Ethics of Global Business

Business: BTEC Level 3 National Extended Diploma, topic 4.4.2

Ethics in Global Business

Ethics refers to the moral principles which inform business decisions above and beyond the requirement to do so by law.

A stakeholder is any individual or group of individuals involved in or affected by the actions of a business.
The objectives of different stakeholder groups can conflict, and this is called stakeholder conflict.
Stakeholder conflict can occur in different ways:
Shareholders can demand dividend payments and shareholder value, but this may mean compromising the pay and working conditions of employees.

Being ethical can involve considering your impact on the environment and taking steps to reduce the emissions and waste produced by the business.
If MNCs use cheap labour to extract non-renewable resources in some countries, many consumers may use this as unethical.

When operating globally, a business must consider its supply chain:
Global businesses may need to ensure they do not exploit labour in countries where working conditions may be poorer than home markets.
Global businesses may need to ensure they do not support child labour in countries where regulations may be poorer than home markets.
For example, Zara was accused of exploiting child labour through its supply chain in Turkey though claimed it did not realise its suppliers were using children to manufacture clothing items.

When carrying out marketing activities, businesses must ensure they comply with laws and regulations to ensure they do not use misleading product labelling or inappropriate promotional activities.
For example, food producers from across Europe were found to be using misleading labelling to sell meat products in 2015. Some meat products were found to contain horsemeat.

Although a worker earning £1/day working for an MNC sounds awful. If the alternative jobs available in that nation pay 50p/day, then the MNC is doubling that person's earning power and standard of living.
The impact of MNCs should not be judged by your standards, but by the opportunity cost for that individual worker.

If a shareholder is demanding higher dividend payments, what could be compromised?