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Human rights activists have frequently voiced concern that China’s rapid pace of
industrialization may come with human costs. Some worry that as the country establishes
itself as the factory floor for the world, it is not ensuring that proper safety measures are
being taken by companies. Moreover, as factories skirt safety issues in favor of
producing cheap products for the Western world, Chinese workers feel trapped. They
worry that they will not be able to find new jobs because of the health problems brought
on by their current jobs. The workers involved in the situation at Wintek for example, are
finding it difficult to find new jobs because of their occupational disorders. Apple, more
than a year later, did finally respond to the allegations of the Wintek employees with a
report that indicated that it was requiring facilities that had improper storing and handling
of hazardous materials to implement new procedures and policies. However, Debby
Chan of Students and Scholars Against Corporate Misbehavior, like Ma Jun believes that
Apple needs to more and recommends that the company provide long-term health care to
affected workers so that they have the flexibility to find new jobs.
Discussion Questions:
1. The factory in China that recently made headlines when workers claimed they were
being forced to come into direct contact with toxic chemicals supplied iPhone screens to
Apple. Reflect on this situation. Is it unethical for companies to use suppliers that
exploit their workers? Is it ever acceptable to buy from a company that mistreats its
workers?
2. Consider the situation involving Wintek and Apple. Is Wintek actually breaking the
law by requiring employees to come into contact with toxic chemicals? Which standards
should be applied to the issue? Should it be China’s or the United States’?
3. Do you as a consumer of iPhones have a responsibility to ensure that the companies
that you are buying from act in an ethical manner? Why might some consumers take an
“out of sight, out of mind” approach to this issue?
4. What steps should multinational companies take to ensure that their subcontractors are
behaving in an ethical manner towards employees? How should companies make human
rights issues part of their overall policy?
INTEGRATING VIDEOS
There are also several longer video clips that can be integrated with the material
presented in this chapter. In particular, you might consider the following from
International Business DVD Volume 6:
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Title: Hazardous Manufacturing
Learning Objectives
The purpose of this video is to help you:
❖ Explore corporate social responsibility for multinational companies.
❖ Identify problems associated with offshore manufacturing and the buyer-supplier
relationship.
❖ Recognize the impact of foreign companies on the host country.
❖ Understand how companies can incorporate social responsibility into their strategies.
Key Words
❖ Corporate ethics
❖ Corporate social responsibility
❖ Foreign direct investment
❖ Impact of the multinational company on the host country
❖ Globalization
Synopsis
An investigation by the London Sunday Times has revealed that tons of waste is being
illegally dumped on the outskirts of Maseru in Africa. Some of the illegal waste is
tagged with the names of companies like Gap and Levi Strauss. The waste is coming
from garment manufacturers that supply large well-known multinational companies.
Each day, dozens of very poor children search through the waste looking for anything of
value that they can sell. It is a dangerous process. Hidden among the scraps of fabric are
sharp razors and needles used in the manufacturing process. Moreover, a fire is
continually burning at the dump filling the air with acrid smoke that gives many children
chest infections. Chemicals are also being dumped. One woman claimed that she was
covered with sores after touching chemicals hidden in the waste.
The arrival of garment manufacturing to the area was supposed to have been a good thing
for the region. Indeed, contracts with companies like Gap and Levi Strauss created
thousands of new jobs in Lesotho. However, as a condition of being awarded a
manufacturing contract, the companies agreed to adhere to strict codes of social and
environmental responsibility, promises they have seemingly broken. At the textile mill
that supplies denim to Gap and Levi Strauss a broken pipe spills untreated bright blue
When the problems were initially reported, Gap, which takes pride in its reputation as
being a socially responsible organization, quickly moved to investigate and correct the
situation. The company conducted its own ground investigation and also hired an outside
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firm to explore the issue. One factory was put on immediate notice until the issues were
adequately resolved. Levi Strauss also promised to take action, and committed to
working closely with both suppliers and government leaders to ensure that its operations
were conducted in a socially responsible manner. However, it seems that without the
Discussion Questions
1. Should multinational companies doing business in developing companies behave
according to local standards or according to the standards in their home countries?
