An investigation about Business Ethics Up and Down the Global Supply Chain
University of Bakht-Er-Ruda
Deanship of Postgraduate Studies
Department of Management Business Administration
An investigation about Business Ethics Up and Down the Global Supply Chain
A Proposal Submitted to Graduate Studies in the Partial Fulfillment of the Requirements
For the Degree of Masters
Conducted by: Erica Latif
Supervised by: Dr. Hani Awad
Business Ethics Up and Down the Global Supply Chain
There are countless examples throughout the history of the United States for the need for oversight of the nature of how companies conduct business. If left unchecked in a capitalistic system, businesses will do anything in their power to continually increase profit margins and maximize efficiency. This is the typical and expected behavior by any successful business organization.
The problem, however, are the tradeoffs that happen in the marketplace when firms take measures to increase profit margins. To reduce labor or other operational costs a business might choose to cut worker wages or provide a less safe workplace. The company might reach the bottom line gains they desire, but in the process the lifestyle and safety of the workers suffer. Beginning during the Great Depression in the United States the federal government played a heavy hand in the marketplace to make sure that an attempt to increase profits by a business does not come at the expense of basic rights of workers, consumers, or the natural environment. Lasting institutions such as the Securities and Exchange Commission (SEC), the Fair Labor Standards Act, the Civil Rights Act of 1964 (and the additions that followed), the Clean Air Act, and the newly created Affordable Health Care Act are all examples of the government setting minimum standards that businesses must comply with.
The cost of compliance is not something that a functional firm will ever just accept. These expenses are often times passed on to consumers in the form of higher prices or lesser quality products. There were two additional opportunities in the 1990s that combined with arrival of home computer internet connections in nearly every household in the world that allowed for businesses to work around many of the regulations and protections the government put in place to force ethical and responsible behavior by businesses in the United States.
The North American Free Trade Agreement (NAFTA) and the granting of Most Favored Nation (MFN) status to China combined with the new communication technologies became the catalyst that led to an era of global trade and cooperation never seen before in the history of the planet. The benefits of international trade have been well documented throughout the history of the world. Nations that trade together are highly unlikely to ever go to war with each other. International trade allows nations to focus on the development of the goods that they can produce most efficiently. Individuals and corporations have access to goods and financial services that would otherwise be closed to them. In general, global trade is a mechanism that can lead to greater wealth and prosperity for everyone on the planet.
There is, of course, a flip side to this phenomenon. Globalization provides an opportunity for companies to work around the protections and regulations by the US government. Companies today can order raw materials, manufacture components in multiple countries, and then assemble and sell them in others. By outsourcing these jobs, a firm not only saves on costs, but it passes on their corporate social responsibilities (CSR) to their suppliers. In most cases the nations doing the outsourced labor do not maintain the high standards for worker safety and pay or protections for the environment that are established in the United States.
Some international governmental organizations (IGOs) such as the United Nation’s International Labor Organization (ILO), non-governmental organizations like the Fair Labor Association (FLA), and ultimately human rights activist groups like the Human Rights Watchare working on this issue. Although these groups are working on the issue, there remains a wide range of opinion globally on the responsibility corporations have when they outsource many parts of their supply chains to other nations.
2. Statement of the Problem
Globalization creates a condition that allows corporations to removetheir responsibility from worker safety, pay, health, in addition to environmental concerns when they outsource the production of the product to 3rd world and developing nations.
3. Hypotheses of the Study
The researcher is going to test the following hypotheses:
• The tradeoffs that happen in the marketplace when firms take measures to increase profit margins.
• How large companies, by outsourcing their labor affect the workers negatively in 3rd world and developing nations, through Globalization.
4. Objective of the Study
• Analyze the impact globalization and outsource of the supply chain have on worker safety, pay, health, and quality of life.
• Analyze the impact globalization and the outsourcing of the supply chain has on the physical environment when production shifts to nations that have lower environmental standards than the US or Europe.
• Discover what is currently being done to combat the issue.
• Propose methods that can be taken to create more corporate social responsibility when work is outsources to 3rd world or developing nations.
5. Significance / Justification of the Study
This research is hopefully expected to be a significant contribution to the research that has been done already concerning the negatively exploitation of workers in 3rd world and developing countries. The research will show whether the larger companies are justified in their pursuit to increase profit margins and the extent they have to go to in order to accomplish this.
6. Scope and Limitations of the Study
In this study I will collect some statistics about worker safety, pay, health and quality of work in the 3rd world countries. I will also gather information on the impact of globalization on the physical environment in the US and Europe.
I will, however, not do any analysis on the countries in the Middle East, Asia and Russia.
7. Organization of the Study
The study consists of five chapters. Chapter one sets an introduction which consists of the basic concepts of the study. Chapter two deals with analytical reviews of the impact of globalization and outsourcing, which consists of two parts: theoretical framework and previous studies. Chapter three deals with the analytical reviews of the impact of globalization on the physical environment. Chapter four handles and explore the current situations to combat these issues. Finally, chapter five comes out with the results, findings, and conclusion as to how to create more corporate responsibility when work is outsourced.
8. The Research Methodology and Data Collection
The study uses an analytical data collection method. Data is gathered from different sources that consist of primary and secondary sources. The primary information is collected from the internet. The secondary data is gathered from references, encyclopedias, newspapers, magazines and articles.
The first step in this study is building the theoretical framework. To do this the researcher goes through different references that are related to the topic. Second, the review of previous studies will be synchronized. Third, to identify a profound background about the issue under the study, the researcher will collect the relevant data through the data collection method. Fourth, the data is analyzed by using Statistical Analysis software. Finally, the results, findings, and conclusion will be made.
Analyze the impact globalization and outsource of the supply chain have on worker safety, pay, health, and quality of life.