Week 10 Flashcards
Describe MNCs?
- they play a key role on the global stage in terms of development of international trade
- they control vast resources, and are influential in many domains
- they operate beyond borders and national jurisdictions
- formal accountability is limited to shareholders
what are the benefits of MNCs?
- Economic Productivity
- Reduces Prices for Consumers
- Developing countries have access to foreign investment
- Transfers Technology
- Promotes communication, reduces conflict
what are the negatives of MNCs?
- Job Insecurity; pressure on domestic wages
- Nations policies can be undermined
- Weakens Government power:
- Supplier conditions
- Home producers unable to compete with global brands
- Suppliers/workers in weak bargaining position
factors that affect what type of CSR to apply to MNCs (home or host nations version?
- Cultural and legal institutions
- Role of state
- Philosophy and religious norms
- Differing focus for ethical dilemmas
why has the power of MNC’s increased?
- deregulation of markets and industries -> made it easier for MNC’s to move into different markets
- Financial power
- Ease of relocation to different geographical areas
- Limited power of public institutions (national and supra-national) to regulate their activities
= corporate and commercial interests taking over political institutions role in terms of social and environmental issues?
what are issues with global supply chains?
- Worker conditions, pay/health and safety/child labour – sub contactors, how do you ensure they’re doing what you want, monitoring safety of products eg Mattel and Children’s Toys – used lead paint on toys
- Ethical Issues in connection with the environment eg net zero goals but developing countries don’t get opportunity to do so
- Fair or ‘Optimal’ sourcing practices
- Locus of Responsibility in case of problems
what is ethical sourcing?
- the inclusion of explicit social, ethical, and/or environmental criteria into supply chain management policies, procedures and programmes
- developed as a result of consumer backlash in supply chain practices
- slowly getting established into business practice through social auditing
describe the Bagladesh Rana factory collapse?
The factory housed a number of UK High Street suppliers
- When it collapsed much blame attached to pressure on suppliers to work to very tight margins. 1100 people were killed
- Concerns raised as to hours worked, pay and conditions.
In the UK strict limits on all three, a very variable position in Bangladesh
what is individual corruption?
- Very often demanding “facilitation payments” eg not taking action on something because X has paid so much
- It may be seen as a way of topping up a low wage
what is corporate corruption?
- Legislation may push bribery underground and become far more subtle
- In an international context, make innocent hospitality practices – eg a welcome dinner designed to promote trust – as coming within the law
EG Seimens were fined 800 million dollars by US regulators, as it had been bribing elsewhere, bribing government officials in different countries
what is the employees’ role in corruption?
- Very often the first to suspect that something is going wrong
- Issues they can notice are Health and Safety Failings; Bribery; Financial Irregularities; Stakeholder mistreatment
- Employees though may have loyalties to their corporation, colleagues and be concerned with negative workplace consequences after disclosure. Also a concern that nothing may come of their action other than pain to themselves
what is tax avoidance?
Tax evasion is criminal
- Tax Avoidance, in general, is using a tax relief scheme, as intended by government, to benefit both society and the corporation. An example would be a business giving to charity and being able to reduce its tax bill
- Tax Avoidance that uses complex tax relief schemes in a way not intended by government to solely benefit the corporation,
what is the wrongdoing of tax avoidance?
- It creates an unfair business environment where MNCs can move profits across jurisdictions whilst domestic firms suffer
- It means that profitable activities, based on normal
economic criteria, are not paying their fair share of
tax to the host community - It negates the idea of the company being a good
corporate citizen and is solely driven by self interest
It encourages a race to the bottom
what is the case study of Starbucks?
- found to have a low taxation bill in the UK, and paid no tax from 2008 to 2011
- they through a subsidiary charged themselves a high premium for their coffee beans, so that UK profits were brought down, increasing profits of subsidiary overseas where corporation tax was lower.
