Ethical Issues in International Business

A case study from Bangladesh

Prepared For
Assoc. Prof. Dr. Rasidah Arshad

Presented ByNazia Choudhury (ZP01424) N.M.Baki Billah (ZP01431) Zihan Mohamed Jailabdeen (ZP10454)

Savar Tragedy
On 24 April 2013, an eight-story commercial building, Rana Plaza, collapsed in Savar, a sub-district in the Greater Dhaka Area, the capital of Bangladesh. The search for the dead ended on 13 May with the death toll of 1,127. Approximately 2,500 injured people were rescued from the building alive. It is considered to be the deadliest garment-factory accident in history, as well as the deadliest accidental structural failure in modern human history. The building contained clothing factories, a bank, apartments, and several other shops. The shops and the bank on the lower floors immediately closed after cracks were discovered in the building. Warnings to avoid using the building after cracks appeared the day before had been ignored. Garment workers were ordered to return the following day and the building collapsed during the morning rush-hour.

Reasons for this Tragedy

Bangladeshi news media reported that inspectors had discovered cracks in the building the day before and had requested evacuation and closure. The shops and the bank on the lower floors immediately closed, but garment workers were forced to return the following day, their supervisors declaring the building to be safe. Managers at Ether Tex threatened to withhold a month's pay from workers who refused to come to work.

Upper four floors had been built without a permit.

The structure was potentially not strong enough to bear the weight and vibration of heavy machinery

Before

After

This Factory used to manufacture apparels for following companies

Ethical Issues in International Business

Ethical Issues in International Business

Obligation of MNC

Ethical Dilemma

Corruption & Bribery

Environment Pollution

Savar Tragedy
Sweatshops

Employment Practices

Humanrights

Moral obligations of MNC

For corporations to make transparent the potential need to engage in assistance and to specify the limit on resources for assistance before that assistance is offered.

To shift from thinking in terms of balancing needs to prioritizing needs.

To locate managerial responsibility within a broader framework of moral responsibility.

We have to make international companies understand that while the workers are physically in Bangladesh, they are contributing their labour to the businesses: they are stakeholders.

Sad But True!

The ethical obligations of a multinational corporation toward employment conditions, human rights, corruption, environmental pollution, and the use of power are not always clear cut. Companys main duty is to maximize wealth of shareholders, not society at large. Let shareholders decide what to do with the money! Multinational corporations often operate in countries characterized by unrelenting poverty. "The annual revenue of the five largest corporations is more than double the GDP (gross domestic product) of the poorest 100 countries in the world," Hsieh said.

Sweatshop

Corporate Greed

A process where profits are sweated out of workers by forcing them to work longer and faster.
Poverty

Not Implemen -ting Laws

America has stronger labor laws than most undeveloped countries, but it is not free of sweatshops. Many slip under the radar of the U. S. Department of Labor.

Corruption & Bribery

International businesses can, and have, gained economic advantages by making payments to government officials

In the United States, the Foreign Corrupt Practices Act outlawed the practice of paying bribes to foreign government officials in order to gain business

Political Aspects
The Savar tragedy is the consequence moral bankruptcy of the politicians. The building, Rana Plaza, was owned by Sohel Rana, allegedly leading member of the local Jubo League, the youth wing of the ruling Awami League political party. There is a serious deficiency in terms of implementation of labour laws by the owners and government. Export orders worth US$ 2.56 million of 32 factories have so far been cancelled due to frequent strikestimely shipments of export goods worth US$ 9.28 million through seaway have become uncertain also because of shutdowns

Ethical Dilemmas
Ethical dilemmas are situations in which none of the available alternatives seems ethically acceptable

Suppose your subcontractor has hired a 12 year old girl. Do you demand that she be laid off? What if she is the sole support of her younger brothers and sisters? What if working will mean she never gets an education?

Can you tolerate this???

