Interest of the stakeholders of a company for operating in Mexico
Friction costs can arise in Multinational corporations when the public sees practices of the firm as exploitative or unethical. These types of actions can lead to public criticism and loss in the value of the company’s goodwill. In this short discussion I will discuss the interest of the stakeholders at a company. The stakeholders are divided into 4 groups: Management and stockholders; Maquilodora (Mexican) workers; Consumers; and Mexican government.
I. Management and Stockholders
i. It is important for Management to be sure that management practices don’t lead to public criticism.
ii. “1977, Brenner and Molander published a study where 43% of the executives interviewed felt compelled to resort to practices they considered shady, but apparently found necessary for the survival of their companies and hence their own careers.” (Brenner & Molander, 1977, pg 57-71) (Novartis)
i. A company has an obligation to behave responsibly. By doing so we represent our stockholders and ensure return on investment for them.
ii. “Unethical behavior is a liability for a company” (Novartis, 2004) ” “putting business ethics into practice and thus though legal behavior generally leads to increased costs and reductions in sales and profits.” (Novartis) However unethical business ethics can lead to public outcry and even intervention by authorities. As a result stock prices could plummet.
II. Maquilodora (Mexican) Workers
a. Mexican Government
i. It is the responsibility of the Mexican Government to ensure ethical and moral practices are followed along with the responsibility of the Management. When a company receives public criticism, it is a lose – lose situation whereas both the multinational corporation and the government loses losses in revenue.
i. It is important for Management to respect human life. This is a wonderful opportunity for Management to operate in a free trade zone.
a. The consumers benefit from this type of trade is the cost of goods.
b. “Many consumers believe that a corporation cannot simultaneously have high principles and high profits. In fact, there is an increasingly common view that many corporations are ethically irresponsible, pursuing their profits unscrupulously at the cost of the environment and the safety and health of consumers. ” (Novartis, 2004)
IV. Mexican Government
a. Human Rights in Mexico
i. Types of violations currently going on in Mexico and illustrated in the map below are Disappearances, Extra-judicial killing, denial of freedom of assembly and association, Arbitrary arrest and detention, denial of freedom of expression. (Novartis, 2004)
ii. It is the responsibility of the Mexican Government to ensure human rights are respected by those doing business in their country.
b. In addition, a company will need to weary of government deficits and corruption. “In emergent countries such as South Korea and Mexico former top officeholders have been arrested or are suspects in connection with corruption” (Novartis, 2004)
c. Public outcry for lack of respect for human rights may cause losses in tax revenue for the Mexican government.
Brenner S N/Molander E A: Is the ethics of business changing?. In: Harvard Business Review, Jan/Feb 1977, pp 57-71.
Novartis Foundation for Sustainable Development, 2004, “Articles and Publications”, “Corporate Ethics and International Business: Some Basic Issues” retrieved on October 29, 2005 from http://www.novartisfoundation.com/en/articles/business/business_corporate_ethics.htm
Map of violation types can be viewed at http://www.novartisfoundation.com/pdf/business_and_human_rights.pdf