“To deny people their human rights is to challenge their very humanity.” – Nelson Mandela
Technological advancements have narrowed the time-space convergence by enabling cross-border travel, integration, and trade, resulting in a globalized and united world trade frontier. This has been the catalyst for the escalated growth of multinational corporations (MNCs) in recent years. According to Root (1994), an MNC is a parent company which has agents and operations which involve cross-border transactions (Ijrsp.org, 2014). There has been much debate surrounding the concern of the growing power of multinational corporations, and their ability to get away with creating adverse effects to human rights, thus worsening their public image to consumers. Human rights are rights inherent to all human beings without discrimination, which consists of the right to life and liberty, freedom from slavery and torture, freedom of opinion and expression, and the right to work and education (Un.org, n.d.). A company’s code of conduct is a “central guide and reference for employees to support daily decision making of the organization” (Erwin, 2011). To reduce ambiguity in this essay, accountability will be interpreted as “the obligation of an individual or organization to account for its activities, accept responsibility for them, and to disclose the results in a transparent manner”, since this definition puts the term in a corporate context, in alignment with this essay (Businessdictionary, 2018). There have been numerous cases in recent years of MNCs unfairly exploiting human rights namely, Nestle’s forceful and abusive use of child labor, Coca Cola’s water privatization and discrimination, as well as Foxconn’s mass suicides (Guo et al.2012), to name a few. Hence, there is a deficiency of corporate accountability as well as transparency over the protection of human rights, indicating that existing codes of conduct have not been very useful.
This essay aims to analyze and assess the extent to which individual company codes are useful in promoting human rights accountability within MNCs operations by evaluating ethical perspectives through the lens of relevant theory. The essay will take an extensive approach to this thesis while considering ethical, legal, and social implications.
“Codes of ethics motivate members of an association to behave ethically and inspire them because they ‘provide a positive stimulus for ethical conduct'” (Press-files.anu.edu.au, n.d.). Company codes of conduct exist to protect the livelihood and the human rights of all staff in the workplace, as well as serve as a public statement of their values and beliefs. Any organization must implement a code of conduct whether it is legally mandated or not (Gilman, 2015). The emergence of these codes has already been a big step towards the progress of preserving human rights in the business world. The codes usually encapsulate both an internal guideline and an external statement of corporate values and responsibilities. (Ethics.org, 2018) Well-written codes include a lengthy and thorough mission statement, values and principles, and a benchmark for professional conduct.
As a result of the advancements of the internet, popular MNCs have become increasingly important public figures and are therefore constantly under public inspection. (Sethi, 2003) The increase in public cases of human rights violations by MNCs in recent years has resulted in growing attention that they should be held accountable for them. In order for MNCs to preserve a positive public image for their consumers, they find it important to establish a well-written company code of conduct. Although most MNCs have well-written codes of conduct, their main focus is to maximize profits in order to increase wealth for their stakeholders. They take a different approach to the ‘triple bottom line’ as they usually only focus on the economic branch of the framework, while taking less consideration for social and environmental factors. (F. Slaper et al., 2011) This notion contrasts John Elkington’s framework which suggests that primary focus on one aspect should not be at the expense of others (Ibid.). Since MNCs are non-human entities, it would be fair to argue that they do not have a moral obligation to follow an ethical code, despite having a code of conduct. Additionally, codes of conducts are not necessarily legally binding (Murphy, 2005). However, prominent writers such as Friedman questioned this and believed that multinational corporations should act ethically beyond their legal obligations.
MNCs tend to exploit workers’ human rights by underpaying workers in poor working conditions in order to benefit from lower costs and higher profits (Warwick.ac.uk, 2006). This usually takes place in countries with less regulations and little emphasis on human rights accountability. Most MNCs maintain their public image with a well-written code of conduct, but still engage in unethical activities such as human rights violations behind closed doors. In 1983, Nike shifted its production by outsourcing most of its manufacturing to Indonesia. This was supposed to bring a developing nation economic growth by increasing employment and by bringing FDI to the country’s economy. However, Nike failed to comply with its code of conduct and did not meet minimum wage requirements on several occasions, which amounted to 600,000 hours of overtime worth $1 million USD. (Kavoussi, 2013) They began to re-shore soon after, which risked the loss of 171,000 jobs. (Ibid.) This would be a disaster as it would affect workers rights as there would be mass unemployment in the country. The case of Nike demonstrates that having a company code of conduct does not promote MNCs accountability for such human rights, and is therefore not very useful.
