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Corporate Codes of Conduct and the Success of Globalization

Published online by Cambridge University Press:  28 September 2012

S. Prakash Sethi
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Abstract

This article focuses on the expanding role of multinational corporations (MNCs) in developing countries, within the context of globalization and free trade. It demonstrates that the current state of globalization does not conform to the conventional notion of free trade. Therefore, given the prevailing circumstances, MNCs have an unfair advantage in expropriating a greater share of gains from efficiency and productivity from international trade than would be possible if labor had greater mobility or more equitable bargaining power.

The article presents evidence that the arguments advanced by MNCs in defense of their position are factually incorrect and logically flawed. Next, the article examines the efforts made by MNCs to ameliorate some of the adverse conditions arising from their overseas manufacturing and sourcing operations. The findings show that most of these efforts are more rhetorical than substantive.

Finally, it outlines a framework that allows multinationals to undertake meaningful actions that would both minimize the adverse consequences of, and enhance the positive benefits emanating from their overseas operations. These actions must be independently verifiable and transparent if MNCs are to gain credibility and public trust.

A failure to undertake meaningful reforms will retard or even reverse the process of globalization, thus depriving all concerned of globalization's attendant benefits. Even more ominously, such a failure would seriously undermine democratic values and erode the very foundations of political and economic freedom in large parts of the world that sustain private enterprise, property rights, respect for individual freedom, and protection of human rights.

Type
Articles
Information
Ethics & International Affairs , Volume 16 , Issue 1 , March 2002 , pp. 89 - 106
Copyright
Copyright © Carnegie Council for Ethics in International Affairs 2002

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References

1 Bhagwati, Jagdish, A Stream of Windows—Unsettling Reflections on Trade, Immigration, and Democracy (Cambridge: MIT Press, 1998Google Scholar); Batterson, Robert and Weidenbaum, Murray, The Pros and Cons of Globalization (St. Louis: Center for the Study of American Business, 2001), p. 1–22Google Scholar; “Globalization and its Critics,” Economist September 29, 2001, pp. 1–30.

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7 This author's considerable experience observing manufacturing operations in many developing countries suggests that worker productivity in low-skilled and comparatively less capital-intensive manufacturing operations is considerably higher in developing countries. A large part of this productivity comes from long working hours and high production speeds. This also accounts for the fact that relatively young, sixteen-to-eighteen-year-old, workers perform most of these operations. The fact that such long hours and high manufacturing speeds lead to exhaustion, worker injury, and long-term health damage rarely enters into employers' considerationGoogle Scholar.

8 Daniel Cohen has made a similar argument with respect to the use of women as beasts of burden in Africa. See Cohen, Daniel, The Wealth of the Wirld and the Poverty of Nations (Cambridge: MIT Press, 1998), p. 7Google Scholar.

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11 Kapstein, 'The Corporate Ethics Crusade” p. 106. See also “The Case for Globalization,” Economist and “Globalization and Its Critics,” EconomistGoogle Scholar

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16 Ibid.Google Scholar

17 Illustrations of various corporate codes of conduct can be found on company Web sites, for example, Levi Strauss, Gap, Mattel, McDonald's, Wal-Mart, Walt Disney, Shell, Nike, Motorola, Texas Instruments, and Sara Lee, to name a fewGoogle Scholar.

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20 Sethi and Williams, Economic Imperatives and Ethical Values in Global Business See also Sethi and Williams, “Creating and Implementing Global Codes of Conduct.”Google Scholar

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22 The author of this paper worked as a consultant-adviser to the Executive Office of the Secretary-General on issues pertaining to the implementation strategies of the Global CompactGoogle Scholar.

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27 Marc Kasky on Behalf of the General Public of the Sate of California v. Nike, Inc., San Francisco County Superior Court, September 25, 1998. See also “Corporation, Officers Cleared in Public Relations Misrepresentation Case,” Corporate Officers and Directors Liability Litigation Reporter 15, no. 11 (April 3, 2000), p. 12Google Scholar.

28 See “Global Labor: A World of Sweatshops,” Business Week, p. 52Google Scholar.

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30 Kaufman, Leslie and Gonzalez, David, “Labor Standards Clash With Global Reality” New York Times, April 24, 2001, p. A1Google Scholar.