S. Prakash Sethi

The influence of “country of origin” on multinational corporation global strategy: A conceptual framework

This article examines the proposition that MNCs from a particular country are likely to exhibit profile similarities that are distinct from those of MNCs emanating from another country due to differences in home country factors. We call this country of origin effect (COE). A generalized framework is presented briefly explaining the nature of relationships among various COE elements that influence MNC strategy. A number of research propositions are offered that postulate the presumed effect of COE elements on MNC strategy and competitive behavior. Finally, suggestions are made as to the implications of this avenue of enquiry for further research as well as guide for management action.

Ethical Behavior as a Strategic Choice by Large Corporations: The Interactive Effect of Marketplace Competition, Industry Structure and Firm Resources

Analysis of ethical conduct of business organizations has hitherto placed primary emphasis on the conduct of that corporation’s managers because ethical conduct, like all conduct, must manifest itself through individual behavior. This paper argues that in the real world corporate actions are influenced, to a considerable extent, by external market-based conditions. Therefore, a more comprehensive explanation of ethical business conduct must incorporate both corporate, i.e., internal considerations, and competitive, industry structure-based, i.e., external considerations. A framework is presented that provides a systematic analysis of the interactive effect between different types of external market-based competitive conditions, institutional opportunities to engage in ethical behavior, and the likelihood that corporations would do so. The analytical framework leads to recommendations as to the types of actions that might be more effective in improving business ethical conduct under varying sets of market-based competitive conditions.

Imperfect markets: Business ethics as an easy virtue

This paper marks a radical diversion from the large body of prevailing literature in business ethics which primarily views the issue in individual-personal terms, i.e., corporate executive and employee, and suggests that making corporations more ethical would primarily come through changes in executive behavior. While this approach has strong intellectual roots in moral philosophy and religion, it fails in explaining the persistence of unethical and illegal behavior among corporations of all sizes, financial health, competitive market conditions, and, level of individual executive compensation. This paper argues for a fundamentally different approach to understanding ethical behavior, or lack thereof, among corporations and their executives. It is asserted that an overwhelmingly large rationale and/or inducement for proactive ethical business behavior is rooted in competitive aspects of particular markets, and industry structures prevailing in those markets. Furthermore, while highly competitive markets may promote efficiency, they do not guarantee ethical behavior and may indeed provide greater opportunities and incentives for unethical business behavior. Thus, by following the current prognosis, we could be wasting enormous resources in terms of teaching business ethics, and creating and imposing corporate codes of conduct. We assert that these approaches would at best make a marginal improvement in the ethical performance of corporations while at the same time exacerbate the problem by ignoring more fundamental, structural issues. Imperfect markets, with their above-market profits, are a necessary but insufficient condition for corporations to behave ethically. It is only under conditions of imperfect markets that individual executives can play an important role in guiding their corporations toward greater ethical norms. These are undertaken for a variety of reasons, including, protecting a corporations good name, public expectations, competitive norms, and, corporate culture and individual executives predilections, to name a few.

Raising the Ante

Leon Sullivan’s rationale in creating the Principles was to have the United States companies play an important role in dismantling apartheid in South Africa. He recognized that, though perhaps unable and unwilling to exert direct political pressure on the South African government, the companies could nonetheless exert substantial albeit indirect pressure through the economic power they wielded.

The Role of NGOs in Ameliorating Sweatshop‐Like Conditions in the Global Supply Chain: The Case of Fair Labor Association (FLA), and Social Accountability International (SAI)

Over the last 20+ years, globalization has made international trade and investment more efficient and productive. In the absence of coordinated global regulatory regimes, it has also made multinational corporations (MNCs) impervious to social concerns in the countries where they operate. There is considerable debate in the academic, political, and business arena as to the causes of the apparently inequitable distribution of benefits between labor and capital. Notwithstanding, the relative merits of this debate, and facing tremendous societal pressure, companies have adopted voluntary codes of conduct to ensure that workers making products for them in poor and developing countries are protected from hazardous working conditions and receive wages that meet local laws and market conditions. These codes, however, suffer from a lack of credibility and proof of substantive compliance. A new type of nongovernmental organization (NGO) has emerged that monitors a companys compliance with prespecified standards and provides assurance to the external stakeholders that the company has fulfilled its voluntary obligations. From an historical perspective, this has been an innovative phenomenon where the monitoring organization purports to act as an honest broker to ensure all concerned that the company/industry has fulfilled its obligations. In this article, we undertake a thorough examination of two such organizations, that is, Fair Labor Association, and Social Accountability International, that have played a pioneering role in bridging the gap between societal expectations and corporate performance. We examine their governance structures, operating procedures, monitoring standards, and public disclosure of findings, and above all, their success in improving the level of corporate compliance with their self‐created codes or standards. Unfortunately, our findings and conclusions are disappointing. In our view, the two groups have mostly failed to meet their avowed goals. Rather than using their NGO status to help companies improve their code compliance, they have suffered from managerial capture and have been reduced to corporate apologists.

