4-6 pages double-spaced Business Ethic Paper!!!
Maoxiaoying
bird.pptxBusiness Ethics
Business in developing areas
The Problem
Transnational corporations (TNCs) that set up their operations in developing countries face special challenges (no guidelines, different customs, unstable governments, social tensions, labor issues, etc.) and acquire a different set of responsibilities than domestic businesses do.
TNCs, remember, are not regulated by laws that govern their treatment in other countries, so their responsibilities are either negotiated with host countries or unilaterally decided by the company itself.
The Goal
Bird seeks to provide a notion of economic development and then argue that it is the responsibility of TNCs to contribute to economic development in this sense. This is meant to be a more concrete theory than just telling TNCs to respect human rights.
Bird’s Definition of Development
Bird wants to offer a concept of development that includes more than just increased per capita income.
If development just means increased per capita income, then TNCs contribute to development through the wages they pay, the taxes they generate, and investments in the area.
Bird’s Definition of Development
“I argue that economic development in particular can be best understood in terms of those kinds of economic arrangements (institutional patterns) that foster greater productivity” (86)
Bird’s Definition of Development
Productivity means: “the effective utilization of particular inputs, namely existing human and natural resources, so that they yield more benefits (uses, values, wealth) without seriously depleting those resources” (86)
This could involve finding new ways to use existing resources (ex. renewable energy), ways to more effectively and less wastefully use resources, ways to conserve resources, etc.
Higher productivity create more benefits from the same resources and these benefits can be used for the public good, or for private ends.
Bird’s Definition of Development
Things that foster higher productivity: local and foreign investment, technological innovation, education, commerce
Two things seem especially important: public security and working infrastructures
Physical infrastructure (roads, electricity, water, sewage)
Social infrastructure (schools, health care, welfare)
Economic infrastructure (employment, credit, regulation of market)
Bird’s Definition of Development
On this model of development, TNCs are “to be evaluated in terms of degree to which they foster increased productivity”(87).
Do they augment natural, human, social, and financial resources to create more benefits, and add to the long-term productive capacity of the area?
Or do they deplete natural resources, exploit or abuse human resources, and contribute to the lopsided distribution of financial resources by only producing short-term wealth gains for some members of area who are directly involved?
Bird’s Definition of Development
Why do TNCs have this responsibility?
Bird’s Definition of Development
Why do TNCs have this responsibility?
TNCs are depleting some of the resources of an area (whether environmental or human), so they have a responsibility to augment other resources to there is a long-term net benefit to the area
What practices of TNCs work to facilitate economic development?
Bird identifies two main practices that help and contrast them with practices that do not:
1. An asset building approach instead of a cost minimization approach
2. Interconnecting your business with local businesses instead of remaining isolated
1. Asset building vs. cost minimization
Cost minimization approach:
1. Asset building vs. cost minimization
Cost minimization approach:
tries to keep costs for labor, supplies, credit, and taxes low
invests as little as possible in fixed assets (property, plant, equipment)
contributes as little as possible to public revenues, suppliers, and workers
move to other locations if they have lower labor costs
popular with TNCs that mass-produce goods
1. Asset building vs. cost minimization
Asset building approach:
1. Asset building vs. cost minimization
Asset building approach:
tries to increase the value of overall assets, including fixed assets, connections with local suppliers, skilled and loyal workers, loyal local customers
used more by TNCs that are trying to develop local consumer markets, and that have a large set-up expense
Bottom of the pyramid (BOP) initiatives are good examples
initiatives include selling items in small affordable packages, offering low-cost micro-credit, and contracting with women in poor areas to sell their goods
goal is not savings, but savings are by-product of expanding customer base and developing relationships with them
socially responsible, but also receives more reliable flow of goods
1. Asset building vs. cost minimization
The difference between these approaches lies in how businesses “conceive of and assess the economic value that their firms produce” (89).
What do they view as their assets?
Who do they see themselves responsible to?
2. Interconnection vs. isolation
Isolated approach:
2. Interconnection vs. isolation
Isolated approach:
TNC exists as economic island apart from local commerce
Often used by companies that extract minerals or other raw materials, since their goal is to collect materials and ship them elsewhere to be refined
Also used by assembly plants, since their goal is to use low-cost labor to assemble and then sell product elsewhere
TNC generates local wages and taxes, but not interconnected with local commerce
TNC often acquires supplies, equipment, management elsewhere
Often the money created goes to local elites and aggravates inequalities
2. Interconnection vs. isolation
Interconnected approach:
2. Interconnection vs. isolation
Interconnected approach:
tries to develop and become part of local economy
often used in places where TNCs are trying to cultivate local markets
less of an alternative for TNCs extracting resources
These kinds of businesses should pursue other solutions, such as working with local gov’ts and businesses to build infrastructures that the public and other businesses can use, rather than building infrastructures that only your business can use.
