Ethical Dilemma in Today's Business

Global interdependence is a compelling dimension oI the global business

environment, creating demands on international managers to take a
positive stance on issues oI ethical behavior, social responsibility,
economic development in host countries, and environmental protection
around the world. However, there were still several large multinational
companies indulging in ethically questionable practices. II MNCs behave
unethically, it soon comes to the notice oI the public and the company`s
image is tainted. Multinationals are oIten worse oII Ior having behaved
unethically in the interest oI short term gains, as the bad publicity
generated by unethical practices leads to Iar greater losses in the long run.

In the challenge oI modern society, manager or worker oIten encounters a
situation than challenges one`s ethical belieIs and standards. Managing
across border increasingly includes diIIicult ethical dilemmas. It is less
clear where to draw the line between ethical behavior and the corporation`s
other concerns, or between the conIlicting expectations oI ethical behavior
among diIIerent countries. The paper aims to (1) discuss current ethical
dilemmas in global environmental ethics, (2) examine how multinational
would address conIlicting norms and expectations by illustrating one case
study oI ethical dilemma and its resolution.
Nestl`s Corporate Crimes

1.0 Nestl`s ethical dilemmas
1.1. Unethical marketing practices
Infant formula
In 1977, Nestle got embroiled in a controversy, when it was criticized Ior
using unethical marketing practices endangering consumer health to
promote its inIant Iormula in developing nation. A number oI aid agencies
called Ior the boycott oI Nestle products and this protest continued right
into the 1980s, when Nestle agreed to adopt the inIant Iormula marketing
code laid down by the World Health Organization and UNICEF. Although
Nestle had a charter on inIant Iormula, the company is usually violated the
principles laid down in it (ReIer to reIerence3).

enetically Modified Foods
Nestle was criticized Ior using genetically modiIied (GM)1|1| ingredients
in its Iood products, and was accused oI dumping products rejected in
Europe in developing Asian countries where the laws on GM products
were either absent or less stringent.
For Kant, the company`s decision makers would have to be willing to
advocate marketing the product even iI they were themselves in the
position oI uniIormed consumers. ThereIore, providing unsaIe products
standard and ill-inIormed consumers by Nestle is absolutely wrong.

1.2. Overcharged prices
Nestle launched bottled water, called 'Pure LiIe in some Asian countries
like Pakistan and India (in 1998 and 2001 respectively). Nestle introduced
bottled water, which provided saIe clean water but priced it so high that it
was unaIIordable Ior the lower income groups. It turned water into a
luxury by pricing it around $ 0.4 (in Pakistan) Ior a one liter bottle.

1|1| Genetically modiIied Ioods are lab-crated grains, vegetables, Iruits and other
primary Ioods. Their use has been somewhat controversial. Some people are concerned
about the consequences to their health oI the use oI these products. European countries
require all GM Ioods to be clearly labeled as such; however, in countries Canada and the
US, labeling is optional.

According to utilitarianism, ethical action is evaluated by looking at its

consequences, weighing the good eIIects against the bad eIIects on all the
people aIIect by it (Shaw & Barry, 2004). Most developing countries laced
basic drinking water Iacilities. A very high water price was charged by
Nestle limiting a number oI people to buy it. Nestle`s action produces the
worse Ior the greatest number oI South Asian because people could not
aIIord Ior water which is basic human needs and is sporadic and
contaminated in south Asia countries.

1.3. Unfair labor practices
Nestle was one oI the biggest purchasers oI cocoa Irom Ivory Coast, a
country in West AIrica. UNICEF studies and International Labor
Organization (2002) revealed that the workers on these plantation lived
and worked in poor conditions. They were paid minimal wages and
exploited by the land-owners. Most oI the workers had been traIIicked by
bought and sold, making them practically slave labor. Nestle purchased
cocoa Irom these Iarms despite its awareness oI the conditions oI the
laborers, thus making it a party to their exploitation.

Child labor was also employed on the plantation. UNICEF and The
International Institute oI Tropical Agriculture (IITA) studies (2002)
revealed that over 200,000 children were shipped to Ivory Coast and other
cocoa producing countries in Western AIrica Irom neighboring countries
like Mali and Burkina Faso, to work on the plantations, especially during
the harvesting oI cocoa or coIIee beans.

Another unIair labor practice was occurred in Thailand. When a group oI
13 workers, wording in a sub-contracting Iacility oI Nestle in Thailand,
organized themselves to Iorm a union, Nestle immediately cut the number
oI orders to that company and asked the company to put the unionized
workers on indeIinite leave with halI pay. The workers were Iorce to quit
because oI their lowered pay (Manager 2001). In doing so, Nestle had
clearly denied these workers their right to organize themselves to better
their interests.

1.2. Applying De George`s principles

International business ethics reIers to the conduct oI MNCs in their
relationships to all individuals and entities with whom they come into
contact (DaIt, 2002). Ethical behavior is judged and based largely on the
cultural value system and the generally accepted ways oI doing business in
each country or society. MNC Manager must decide whether to base their
ethical standards on those oI the host country or those oI the home country
and whether these diIIerent standards can be reconciled (Donalson, 1996).

