India Study Tour Project Proposes Ethical Framework for Multinationals

India Study Tour Project:
An Ethical Framework for Multinationals Doing Business in India
and a Proposal for a Globalization Ethic
University of San Francisco
MBA 697 – Overseas Study Tour: India
By Payson E. Johnston
PaysonJ@gmail.com
March 2, 2007

India Study Tour Project
India Study Tour Project:
An Ethical Framework for Multinationals Doing Business in India
and a Proposal for a Globalization Ethic
Executive Summary
Multinationals have driven the rapid economic expansion of India at a breathtaking pace.
At the same time, India's infrastructure has not kept up with demand, the poor are not able
to tap into the economic influx, and multinationals have raised locals concerns on what
ethical practices should be driven within the country. India's situation is different from past
"outsourcing activity" with the rise of globalization and makes the questions bigger. How
should multinationals conduct business within India and what does an ethical framework
look like specifically within India and in light of the changes caused by globalization?
This paper will look at a proposal for an ethical framework for multinationals doing
business in India and will propose a need to inquire and put in place a globalization ethic
that will serve today's new business climate. Beyond the normative business ethics of
utilitarianism and Kant's theory of the categorical imperative the ethical model of virtue
ethics will be applied through the lens of a vocational metaethic. The new ethical
framework will also apply Indian tradition in the context of present and past reflection to
strive for Justice in the new expansion of India. An additional framework of the ethical
model is globalization to ensure that business strives forward but at the same time considers
the realities of the market situation. To complete the ethical model the paper analyzes key
stakeholders in Indian business, beyond the traditional stakeholders, to give multinationals a
framework to weave within the fabric of their organization and help put in place policies
and process that reflect the ethical model. The fictional company Transporter, a creator and
manufacture of cell phones, provides a "case study" of how the ethical model can take
shape within a multinational complex situation in doing business in India.

I. Introduction
The world is truly flat proclaims the now famous "short" history of the 21st
century that
explores the new trends and reality of globalization.1
Companies all over India echo the
sentiment of a "flat world" and talk about the changes it is making on both Indian and
multinationals companies and the larger society. As more and more business flows into
India, multinational companies (MNC) need to take a step back and analyze the best way to
approach business in a country that has in the past been exploited by outsiders2
and is
cautiously drinking the kool-aid of money as it flows into a country that is bursting from
expansion. At the same time that a new generation of entrepreneurial talent has been
unleashed,3
"infrastructure, such as roads and power, and public services, such as education
and drinking water, are woefully inadequate and limit growth."4
The latest issue of The
Economist mentions "it seems incongruous that somebody can own a mobile phone, yet has
to waste hours queuing in line for drinking water."5
The chairman of the Confederation of Indian Industries Banmali Agarwala, "…in [a]
answer to a question about business ethics and [the] fact that some CEOs in the U.S. face
criminal and civil charges, said Maharashtra is developing a 'code of conduct' in partnership
with industry leaders. Whatever framework is developed 'has to be for the public good.'"6
The proposal of an ethical framework is critical to ensuring the continued expansion of
multinationals into India's vast potential market.
This project will analyze the implications of doing business in India from the perspective
of a multinational that needs to grow a market, outsource work, and help a country continue
to develop India's infrastructure. First, it will look at how MNCs and Indian companies have
1
Thomas L. Friedman, The World Is Flat: A Brief History of the Twenty-First Century
(New York: Farrar, Straus and Girox, 2006), 7.
2
Amartya Sen, The Argumentative Indian: Wrings on Indian History, Culture and Identity
(New York: Picador, 2005), 139.
3
"India Overheats," The Economist, February 3rd-9th 2007, 11.
4
Ibid.
5
Ibid.
6
Richard Springer, "Maharashtra Cm Reassures Silicon Valley Entrepreneurs," India -
West, Jul 1 2005.

approached doing business in India over the last few years. Next, the paper will look at
journal articles on business ethics in order to look at ethical approaches to conducting
business. This information will help identify the stakeholders within India that are the MNC
responsibility to treat with respect. When the analysis/synthesis is complete, it will help to
define the framework of an ethical model in which MNCs can utilize when doing business
in India.
India also provides a live "case study" in which to develop an ethical model for the future
of globalization. The unique situation of India is the experiencing urbanization in a large
scale in the era of globalization verse urbanization that happened during the industrial
revolution.7
Theshift calls for an urgent re-evaluation of the today's normative business
models to embrace and include the larger factors of globalization and multiple stakeholders
affected in today's business environment. It should not be about the "haves and have nots"
but should be about making profits in an ethical manner that also values contributing to the
common good and social well-being of the world.
II. Current Company Practices in India:
Insights from the University of San Francisco Study Tour
India's business practice has had different effects over the years on Indian business norms.
India has experienced everything from the Great Indian Peninsular Railway Campaign in
England during the colonial period to current MNCs in today's period of globalization.8
The
globalization affects on India are noticeable through the growth within the country and the
attitude of today's business both local and foreign. On the University of San Francisco's
India Study Tour, the class was able to hear from many voices throughout many different
industries in India focusing mainly in the Bangalore area. Companies as well as non-profits
visited by the class included: Infosys, JP Morgan Chase, NEXT, Toyota, TIE Bangalore,
7
University of San Francisco, Overseas Study Tour: India, January 5 - January 20, 2007.
8
Nilanjana Bardhan and Padmini Patwardhan, "Multinational Corporations and Public
Relations in a Historically Resistant Host Culture," review of Reviewed Item, Journal of
Communication Management, no. 3 (2004).

