Example of multination company's violated human rights in developing countries

As a compliance officer asked to update the Board of Directors on the regulatory environment for doing business in countries where human rights records and protections have been weak, how would you support your recommendations based on the legal cases discussed in the Schrempf-Stirling and Wettstein () article? Please support your analysis with specific examples.

Human rights have quickly become a polarizing and contentious issue with many of the developing countries. Element such as working conditions, hours, benefits, and wages are now being highly scrutinized as it relates to global standards. A growing number of corporations have exploited lax rules and regulations in an effort to increase profitability at the expense of their workers. Interesting, both small and large companies have been found to exploit these legal loopholes for their own gain. These companies include well established brands such as Google and well as lesson known companies such as Roche. In each instance however, there has a wide spread abuse that has resulted in the exploitation of workers, primarily in developing countries. To mitigate these occurrences a large number of corporates are filing foreign direct liability cases in the country in which the multination is domiciled. Unfortunately, a vast majority of these cases have been dismissed. However, in each instance the company has adjusted their human rights policies to better reflect the higher standards of the country in which they are domiciled. As a compliance officer, I would ask the board of directors to adopt the human rights standards in their country of origin to help avoid conflict of interest and the temptation of adopting lesser standards to exploit others (Alston,, 2005).

As the Schrempf-Stirling article indicates, human rights violations are a byproduct of globalization. Many developing countries are looking to open their markets to competition, foreign direct investment, and joint ventures. Many of these countries including China, India, and Brazil are attractive due to their very large and growing middle class. Currently, these individuals have very low incomes relative to their developed country counterparts. Certain areas of India and Brazil for example make less than $5,000 a year. Going to other parts of African and South America these figures are even worse. As a means to improve the middle class these developing countries have allowed businesses to invest within their respective countries in exchange for hiring native born citizens (U.N. Centre for Human Rights, 2004). This has worked particularly well for developing countries as they are able to penetrate a very attractive market while the developing country obtains access to products, goods, and service. In the case of China, they have require developing countries who enter their markets to have a Chinese joint venture partnership. This was particularly useful as China was able to learn the product know-how necessary to develop the products themselves. In certain instances, businesses have been known to outright steal the intellectual property of American companies with little to no repercussions. Developing nations were happy to oblige with these demands as they were able to sell products to growing middle class with very strong purchasing power. Due to this globalization, multinational companies looked to employ citizens within the developing countries. These citizens, most of which were in poverty were more than eager to accept very low wages as the wages being offered were higher than what they could receive elsewhere in the labor force (Brysk, 2009). Although the wages were higher by Chinese and India standards, they were much lower as compared to developed world standards. This is essentially the crux of the human rights problem as it relates to multinational operations. The juxtaposition of developed world standards with those of developing world standards and how this variance will be reconciled. As is the case with India and China, their citizens are receiving a stable and livable wage to their country’s standards. In addition, both of these cultures have a large propensity to save their earnings which has allowed many millions of citizens to enter the middle class. By being able to enter the market consumers can then access very high-quality goods and services from the most well recognized multinational brands. This, on the surface appears like an adequate trade off. However, what has occurred is the exploitation of workers in the pursuit of western ideals of profit. As the Schrempf-Stirling article indicates, many companies who violate these human rights standards are not found guilty, but do change their policies. Nike is a perfect example of this at work.

According to the Schrempf-Stirling article, convictions of violations are very rate. As such, companies have tended to stretch the rules of human rights. Many multinational organizations have used these low wages to further pressure they developing market peers. This has included very long working hours, inhumane working conditions, and little to no benefits. A classic example of human rights violations occurred with Nike and their “sweat shops”. Here, in the pursuit of low costs, Nike sought the lowest cost labor from developing countries (Alston,, 2014). This ultimately led to humans’ rights violations as the company would exploiting children with toxic emission, verbal and physical abuse, and 15-hour shifts. The children and workers who complained were then subject to still further physical abuse and violence. In addition, those who were being exploited were predominately women and children, with many of the many being the one who were abusing them if they complained. This women and children were voiceless until a report by Jeff Ballinger ignited a firestorm of negative press against Nike. Ironically, as Bellinger’s report indicates, the working conditions coupled with minimum wage left many workers the choice between medicine or food, which ultimately resulted in the focus on survival rather than any life experiences. In the case of Nike, the middle-class people working for the company where not improving their lives but instead enduring a different form of financial entrapment. This form of exploitation did not help to alleviate poverty, as was the prevailing notion at the time. Instead, essentially workers had no choice as to their overall behaviors and attitudes towards employment. In essence, these workers were to work long hours with minimal pay or receive nothing for their efforts. As people eventually left, a new and more impoverished group of young workers would replace them, creating a vicious cycle of exploitation on the part of Nike. Nike would eventually improve its human rights initiatives in foreign countries but not with a significant impairment to the brand and its image as a corporate citizen (Bornstein, 2011)

As the Nike case above illustrates, the consequences of human rights violations can be very severe as it relates to brand equity, sales, and profitability. Nike is not unique in this instance, as other companies from small to large have experienced very similar outcomes. COVID-19 has also exacerbated the need for companies to be strong corporates citizens to society. It is now not enough to earn high profits, but society has demanded the companies also look to use their positions to help illicit change and improvements for the future. Human rights are no different in this regard. For many companies, the consequences of not adhering to a strong standard can be dire. As Nike has indicated, the brand can forever be tarnished due to irresponsible behavior. We have seen brands that have never recovered due to irresponsibility. BP, the oil and gas company, had one of the largest oil spills in modern history. Here, the company employed a litany of low skilled foreign workers to help boost profits and lower wage costs. In addition, the company did not adhere to security and governance protocols resulting in faulty equipment. The combination of low skilled cheap labor and faulty equipment resulted in a large oil spill that destroyed the surround ocean areas, the coasts and the overall ecosystem. The damage to the brand and environment has been severe. Since the oil spill in 2010, the company stock price has still not recovered. The share price prior to the oil spill was nearly $60. Today it is $20 reflecting the deterioration of confidence from investors, society, and the public at large. This same fate can befall any company that does not adhere to strong human rights protections.