You are on page 1of 6

Ethical Dilemma in Today's Business

Global interdependence is a compelling dimension of the global business environment,

creating demands on international managers to take a positive stance on issues of
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. If MNCs
behave unethically, it soon comes to the notice of the public and the company�s
image is tainted. Multinationals are often worse off for having behaved unethically in
the interest of short term gains, as the bad publicity generated by unethical practices
leads to far greater losses in the long run.

In the challenge of modern society, manager or worker often encounters a situation

than challenges one�s ethical beliefs and standards. Managing across border
increasingly includes difficult ethical dilemmas. It is less clear where to draw the line
between ethical behavior and the corporation�s other concerns, or between the
conflicting expectations of ethical behavior among different countries. The paper aims
to (1) discuss current ethical dilemmas in global environmental ethics, (2) examine
how multinational would address conflicting norms and expectations by�illustrating
one case study of ethical dilemma and its resolution.
Nestlé�s Corporate Crimes

1.0 Nestlé�s ethical dilemmas

1.1.����� Unethical marketing practices

Infant formula
In 1977, Nestle got embroiled in a controversy, when it was criticized for using unethical marketing
practices endangering consumer health to promote its infant formula in developing nation. A number of
aid agencies called for the boycott of Nestle products and this protest continued right into the 1980s,
when Nestle agreed to adopt the infant formula marketing code laid down by the World Health
Organization and UNICEF. Although Nestle had a charter on infant formula, the company is usually
violated the principles laid down in it (Refer to reference3).

Genetically Modified Foods

Nestle was criticized for using genetically modified (GM)[1] ingredients in its food products, and was
accused of 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 if they were themselves in the position of uniformed consumers. Therefore, providing unsafe
products standard and ill-informed consumers by Nestle is absolutely wrong.

1.2.����� Overcharged prices

Nestle launched bottled water, called �Pure Life� in some Asian countries like Pakistanand India (in
1998 and 2001 respectively). Nestle introduced bottled water, which provided safe clean water but
priced it so high that it was unaffordable for the lower income groups. It turned water into a luxury by
pricing it around $ 0.4 (in Pakistan) for a one liter bottle.

According to utilitarianism, ethical action is evaluated by looking at its consequences, weighing the
good effects against the bad effects on all the people affect by it (Shaw & Barry, 2004). Most
developing countries laced basic drinking water facilities. A very high water price was charged by
Nestle limiting a number of people to buy it. Nestlé�s action produces the worse for the greatest
number of South Asian because people could not afford for water which is basic human needs and is
sporadic and contaminated in south Asiacountries.

1.3.����� Unfair labor practices

Nestle was one of the biggest purchasers of cocoa from Ivory Coast, a country in West Africa. 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
of the workers had been trafficked by bought and sold, making them practically slave labor. Nestle
purchased cocoa from these farms despite its awareness of the conditions of the laborers, thus making it
a party to their exploitation.

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

Another unfair labor practice was occurred in Thailand. When a group of 13 workers, wording in a sub-
contracting facility of Nestle in Thailand, organized themselves to form a union, Nestle immediately cut
the number of orders to that company and asked the company to put the unionized workers on indefinite
leave with half pay. The workers were force to quit because of their lowered pay (Manager 2001). In
doing so, Nestle had clearly denied these workers their right to organize themselves to better their

1.2.�� Applying De George�s principles

International business ethics refers to the conduct of MNCs in their relationships to all individuals and
entities with whom they come into contact (Daft, 2002). Ethical behavior is judged and based largely on
the cultural value system and the generally accepted ways of doing business in each country or society.
MNC Manager must decide whether to base their ethical standards on those of the host country or those
of the home country and whether these different 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 of doing no harm requires Nestlé�s management to look
beyond its own interests (i.e., cheap cocoa, and high market-share). Unethical marketing of infant
formula and GM foods in developing countries are example of doing harm knowingly and willingly and
of benefiting from the lack of legal restraints to the detriment of the eventual consumers. If business
follow Kant�s rule, it will provide a quality and safe product to its entire market.� Nestle decide to
sell unsafe (GM) foods even it knows that the product is unsafe. In addition, Nestlé�s marketing
strategy in developing countries was to distribute free samples to nursing mothers, thus getting the baby
used to the formula very early in order to get a hold on its captive market. Unethically, Nestlé promoted
the use of infant milk formula as a substitute for mother�s milk. This unethical manner causes
widespread infant malnutrition and susceptibility to infection, which could even lead to infant death.
Following this norm, Nestle should preserve the safety and health of consumers by disclosure of
appropriate information, proper labeling and accurate advertising.

Workers on cocoa production from Ivory cost were paid below minimal wages and were practiced as
slave labor. Despite its awareness of the conditions of the labors, Nestle continued purchased of cocoa
from these suppliers. The company must pressurize its suppliers to change because it is in a position of
major buyer. Regarding to Nestlé�s inThailand, the company should respect the right of employees to
organize for the purpose of 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 file
complaints of harassment or discrimination or who participate in their investigation (Zimmerman,

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 significant
Nestlé�s profit since the labors received only a very small proportion of the price paid for the Nestle
product by the final consumer. According to the norm of doing more good than harm to host country,
Nestle must stop buying cocoa from South Africa, 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 benefit to others. On the other side of the balance are factors
like corporate reputation (Orts, 1995). These factors can make corporate altruism worthwhile in the long
run, even at the short-run expense of the stockholders. Nestle should demonstrate its ethical
commitment through philanthropic contribution and use of its expertise and resources on numerous
social problem in host countries.

Importantly, Nestle should integrate social and ethical issue in strategic process (see figure4). Along
with an investment appraisal, such planning should include an environmental impact assessment.
According to Whetton & Cameron (2005) leadership is the key success for organizational change as
well as the key to aligning organizational systems and follower behaviors around a new organizational
vision. Ethical leadership practices are necessary prerequisite for organizational effectiveness
(Ausguien, 2001). Therefore, 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 Formulation
Source: Adapted from Thompson & Stickerland (2003, p.7)
To upgrade company�s ethics, Nestle must impose codes of 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 of codes of conduct include do not use child or forced labor, provide a safe
working environment, and respect worker rights to unionize (Refer to figure2). Corporate moral
excellence can be alternative to develop Nestlé�s ethical culture. For a corporate to be morally
excellent, it must develop and act out of a moral corporate culture (Hoffman, 1994). In a situation with
intolerance arise, manager should be guided by precise statements that spell out the behavior and
operating practices that Nestlé�s demand. Nestle must be careful when placing a foreign manager in a
country whose values are incongruent with his own because this could lead to conflict 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 fact, ethical business must respect for human dignity, and protect the fundamental
rights of people. According to Aristotelian, equal should be treated equally and unequal unequally
(Hirschman, 2001). This infers that individuals should be treated the same, unless they differ in ways
that are relevant to the situation in which they are involved. If labors work the same jobs, they should be
paid the same wage. If 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) fail to do its duty to others, but also fails to do this duty to
itself; Nestle make itself into an object.

1.2.4.����� Respect local regulations

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

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