Wipro, The Prem Jen Foundation, Cisco, an SOS Children's Village.9
The trip revealed
many management practices both good and bad as well as the direction of companies in the
future.
An issue that was brought up at the TIE Bangalore visit was MNCs currently are focused
on increasing profits since a big trend has been outsourcing for lower wages instead of
focusing on the community where its business resides.10
Not all businesses are focused on
only profits as can be seen by the examples of WiPro with the Prem Jen Foundation for
helping schools and Cisco's eGovernance and Networking Academy initiatives. However,
even with the inflow of investment, India's poor is still a real and extremely visible
problem.
During the trip, additional issues/problems bubbled to the forefront as themes facing both
national and MNCs. The first theme was around the education and retention of employees
in a highly competitive culture. Companies in India face very high demand for recent
graduates and skilled workers from both internally and externally (countries such as the US
and the EU), driven by the advances of globalization. Although India has 350,000
engineering graduates, each year supply has not keep up with demand. WiPro offers its
employees the Wipro University and employs over 100 professors to ensure employees are
equipped. Workers loyalty to companies is low especially when a competing firm can offer
50% increases in salary. This practice has created quite a situation in which MNCs that
want to establish operations quickly recruit from Indian companies who have invested years
of training and education on an employee. The practice has raised the eyebrows of well-
respected Indian business men and women who have pointed to a management problem and
an ethical problem.
Another theme that was prominent in discussions with many of the businesses within
Bangalore was the topic of infrastructure. Cities such as Bangalore and Chennai are
"creaking at its seams."11
Companies have created large-scale corporate campuses that are
9
University of San Francisco, Overseas Study Tour: India.
10
Ibid. TIE Bangalore, Jan 15, 2007
11
"Infrastructure Needs Serious Attention in Tn," Businessline (2007).

essentially islands. These "islands" consist of their own power, infrastructure, food service
etc. while the surrounding city overflows with traffic, housing, people, and in some cases
requiring the poor to relocate. Companies at the same time have brought an immense
amount good to India, especially in the form of monetary benefit. However, the
infrastructure needs of the country cannot go without notice and private industry needs to be
part of the solution rather than just seen as the problem.12
As I start to formulate the ethical framework for MNCs doing business in India, I will use
a fictional company named Transporter, their business model being the creation of software
and hardware for the cell phone industry. Their goal is to provide a low cost handset for
emerging markets as well as penetrate more developed markets in the future with a low cost
operation model. The company's revenues are currently at $1 billion dollars and they have
made healthy profits in developing software that is in most of the world's cell phones. The
headquarters of the company is in Canada and the company is on the NASDAQ under the
symbol TRPT. Although they are currently in several countries including most of the
European countries as well as China and South Korea they have decided to make a huge
push in their strategy to both manufacture in India and engage the ever growing Indian cell
phone industry. As the ethical framework develops in this paper, Transporter will allow us
to provide examples and nuances that would otherwise be lost if the concepts were strictly
discussed in the abstract. First, we will look at developing an ethical framework/model for
MNCs conducting business within India.
III. Developing an Ethical Framework
"Many multinationals see Asia as a source of opportunity, but it will also give them their
greatest challenges in business ethics and corporate social responsibility."13
One of the
issues that companies face is what ethical model to use within the business operations. In
the past, business ethics discussions centered on two normative approaches to making
12
"Public-Private Partnership Is the Way to Build Infrastructure," Businessline (2006).
13
Chandran Nair, "Why Asia Must Look Beyond Profits to Ethics Chandran Nair,"
Financial Times, Sep 5 2005.

ethical decisions in business in the older ethical models of deontology and teleology.
Deontology is the belief "…that there are certain sorts of acts that are wrong in
themselves, and thus morally unacceptable means to the pursuit of any ends, even ends that
are morally admirable, or morally obligatory."14
Kant expressed a derivative of this view in
the language of acts.15
Although at first glance this position seems to be a very moral
position, it fails to take into account consequences of decisions especially when the
decisions are in grey areas of large and complex business problems that do not have a clear
right or wrong attached to them. These decisions however could materialize in grave ethical
issues if the outcomes are not considered. In an article from The Journal of Business Ethics
on the ethical implications of sweatshops, it is concluded that deontology falls short for
offering a solution for this very big problem. The article concludes: "Deontology thus fails
to offer adequate assistance in enabling individuals to contextualize their decision-making
within a range of norms and the parameters of foreseeable consequences."16
Teleology, also known as utilitarianism only focuses on the ultimate outcome and the
greatest utility. The philosopher Macintyre "…rejects the enlightenment view of ethics as
rational action based on duty or rules (deontological), or the greatest happiness for the
largest number (utilitarianism or consequentialism)."17
Both normative views are lacking a
complete picture of ethical decision-making. A motivation beyond utility and defining
attention to character is needed to move past the current stalemates and to move into a
model that will help businesses make ethical decisions that are embedded within the fabric
of the organization and its people in light of new era of globalization.
14
Nancy Davis, "Contemporary Deontology," in A Companion to Ethics, ed. Peter Singer,
Blackwell Companions to Philosophy (Oxford: Basil Blackwell Ltd., 1993), 205.
15
Ethical Theory and Business, ed. Tom L. Beauchamp and Norman E. Bowie (Upper
Saddle River: Pearson Prentice Hall, 2004), 25.
16
Tara J. Radin and Martin Calkins, "The Struggle against Sweatshops: Moving Towards
Responsible Global Business," Journal of Business Ethics, no. 66 (2006): 264.
17
David Knights and Majella O'Leary, "Leadership, Ethics and Responsibility to the
Other," Journal of Business Ethics, no. 67 (2006): 132.