Software company Dell was also accused of exploiting workers in 2013. Dell suppliers in China employed workers for up to 74 hours a week in very poor working conditions and many health risks. Some workers were paid just 66p per hour. “When companies compete on supplying computers in the cheapest way possible, and when our public buyers aim for the cheapest wares on the market, a high human cost is paid.” (Toor, 2013) However, after news of the scandal died down, the company was committed to implementing new codes of conduct by complying with more ethical standards. It managed to earn its third consecutive award as the most ethical company in 2016 through its core values of winning with integrity, its ongoing focus on accountability across the company, as well as its Dell’s high ethical standards and commitment to conducting business in the best interest of customers, suppliers and partners. (Toor op. cit.) The company code of conduct served as the milestone moment in which Dell changed to become more ethical. However, the reason behind the change to act more ethically truly stemmed from the societally pressured concern of its consumer image. This suggests that the enactment of these company codes of conduct in itself, has not usefully promoted human rights accountability for MNCs. Hence, there is no “firm support for those who would claim that codes have a substantial impact on business practice” (Press-files.anu.edu.au op. cit.). While it is evident that there are cases where codes of conduct can be effective, there is still a need for a higher level of accountability. To achieve a higher level of accountability, an internationally standardized code of conduct could be implemented to further enforce the promotion of human rights accountability from MNCs. This would be the most morally fair code since MNCs operate across international borders (Ijrsp.org op. cit.). This will help mitigate a risk of any more human rights violations. With a higher level of accountability, there will be an economical push forward for upholding human rights accountability for MNCs in the global workplace.
Some large multinational corporations have grown powerful enough to influence government decisions through political lobbying. A notable example is Walmart, with annual revenue sales exceeding $485 billion in 2014. If it were a country, it would be the 26th largest economy in the world (Fortune, n.d.). Large and powerful multinational corporations like Walmart are principally able to exploit human rights in lower economically developed countries, which have significantly weaker regulations and costs. There has been growth in workers’ strikes in recent years in these lower economically developed countries, as a result of their weak codes of conduct and their lack of enforcement on them. These governments are unable to contend with the harmful violations which MNCs generate due to their size and power. They turn a blind eye to MNCs in search for possible economic benefits or to avoid threats of economic decline, all at the cost of human rights. As a result, MNCs have the power to steer away from the accountability and responsibility for their actions, defeating the purpose of the company codes of conduct. Countries with strict government enforcement of codes of conduct such as Germany or the USA have a higher value on the Human Development Index (HDI) than countries with weaker regulations such as Indonesia (Hdr.undp.org, 2016). These values indicate that countries with a stricter government experience less human rights violations since human rights is one of the sub-components on the index. This suggests that in order for codes of conduct to be strongly effective and useful in promoting the human rights accountability for MNCs, there needs to be at least some government supervision on company codes of conduct. Governments could also set strict human rights legislations coupled with well-written codes of conduct. Moreover, they could facilitate the set up of trade unions and thus improve the regulation of MNCs. This would be much more useful in promoting human rights accountability in MNCs.
Drawing upon ethical, social, and legal frameworks this essay has explored the extent of the usefulness of an individual company’s code of conduct to promote MNCs accountability for human rights in their operations. Codes of conduct serve as a standard for the values of how an organization conducts its operations. They encourage all employees and staff in the workplace to comply with an ethical code as well as and report any unjust activity which takes place. This in turn improves transparency within a supply chain (HRW, 2016), indicating that they do have the ability to assist with the promotion of human rights accountability in MNCs. The emergence of these codes of conduct demonstrates that the protection of human rights has come a long way since the codes regulations were introduced legally. The deviation from a purely economic driven business ethic in itself is enough to illustrate that an individual company’s code of conduct is not just useful, in this aspect, they are necessary. However, the examples of Nike and Dell demonstrate that an individual company’s code of conduct is not always followed if it is not enforced strictly, and is thus not always useful. Moreover, some large MNCs have been able to avoid complying with governments and codes of conduct due to their power and size. Countries such as Germany and the USA demonstrate that if state agents intervene and set legislations which complement these codes of conduct, they will be more likely to be followed by MNCs. This will ensure that individual companies’ codes of conduct are effective in attributing greater human rights responsibility and accountability for MNCs to greater mitigate human rights violations (Murphy, 2005). Additionally, an internationally standardized code of conduct could also be implemented in order to further enforce human rights accountability in MNCs, since they operate on a global scale. State agents could also even set up monitoring points to regulate these MNCs more strictly against their individual codes of conduct. This essay concludes that company codes of conduct can be useful in the promotion of human rights accountability of multinational corporations. However, it should be coupled with strong government intervention to ensure it is enacted and enforced. Thus, resulting in greater compliance and human rights accountability from multinational corporations on a global scale.