1.2.1. Do no harm
Thompson & Stickerland, (2003, p. 65) asserts that 'a company has ethical
duties to owners, employees, customers, suppliers, the communities where
it operates, and the public at large. The norm oI doing no harm requires
Nestle`s management to look beyond its own interests (i.e., cheap cocoa,
and high market-share). Unethical marketing oI inIant Iormula and GM
Ioods in developing countries are example oI doing harm knowingly and
willingly and oI beneIiting Irom the lack oI legal restraints to the detriment
oI the eventual consumers. II business Iollow Kant`s rule, it will provide a
quality and saIe product to its entire market. Nestle decide to sell unsaIe
(GM) Ioods even it knows that the product is unsaIe. In addition, Nestle`s
marketing strategy in developing countries was to distribute Iree samples
to nursing mothers, thus getting the baby used to the Iormula very early in
order to get a hold on its captive market. Unethically, Nestle promoted the
use oI inIant milk Iormula as a substitute Ior mother`s milk. This unethical
manner causes widespread inIant malnutrition and susceptibility to
inIection, which could even lead to inIant death. Following this norm,
Nestle should preserve the saIety and health oI consumers by disclosure oI
appropriate inIormation, proper labeling and accurate advertising.

Workers on cocoa production Irom Ivory cost were paid below minimal
wages and were practiced as slave labor. Despite its awareness oI the
conditions oI the labors, Nestle continued purchased oI cocoa Irom these
suppliers. The company must pressurize its suppliers to change because it
is in a position oI major buyer. Regarding to Nestle`s in Thailand, the
company should respect the right oI employees to organize Ior the purpose
oI collective bargaining. Nestle had better prohibit retaliation to their
employees, though disciplinary action, or an anti-harassment policy. In
addition to Anti- harassment, companies need to develop policies and
procedures to prevent retaliation against individual who Iile complaints oI
harassment or discrimination or who participate in their investigation
(Zimmerman, 2002).

1.2.2. Do more good
In Ivory Coast, Children worked in hazardous conditions using machetes
and spraying pesticides and insecticides without the necessary protective
equipments. Such exploitation involves in signiIicant Nestle`s proIit since
the labors received only a very small proportion oI the price paid Ior the
Nestle product by the Iinal consumer. According to the norm oI doing
more good than harm to host country, Nestle must stop buying cocoa Irom
South AIrica, which is under apartheid and uses child labor in hazardous
working condition. For a utilitarian, however, these are considerations that
can be balanced against other considerations, such as the beneIit to others.
On the other side oI the balance are Iactors like corporate reputation (Orts,
1995). These Iactors can make corporate altruism worthwhile in the long
run, even at the short-run expense oI the stockholders. Nestle should
demonstrate its ethical commitment through philanthropic contribution and
use oI its expertise and resources on numerous social problem in host
countries.

Importantly, Nestle should integrate social and ethical issue in strategic
process (see Iigure4). Along with an investment appraisal, such planning
should include an environmental impact assessment. According to
Whetton & Cameron (2005) leadership is the key success Ior
organizational change as well as the key to aligning organizational systems
and Iollower behaviors around a new organizational vision. Ethical
leadership practices are necessary prerequisite Ior organizational
eIIectiveness (Ausguien, 2001). ThereIore, Nestle top management must
train to be ethical leadership (see Recommendation action in appendix3).

Figure4: Integrating social and ethical issues in the strategic management
process
Social & Ethical Issues
Environmental Analysis
Establishing Organizational Direction
Strategic
Implementation
Strategic Formulation
Strategic
Control
Source: Adapted Irom Thompson & Stickerland (2003, p.7)
To upgrade company`s ethics, Nestle must impose codes oI conduct that
treating other person with respect and should provide leadership`s ethical
training as leaderships are key person to make a strategic-decision.
Examples oI codes oI conduct include do not use child or Iorced labor,
provide a saIe working environment, and respect worker rights to unionize
(ReIer to Iigure2). Corporate moral excellence can be alternative to
develop Nestle`s ethical culture. For a corporate to be morally excellent, it
must develop and act out oI a moral corporate culture (HoIIman, 1994). In
a situation with intolerance arise, manager should be guided by precise
statements that spell out the behavior and operating practices that Nestle`s
demand. Nestle must be careIul when placing a Ioreign manager in a
country whose values are incongruent with his own because this could lead
to conIlict with local managers, governmental bodies, customers and
suppliers.

1.2.3. Respect the human rights of their employees
Doing good business and being a good employer is pivotal and important
guidelines in doing today`s multinationals. In Iact, ethical business must
respect Ior human dignity, and protect the Iundamental rights oI people.
According to Aristotelian, equal should be treated equally and unequal
unequally (Hirschman, 2001). This inIers that individuals should be treated
the same, unless they diIIer in ways that are relevant to the situation in
which they are involved. II labors work the same jobs, they should be paid
the same wage. II Nestle pays its labors less than other companies, then
Nestle has an injustice in remuneration system. Violating human rights is
immoral practices due to Kant`s principle. This indicates that Nestle
exploited and treated others as means rather than as ends, as thing rather
than as person. Not only does Nestle (exploiter) Iail to do its duty to others,
but also Iails to do this duty to itselI; Nestle make itselI into an object.

1.2.4. Respect local regulations
MNCs are subject to the laws, regulations, and jurisdiction oI the countries
in which they operate (OECD, 2004). Nestle must not resist against law
that protect the country`s workers or consumers, even iI such laws make
operating in these countries less proIitable. It is evidence that Nestle did
not respect Ior domestic rules and regulation. Nestle broke Thai law bys
paying workers less than minimum wage and cut them oII. For consumer
saIety, Nestle did not respect the laws and regulations oI the countries in
which they operate with regard to consumer protection. In China, there is a
regulation oI GM Iood, which required that all products which were
contained GM ingredients, be labeled explicitly. Despite consist oI GM
ingredients, Nestle products were not labeled. Indeed, it could not
unilaterally continue with its double standard practice and ignore the
concerns and demands oI the general public in Asia.



u Lawrence
: ::! h 2550
!!