IV. A Vocational "Calling" Metaethic:
Wisdom Lessons in Motivation
In setting out to define an ethical model, I want to first define the source of inspiration
when applying normative ethical approaches to business. Without a source of inspiration
or motivation, it is hard to argue for a need for an ethical model beyond legal or profitable
concerns. A source of motivation will help provide a reason for performing within an
ethical model. The motivation to the framework I am proposing is a metaethic of "calling"
or viewing your role in society as a vocation, similar to a profession of a doctor or priest
who are both called into actions beyond their own personal gain. A business leader within
the organization needs a purpose beyond their work environment that drives them to make
ethical decisions or even apply an ethical model.18
Without this motivation or reason why
would a business leader want to make good decisions beyond those that would benefit the
company's profits? This especially becomes a concern in areas that are not legally binding
and fall into seemly grey areas that without an ethical model would drive profits to rule out
ethical decisions. These "grey" areas are important because the decisions made within this
area can move companies to large-scale unethical behavior and practice, especially in
countries that do not have clearly defined laws (i.e. child labor practices within India).19
The question arises on how the first step of the framework will help the fictional company
Transporter in its operations within India. The metaethic concept, defined as questions on
the meaning of ethics, or "what they are doing when they talk about what they do"20
helps
ensure one is really looking at the motivation behind an ethical act or acts. Transporter first
needs to have a reason to do an ethical act. Is it purely legal? On the other hand, are
business actions motivated by a sense of higher purpose? The concept of calling or vocation
gives a motivation that one's purpose as a business and organizational leader is to "…hold
18
Payson Johnston, "Business and Organizational Leadership as a Vocation: A Renewed
Approach to Business," (University of San Francisco, 2005).
19
Augendra Bhukuth and JÈrÙme Ballet, "Is Child Labour a Substitute for Adult Labour?,"
International Journal of Social Economics 33, no. 8 (2006).
20
Alexander Miller, An Introduction to Contemporary Metaethics (Cambridge: Polity
Press, 2003), 2-3.

resources, people and capital in trust for many and it is essential that their guiding principles
for such stewardship transcend the instrumental and narrowly parochial concerns of their
professional positions and practices."21
Unfortunately, in today's business environment
organizational leadership does not yet have the respect of a true profession or vocation even
though organizations have a large affect on the morals of people and the society.22
This is a
key area in the realm of business that needs to change in order to build a more robust
framework for ethical decisions.
By Transporter applying the concept of vocation as the motivation for the ethical model, it
helps provide the motivation for acting ethically beyond the law or solely profits. It helps
the leader regard business management in terms of stewardship and stakeholders.
Moreover, it moves the motivation beyond any individual person's self gain to something
that provides a societal purpose of improvement of the common good. If Transporter's
employees embrace the concept of vocational decision making the motivation of the
company will be ensuring the welfare of all involved. Society and India will be better for
this since business leaders are now "social roles, which provide a culture with its moral
definitions."23
V. Values:
Tempering the Market with Virtue Ethics
The normative ethical theory of virtue ethics is the second step within the framework of the
proposed business model. This theory is …"an alternative to the main deontological and
consequentialist traditions in modern moral"24
thought and "challenges the autonomous
21
Johnston, "Business and Organizational Leadership as a Vocation: A Renewed Approach
to Business," 10.
22
"The Ethical Mind: A Conversation with Psychologist Howard Gardner," Harvard
Business Review 85, no. 3 (2007): 53.
23
Alasdair MacIntyre, After Virtue (Notre Dame: University of Notre Dame Press, 1981),
31.
24
Virtue Ethics, ed. Stephen Darwall (Oxford: Blackwell Publishing, 2003), From the Back
Cover.

self."25
It is "…argued that the recent corporate scandals could be seen as resulting from
ethical failures arising from contemporary concerns with material and symbolic success,
which reside in an ultimate pre-occupation with the self."26
In contrast to the other
normative theories, virtue ethics provides a balance of individual actions with
understanding and looking at the ultimate consequences. It aligns more closely with the
value-based system of India, explored later. A recent article in the Journal of Business
Ethics discusses why virtue ethics can help in business decisions where other normative
theories fail:
"…our sympathy towards virtue ethics resides in a view of the telos or moral
project outlined by MacIntyre as a perfect accompaniment to Levinas’s
responsibility to the Other. An ethic of responsibility moves us away from a pre-
occupation with the self towards an indeclinable and unlimited responsibility to the
Other, experienced in the face-to-face interaction and driven by an inexhaustive
care. In-keeping with the constructionist approach, which we endorse, leadership
here is interpretation of the Other and the self in the face-to-face interaction."27
Virtue Ethics is "agent-centered" as compared to other normative business ethics are
theories that tend to be "act-centered."28
The system has several principles. The first
principle is because "I acknowledge I am far from perfect…I need to ask for advice from
someone who knows."29
The second principle is that of "…virtue generate a prescription –
act honestly, charitably, unjustly – but each vice a prohibition – do not act dishonestly,
uncharitably, unjustly."30
This version of ethics "…has always emphasized the importance
of moral education, not as the inculcation of rules but as the training of character."31
Instead
of just a series of rules, the overall character of the individual is the key concern. One of the
potential issue of virtue ethics is that there has not been enough written about applying it to
25
Knights and O'Leary, "Leadership, Ethics and Responsibility to the Other," 134.
26
Ibid.
27
Ibid.
28
Rosalind Hursthouse, "Normative Virtue Ethics," in Virtue Ethics, ed. Stephan Darwall
(Oxford: Blackwell Publishing, 2003), 185.
29
Ibid., 189.
30
Ibid., 190.
31
Rosalind Hursthouse, Virtue Ethics (Metaphysics Research Lab, SDLI, Stanford
University, 2003 [cited February 12 2007]).