2. What was the real cost of the jobs created through contracts with Levi Strauss and
Gap? In your opinion, was the country more concerned with job creation and the
economic development that could ensue than damage to the environment? Did Africa in
essence trade the environment for jobs?
3. In your opinion, should Gap and Levi Strauss be held responsible for the
environmental violations that occur at their suppliers’ operations? Why or why not?
4. In your opinion, was the response by Gap to the investigation by the London Sunday
Times appropriate? What steps should companies like Levi Strauss and Gap take to
ensure that problems like the ones in Maseru do not occur again?
INCORPORATING globalEDGE™ EXERCISES
Use the globalEDGE™ site {http://globalEDGE.msu.edu/} to complete the following
exercises:
Exercise 1
Promoting respect for universal human rights is a central dimension of many countries’
foreign policy. As history has shown, human rights abuses are an important concern
worldwide. Some countries are more ready to work with other governments and civil
society organizations to prevent abuses of power. Begun in 1977, the annual Country
Reports on Human Rights Practices are designed to assess the state of democracy and
human rights around the world, call attention to violations, and – where needed – prompt
needed changes in U.S. policies toward particular countries. Find the annual Country
Reports on Human Right Practices and provide information on how the reports are
prepared.
Exercise 2
The level of perceived corruption varies from culture to culture. The Corruption
Perceptions Index (CPI) is a comparative assessment of a country’s integrity performance
based on research done by Transparency International. Provide a description of this index
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and its ranking. Identify the five countries with the lowest as well as the highest CPI
scores. Do you notice any similarities or differences in each group of five countries?
Answers to Exercises
Exercise 1
The report can be accessed by searching for the term “Country Reports on Human Rights
Practices” at http://globaledge.msu.edu/ResourceDesk/. The Country Reports on Human
Rights Practices is the only source in this search, and is published by U.S. Department of
Exercise 2
The report can be accessed by searching for the term “Corruption Perceptions Index” at
http://globaledge.msu.edu/ResourceDesk/. The Corruption Perceptions Index (CPI) is a
study posted by Transparency International. This resource is found under the
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End of Part Case Notes
Part Two:
Siemens Bribery Scandal
1. What explains the high level of corruption at Siemens? How did managers engaged in
corruption rationalize it?
Answer: Most students will probably suggest that the high level of corruption at Siemens
is a result of the company’s corporate culture. Prior to 1999, bribery was not prohibited
2. What do you think would have happened to a manager at Siemens if he or she had
taken a stand against corrupt practices?
Answer: Since Siemens appears to have viewed bribery as a necessary part of securing
the contracts it needed to stay in business most students will probably conclude that a
3. How does the kind of corruption Siemens engaged in distort competition?
Answer: Many competitors of Siemens complained that the company’s practices made it
difficult for them to compete. By having an unfair advantage with government officials
4. What is the impact of corrupt behavior by Siemens on the countries where it does
business?
Answer: Siemens’ continual willingness to bribe government officials in order to win
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5. If you were a manager at Siemens and you became aware of these activities what
would you have done?
Answer: Students will probably respond to this question in different ways. Many
students will probably take the ethical high road and claim that they would have taken a
stand against the corrupt way Siemens approached business. Other students however,
Wal-Mart’s Foreign Expansion
1. Do you think Wal-Mart could translate its merchandising strategy wholesale to another
country and succeed? If not, why not?
Answer: Most students will probably agree that it would be virtually impossible to
translate Wal-Mart’s strategy to another market with no changes of any sort. Even in
2. Why do you think Wal-Mart was successful in Mexico?
Answer: Many students will probably attribute Wal-Mart’s success in Mexico to the
decision to join forces with local company, Cifra, the country’s largest retailer. In
3. Why do you think Wal-Mart failed in South Korea and Germany? What are the
differences between these countries, and Mexico?
Answer: Unlike its experience in Mexico, Wal-Mart found it hard going when it decided
to expand into South Korea and Germany. In both countries, Wal-Mart found itself up
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4. What must Wal-Mart do to succeed in China? Is it on track?
