The spread of international business, in which larger multinational corporations outsource production to poorer nations in order to cut costs, has created controversial situations across the world, in which business ethics are skirted around and violated. While this system of co-dependent countries will always exist as long as there are inequalities between currencies, cost of living, and labor wages, there are lines that international businesses must never cross. Crossing these lines can easily destroy your company. There have been endless cases of ethical violations in which environments were irreparably damaged, lives were lost, and businesses were dismantled by regulators. Violating ethics can cost your company customers and investors, and ultimately your business. Let’s take a look at the main themes of corporate ethics for international business, and some examples of ethics violations.
This is the most common practice in relation to international businesses. American companies often outsource their manufacturing to emerging and developing countries, where labor and parts are cheaper. China was once the factory capital of the world, but due to rising wages, companies have shifted their focus to poorer nations, such as Indonesia, Vietnam, and South American countries.
In the 1990s, Nike was harshly criticized by human rights groups for appalling work conditions in its Chinese factories. Author Naomi Klein reported that Nike’s factory workers in China were forced to work 12-15 hour workdays for minimal pay and forced to sleep at filthy, dangerous factory dorms. Klein’s best-selling book, No Logo, prompted such a public outcry that Nike was forced to issue a point-blank response to Klein in order to contain the public relations damage.
In 2010, Taiwan-based Foxconn, the manufacturer of Apple’s iPhones and iPads, experienced a PR nightmare following a string of suicides at its Chinese plant. 18 employees committed suicide in a single year, decrying the factories as a “labor camp” with atrocious work conditions. These suicides not only tarnished Foxconn’s image but Apple’s as well.
When outsourcing to another country, make sure the wages are fair and the employees are well treated. Local subsidiaries have to be monitored carefully for abuses. Don’t violate ethics just for a few margin percentage points – this can come back and bite your company hard.
Mining and oil companies often violate corporate ethics in an attempt to escape environmental groups and federal regulators, by establishing operations in countries where the laws are loose and the government can be easily bribed.
Texaco, now a subsidiary of Chevron, deserves a place on the wall of shame for its role in the environmental damages to Ecuador, when it allegedly dumped 18 billion gallons of toxic waste into unlined pits, rivers, and streams, causing birth defects and deaths throughout the 1970s to 1992. Chevron was sued for $16 billion in a landmark case brought forth by local residents. Texaco originally operated in Ecuador due to lenient environmental laws and an extremely corrupt government connected to the state-owned Petroecuador, which was its joint venture partner.
Meanwhile, PetroChina, the state-owned Chinese oil giant, made Chevron look like a small fry by partnering with Sudan’s corrupt government in 2007. In exchange for allowing PetroChina to drill in oil-rich Sudan, 70% of the income generated from the revenue sharing agreement was used to fund Sudan’s military, which was directly responsible for the genocide in Darfur.
Even though your company may escape prosecution in your home country, expanding into lawless lands in hopes of increasing your revenues may come at steep environmental and human costs. Although your company might not have a soul, your investors would probably like to keep theirs and may avoid your company if it is steeped in human misery.
Since the 1990s, it has been increasingly popular for companies to assemble ethics committees in order to avoid the train wrecks mentioned above. General themes to consider include, but are not limited to:
Responsible ethics and self-policing will keep your business safe in the unpredictable arena of international business.