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International business (1171 words)

International business
Tarhab Motiwala
Assignment 3
1. A visiting American executive finds that a foreign subsidiary in a poor nation has hired a 12-year-old girl to work on a factory floor, in violation of the company’s prohibition on childlabor. He tells the local manager to replace the child and tell her to go back to school. The local manager tells the American executive that the child is an orphan with no other means of support, and she will probably become a street child if she is denied work. What should the American executive do?
ANS. This question, illustrating a potentially very real ethical dilemma facing managers working in subsidiaries located in developing countries, is designed to stimulate class discussion. Students should recognize that neither alternativeviolating the company’s position on childlabor, nor putting the child out on the streetsseems acceptable. In the end, many students may agree that allowing the child to continue to work in the factory is the lesser of the two evils.

2. Drawing upon John Rawls’s concept of the veil of ignorance, develop an ethical code that will
(a) guide the decisions of a large oil multinational toward environmental protection, and
(b) influence the policies of a clothing company to outsourcing of manufacturing process.

ANS.According to John Rawls, a decision is just and ethical if people would allow for it when designing a social system under a veil of ignorance. Rawls’ veil of ignorance is aconceptual tool that can contribute towards the moral compass that managers can use to help them navigate through difficult ethical dilemmas.
3. Under what conditions is it ethically defensible to outsource production to the developing world wherelaborcosts are lower when such actions also involve laying off long-term employees in the firm’s home country?
ANS. This question is likely to stimulate some lively discussion, particularly if students have personally felt the impact of this practice. Many American companies are outsourcing not onlyblue collarwork, but white collar positions to the developing world. Students are facing a tenuous job market where positions that they may have sought when they began their college degrees are being “shipped abroad.” Some students will argue that companieshave todo what is best for all stakeholders, and if that means taking advantage of cheaperlaborcosts elsewhere, then that is the appropriate strategy. Others however, will probably argue that companies owe a social debt to their home countries, and that loyalty from long term employees should be rewarded.

4. Are facilitating payments (speed payments) ethical?
ANS. Although facilitating payments are legal, facilitating payment are questionably from an ethical point of view. In many countries, payoffs to government officials in the form of speed money area part of life. From a practical standpoint, giving bribes, although a little evil, might be the price that must be paid to do a greater good. According to the textbook, several economists advocate this reasoning, suggesting that in the context of pervasive and cumbersome regulations in developing countries, corruption may improve efficiency and help growth. These economists theorize that in a country where pre-existing political structures distort or limit the workings of the market mechanism, corruption in the form ofblack-marketeering, smuggling, and side payments to government bureaucrats to “speed up” approval for business investments may enhance welfare. However, facilitating payments allows for unfair competition. Smaller businesses have fewer opportunities and less financial possibilities when larger corporations can bribe foreign government officials. In addition, facilitating payments provides a dependence on irregular payments, creates additional risk, and discourages investment. In my opinion, I think facilitating payments are unethical from a business standpoint.

5. A manager from a developing country is overseeing a multinational’s operations in a country where drug trafficking and lawlessness are rife. One day, a representative of a local “big man” approaches the manager and asks for a “donation” to help the big man provide housing for the poor.The representative tells the manager that in return for the donation, the big man will make sure that the manager has a productive stay in his country. No threats are made, but the manageris well aware thatthe big man heads a criminal organization that is engaged in drug trafficking. He also knows that that the big man does indeed help the poor in the run-downneighborhoodof the city where he was born. What should the manager do?
ANS. Many students will probably suggest that the manager should not accept the assistance of the “big man”, nor make the recommended “donation”. Students taking this perspective are likely to suggest that doing so would be unethical, and that if the manager really wants to help poor people it can give a more legitimate donation. Other students however may point out that the “big man” could make life very difficult for the manager, or he could really help the manager. Some students may argue that,in order tosatisfy stakeholders, the managers should meet the demands of the big man”. Still other studentswill probably point out that if conditions in the country are so poor, the company should simply take its investments elsewhere.

6. Reread the Management Focus on Unocal and answer the following questions:
a. Was it ethical for Unocal to enter into a partnership with a brutal military dictatorship for financial gain?
b. What actions could Unocal have taken, short of not investing at all, to safeguard the human rights of people impacted by the gas pipeline project?
ANS. Many students will probably agree that it was unethical for Unocal to partner with Myanmar’s military dictatorship. Students taking this perspective will probably point out that at the time of the investment many American companies wereactually leavingthe country in protest of the political situation there. Other students however may note that the partnership offered Unocal the opportunity to generate significant returns, and that the company had an obligation to its shareholders to make profits. Students taking this point of view may also indicate that in addition to the profits that the project generated for shareholders, it also helped Myanmar’s economic situation, and therefore the country’s 43 million people. Some students may suggest that if Unocal decided to form the partnership, it should have done so only with a clear policy in place to protect the human rights of the Myanmar people. Students may suggest for example, that the partnership should only have gone ahead if plans were in place to help the villagers who lost their homes, and that certainly the villagers should not have been used as slavelabor. Most students will probably agree that Unocal’s claims of ignorance of the situation are weak at best. Students will probably suggest that in a country where other companies are leaving because of the brutalpolitical situation, Unocal had an even greater obligation to be aware of how its presence might affect the population