business ethics since it has been newly re-discovered in the last twenty years. The Stanford
Encyclopedia of Philosophy highlights why there has been a lack of writings of virtue
theory textbooks on ethical theories:
Textbooks "…now try to include articles representative of each of the three
normative approaches but are often unable to find any virtue ethics article
addressing a particular issue. This is sometimes, no doubt, because "the" issue has
been set up as a deontologicial/utilitarian debate, but it is often simply because no
virtue ethicist has yet written on the topic. However, this area can certainly be
expected to grow in the future."32
For purposes of this discussion I will only mention five virtues that can be applied to the
context of Transporter when doing business in India: Justice, which was praised by
Aristotle as the "first virtue of political life."33
Wisdom is the virtue that helps in identifying
stakeholders. Fortitude, the driving force to move forward with courage. Temperance, the
virtue of restraining from excess and the love of extremes in decisions and tames the forces
of the drive for profit. Charity, which shows compassion on all stakeholders involved.34
How can Transporter express these virtues within the context of business decision?
One example is through the virtue of justice. Transporter can apply the virtue principle of
"justice" in the view of both the past and present situations in terms of righting wrongs that
were committed in the past through exploitation. An example of utilizing the virtue of
justice is through the modern day practice of multinationals developing product that are
geared towards the poor in quantities and prices they can afford. This allows the poor to
contribute in the market that traditionally was not available. At the same time, it allows
some of the basics of life to become available. Transporter's vision of a low cost cell phone
for all economic levels can help start to provide access to communications, enable
32
Ibid.
33
MacIntyre, After Virtue, 244.
34
Johnston, "Business and Organizational Leadership as a Vocation: A Renewed Approach
to Business," 21.

education information to be available and provide access to market information that can be
utilized by rural farmers and commodity type businesses.35
Despite the value that virtue ethics brings to business ethics by focusing on both the actor
and action, some issues arise when looking at specific business concerns such as the ethical
concerns of a sweatshop. Tara J. Radin and Martin Calkins in their article entitled "The
Struggle against Sweatshops: Moving towards Responsible Global Business" discussed
some of the potential downfalls of Virtue Ethics when evaluating business practices such as
ethical considerations in international manufacturing or outsourcing:
While helpful in providing a mechanism for accounting for the broader impact of
sweatshops on people, as individuals and as a group, and while facilitating an
understanding of subjective differences and the reasons why people conclude one
situation is a sweatshop and another is not, virtue ethics is deficient in a number of
key areas and this inhibits virtue ethics from offering a comprehensive treatment of
sweatshops. First, it fails to provide firm guidelines for consensus gathering and
sanctioning wrong-doers. In addition, while the virtue of justice (an excellence of
the soul that distributes to each according to his or her desert) motivates the
individual to relate properly to others (and although modern virtue theories consider
justice to be the preeminent ‘‘social virtue’’), without principles and laws to back it
up, justice remains rather toothless and arbitrary. Finally, as a normative moral
theory, virtue ethics espouses the development of subjective notions of character and
recommends the individual strive toward an ambiguous final good end (telos) of
happiness (eudaimo´nia). In doing so, virtue ethics has limited utility and appeal
when dealing with international issues such as sweatshops, which bring in highly
diverse viewpoints about character and the final end of happiness."36
In this example, it highlights that even virtue ethics along with the other normative
theories has its faults. None of the theories are perfect and "…all of them appear vulnerable
to manipulation and can be used almost as easily to defend sweatshops as to condemn them.
As a result, part of the reason sweatshops continue to exist is that moral philosophy does
not offer a robust and uniform argument against them."37
This is the problem of all the
35
David Lehr, Project Market Light (Pml) (Digital Vision Program at Stanford Univeristy,
2006 [cited February 17, 2007); available from http://rdvp.org/fellows/2005-2006/david-
lehr/.
36
Radin and Calkins, "The Struggle against Sweatshops: Moving Towards Responsible
Global Business," 264-5.
37
Ibid.: 265.

normative business ethic models including virtue ethics viewed in the context of an ethical
theory standing alone without a motivation besides rules developed within the model.
However, the proposal of this paper considers virtue ethics as the tempering value that
follows the motivation of a calling. In addition to motivation of calling and the temperance
of virtue ethics the proposed ethical framework looks at justice in considering Indian
identity, globalization as the "value" enabler of economic creation between trading nations,
and the consideration of stakeholders as a community viewed through the virtue of charity.
Within this framework it will help expand the "utility and appeal"38
of utilizing an ethical
framework that is applied through the lens of virtue ethics.
As Transporter uses the values of virtues to restrain business decisions it helps motivate
questions such as: What will my factories working conditions be like? To answer the
question first one must ask what is it to be charitable and just? Will I need to have safe
working conditions? Justice would demand at least equality to other working standards in
more developed countries.
VI. Culture Context:
Justice and Indian Identity
Amartya Sen, The Indian Nobel Peace Prize winner in Economics describes, "attempts
from outside India to understand and interpret the country's traditions can be put into at
least three distinct categories…exoticist approaches, magisterial approaches and curatorial
approaches."39
The first two relate to the imagination in the eyes of romanticism or imperial
power.40
The latest is more of an objective observer approach to viewing India.41
Sen
concludes that the best approach to viewing India is to look at a threefold categorization of
all three of exoticist, magisterial, and curatorial approaches.42
All these approaches
however, are from the West looking in on India. A MNC faces a tougher question and needs
to develop a lens beyond what has happened in the past, whether it is through politics or
38
Ibid.
39
Sen, The Argumentative Indian: Wrings on Indian History, Culture and Identity, 141.
40
Ibid., 141-2.
41
Ibid., 142.
42
Ibid.

