Business ethics can be defined as written and unwritten codes of principles and

values that govern decisions and actions within a company

Why are ethics important?

Recent events in corporate America have demonstrated the destructive effects

that occur when the leadership of a company does not behave ethically. One
might wonder why highly educated, successful, and business savvy corporate
professionals at Enron, Tyco, WorldCom, and Adelphia got themselves into such
a big mess. The answer lies in a profound lack of ethics.

Running a business ethically is good for business. However, "business ethics" if

properly interpreted means the standards of conduct of individual business
people, not necessarily the standards of business as a whole.

Business leader are expected to run their business as profitably as they can. A
successful and profitable business in itself can be a tremendous contributor
toward the common good of society. But if business leaders or department
managers spend their time worrying about “doing good” for society, they will
divert attention from their real objective which is profitability and running an
efficient and effective organization.

Applying ethics in business makes good sense. A business that behaves ethically
induces other business associates to behave ethically as well. If a company (or a
manager) exercises particular care in meeting all responsibilities to employees,
customers and suppliers it usually is awarded with a high degree of loyalty,
honesty, quality and productivity. For examples, employees who are treated
ethically will more likely behave ethically themselves in dealing with customers
and business associates. A supplier who refuses to exploit its advantage during a
seller's market retains the loyalty and continued business of its customers when
conditions change to those of a buyer's market. A company that refuses to
discriminate against older or handicapped employees often discovers that they
are fiercely loyal, hard working and productive.

It is my firm belief that a “good man or woman” who steadfastly tries to be

ethical (i.e. to do the “right thing", to make appropriate ethical decisions, etc.)
somehow always overtakes his immoral or amoral counterpart in the long run. A
plausible explanation of this view on ethical behavior is that when individuals
operate with a sense of confidence regarding the ethical soundness of their
position, their mind and energies are freed for maximum productivity and
creativity. On the other hand, when practicing unethical behavior, the individual
finds it necessary to engage in exhausting subterfuge, resulting in diminished
effectiveness and reduced success.

The best way to promote ethical behavior is by setting a good personal example.
Teaching an employee ethics is not always effective. One can explain and define
ethics to an adult, but understanding ethics does not necessarily result in
behaving ethically. Personal values and ethical behavior is taught at an early age
by parents and educators.

I am quite certain that well-educated business professional like Kenneth Lay,

Martha Stewart, Dennis Kozlowski or the former CEO of General Motors who
received a multi-million dollar salary and bonus package in 1987 at a time when
the company was closing plants and was laying off thousands of people know
and understand ethics. They either were too far removed from the “nitty gritty”
that ethical standards did not resonate with them or they simply did not care.

People at the top of an organization are expected to share the burden of cost
reductions and belt-tightening during difficult times. Senior executives of
companies who freeze their salaries or take a personal pay cut in a problematic
year rather than lay off employees to cut costs deserve our utmost respect.
However, this does not mean that a company should lose flexibility in adjusting
its cost structure during bad economical times, replace old factories by new
ones, or change technology in ways that would require fewer people to do the
work. Decisions like that should be made with empathy and support (financially)
to those who will be affected by it.

Conclusion

Ethics are important not only in business but in all aspects of life because it is an
essential part of the foundation on which of a civilized society is build. A business
or society that lacks ethical principles is bound to fail sooner or later

Ethical dilemma
Ethical dilemma is a complex situation that will often involve an apparent mental
conflict between moral imperatives, in which to obey one would result in
transgressing another. This is also called an ethical paradox since in moral
philosophy, paradox plays a central role in ethics debates.
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 Pakistan and
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 Asia countries.

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 interests.

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 in
Thailand, 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, 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 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
Implementation
Strategic Formulation
Strategic
Control
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.

Social responsibility
Social responsibility is an ethical or ideological theory that an entity whether it is
a government, corporation, organization or individual has a responsibility to
society at large.