Muhammad Osama Bin Naseer 2016341

Niaz Ahmad 2016387

Shoaib Azam 2016465
Sohail Makhani 2016469
Syed Essa Rasan 2016479
Introduction
Various definitions of ethical codes have been proposed, but no commonly accepted definition has yet
been reached. Nevertheless, in recent publications, three common themes emerge. First, an ethical
code is a formal and written document (Cleeck, 1998) (Schwartz, 2001). Second, the content of such
document consists of morally oriented policies. These policies might be portrayed as moral standards
(Schwartz, 2001), primary values (Cleeck, 1998), principles (Marnburg, 2000) or as a general statement
of an organization’s ethical orientation (Valentine, 2002). Third, these policies are formalized in order to
guide the behavior of the employees (Schwartz, 2001) (Cleeck, 1998) or of the organization as a whole
(Marnburg, 2000) (Schwartz, 2001). For the purpose of this study, the definition of (Schwartz, 2001) is
used, because it encompasses all these themes. An ethical code is defined as ‘a written, distinct and
formal document which consists of moral standards used to guide employee or corporate behavior’.

In a business that competes mainly in global markets, multinational companies (MNCs) operate in
different social, cultural and ethical environments. This poses significant ethical dilemmas over MNCs.
Particularly, choosing how to behave, is not a choice between good and bad, right and wrong, but only
between the right and right choice. We will discuss ethical dimensions of MNC's business and issues
such as child labor, sweatshops, discrimination, environment pollution, indigenous people rights,
nepotism, human rights, bribery and corruption. Questions whether MNCs have obligation or not
towards suppliers, subcontractors and consumers are represented. (Dimitrova, 2017)

The concept of ethics to business decisions encompasses all aspects of operations in a business
organization. There is always the question of what the ultimate structure of an organization would be,
this is vital as it would help aid the smooth running in the production of goods and services. There is
always a tendency for ethical issues to arise in a global market and multinational organizations are no
exceptions. On the contrary, the positive ethical practices of an organization are highly important; this
would normally boost the image of such an organization as they tend to have an edge over others in a
very competitive market.

In regards to the challenges of multinational organizations, does it matter if employees are motivated to
contribute to an organization in a society? Are they demonstrating a sense of social responsibility? Or is
it strictly businesses that would benefit the organization alone? What is the duty of the multinational
organizations in the countries businesses are located or situated? How can Multinationals perform in an
ethical and socially responsible way? These are the questions that will be asked in the report as well as
the questionnaire.

Laws governing certain businesses within an organization in an individual country could have its
variances and inconsistencies, nevertheless when other counties are internationally concerned, the
intensity of inconsistency is even more diverse. Organizations that have made a cautious effort to be
truly ethical must evaluate and measure the rules and regulations governing the countries in which
businesses are carried out. These organizations must be aware of and must conform to the host
country’s domestic laws. Not neglecting trade organizations such as United Nations as well as
international agreement between companies.

The reported adoption rates of ethical codes demonstrate that organizations regard ethical codes as an
important issue. In 1992, 90% of the organizations in the US had already adopted an ethical code; in
2000, 86% of the Canadian companies reported having embraced an ethical code (Schwartz, 2001).
However, adoption rates could be biased, as large organizations are over-represented in these research
samples. (Valentine, 2002), studying mainly small and medium-sized businesses, reported an adoption
rate of only 37%. European figures on adoption rates are still scarce. (Schwartz, 2001), using data from
1990, reports adoption rates of 51% in Germany and 30% in France. The research of (Marnburg, 2000),
undertaken in Norway, revealed that 49% of the organizations have developed an ethical code.

Literature Review
A variety of factors has pressured organizations to develop ethical codes. External to the organization,
governments, public opinion and consumers increasingly call for responsible behavior of organizations.
Organizations may respond to these pressures by formulating ethical codes and showing a concern for
ethics. In fact, several authors propose that limiting legal responsibility and promoting the public image
are important motives for developing ethical codes (Marnburg, 2000) (Schwartz, 2001). However, one
may question the morality of developing ethical codes if they are mainly used as a tool to silence and
pacify society. Also, internally, employees increasingly ask for clarity on ethical issues and request a
codification of the organization’s ethical values. Several studies (Wotruba, 2001) (Kaptein, 1998) indicate
that ethical codes are used to solve the ethical contradictions and inconsistencies in organizations and
to transmit the organization’s moral principles to the employees. Despite the wide range of potential
marketing purposes, perhaps the overriding objective of ethical codes is to influence the behavior of
employees (Wotruba, 2001) (Marnburg, 2000) by serving as guidelines in moral issues.

