Ethical Obligation of Multinational Companies - Essay Example

2021-08-30 18:48:06
6 pages
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George Washington University
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Multinational corporations are huge companies operating in multiple countries of the world. In poverty-stricken countries such as those in Africa, many multinational corporations are operating and making more in profits that the gross domestic product (GDP) of some of the hosting nations. For example, five largest corporations earn annual revenues than double the GDP of one hundred poorest countries (Hilson, 2012). Given this reality, the question as to whether multinational corporations should be obligated to assist citizens in poverty-stricken countries in which they operate has elicited a hot debate. The debate surrounds the question of corporate social responsibility. Corporate social responsibility is a business philosophy to which the proponents presuppose that a corporation should behave as a good citizen but not merely obey the law. According to the philosophy, a firm should consider legal, ethical, philanthropic and economic responsibilities to the shareholders, consumers and the society (Carroll, 2015). However, the critics of corporate social responsibility believe that a business is only obligated to meet the goals of the shareholders because the firm exists for one major goal of making a profit to benefit the shareholders. Ideally, multinational corporations have an ethical obligation to assist citizens in need because firms are obligated to rescue as a moral responsibility, are the largest beneficiaries from the resources in poor countries and, as a business, are obligated to do what is right.

Many of the critics of corporate social responsibility present some arguments to support their position. One of the main arguments is that the major duty of a company is to its shareholders because they are the owners. If a company's money is spent money on social responsibility, it would be a theft to the rightful owners of the enterprise (Blowfield & Murray, 2014). Another skeptic argument is that businesses are operating in hard times and are too busy to survive under harsh circumstances. Therefore, firms cannot afford to take an eye off the ball to focus on social responsibility; instead, all the efforts should be directed towards the core business (Blowfield & Murray, 2014).

The above claims are worthy. However, when critically examined, they fail to convince one that a business can just be right to ignore service to humanity because it wants to survive and benefit a few individuals who are the entrepreneurs. The first claim that terms social responsibility as theft of business owner's property is an assumption. It is an assumption which relies on a misinterpretation of philanthropic business responsibility where it is believed that social responsibility will simply create a leeway for business managers to "give away" money which belongs to the shareholders. When one considers philanthropic social responsibility as a business process through which a firm manages its relationships with powerful forces such as customers who determine the existence of the business, it will become apparent that it is not theft as is thought. Philanthropic responsibility is a way of building relationships with consumers, attracting talented staff and retaining them and assuring company reputation (Blowfield & Murray, 2014). Thus, it cannot be true that social responsibility through philanthropic activities becomes a theft to shareholder's dues.

Similarly, the second claim is well justified because a business cannot struggle to pay the employees and still assist the needy. However, there is another way to view this. Multinational corporations are still making billions of dollars in profits and even exceeding the GDP of some countries despite the hard times. This means that managing social responsibility is equivalent to managing the business. If social responsibility might distract focus on core business that could signify bad management because well managed social responsibility has become a way of supporting business objectives and building relationships with customers (Bachmann & Ingenhoff, 2016). Even practically a company would not say that because times are hard, it can find its way to survival by polluting the environment and running away. It still has to take care of the environment which is not much different from assisting the needy.

In actual sense, multinational corporations have a moral responsibility to assist those in need because firms are obligated to rescue. The principle of rescue is an ethical matter of managerial challenge which has been addressed by some great philosophers. Thomas M. Scanlon argued that where a manager is presented with a scenario whereby if he or she acts can prevent something terrible from happening, it would be morally wrong not to act (Scanlon, 2002). In the case of poverty-stricken countries in which a majority of the multinational companies operate, there are terrible things that are bound to happen. For example, Sub-Saharan Africa accounted for 74% of the 1.5 million who died from HIV/AIDS in 2013 (Kharsany & Karim, 2016). The deaths resulted because many people in this region are poor and could not afford anti-HIV/AIDS medications as well as protective drugs against HIV infections. This is what Scanlon probably meant by something terrible bound to happen. Supposing that multinational corporations operating in this region had taken a moral responsibility of donating a percentage of their profits into buying of anti-HIV/AIDS medications and provision of protection against HIV infections such as condoms and even educating the people, about a million lives would have been saved. In this situation, therefore, multinational corporations should respect and incorporate the principle of rescue to act and prevent deaths from endemic diseases killing poor people yet can be prevented through assistance in buying medications.