business ventures. Becoming part of the fabric of a country and embracing it from within is
key with a healthy tension to the knowledge of the need to also identify with globalization.
Friedman's concept of the local culture going global expresses this concept well in the
statement: "It is the local which goes global."43
Within the Indian culture context a big concern is the issue of how the poor are affected.
This has also been a concern to writers in the past on the negative affects of colonization
and its lack of addressing the concerns of the poor at the time.44
Although the question of
how to deal with the poor is a reality in most places, India's issue is troubling since the large
amount of cash inflow has not necessarily helped the condition of its poor as can bee seen
in malnutrition rates of children and other indicators.45
Along with the realities of the present, India's past can help contribute to the present
discussion on business ethics. Kautilya's Arthashastra provides inspiration to ethics within
India Business in the 4th
century BC.46
His ethical based model for the organization touches
on organizational structures, leadership requirements and even recommends a value based
system similar to one proposed within modern virtue ethics or Aristotelian ethics.47
The
Journal Humanomics expresses the almost prophetic nature of Kautilya's system:
Not only the Socratic question was asked more than a thousand years earlier in
India but also a comprehensive and consistent theory of attaining Moksha was
developed, the virtues of truthfulness, compassion, tolerance and non-violence were
identified and recommended, and elaborate rules were formulated to lead a virtuous
life. Kautilya was way ahead of the Greeks and Adam Smith in offering both
morality-based and legality-based approaches to ethics for resolving conflict of
interest issues. Moreover, he believed that ethical values and prosperity were
interdependent whereas the Greeks thought that prosperity was a threat to the ethical
fabric of a society. Similarity, Kautilya recommends a proper mix of security,
43
Friedman, The World Is Flat: A Brief History of the Twenty-First Century, 508.
44
Simon Gikandi, "Preface: Modernism in the World," Modernism/Modernity 13, no. 3
(2006).
45
Somini Sengupta, "Even Amid Its Wealth, India Finds, Half Its Small Children Are
Malnourished," New York Times, Feb 10 2007.
46
N. Siva Kumar and U. S. Rao, "Guidelines for Value Based Management in Kautilya's
Arthashastra," Journal of Business Ethics 15, no. 4 (1996).
47
Ibid.

servings and strings but above all, ethical grounding and moral incentives to elicit
optimum effort.48
As Transporter conducts business within India, culture factors such as history, past abuses
of foreign governments and companies, as well as local concerns such as the poor, need to
be taken into consideration when formulating business decisions. Keeping the local
perspective at the forefront of business decisions in light of the vastness of globalization is
key when doing business with India or any country. Considering the values of the country
will help Transporter be sensitive to the cultural context and history India posses. Business
profit cannot override these factors and if culture and profit collides, Transporter needs to
take a step back and work through the issues with dignity and respect of the Indian culture.
VII. "Value" Enabler:
Driving Forward with Fortitude in Globalization
"Outsourcing is not a good word to use anymore," says the CEO of JP Morgan Chase's
India operation. The word creates fear and the charge that protectionism is needed whether
in the US, Europe, or Japan. Those affected by the possibilities of outsourcing are rightly
concerned. However, with the rise of globalization, it is no longer a question about
outsourcing but how will specific countries compete in a "globalized" world. Globalization
conjures up glimpses of what Adam Smith was writing about in his Wealth of Nations 300
years ago. He observed, "Scarce any nation has dealt equally and impartially with every sort
of industry."49
Modern economics has proven that the trade of two nations or many nations
of their expertise creates additional value beyond what already existed. The companies that
will benefit the most are those that embrace globalization and redesign their business model
to support it or those, such as Infosys, who have been "forced to be a flat world company
48
Balbir S. Sihag, "Kautilya on Ethics and Economics," Humanomics 21, no. 3/4 (2005):
14.
49
Adam Smith, Wealth of Nations (London: George Bell & Sons, 1892), 3.

