International Finance Assignment

International Finance

MNC’s operate in many different countries with many different cultural and ethical norms and environments. Relative to practices in the US should a US MNC relax its ethical standards in order to be more globally competitive?

Student 1: Multinational corporations (MNC’s) operate within different geographical locations all with different cultures and ethical practices. However, these differences do not warrant for a MNC to change or reduce its ethical standards just to remain competitive.

First of all, ethics are provide a ‘social contract’ between an organization and the public. This means that ethical practices represent the face of the company even in absence of the law. As such, it is important to maintain uniform ethical practices across countries even for MNCs. Moreover, varying ethical standards from one country to another for the sake of profits portrays an organization as one that does not mind the overall relationship with global customers and one can easily end its principles for selfish gains. This in turn paints the organization in bad light leading to loss of business.

Student 2: This topic has been an ethical dilemma for years and something companies battle with continuously.

On the one hand, it may be best to be globally competitive to pay lower wages and not follow the same safety standards as in the U.S. This is especially true when comparing wage differences in poorer countries. It can be argued that it’s not unethical to pay $1/day because it for standards in the country they are producing in, it may be considered a good wage. So, of course, comparing pay based on American standards would not work oversees. For example, I send my brother $100 which in turn comes out to 8000 Argentinian pesos which are actually a week’s wages for him. That breaks down to .50 an hour which is below our minimum wage and would cause a legal issue in our country if that were paid to someone working 40 hours.

On another note, there are a few standards that I believe should never be relaxed and those include safety issues, regardless of different standards. Things like factory worker safety and labor standards. We have regulations in this country that keep us safe from this type of abuse, a company should uphold the same standards no matter if they’re not forced to just to save money. Another example includes the  Consumer Product Safety Improvement Act (CPSIA) which regulates children’s clothes and toys for safety from lead, flame retardant, etc. Not only did companies need to get rid of lots of unsafe items, but they did so by selling it to 3rd world countries and/or countries without these safety standards. This is just something which is unacceptable no matter how much money will be saved because a child’s life is at stake.

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