The Comprehensive Anti-Apartheid Act of 1986

The third of October 1986 was a momentous day in the history of the United States and also in the presidency of Ronald Reagan, one of the most popular United States presidents at home and abroad: both houses of Congress voted by significant majorities to override President Reagan’s veto and thereby enact into law the Comprehensive Anti-Apartheid Act (CAAA) of 1986 (H.R. 4868). The law was intended to express strong United States opposition to the apartheid regime of the White-controlled minority government of South Africa. In addition to imposing economic and trade sanctions on that country, the law sought to bring worldwide political and economic pressure on South Africa’s government with a view to creating a democratic, nonracial society there.

Eli Lilly & Company, Inc.

Eli Lilly & Company was one of the earliest signatories to the Sullivan Principles.1 Joining the Sullivan Principles was, indeed, consistent with the company’s overall posture of being a socially responsive company with a long history of community involvement. The company also had the good fortune of not being initially subjected to the extreme external pressure from religious groups that confronted hosts of other large corporations in different parts of the United States. Indianapolis, Indiana—the location of the company’s headquarters—was not exactly a hot bed of social turmoil.

Corporate Compliance with the Sullivan Principles

The working of the Sullivan Principles in South Africa can be analyzed along two dimensions. The first relates to the Principles themselves: their content; their evolution and modification; their underlying rationale and social and moral import; and the goals they were designed to achieve. These questions were central in motivating us to write this book. In the current chapter, however, we focus on the second dimension of the working of the Principles. To wit, we consider the manner in which the Sullivan Principles were operationalized and implemented in South Africa. In particular, we examine the criteria by which projects were selected and managed, and the standards and processes that were created for monitoring and evaluating performance. We also attempt to evaluate operational efficiency, the achievement of goals (as measured by the auditing and monitoring instruments used in the process), and the impact the companies’ efforts when seen from the perspectives of the recipient groups.

The Anti-Apartheid Movement and Its Impact on United States Companies to Withdraw from South Africa

The strategic thrust of the anti-apartheid movement in the United States was to force United States companies to disinvest in South Africa and to cease doing any business in that country. This strategy had widespread support among the anti-apartheid groups in the United States, and it was also supported by a vast majority of Black. South Africans. As companies began to adopt the strategy of divestment, critics pointed out its defects, only to be largely ignored.

Assessment of the Sullivan Principles As a Role Model for Developing International Codes of Conduct

The promulgation of the Sullivan Principles was a watershed event in a drive that had been gathering momentum—primarily in the United States, but also in many other industrialized countries of the world—for enhancing the responsibility of multinational corporations.1 This drive was a reflection of the worldwide operations of such corporations, coupled with a concern for the worldwide consequences of how those operations were conducted. In its most basic form, the notion of enhanced responsibility has three components: n n nMNCs must deal with all of their stakeholders, and not merely stockholders, in a fair and equitable manner. This concern has special relevance when the operations of MNCs involve developing countries or poor people (anywhere); that is, involve those who lack the necessary economic and political power to bargain with MNCs on more equitable terms. n n nMNCs must act as positive and proactive agents of change through the use of their enormous economic power—even, when necessary, against the express wishes or prevailing customs of host countries. The goal is to protect and foster basic human rights and democratic values that are the foundation both of MNCs economic strength and of their prosperity in their home countries. n n nMNCs must not consider enhanced responsibility and the actions thereby required either as discretionary or as a necessary inconvenience (for example, simply as a cost of doing business). Instead, the standards of enhanced responsibility must be treated as de minimus standards of behavior, compliance with which must be mandatory, transparent, and subject to external validation.