from the start."50
The Journal of Business Ethics proposes an approach to globalization via
the concept of a Global Business Citizen (GBC):
The GBC approach is a hybrid of these two strategic patterns that takes into
account the fact that some situations require a company to take an absolute and
uniform policy and other situations necessitate responsiveness and adaptability to
local norms or contingencies. In addition, and importantly, GBC explicitly
accommodates several levels of ‘‘ethical certainty,’’ or the degree to which norms
and values match up with behaviors, practices, and customs in a particular locale or
across sites.51
However, "…few topics are more intensely
debated or generate more contrasting emotions
than the merits and costs of globalization,
particularly foreign direct investment (FDI) by
multinational companies in emerging markets."52
A McKinsey Global Institute study showed a
positive economic impact on multinationals when
growing business in emerging countries. The
study also shows that the local consumer won via
better prices and improved living standards when
global investment increased, although local companies have had issues.53
The study
concludes:
"Today there is a growing backlash against globalization and many observers question
whether it has broadly alleviated poverty and increased standards of living. The
evidence from our research clearly shows that it can. Rather than holding foreign
direct investment at arm's length, developing nations would do better by embracing it
and implementing sound policies to get the most from it." 54
50
University of San Francisco, Overseas Study Tour: India.
51
Jeanne M. Logsdon and Donna J. Wood, "Global Business Citizenship and Voluntary
Codes of Ethical Conduct," Journal of Business Ethics 59, no. 1-2 (2005): 58.
52
Diana Farrell, "The Case for Globalization," The International Economy 18, no. 1 (2004):
52.
53
Ibid.
54
Ibid.: 55.

As MNCs increase investment inside these developing countries, they need to be careful
not to repeat the failures of the past in other types of movements. Globalization is a value
enabler that drives improvement in a country. At the same time, unconstrained globalization
could be worse than other past movements. Ethical models AND market rules must restrain
globalization in order to govern a more "compassionate capitalism."55
This type of
globalization will not only look at the profits it is generating but also will look at how it can
make this profit ethically and at the same time give back to society. When this double
bottom line is real, globalization can truly become a "value enabler" for both profits and
social impact.
IX. Community Responsibility:
Stakeholder Analysis & Synthesis with Considerations of Charity
The focus of MNCs for cost cutting is something that needs to change as they consider
all the key stakeholders. R. Edward Freeman, in the article entitled "A Stakeholder Theory
of the Modern Corporation" argued for defining the key stakeholders of the corporation as
"suppliers, customer, employees, stockholders, and the local community, as well as
management in its role as agent for these groups."56
Globalization has caused stakeholders
to expand past the boundaries of traditional stakeholders especially since MNCs stretch
again several countries and in a sense serve in a larger capacity of governance than some
countries.
55
The "compassionate capitalism" discussion has been voiced within Catholic Social
Thought in such documents as: "A Decade after Economic Justice for All: Continuing
Principles, Changing Context, New Challenges," in National Conference of Catholic
Bishops (1995). Other movements have started to address this new type of capitalism such
as the Social Entrepreneurship movement in double bottom line ventures of profit and
social impact. Many of these ventures are highlighted in a recent PBS program: Marion
Rice, "The New Heros," (2006).
56
R. Edward Freeman, "A Stakeholder Theory of the Modern Corporation," in Ethical
Theory and Business, ed. Tom L. Beauchamp and Norman E. Bowie (Upper Saddle River:
Pearson Prentice Hall, 2004), 55.

Globalization has resulted in more and more nations with diverse cultures and
experiences participating in the global economy. It has also seen increased scrutiny
of corporate behavior by the communities. Unethical behavior by individuals costs
the organizations, stakeholders and society, billions of dollars, not withstanding the
social cost of such actions. The rising numbers of corporate misconducts and
failures in the recent past have further accentuated the need for a closer look at the
issues of managerial ethics. Clearly managers are under increased pressure from
stakeholders not only to outperform their competitors but also are expected to do so
in an ethical manner.57
Although market dynamics drive business and can bankrupt the company, if the business
is not careful, it should not be the sole driving force of decisions in business. Remembering
stakeholders in context of the proposed ethical framework outlined will help keep the focus
on good ethical decisions within a corporation. As globalization has arisen, more and more
groups have started to state their opinion on this matter:
Other stakeholders are asking for greater support of human rights, a higher
concern for the natural environment, more genuine stakeholder dialogue, and more
information about the decisions and impacts of organizations.58
The fictional company Transporter needs to clarify whom their stakeholders are and what
concerns are pivotal in order to make sure that the company is moving in an ethical
direction. The first sets of stakeholders in Transporter's business are the traditionally
defined stakeholders of suppliers, stockholders, customer, employees, and the local
community. When making decisions Transporter needs to ensure that all stakeholders are
considered. However, three additional stakeholders need consideration by Transporter in the
context of India and globalization. The first stakeholders are specifically defined as those at
the bottom of the pyramid (BOP) as argued by C. K. Prahalad in his book The Fortune at
the Bottom of the Pyramid: Eradicating Poverty through Profits.59
The second group of
stakeholders is the Indian companies that are Transporter's affected competition. The third
57
Manjit Monga, "Managers' Moral Reasoning: Evidence from Large Indian Manufacturing
Organisations," Journal of Business Ethics 71, no. 2 (2007): 179.
58
Logsdon and Wood, "Global Business Citizenship and Voluntary Codes of Ethical
Conduct," 55.
59
C. K. Prahalad, The Fortune at the Bottom of the Pyramid: Eradicating Poverty through
Profits (Upper Saddle River: Wharton School Publishing, 2005).