Organizations might develop ethical codes in order to regulate their employees’ ethical behavior
directly. By expressing moral standards, ethical codes might align the individual’s behavior with the
organizational ethical values. Taking this perspective, ethical codes can be regarded as a type of control
mechanism. Hence, an ethical code is nothing more than a body of rules and procedures, which specifies
what employees should and should not do in particular situations (Cassell, 1997). In order to ensure
compliance with these rules and procedures, monitoring systems are required which allow the
organization to detect and sanction unethical behavior. These monitoring systems are vital ingredients
to effective ethical codes. Cleeck and Leonard (1998), as well as Marnburg (2000), argue that ethical
attitudes are not directly affected by the presence of ethical codes. Instead, ethical codes could have an
effect on behavior by the processes they represent. An important element in this process is the degree
of enforcement or the communication of the code (Cleeck, 1998), which makes employees aware of
ethical values of the organization (Fritz, 1999).

In the words of Mauro Guillen, Wharton management professor and director of The Lauder Institute, it
is obvious that emerging multinationals should make an effort to include women in their workforce.
Noting the much-reported fact that a large proportion of today’s university and MBA students are
female, he stated, “If you don’t hire, attract and retain women executives … you are discarding half the
talent pool graduating from business schools (Twitter:2016) .” https://lauder.wharton.upenn.edu/ (As
Emerging Multinationals Take Off, Are They Leaving Women at the Gate?)

But gender equality in the global workforce has been slow to take root. The January 2016 World
Economic Forum (WEF) report “The Industry Gender Gap” surveyed 371 leading global employers and
stated, “Female talent remains one of the most underutilized business resources, either squandered
through lack of progression or untapped from the onset.” The report said that although women are now
more educated than men globally, their chances of rising to leadership positions are only 28% of those
of men. Moreover, women make up less of the workforce overall, and continue to be paid less than
men. (htt1)

In a similar vein, a 2015 McKinsey report called gender inequality “not only a pressing moral and social
issue but also a critical economic challenge.” It estimated that $12 trillion could be added to the global
GDP by 2025 by advancing women’s equality. (htt1)

We shall look at the case of Pakistan in more detail: labor force participation for women in Pakistan is
25% (World Bank, 2015) which is below that of other South Asian countries such as India (34%),
Malaysia (59%) (World Bank, 2014). Bangladesh is a lot further ahead with a participation rate of 69% as
is China at 82%.a. The underrepresentation of women in leadership and on corporate boards is an issue
worldwide. Scandinavian countries lead the way on gender diversity on company boards with Norway
having the highest rate of women at that level. In terms of a global outlook, 23% of board members on
Fortune 500 companies are women (Deloitte, 2016). Western Europe performs better than the US with
women making up 32% of boards in major European indexes and 17% of executive committees. In the
US, women’s representation on boards is lower, standing at 19% (Mckinsey Women Matter,
2017).Figures for Asia are much lower, with women only making up 6% of board seats in 10 major Asian
markets in 2012 (Mckinsey). Female directors comprise only 8% of directors on the MSCI Emerging
Markets Index companies (2014). However, several countries have made legal interventions to tackle
this. India, for instance, requires companies to have at least one woman as director on their board.
Pakistan fares poorly in this area, both within Asia as well as beyond. This survey has shown that more
than 50% of companies surveyed have no women on their boards, which seems to indicate that things
haven’t improved much since an ACCA study in 2010 found that 78% of KSE 100 companies have no
women on their boards. Developing a pipeline of women talent and leaders is a key element of
achieving gender equality in the workplace and to increasing women’s representation at the top.
Research by Catalyst has consistently shown the ‘pyramid effect’ with women’s representation dropping
off at each level of seniority an organization. For 2016 in S&P 500 companies, women represented
44.3% of all employees, which dropped to 36% at mid managerial level, 25% off at senior management,
19.9% at board level and only 5.8% at CEO level. Women also only represented 9.5% of top earners
(Catalyst, 2017) (Gender Diversity in Business)

