Research Proposal on "Nestle's Social Irresponsibility in Developing Nations"

Research Proposal 6 pages (1943 words) Sources: 5

[EXCERPT] . . . .

Nestle

There are several ethical issues arising from Nestle's business practices is developing nations. These issues include the lawsuit against Ethiopia, the use of child labor, union busting, and the myriad of issues surrounding the infant formula controversy. Evaluating these issues, however, presents many challenges. There are different schools of ethical thought, for example. An issue can be evaluated on a deontological basis, which measures the morality of our actions based on the nature of the actions themselves, regardless of the outcomes. The other major philosophy regarding ethics is consequentialism, in which the morality of our actions is judged by their outcomes, regardless of intent. Beyond these two perspectives, there are several other complicating factors. One is the legal factor, which is a significant factor for Nestle in that their operations in the developing world are often in nations with limited legal systems. Another complicating factor is that the controversy is often generated from the West, whereby Western observers apply their own values systems to actions that occur in faraway countries with vastly different cultures.

Some of Nestle's actions fail any ethical test. The lawsuit against Ethiopia, for example, goes beyond bad ethics into outright stupidity. From a deontological perspective, the lawsuit was unethical, mainly on account of the time lapse between the action and the lawsuit. Even under well-developed Western legal systems, there is a statute of limitations for most legal action. To take such legal action so long after the nationalization occurred demonstrates not only a lack of ethics but of good sense. From a consequential perspective, the action is even worse because this perspective takes into account the potential damage to the Ethiopian government.

The union-busting in Thailand is also a failure from all ethical points-of-view. The right of workers to organize is firmly entrenched in the legal systems both in Switzerland and in Thailand. It is almost always considered to be unethical practice to engage in punitive behavior against workers who wish to organize. From a consequentialist perspective, the workers lost their jobs so that Nestle could save a few baht. This is definitely unethical.

The use of child labor in West Africa better exemplifies the scope of the ethical quandary. In these countries, such labor practices are commonplace, and there are not likely to be any strong laws forbidding such practices. Many children in the developing world work to help support their families. From a Western perspective, the use of child labor is definitely unethical, but from a West African perspective this is not necessarily the case. Moreover, by taking away the capacity for these children to earn, damage may be done to their families, putting their health and security at risk. From both a deontological perspective and a consequentialist perspective this is a grey area at best.

However, this case is complicated by the indentured nature of the labor. That the workers come from a labor broker, and do not have freedom of movement, shifts the ethical balance in this case. Near-slavery is considered unethical in almost all cultures in this world. The workers may find themselves in this position out of desperation, but at that point Nestle has a social responsibility to improve the conditions of their workers to the point where they at least have the option to maintain or end their employment. At this point, the consequentialist perspective demands that Nestle not support such near-slavery conditions amongst its suppliers.

The baby formula situation again illustrates the complexity of ethics cases. For Nestle, the deontological perspective argues that they worked within the law, and provided adequate information about their product. Therefore, they did nothing wrong. However, the consequentialist perspective shows that their product contributed to an increase in infant sickness and mortality in many countries. Moreover while Nestle may not have violated any laws, they did violate their own Infant Formula Charter and the WHO's International Code of Marketing of Breast Milk Substitutes. These charters and codes may be voluntary, but Nestle had promised all of its stakeholders, customers included, that it would adhere to these codes and subsequently broke that bond of trust. Even with regards to product misuse, Nestle failed to exercise sufficient duty of care. That mothers in these countries are often poor and would misuse the products (stretching the product or using tainted water, for example) could have and should have been anticipated. By only offering the same education and awareness to customers in the developing world as the offered to customers in the developed world, Nestle violated its duty of care. Therefore, the manner in which they marketed their baby formula in the developing world may not have been illegal but it was unethical, especially from a consequentialist perspective. But with the broken duty of care, it is reasonable to argue that they committed ethical violations even using a deontological perspective.

2) Nestle's unethical practices had a significant impact of their corporate image. Nestle had failed to anticipate that their actions in the developing world would not only be monitored by Western agencies, but would be evaluated on the basis of consequentialist ethics and Western ethical and legal perspectives. The Ethiopian scandal, for example, resulted in demonstrations at Nestle offices led by the large and visible charity group Oxfam. The group organized a boycott. Given that Nestle was essentially shamed into donating the money received from Ethiopia to the Red Cross in Ethiopia, the losses Nestle suffered from the Oxfam-led boycott in the wake of the lawsuit were far above and beyond any gains made from the lawsuit. Moreover, the incident remains a stain on the company's image to this day. No matter what changes Nestle may have made to its ethics program in the interim, this incident has been recorded for posterity online and was so appalling to Western ethical sensibilities that it is still cited as an example of corporate greed and unethical behavior. Nestle's image has taken such a hit that they are still working to repair it several years later, with initiatives in Western markets to mollify audiences in the developed world.

This impact relates to another key consideration with regards to business ethics - the duty of the corporation. Milton Friedman postulated that the primary duty of a corporation is to increase its profits, with the laws and codes of conduct of the land. Even if we presume that the code of conduct of the land is in favor of Nestle's behaviors, the resulting controversy and boycotts that stem from Nestle's actions show that they did not meet the duty that they owed to their most important stakeholder, which is also unethical.

3) in business, it is important to have a strong ethics program for several reasons. The shareholders - Friedman's number one stakeholder - benefit. Businesses with strong ethical programs have been demonstrated to by more profitable in the long run than those without strong ethical programs. Additionally, they are not subject to the substantial risk to which firms that lack strong ethical codes are subject. Nestle may have lost millions as a result of boycotts due to its questionable ethics, but other firms such as Enron and WorldCom suffered far more catastrophic consequences. Major institutional investors such as CalPERS understand the value of strong business ethics and have made it a major part of their investment criteria.

Another benefit to having a strong ethical program is that it can help to retain top talent. The best people are drawn to companies that have strong ethical programs. Such programs help provide a better work environment, a better reputation for them, and more secure employment. Strong ethical programs also create goodwill in the marketplace. Many firms have made ethics an important component of their business model, because it matches the values of consumers. Strong ethics programs reduce the risk of legal action, of protests and of scandal.

Ethics programs also serve practical functions within the organization. For example, they align the ethics and activities of the employees with those of the organization as a whole. Ethical matters are not left up to individual interpretation. As a result, not only are the actions of employees aligned with regards to ethics, but they are consistent as well. From the executive perspective this is critical because senior executives are sometimes held accountable by law for the ethical misdeeds of their staff. A strong ethics program can also help serve as an anchor during periods of instability. Ethics can help guide strategic choices, useful in times when the firm is faced with a new, complex or changing operating environment.

4) There were some illegal issues arising from Nestle's operating in the developing world. The most egregious case was with regards to the union-busting in Thailand. Thai law provides for workers to have the right to organize in order to protect their interest. Nestle's actions were directly punitive towards the specific workers who unionized, and were therefore illegal. The rule of law in Thailand is reasonable, but likely does not provide for a handful of poor, disenfranchised… READ MORE

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