Chapter 03 – Ethics, Social Responsibility, and Sustainability
In-Depth Integrative Case 1.1: Student Advocacy and “Sweatshop”
Labor: The Case of Russell Athletic
1. Assume that you are an executive of a large U.S. multinational corporation
planning to open new manufacturing plants in China and India to save on labor
costs. What factors should you consider when making your decision? Is labor
outsourcing to developing countries a legitimate business strategy that can be
handled without risk of running into a sweatshop scandal?
Answer: Many U.S. companies continue to shift production to countries like China
and India in order to capitalize on the lower wage rates in those countries. When
making the decision to open manufacturing operations in a foreign country,
companies need to consider the risks involved by assessing factors such as the
political, legal, and economic environments. Companies also need to act in an
ethical and socially responsible manner wherever they operate. Therefore,
2. Do you think that sweatshops can be completely eliminated throughout the world in
the near future? Provide an argument as to why you think this can or cannot be
achieved?
Answer: Most students will probably suggest that it would be very difficult to
eliminate all sweatshop operations. Victims of sweatshop situations are there
because they have no alternatives. Because there will always be people who need
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Chapter 03 – Ethics, Social Responsibility, and Sustainability
3. Would you agree that in order to eliminate sweatshop conflicts large corporations
such as Russell Athletic should retain the same high labor standards and regulations
that they have in the home country (for example, in the U.S.) when they conduct
business in developing countries? How hard or easy can this be to implement?
Answer: While it can be easy to suggest that companies develop a set of standards
and then stick with them regardless of where in the world they operate, it may also
be a bit naïve. The situation in some countries can demand different approaches.
4. Do you think that the public and NGOs like USAS should care about labor
practices in other countries? Isn’t this a responsibility of the government of each
particular country to regulate the labor practice within the borders of its country?
Who do you think provides a better mechanism of regulating and improving the
labor practices: NGOs or country governments?
Answer: This question will probably generate a fair amount of debate among
students. Some students will argue that it is because governments are failing to
insist that companies operate in a socially responsible and ethical way that
organizations like USAS have emerged. Other students may suggest that if
5. Would you agree that Russell Athletic made the right decision by conceding to
USAS and union demand? Isn’t a less expensive way to handle this sort of
situation simply to ignore the scandal? Please state your pros and cons regarding
Russell’s decision to compromise with the workers’ union and NGOs as opposed to
ignoring this scandal.
Answer: Russell Athletic capitulated to the demands of USAS only after the
organization threatened the company’s profits by getting schools and universities to
suspend their contracts with the company. Some students may suggest that Russell
Athletic should have reconsidered its decision much earlier in the process. In doing
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Chapter 03 – Ethics, Social Responsibility, and Sustainability
In-Depth Integrative Case 1.2: Pharmaceutical Companies,
Intellectual Property, and the Global AIDS Epidemic
1. Do pharmaceutical companies have a responsibility to distribute drugs for free or at
low cost in developing countries? What are the main arguments for and against
such an approach? What are the advantages and disadvantages of giving drugs for
free versus offering them at low no-profits prices?
Answer: Organizations in general have the social responsibility to be good citizens,
both in the countries in which they operate, as well as in the world in which they
exist. Whenever economically feasible, organizations are ethically compelled to use
their competitive advantage to benefit all their stakeholders, not only their
approaches primarily include economic and intellectual property concerns. (The
next question provides further details.)
2. What are the principal arguments of pharmaceutical companies that oppose making
exception to IPR laws for developing countries? What are the arguments by NGOs
and others for relaxing IPR laws?
Answer: Pharmaceutical companies spend tremendous amounts of money, time,
and effort in developing drugs. Strict IPR laws are their only way to recoup these
investments, which may threaten their survival in the future. Moreover, it may
reduce the incentives for research and development in the industry, hurting patients
from both developed and developing countries. Moreover, pharmaceutical
companies worry that these apparently humanitarian exceptions may lead to a
for patients from developing countries to buy the more expensive products, but to
further spread the disease or to die, which will not bring any benefits for
pharmaceutical companies.
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Chapter 03 – Ethics, Social Responsibility, and Sustainability
3. What impact would you expect South Africa’s decision to levy duties on drug
imports from Western nations to have on the international distribution of drugs to
South Africa?
Answer: Any protectionist measure from either side is likely to hinder the process
of making these drugs available to where they are most needed. However, such
4. In June 2002, the WTO extended the transition period during which least-developed
countries (LDCs) had to provide patent protection for pharmaceuticals. In your
opinion, was this an appropriate change in policy or a dangerous precedent? What
could be some of the negative ramifications of this resolution? What about the
effects for other industries?
Answer: In this situation, such action may have been warranted, but there is no
guarantee that it will not be used as a precedent by other industries. Negative
ramifications may include delayed enforcement of IPR in many developing
countries, reducing the global incentives for research, development, innovation, and
5. Given the initiatives announced by global development and aid organizations and
among pharmaceutical companies themselves, was it necessary to relax IPR rules in
order to ensure that adequate supplies of AIDs medications would be available for
distribution in the developing world?
Answer: Apparently, these actions were still necessary. The price of the
medications continued to be beyond the reach of many patients. Generic drug
producers were still able to supply the drugs at lower prices, which would help
patients and conserve the budgets of various humanitarian funds.
It seems that not all market-oriented approaches are equally applicable in
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6. What role do MNCs have in providing funding or other assistance to international
organizations such as the Global Fund, UN, and WHO?
Answer: MNCs are likely to be the primary sources of financial resources in
tomorrow’s economies, especially as government control continues to decrease in
material significance (although not necessarily in political or regulatory
importance). Hence, the role of MNCs is likely to increase. Moreover, such
initiatives are likely to increase in power and influence due to the impact of
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