set of stakeholders is a subset of Transporters employees who are by shifts in work from
one country or region to another.
Along with the traditional stakeholders, in the context of India, Transporter needs to
consider the BOP as a subset broken out from the local community. This does not just need
to be in the context of monetary help for the BOP's needs but in looking for ways to limit
their suffering as well as benefit Transporter in both social viewpoints as well as profit. This
can be accomplished in many ways such as providing education to the poor to train workers
in Transporter's factories. Transporter, as mentioned earlier, can design products,
especially cell phones, that help solved the needs of the poor at an affordable price and
enable the BOP to benefit from products specifically designed for them and marketed to
them.
The second set of stakeholders that Transporter needs to review is its competition within
India. The word competition is defined as stakeholders that are by the recruitment practices,
hiring, and training competing for resources. Although not traditional defined as
stakeholders, India companies are very important in this consideration since unethical
practices against them could trigger a more protectionist response and appeal to the Indian
government. Transporter should take care to explain its hiring practices, should view hiring
in India as long-term investments in training, and not solved by a quick fix of pulling
people from companies who have invested years in them. College recruitment and training
of people who would not necessarily have the skill sets can help Transporter's reputation as
caring for the community instead of only recruting employees by offering money
incentives. This also can be accomplished by shifting senior leadership from other regions
to establish and train a staff that is focused on a long-term perspective, as can be seen on the
latest move from Cisco shifting 20% of its current executives to establish Bangalore as a
globalization center.60
The third sets of stakeholders are the workers of Transporter affected by shifts in the
business to new regions. As business shifts based on cost or market trends, globalization is
60
"Cisco Puts Executives in India," FinancialWire (2007).

causing "the emergence of [a] completely new social, political, and business model."61
Workers affected by layoffs or skill-set changes will face the global impact of the world
were jobs can be done from almost anywhere without worrying about location. Transporter
needs to view its employees as more than just resources and constantly consider the long-
term benefits of firing in one region and hiring in a lower cost region. If job shifting is
necessary, employees need treatment with respect and the focus of the company should be
on retraining their employees for the next phase of skill-sets that will propel the company
for the future. This will not only create loyalty of the employees to the company but will
help Transporter nurture a reputation with host governments that it can be trusted. The case
applies to both economically mature nations as well as India in the future.
Transporter can break the trends and instill in the company a framework that helps the
company maintain an ethical standard with it stakeholders. This should not only be talked
about but MUST be lived out by its organizational leaders as well as engrained within it
policies and processes. This action will ensure the organization itself has an ethical
framework to guide the decision makers to first ask if they do not know how to make an
ethical decisions and second nurture the virtues needed to ensure ethical business practices
in India and the globalized world at large.
IX. Business Action:
Framework for Multinationals Doing Business in India
The framework proposed in this paper is a holistic approach to large decision-making, as
well as a process/policy guideline for operations. Wisdom of ones vocation or calling drives
the motivation of the system to consider virtues that provide a grid in which to function.
Virtue Ethics provide temperance to know if decisions are ethical and consider them in
reflection to ones individual action as well as the results of the actions. Justice is reflected
when considered in the Indian context in making decisions: honoring culture on one hand
and being mindful of past exploitation to ensure it does not happen again. Fortitude drives a
61
Friedman, The World Is Flat: A Brief History of the Twenty-First Century, 48.

company to embrace
globalization as the business
model of the future that will
enable the world to experience
economic prosperity like is has
never known before in the
past. The embracing of
globalization allows for the
extension of the market to
dominate transactions were
companies are responsible if
un-ethical practice occurs. The
key to tempering the market
forces is by considering all
stakeholders with charity,
including the poor, other India
companies, and one's global
workforce. This charity is not
in the context of a "free handout" but in an understanding that a business should not only
make a profit but should also consider a double bottom line of social impact and
improvement.
Returning to Transporter, one last time: when applying this ethical model it provides a
structure to answer questions that are beyond the mere yes or no. It will help Transporter
forge forward in the new era of globalization while considering the local Indian perspective.
X. Future Trends & Implications:
Globalization Ethic
What are the future trends and implications of a new type of ethical framework? The
first is that a company must embrace guidelines of some sort in order to avoid the potential
An Ethical Framework for Multinationals
Conducting Business in India

pitfalls of recent and past companies. This model will not create a perfect framework but
recreates the tools needed to counteract what MacIntyre laments "there seems to be no
rational way of securing moral agreement in our culture."62
As India expands, a new ethical approach to globalization is critically necessary. This is
especially true since India is a democratic and market driven economy and there is not an
"artificial" moral guide (i.e. the government) that monitors one behavior not defined by the
law.63
The model, although applied to the context of India, is applicable to future movement
of MNC's business operations to new centers of business. There are limitations to any
model or framework. A MNC must think through how the globalization ethic framework
interlocks and entwines in the fabric of the companies' culture and applied through the
policies and processes of their company to ensure ethical decisions and virtues are at the
heart of the company. Organizational leaders must model this and hold their people to this
standard in order to ensure a company can reflect true ethical virtues. The challenge is real
and is necessary in order to temper the abuse of the past and forge ahead with a new
globalization ethic64
modeled by MNCs in the new era of expansion into the India nation
and into a new era of ethical companies.
62
MacIntyre, After Virtue, 6.
63
"Europe: Do as I Say--or as I Do?; Charlemagne," The Economist 382, no. 8516 (2007).
64
Declaration toward a Global Ethic (Parliament of the World's Religion, 1993 [cited
February 28, 2007); available from http://www.weltethos.org/dat_eng/index_e.htm. The
concept of a Global Ethic was originally proposed by Hans Kung and the Parliament of the
World's Religions for the focus on religious tolerance. This paper proposes using the
concept and expanding it to the era of globalization, in addition to the rest of the proposed
framework.

