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International Business Ethics

1. Child Labor. Child labor as an exploitative practice that violates principles of business ethics and damages both corporate image and children’s lives is unfortunately widespread in modern society. By Unicef’s estimates, “211 million children (aged between 5 and 14) are engaged in some type of work” and “1 in 12 children (180 million young people under 18) are involved in the worst forms of child labour”. Despite wide usage, child labor is incompatible with ethical business behavior.

Many organizations today try to follow the principle summarised by Hitachi Metals: “make positive contributions to society as good corporate citizens” (“Globalization and Business Ethics”). Clearly, the exploitation of child labor is inconsistent with such desires and proclaimed principles. In the globalizing world, where many multinational corporations enter markets where child labor is extensively used, it is important to develop policies that will allow them to react effectively to this phenomenon. The evaluation of child labor should occur against the backdrop of the stakeholder perspective.

If the organization believes in being responsible to a number of stakeholders, it should assess carefully everybody’s interests and benefits. For many, the incentive to use child labor is purely economic. Children will often be paid smaller salaries than

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adults because of the historic tradition and their supposedly smaller material needs. Savings enabled by child labor can then be passed on to consumers in the form of lower prices and to investors in the form of higher profit margins. On the other hand, children are often forced to toil in unacceptable, unsanitary conditions that take a heavy toll on their health.

This leaves the community worse off and reduces children’s ability to obtain an education or otherwise secure a better future. This means leaving the community as a stakeholder out of the picture. Child labor was a hallmark of factories in the epoch of the Industrial Revolution when the main business qualities of an executive involved the extent to which this person “employed his competitive virtues to defend and increase his own material well-being, and that of his friends” (“History of Ethics”).

Today, however, it is not only important to increase one’s own material well-being; it is important to do so in strict accordance with the ethical norms existing in society. It is vital to remember that “business activity does not occur within a vacuum, it is tributary to many Political, Economic, Social and Cultural factors” (“Globalization and Business Ethics”). Evaluating the issue of child labor, it is worthwhile remembering Kant’s appeal to “act in such a way that you always treat humanity, whether in your own person or in the person of any other, never simply as a means, but always at the same time as an end” (“Ethics of Kant”).

Therefore, each of the children whose labor is being used in a facility has to be treated as an end, not only as a means. Indeed, it is difficult to demand of a business to live by Kantian ethics, since employees will almost always be treated as a means, not as an end. However, most businesses will stop where it is clear that employment is clearly not for the development of the individual, but in fact is ruining future prospects and undermining health, if this is the case with child labor.

In fact, when the business employs a white-collar professional, offering him or her trainings and extra courses, this person can be both used as a means and an end. The employers uses his/her mental faculties for own self-interest, also giving the individual an opportunity to enrich one’s life. However, in case child labor is used to decrease the costs of the business, the outcome is unlikely to be favourable for the child in terms of personal development. The child is then used only as a means and not as an end.

The above discussion suggests that organizations can be justified in using children’s work as long as several conditions are met. In the first place, the level of stress and conditions of work should be proper, the work should not be wearisome and too difficult and in terms of time limit children’s access to school studies. It is ideal if it is developing world outlook and fostering useful professional skills that the child can use in future work at some point in time.

All kinds of part-time internships can in this way be offered to high school or perhaps even younger students to increase their acquaintance with the business world and help them earn some additional money. These activities can then benefit all stakeholders, including children, families, community, and companies. In making decisions concerning child labor, a business organization should consider “implications for other objectives” (“Decision Making Theory”).

If the company wants to promote an image of adherence to Corporate Social Responsibility (CSR), “a concept that frequently overlaps with similar approaches such as corporate sustainability, corporate sustainable development, corporate responsibility, and corporate citizenship”, use of child labor can hurt this image (Industry Canada, 2006). An increase in consumer awareness of ethical issues and proliferation of “ethical consumer decision-making” is the reason why exploitation of child labor can ultimately damage all stakeholders (McGregor, 2005).

If the practice becomes widely publicized, it may attract the attention of the media and consumer organizations, leading to a boycott or drop in sales volume of the company’s products. In this case, all stakeholders will be affected by the outcome of the flawed corporate decision-making because profits will sag, and revenue drop, hurting investors and possibly leading to pay freezes or layoffs. Unicef, an entity that addresses child labor in its campaigns, mentions the following benefits to companies that give up using child labor and use their resources to track it down the supply chain: “Increased brand capital

Higher consumer/customer reputation and loyalty Higher quality of goods Reduced health and safety risks” (Unicef) Thus, corporate decision-making should be based on understanding that use of child labor can prove detrimental to all stakeholders in the company. It is also inconsistent with modern view on business ethics that deny reliance on increase in material wealth as the sole purpose of business and contradict requirements for treatment of individuals put forth in Kantian ethics. 2. Texas Instruments Business Ethics. Texas Instruments’ system of compliance with ethical codes clearly has many advantages as compared to other organizations.