Criticism

The EU parliament is examining whether to continue duty-free facility for Bangladesh in view of safety, security and labour rights issues Pope Francis has said buyers are treating the garment workers like slave laborers.

The influential American Federation of LabourCongress of Industrial Organizations (AFLCIO) petitioned the US Trade Representative (USTR) to revoke Bangladeshs Generalized System of Preference (GSP) facility raising concerns on the poor labour conditions.

What do you think?

Why did they have nothing to say about the retailersWalmart, Disney, GAP, H&M, Benetton, Mango and so onthat created the conditions for slave labor in the first place?

Environment Pollution
When environmental regulations in host nations are far inferior to those in the home nation, ethical issues arise. The tragedy of the commons occurs when a resource held in common by all, but owned by no one, is overused by individuals resulting in its degradation Ethical issues arise when environmental regulations and/or enforcement are inferior to those in the home nation This might result in higher levels of pollution from the operations of multinationals than would be allowed at home Should a multinational feel free to pollute in a developing nation and is it theright and moral thing to do?

Similar stories

Garment factories in the Pakistani cities of Karachi and Lahore caught fire on 11 September 2012. The fires occurred in a textile factory in the western part of Karachi and in a shoemaking factory in Lahore. The fires are considered to be the most deadly and worst industrial factory fires in Pakistan's history, killing 315 people and seriously injuring more than 250

Human Rights
Freedom of speech

Right to leisure

Freedom from torture (Physical abuse)

Employment Practices
Low wages
The Constitution of Bangladesh is also committed to social justice as article 20 proclaims everyone shall be paid for his work on the basis of the principle from each according to his abilities to each according to his work and human labor in every form shall become a fuller expression of the human personality.

Perhaps no other constitution in the world so eloquently proclaims dignity of the workers.

Cont.
Safety issue *dangerous machinery, equipments, insufficient emergency exits & fire extinguishers, no insurance policies for labors

Unhealthy working environment *congested work place, insufficient light, insufficient ventilation
Work Overload *working continuously for 10-12 hours

Impact on Stakeholders
Government- economic loss, social loss *Bangladesh is the worlds second largest producer of textiles, and workers form the backbone of the $18 billion industry. Bangladesh would lose one of its largest contributors to foreign exchange, the currency would depreciate as capital flees, subsidiary industries would fail, the economy will collapseis put forward by those who cannot envision a worker-run industry. Employers- financial loss both in terms of losing international orders and factory losses (machines, equipment)

Cont.
Buyers- financial loss *Disney has decided to pull out of Bangladesh Workers- unemployment, permanent injury, death Customers- refusing slave-labor made products *Dozens of consumers in the US spoke out against unsafe working conditions found in the factory building. People also unleashed their anger at retailers that did not have any connections to that specific building, but are known to source from factories located in Bangladesh Competitors- opportunity for grabbing more customers, gaining profit *Many Canadian apparel firms has decided to move to the markets in Indonesia, Vietnam, India

 Utilitarian Kantian Rights principles

Justice Theory

 The philosopher Immanuel Kant (1724-1804) introduced the principle that people should be treated as ends and never purely as means to the ends of others o People are not instruments like a machine o People have dignity and need to be respected

 Rights theories recognize that human beings have fundamental rights and privileges, which transcend national boundaries and cultures Rights establish a minimum level of morally acceptable behavior Moral theorists argue that fundamental human rights form the basis for the moral compass that managers should navigate by when making decisions which have an ethical component

The notion that there are fundamental rights that transcend national borders and cultures was the underlying motivation for the United Nations Universal Declaration of Human Rights o All human beings are born free and equal in dignity and rights o They are endowed with reason and conscience and should act toward one another in a spirit of brotherhood o Everyone has the right to work, to free choice of employment, to just and favorable conditions of work, and to protection against unemployment

Job Safety Working Environment Safety Working period or time Relaxation Motivation Factors Minimum Wages Allowances