XI. Bibliography
"A Decade after Economic Justice for All: Continuing Principles, Changing Context, New
Challenges." In National Conference of Catholic Bishops, 1995.
Bardhan, Nilanjana, and Padmini Patwardhan. "Multinational Corporations and Public
Relations in a Historically Resistant Host Culture." Review of Reviewed Item.
Journal of Communication Management, no. 3 (2004).
Bhukuth, Augendra, and JÈrÙme Ballet. "Is Child Labour a Substitute for Adult Labour?"
International Journal of Social Economics 33, no. 8 (2006): 594.
"Cisco Puts Executives in India." FinancialWire (2007): 1.
Davis, Nancy. "Contemporary Deontology." In A Companion to Ethics, edited by Peter
Singer. Oxford: Basil Blackwell Ltd., 1993.
Declaration toward a Global Ethic. 1993. In, Parliament of the World's Religion,
http://www.weltethos.org/dat_eng/index_e.htm. (accessed February 28, 2007.
Ethical Theory and Business. Edited by Tom L. Beauchamp and Norman E. Bowie. Upper
Saddle River: Pearson Prentice Hall, 2004.
"Europe: Do as I Say--or as I Do?; Charlemagne." The Economist 382, no. 8516 (2007): 46.
Farrell, Diana. "The Case for Globalization." The International Economy 18, no. 1 (2004):
52.
Freeman, R. Edward. "A Stakeholder Theory of the Modern Corporation." In Ethical
Theory and Business, edited by Tom L. Beauchamp and Norman E. Bowie, 55-74.
Upper Saddle River: Pearson Prentice Hall, 2004.
Friedman, Thomas L. The World Is Flat: A Brief History of the Twenty-First Century. New
York: Farrar, Straus and Girox, 2006.
Gikandi, Simon. "Preface: Modernism in the World." Modernism/Modernity 13, no. 3
(2006): 419.
Hursthouse, Rosalind. "Normative Virtue Ethics." In Virtue Ethics, edited by Stephan
Darwall. Oxford: Blackwell Publishing, 2003.
———. 2003. Virtue Ethics. In Stanford Encyclopedia of Philosophy, Metaphysics
Research Lab, SDLI, Stanford University. (accessed February 12, 2007).
"India Overheats." The Economist, February 3rd-9th 2007.
"Infrastructure Needs Serious Attention in Tn." Businessline (2007): 1.

Johnston, Payson. "Business and Organizational Leadership as a Vocation: A Renewed
Approach to Business." University of San Francisco, 2005.
Knights, David, and Majella O'Leary. "Leadership, Ethics and Responsibility to the Other."
Journal of Business Ethics, no. 67 (2006): 125-37.
Kumar, N. Siva, and U. S. Rao. "Guidelines for Value Based Management in Kautilya's
Arthashastra." Journal of Business Ethics 15, no. 4 (1996): 415.
Lehr, David. 2006. Project Market Light (Pml). In, Digital Vision Program at Stanford
Univeristy, http://rdvp.org/fellows/2005-2006/david-lehr/. (accessed February 17,
2007.
Logsdon, Jeanne M., and Donna J. Wood. "Global Business Citizenship and Voluntary
Codes of Ethical Conduct." Journal of Business Ethics 59, no. 1-2 (2005): 55.
MacIntyre, Alasdair. After Virtue. Notre Dame: University of Notre Dame Press, 1981.
Miller, Alexander. An Introduction to Contemporary Metaethics. Cambridge: Polity Press,
2003.
Monga, Manjit. "Managers' Moral Reasoning: Evidence from Large Indian Manufacturing
Organisations." Journal of Business Ethics 71, no. 2 (2007): 179.
Nair, Chandran. "Why Asia Must Look Beyond Profits to Ethics Chandran Nair." Financial
Times, Sep 5 2005, 13.
Prahalad, C. K. The Fortune at the Bottom of the Pyramid: Eradicating Poverty through
Profits. Upper Saddle River: Wharton School Publishing, 2005.
"Public-Private Partnership Is the Way to Build Infrastructure." Businessline (2006): 1.
Radin, Tara J., and Martin Calkins. "The Struggle against Sweatshops: Moving Towards
Responsible Global Business." Journal of Business Ethics, no. 66 (2006): 261-72.
Rice, Marion. "The New Heros." 2006.
Sen, Amartya. The Argumentative Indian: Wrings on Indian History, Culture and Identity.
New York: Picador, 2005.
Sengupta, Somini. "Even Amid Its Wealth, India Finds, Half Its Small Children Are
Malnourished." New York Times, Feb 10 2007, 7.
Sihag, Balbir S. "Kautilya on Ethics and Economics." Humanomics 21, no. 3/4 (2005): 1.
Smith, Adam. Wealth of Nations. London: George Bell & Sons, 1892.

Springer, Richard. "Maharashtra Cm Reassures Silicon Valley Entrepreneurs." India - West,
Jul 1 2005, A1.
"The Ethical Mind: A Conversation with Psychologist Howard Gardner." Harvard Business
Review 85, no. 3 (2007): 51-6.
University of San Francisco, Overseas Study Tour: India. January 5 - January 20, 2007.
Virtue Ethics. Edited by Stephen Darwall. Oxford: Blackwell Publishing, 2003.

India Study Tour Project Proposes Ethical Framework for Multinationals

Recommended

Recommended

More Related Content

Similar to India Study Tour Project Proposes Ethical Framework for Multinationals

Similar to India Study Tour Project Proposes Ethical Framework for Multinationals (20)

More from Courtney Esco

More from Courtney Esco (20)

Recently uploaded

Recently uploaded (20)

India Study Tour Project Proposes Ethical Framework for Multinationals