The company seems to take a thoughtful approach to business ethics. Disregarding possible costs of maintenance involved, it organized an ethics committee and an ethics office that are engaged in formulating and implementing ethical policies and ensuring compliance with ethical standards. The existence of “TI Standard Policies and Procedures, the TI Commitment, and “The Values and Ethics of TI” booklet” demonstrates that the company is eager to communicate its core ethics values to employees (“Texas Instruments Business Ethics”).

It is also positive that the Ethics Office can help employees resolve ethical issues in cases where they find corporate guidance unclear or misleading. The most obvious downside of Texas Instruments’ large apparatus for ethics compliance is its centralized structure. The mechanism clearly has a top-down approach in which decisions are made by top managers and then passed down the line to other members of the organization. This approach does not neglect the voices from the ‘bottom’ as “people can ask questions, voice concerns” (“Texas Instruments Business Ethics”).

However, the real impetus for actions in the realm of ethics comes from the Ethics Committee including five top executives who then pass their decisions down the organizational structure overseeing the Ethics Office. The TI Ethical Values including Integrity, Innovation, and Commitment are well formulated and arranged in a neat fashion to be communicated to employees. It would help as well to have these values illustrated with examples, if possible, from the everyday life at Texas Instruments. Such an effort would help TI’s employees connect with the values in a more personal and meaningful way.

Discussion of values and testing people’s understanding in trainings and seminars dedicated to ethical issues could also help broaden consensus concerning ethical values. While the company supplies its workforce with a “business-card size mini-pamphlet carried by TI employees at all times”, it is crucial to see that employees take what is written in the pamphlet personally and are ready to take measures to counter unethical behavior or correct their decisions in accordance with the values professed by Texas Instruments.

However, any of the above measures are aimed at softening the top-down approach and making values developed by TI’s staff more palatable to employees. However, the real thrust of a democratic ethics campaign should lie in the ability of employees to make input in the formulation of this code. TI is not alone in making the mistake of passing down a code invented by top executives. Many companies focus on acknowledgement, acceptance and enforcement of their codes of ethics among employees, thus treating them as objects of action rather than agents.

However, other views on this vital document include the opinion that “the process of formulating the code of ethics facilitates discussion among employees about what is right and wrong and ultimately creates better decisions” (Livingston 2002). In day-to-day organizational functioning, executives and employees can have surprisingly few points of contact, and introduction of the Code of Ethics involving company-wide debates concerning the norms to be included can provide an additional opportunity to meet people face-to-face and gain insights into their mentality.

In this light, it is recommended that Texas Instruments conduct a company-wide discussion of ethics values included in the Code of Ethics that will elicit response from people. In many cases, it may prove desirable that the company re-formulate its policies and include new values or omit the ones that seem irrelevant to employees. It should be noted that such bottom-up approach does have its cons. Discussion takes time, can divert attention from other pending issues, and integration of various proposals in one coherent document will not be easy.

The pro of the top-down approach is that it more or less easily ensures coherence in decision-making; this is the reason why companies are most typically governed by a small group of people passing their decisions to the large group. However, the trend of today is to allow for greater employee input in decision-making, and managers should learn to provide for that without depressing the efficiency of the company. The cost/benefit ratio of TI’s ethical compliance is likely to rise as a result of such policies.

The reason is that people are more likely to follow decisions made with their input than the ones from which they were excluded. At times, forcing a code on employees “can result in employee cynicism” and lead to passive attitude toward its implementation (US International Trade Administration). On the other hand, the costs of compiling a code from various proposals may well be justified by pride employees will take in their role in its preparation. This can contribute to compliance with the code.

This improvement in behavior orientation will be the more significant, the less passionate employees feel about today’s ethics enforcement and approaches. In this light, it can forward the company’s organizational objectives such as compliance with ethical norms and legal regulations. Practice proves that “a code of ethics can be an effective internal control on behavior which is more desirable than external controls like government regulation” (Livingston 2002). If Texas Instruments ensures a high degree of compliance with its ethics code, it can count on positive influences on employee behavior.

A change in attitude will likely increase the company’s image in the community and lead to a better partnership with external stakeholders.

References Decision Making Theory. Industry Canada. Corporate Social Responsibility. 11 May 2006. http://strategis. ic. gc. ca/epic/internet/incsr-rse. nsf/en/Home (accessed June 13, 2006) McGregor, Sue. The Ethical Consumer. International Journal of Consumer Studies 29(4): 387. Business Ethics at TI: Texas Instruments Incorporated. History of Ethics. Globalization and Business Ethics: The Context of Decision Making.

Livingston, David. 2002. A Code of Ethics for Off-Earth Commerce. http://www. davidlivingston. com/presentations/A%20Code%20of%20Ethics%20for%20Off-Earth%20Commerce. doc (accessed June 13, 2006) US International Trade Administration. Standards, Procedures, and Expectations for the Responsible Business Enterprise. http://www. ita. doc. gov/goodgovernance/adobe/bem_section_3/chapter_5. pdf (accessed June 13, 2006) Unicef. Child Labour Resource Guide – Executive Summary. http://www. unicef. org. uk/publications/clrg/es. asp.

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