Multinational corporations should assist the needy in poverty-stricken nations since they benefit from the country's resources. There are a lot of things the governments of poor countries do to attract more multinational corporations with the hope of benefiting the citizens through jobs created, technology spillovers and to increase GDP. Most governments in developing countries give out huge subsidies and tax waivers to multinational corporations (Luo, Xue & Han, 2010). Others give out resources that rightfully belong to the public such as oil and other valuable minerals at highly discounted prices or even for free in some instances (Frynas, 2005). The subsidies, tax waivers, discounted prices for raw materials and freely offered natural resources all benefit the multinational corporations as it goes down to saving them billions of dollars in costs. It follows that such firms make huge profits at the expense of the poor countries and especially the sacrifices made by governments on behalf of poor people. Arguably, resources that the multinational corporations are exploiting would have been used by the poor to eradicate poverty and improve their living standards. However, because these firms have got a privilege to access and exploit them on their behalf should ethically imply that a percentage of the profits is used to assist the needy.

Also, the multinational corporations are obligated to assist the poor in countries where they operate because it is simply a way of committing to ethical conduct, doing what is right, in pursuit of profit. Corporations should just commit to social responsibility because it is the right thing to do. Societal problems which include poverty have been as a result of the actions of such business who offer low wages (Crane & Matten, 2016). It is true that some people in poor countries are in poverty because multinational companies they work for low pay wages. Similarly, multinational companies, as they exploit resources in poor countries, harm vulnerable communities, decimate and even wipe them out intentionally or unintentionally leading to their poverty state (Lund-Thomsen, Lindgreen & Vanhamme, 2016). For example, when a corporation wants to extract a mineral or generate electricity, they evacuate the population from their fertile and productive land to infertile areas where they begin to languish in poverty. It is an ethical responsibility of a business to correct such wrongs by simply considering a compensation plan in the form of assisting the poor.

Overall, multinational corporations operating in poverty-stricken countries are obligated to assist the needy as they have a moral responsibility to rescue, do what is right and give back to the society as they benefit from their resources. The principle of rescue requires business managers to act and prevent something terrible from happening as ethical conduct which in this case is assisting the needy who are at risk of death due to poverty-related problems. Similarly, a business is a responsible citizen and is expected to do what is ethically right. Businesses operating in poverty-stricken countries have in one way or the other contributed to that situation and are obligated to balance the effects through uplifting the lives of the needy. Finally, multinational corporations benefit from the resources in poor nations where they operate, and it is ethical that they give part of the profits to charity as a way of rewarding the country. Social responsibility is a plus to the businesses that take it positively and manage it well because, in return, it earns them good reputations and attracts more customers.


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Blowfield, M., & Murray, A. (2014). Corporate responsibility. Oxford University Press.

Carroll, A. B. (2015). Corporate social responsibility. Organizational dynamics, 44(2), 87-96.

Crane, A., & Matten, D. (2016). Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.

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Kharsany, A. B., & Karim, Q. A. (2016). HIV infection and AIDS in Sub-Saharan Africa: current status, challenges and opportunities. The open AIDS journal, 10, 34.

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Luo, Y., Xue, Q., & Han, B. (2010). How emerging market governments promote outward FDI: Experience from China. Journal of world business, 45(1), 68-79.

Scanlon, T. M. (2002). Reasons, responsibility, and reliance: Replies to Wallace, Dworkin, and Deigh. Ethics, 112(3), 507-528.

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