A multinational has to take responsibility when it comes to their branches in different counties
especially the developing countries around the world. The developing countries often trade in the rights
of the individuals for economic prosperity. With few laws to abide by, the multinationals must take the
social responsibility. A research paper found out that over the years, growing attention has been paid to
the ethical, environmental and social dimensions of business, most often under the corporate social
responsibility (CSR) heading. Much of the early literature aimed to specify the concept and the various
components of CSR, as it emerged in the second half of the 20th century. The paper further explores
that many multinationals are bound to follow a code of ethics related to social, environmental and
poverty. (Kolk, 2016)

Multinationals may be bound to code of ethics but the reality is that many multinationals go against this
code. On issues like tax payment, child labor and corruption, many multinationals have a very bad
reputation.

Paying taxes is the law but multinationals in developing counties find loopholes and “grey areas.” A
research paper focused on India reported that many MNEs operate in a large number of different
contexts with widely varying legal rules and norms, and often divergent views of the role of business in
society. These differences suggest that there may be no universal definition of compliance, and in such a
void managers have some discretion in how they comply. The code of ethics are breached in a manner
which is usually not exactly illegal. (Muller & Kolk, 2015)

Another ethical problem that happens because of the multinationals is the employment of children in
industry. Child labor is common in countries of Africa and Asia. A research paper reports that companies
are supposed to be leading in addressing the issue of child labor. This article has shown that this claim
needs considerable modification. Not only is the number of large multinational companies that has child
labor provisions in its codes relatively limited (less than 20%), the codes with such provisions score
mixed results with regard to code specificity and compliance likelihood. Many company codes suggest
universal applicability (of a minimum age, for example), are country-specific and prefer vague or internal
monitoring procedures, whereas others include clear monitoring mechanisms and sanctions for their
business partners in case of non-compliance. (Kolk & Tulder, Child Labor and Multinational Conduct: A
Comparison of International Business and Stakeholder Codes, 2002)

Corruption is another issue that is prevalent in developing countries. “Grey areas” and loopholes are
exploited by multinationals. An article reveals that governments are often unable to arrange transparent
and open bidding processes or promulgate needed regulatory laws. Managers and employees, fearful
for their future and confident of their ability to escape punishment, commonly strip the assets of the
entities undergoing privatization. Many interested parties are able to engage in insider dealing and
political manipulation of the process for their own profit. Many state enterprises do not have the time
to become economically viable before being sold off, leading to frequent sales of industries at below
market value despite heavy government spending on recapitalization. In theory, decentralization –
regarded by the World Bank as essential for combating corruption – is about bringing decision-making
closer to local people and improving services. (Hawley, 2000)

Developing countries have witnessed a significant growth in the interest shown in the environmental
impacts of operations of multinational enterprises. Environmental degradation of host nations as a
result of operations of multinational companies has been of prime interest and has sparked heated
debates about public policy. (Eweje, 2006) Assesses the current policies and ethics of multinational oil
exploration companies with respect to the impacts of oil explorations. The case study of Niger Delta
concludes that as a result of pressure from the stakeholder groups, multinational companies are
realizing that environmental protection is more lucrative in the long run and are routinely incorporating
environmental impact assessments into their corporate and marketing strategy.

(Grimmer & Bingham, 2013) Examines the relationship between the perceived environmental
performance of the companies and consumer purchase intentions and seeks the effects of consumers’
environmental involvement and the relative price of the products on this relationship. The study finds
that consumer with high environmental involvement report high purchase intentions for the products of
companies with higher perceived environmental performance. The study affirms that developing and
managing an environmental brand image is significantly beneficial as long as it is appropriately
communicated to the consumers.

Multinational companies are extensively increasing their environmental disclosure regarding their
environmental strategies as a result of institutional pressure over the last few years. Environmental
innovations are presented as a means of increasing energy efficiency and of obtaining a competitive
advantage in green market products. (Albertini, 2014) Analyses different environmental strategies
applied by companies over the period of 6 years based on the annual reports of the 55 largest French
industrial companies. The study finds that although the environmental assessment systems
implemented by proactive companies allows them to improve their performance, the economic
situation of the companies significantly influences the way environmental issues are addressed.

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