses child labor in hazardous working condition.For a utilitarian, however, these are considerations that can be balanced against other considerations, such as the benefit to others. On the other side of the balance are factors like corporate reputation (Orts, 1995). These factors can make corporate altruism worthwhile in the long run, even at the short-run expense of the stockholders. Nestle should demonstrate its ethical commitment through philanthropic contribution and use of its expertise and resources on numerous social problem in host countries.

Importantly, Nestle should integrate social and ethical issue in strategic process (see figure4). Along with an investment appraisal, such planning should include an environmental impact assessment. According to Whetton & Cameron (2005) leadership is the key success for organizational change as well as the key to aligning organizational systems and follower behaviors around a new organizational vision. Ethical leadership practices are necessary prerequisite for organizational effectiveness (Ausguien, 2001). Therefore, Nestle top management must train to be ethical leadership (see Recommendation action in appendix3).

Figure4: Integrating social and ethical issues in the strategic management process

Social & Ethical Issues

Environmental Analysis

Establishing Organizational Direction

Strategic

Implementation

Strategic Formulation

Strategic

Control

Source: Adapted from Thompson & Stickerland (2003, p.7)

To upgrade companyís ethics, Nestle must impose codes of conduct that treating other person with respect and should provide leadershipís ethical training as leaderships are key person to make a strategic-decision. Examples of codes of conduct include do not use child or forced labor, provide a safe working environment, and respect worker rights to unionize (Refer to figure2). Corporate moral excellence can be alternative to develop Nestléís ethical culture. For a corporate to be morally excellent, it must develop and act out of a moral corporate culture (Hoffman, 1994). In a situation with intolerance arise, manager should be guided by precise statements that spell out the behavior and operating practices that Nestléís demand. Nestle must be careful when placing a foreign manager in a country whose values are incongruent with his own because this could lead to conflict with local managers, governmental bodies, customers and suppliers.

1.2.3.††††† Respect the human rights of their employees

Doing good business and being a good employer is pivotal and important guidelines in doing todayís multinationals. In fact, ethical business must respect for human dignity, and protect the fundamental rights of people. According to Aristotelian, equal should be treated equally and unequal unequally (Hirschman, 2001). This infers that individuals should be treated the same, unless they differ in ways that are relevant to the situation in which they are involved. If labors work the same jobs, they should be paid the same wage. If Nestle pays its labors less than other companies, then Nestle has an injustice in remuneration system. Violating human rights is immoral practices due to Kantís principle. This indicates that Nestle exploited and treated others as means rather than as ends, as thing rather than as person. Not only does Nestle (exploiter) fail to do its duty to others, but also fails to do this duty to itself; Nestle make itself into an object.

1.2.4.††††† Respect local regulations

MNCs are subject to the laws, regulations, and jurisdiction of the countries in which they operate (OECD, 2004). Nestle must not resist against law that protect the countryís workers or consumers, even if such laws make operating in these countries less profitable. It is evidence that Nestle did not respect for domestic rules and regulation. Nestle broke Thai law bys paying workers less than minimum wage and cut them off. For consumer safety, Nestle did not respect the laws and regulations of the countries in which they operate with regard to consumer protection. In China, there is a regulation of GM food, which required that all products which were contained GM ingredients, be labeled explicitly. Despite consist of GM ingredients, Nestle products were not labeled. Indeed, it could not unilaterally continue with its double standard practice and ignore the concerns and demands of the general public in Asia.



[1] Genetically modified foods are lab-crated grains, vegetables, fruits and other primary foods. Their use has been somewhat controversial. Some people are concerned about the consequences to their health of the use of these products. European countries require all GM foods to be clearly labeled as such; however, in countries Canada and the US, labeling is optional.

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