Ethical Issues Facing Companies
Multi national companies enjoy comparatively large economies of scale in their areas of operations. Such benefits such as availability of cheap labor, reduced interest rates, frequent government subsidies and other non-financial benefits, commonly referred to as synergy are gained by the large enterprises. However, most multi national enterprises do not comply with environmental regulations since it is not in their mandate to do so. Furthermore, such organizations attribute compliance to environmental regulations with costs gained due to the adoption of the standards advocated for by the environmental regulators. Despite the costly practices associated with keeping up with environmental rules, it is equally important for firms to practice business ethics by nurturing the environment since the resources the firms draw from the natural surroundings, whether raw materials or human labor, are all affected by the positive or negative activities done on the environment.
For instance, an illustrated case has been provided to understand the conflicting decisions experienced by multinational companies during relocation of their businesses in order to avoid increasing costs and subsequent losses attributed to various government regulations and other factors such as wage demands. The example company is called Electrocorp. The firm is an electronics business organization that specializes in the manufacturing of onboard computer components for automobiles. The firm’s production plants use complex hydrocarbon solvents to clean the chips and other parts that have to be entered into the computer components. Some of the solvents utilized in the process are carcinogens and must be managed with acute care. Currently, all of the production plants belonging to the enterprise are situated in the United States.
The problem forcing Electrocorp to consider other business strategies is driven by the rising costs of production for the firm. Various factors are attributing to the increased production costs. The first factor is the workers union. The group representing the workers is in conflict with the company because of the lower wages and salaries it received. Therefore, the internal strife led to the union waging a strike against the firm, which proved to be successful. Therefore, the pay package at present for starting employees is US$ 15 per hour. The second factor is the set of strict safety rules and regulations imposed for the plant. The safety procedures, which are applied in the production plants, have been costly to implement in terms of time and money. Finally, another factor that is forcing the firm to inculcate relocation is the set of environmental regulations for the production plants. By adapting to an expensive procedure that requires the firm’s plants to incorporate the waste before depositing it to a special disposal facility, Electrocorp’s operations have proved to be more costly thus dwindling the profits experienced by the company and its shareholders.
Regarding the increased costs incurred by the corporation, the organization has found it promising to set up its manufacturing plants in different countries that comprise the availability of cheap labor, flexible environmental regulations and safety standards and reduced costs of production for maximum business profits. Ethically, if the company decides to shut down its local operations and move to other foreign countries, the action will have negative implications on the firm. For instance, Electrocorp is a major employer in each of the cities where it is situated. Thus, closing down the plant will lead to the mass redundancy and lay-off of employees therefore causing an economic imbalance in the cities’ communities. Additionally, despite leaving many people jobless, the shift to other foreign countries will lead to increased unemployment because the employees who will be declared redundant will face difficulty in finding equal positions to fill in other companies.
Despite the moral and ethical issues the company is facing, the main objective of the firm, which is establishing profits, is adamant. Moreover, other companies, including its rivals have close down their localized operations thus acting as an incentive for considering relocation. Therefore, for the firm to make the right decision in choosing the right market for its operations, it is important to hire an agent to investigate the probable areas for plant relocation. Because of the long working experience of the consultant with other companies, the firm has placed utmost confidence in her ability to choose the right less developed countries for firms that have moved their business functions. Based on the company’s research, the agent is required to investigate certain less developed nations such as South Africa, Mexico and The Philippines.
According to the consultant’s research, The Philippines was the country with the most favorable working conditions. This is because the country had advantageous labor, health and safety and environmental factors than all the other countries. However, if Electrocorp decides to venture into the country, it will deteriorate the overall environment of the country. For instance, the emission of carcinogens and hydrocarbons into the atmosphere will lead to various diseases such as cancer and defects in birth. Additionally, untreated waste dumped into the areas’ water system will also lead to the spread of waterborne diseases and lead to grave pollution of the environment. Furthermore, the destruction of the environment will cause the company to gain negative public credibility. The consequence of the company’s negative public credibility will lead to the soiling of the company’s image in view of the public and therefore, lead to a decrease in the rate of customers and decreased financial performance. This is because of the investors unlikely to be associated with the company’s unethical image. In the economic, long run, the firm will face massive losses due to reduced profits and the cost of setting up new plants in the country. Therefore, the firm should continue operations in the United States. Unfortunately, retrenchment is part of a business’ growth strategy thus, it would be profitable for the firm to reduce its labor to counter the increased production costs and uphold existing safety and ethical standards.
There have been various theories that have been developed to explain on how the moral actions of a person can be guided. Utilitarianism is one of the ethical theories. It is a theory in ethics that asserts that the appropriate manner of action is the one that capitalizes on general contentment. The theory advocates that the honorable significance describing action be determined by the result that it will produce. The main principle arising from the theory is the Principle of Utility. The principle avows that behaviors and actions are acceptable as long as they promote happiness or pleasure or satisfaction and improper if they promote pain, unhappiness, or discontentment. Thus, the theory’s common assertion is the epitome of the greater good. Simply put, the utilitarianism theory borders on the effect an action will have on the majority. Therefore, if an action were to have a positive effect on the greater number of people, then the action is considered ethical. However, if the action has a negative implication on the majority, it is considered unethical and immoral without regarding the effect on the minority in both instances.
The second theory is the Deontology theory. The deontology theory advocates for the morally upright position that judges the moral nature of an action based on adherence to the regulations by the action. Therefore, the theory asserts that a person’s obligations are bound by rules and thus if such actions are not in line with the regulations prescribed, then the person committing the act is ethically wrong. The Universalizability Principle implicitly emphasizes the deontology theory because it asserts that the moral decisions made by a person regarding a case should not be different from the decisions the person will make if presented with a similar situation, however, the decision can change if there are differences in the moral subject at hand.
Virtue in ethics can be described as the superiority in morals. A positive peculiarity is good and is therefore, valued as a basis of principle and worthy ethical being. Essentially, virtue illustrates the development of character. Since it describes a habit, character can therefore, be described as the collective form of habits wound together. A person upholding virtue is the type of person that will make moral decisions despite the type of situation they are facing. Virtue thus focuses on the expansion of enduring habits that can enable an individual live and have a good life. Simply defined, the person incorporating virtue is a person of character, expressing their moral, intellectual and ethical values and intuitions through the choices and the decisions they inevitably make in their routine lives.
Through analyzing the various ethical principles, it is correct to state that the agent should uphold on a decision that is morally better for the company. By upholding virtue ethics in the decision of relocation, the consultant will be able to take a firm stand in negatively advocating for the opening of the plants in other foreign countries. This is because the implications caused by the activities and operations of the corporation in areas with low regulatory standards will have an immoral and unethical effect on the company due to the overall negative effect on the society. Furthermore, the firm will also incur huge losses amounted to the operation of the business in the less developed countries. However, every decision has a risk. The risks faced by the company if it decides to stay in the United States will be the incurring of losses due to increased production costs, incorporation of safety standards and environmental regulations. Despite the loss, the costs will be short run since by displaying a good public image; the company is able to take up corporate social responsibility schemes that will enable it gain more customers and investors, therefore increasing its financial performance and at the same time heightening public credibility.
It is important for firms to be ethically and morally upright in their transactions and operations. Presently, the environment is discarded, as more companies do not follow environmental regulations that are put in place to safeguard natural surroundings. Furthermore, the emission of hydrocarbons and carcinogenic substances has led to the increase in global warming due to the disruption of the stratotrophic ozone layer, which further increases the rates of cancer diseases because of the increased radiation. Therefore, for the benefit of the environment and the firms, it is advantageous to be sensitive to the environment.
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