Answer: Wal-Mart’s track record in China is much more positive than its experience in
either South Korea or Germany. Perhaps as a result of its failures in those markets, the
company chose to enter the Chinese market gradually, beginning with just one store.
5. To what extent can a company like Wal-Mart change the culture of the nation where it
is doing business?
Answer: The question of whether a company like Wal-Mart can be an engine of cultural
change is likely to generate some debate among students. Some students will probably
suggest that retail giants like Wal-Mart do have the ability to change the culture of a
nation. Students taking this perspective may point out for example, that Wal-Mart has
Nike: The Sweatshop Debate
1. Should Nike be held responsible for working conditions in foreign factories that it does
not own, but where subcontractors make products for Nike?
Answer: Most students will probably agree that Nike should be held responsible for the
working conditions in foreign factories where subcontractors make products the company
sells. Students taking this perspective are likely to argue that since the workers are there
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2. What labor standards regarding safety, working conditions, overtime, and the like,
should Nike hold foreign factories to: those prevailing in that country or those prevailing
in the United States?
Answer: The question of whether of whether to hold foreign factories to the same
standards as domestic factories is difficult. Some students might argue that Nike should
require all factories regardless of their location to maintain the same standards when it
comes to working conditions, overtime, and so on. Other students however, may suggest
3. In Indonesia, an income of $2.28 a day, the base pay of Nike factory workers, is double
the daily income of about half the working population. Half of all adults in Indonesia are
farmers, who receive less than $1 a day. Given these national standards, is it appropriate
to criticize Nike for the low pay rates of its subcontractors in Indonesia?
Answer: Students will probably be divided on this issue. Some students will probably
point to Nike’s huge profits and argue that those profits come at the expense of workers
in Indonesia who are barely making enough to live on. Other students however, might
4. Could Nike have handled the negative publicity over sweatshops better? What might it
have done differently, not just from a public relations perspective but also from a policy
perspective?
Answer: When the allegations against Nike initially emerged, the company moved
quickly to publicly address them, and implemented various policy changes and
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5. Do you think Nike needs to make any changes to its current policy? If so what?
Should Nike make changes even if they hinder the ability of the company to compete in
the marketplace?
Answer: Nike is between a rock and a hard place. On the one hand, the company needs
to respond to allegations that its subcontractors are requiring employees to work in
6. Is the WRC right to argue that the FLA is a tool of industry?
Answer: The Fair Labor Association (FLA) is an independent monitoring association
comprised of universities, companies like Nike and Reebok, the National Council of
Churches, the International Labor Rights Fund, the Lawyers Committee for Human
7. If sweatshops are a global problem, what might be a global solution to this problem?
Answer: Nike, perhaps because of its size and popularity, has been a popular target of
protestors against poor working conditions. Nike has been forced to respond to
allegations that its subcontractors failed to provide adequate working conditions and
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may suggest that the companies that contract with these suppliers must bear the
responsibility for ensuring that suppliers are providing proper safety and working
Etch-a-Sketch Ethics
1. Was it ethical of the Ohio Art Company to move production to China? What were the
economic and social costs and benefits of this decision? What would have happened if
production had not been moved?
Answer: This is a judgment call that hinges on what the social responsibility of business
is. The decision allowed Ohio Art Company to stay in business. At the same time, the
2. Assuming that the description of working conditions given in The New York Times is
correct, is it ethical for the Ohio Art Company to continue using Kin Ki to manufacture
Etch-A-Sketch toys?
Answer: Again, students will probably be divided in the question. Legally, the
enforcement of Chinese labor law in Shenzen Province is up to the officials of that
province. Law is not ethics, though. Some students may argue that if the work conditions
3. Is it possible, as Mr. Killgallon claims, that the Ohio Art Company had no knowledge
of labor problems at Kin Ki? Do you think company executives had any knowledge of
the working conditions?
Answer: Some students may suggest that it is indeed possible that Mr. Killgallon knew
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4. What steps can executives at the Ohio Art Company take to make sure they do not find
the company profiled in The New York Times again as an enterprise that benefits from
sweatshop labor?
Answer: Most students will probably suggest that Ohio Art Company monitor its
subcontractor through unannounced visits and pull parts of the contract if conformance is