Multinational corporations operate in complex conditions, dealing with different political, legal, and ethical issues in multiple countries. Management must strategize on how to deal with the complexities and make a healthy profit to remain competitive in the market. Legal issues relate to operational regulations, while political issues regard the overall country’s administration and its impact on the business environment. Ethics considers the proper conduct of a business and the harmful aspects it must avoid in its operations. Political, legal, and ethical issues impact business operations, especially the Human Resources (HR) function and corporate social responsibility policies.
Political factors regard a country’s administration. Stable countries usually provide a conducive environment for businesses to thrive, while unstable ones make it challenging for a firm to function. However, political stability might not necessarily favor a business. Changes in government policies, such as tax decreases or increases, affect a business operation, with the former leading to higher profits and the latter a decline in revenue. For multinational corporations, political factors are prominent. They operate in some countries that have political stability while others are unstable. Also, changes in government policies in different countries affect business operations. An increase in excise duties in one country may make a company’s operations expensive, forcing it to terminate its business (Carroll & Brown, 2023). Another aspect of the political factor affecting HR is a country’s unemployment level. When a country’s economy is performing well and has a low unemployment rate, companies will compete for talent. The wages will be high. The company may be forced to pay more for the workers, reducing its revenue. Green-minded administrations will enact sustainability policies that may require a business to incur significant costs to comply. The company will have to align its corporate social responsibility accordingly to comply with the government environment’s conservation demands. Therefore, political factors such as taxes, tariffs, and sustainability policies will impact a business’ HR and CSR strategies.
Multinational organizations must also contend with the impact of legal factors on their CSR and HR functions. Legal factors mainly deal with compliance. Businesses do not operate in a vacuum. They interact with social and physical environments. A business’ operations, from procurement to consumption, must not cause harm to the people directly or indirectly. The government enacts rules that regulate industries and prevent harm to citizens. The rules might apply to all aspects of business operations, including Human resources and corporate Social responsibility (CSR). Labor laws significantly affect HR functions, including wages, a safe working environment, and diversity. CSR activities are mostly voluntary. Most businesses recognize that their operations in the community have an impact, and they feel the need to share a small percentage of their profits with the society (Kos & Gudowska, 2019). However, in some cases, such as environmental protection, the government establishes the laws that define the business’s responsibility to the environment. A country can decide to reduce its carbon footprint in the environment. Each company or industry will be given the level of greenhouse gases it emits. They must develop policies and practices that reduce pollution. In some cases, multinational companies have been forced to purchase expensive, high-quality products that would help them reduce their carbon output and comply with local and international laws regarding environmental protection. Therefore, local and international laws can affect a company’s HR and CSR activities.
Ethics influences a multinational company’s business operations, especially regarding HR and CSR functions. Ethics deals with doing the right thing, which sometimes conflicts with the profit motives of a business. Ethics and social responsibility of a business are closely correlated. A business aims to solve a need in the community, which is an ethical consideration. However, it must make a profit, implying overvaluing products and services, which is an unethical practice. Also, businesses try to keep their wages low by offering their employees minimum compensation. While unethical, such practices are understandable. Charging low prices for a product and paying workers high wages will cause the firm to run at a loss and eventually close down. Ethical considerations emerge when the company makes enough profit to spare some without going bankrupt. It becomes unethical when the company makes billions in profit yet pays its workers less than living wages. Ethical considerations expect businesses to do the right things in their operations, ensuring that they do not harm the people or the environment. Businesses must also ensure that they pay back to the community by engaging in activities that benefit the people, such as tree planting and sports sponsorships. Therefore, ethical principles influence companies to undertake their businesses responsibly without harm to the people and the environment.
Politics, laws, and ethical considerations significantly influence businesses’ HR and CSR functions. These factors have a more acute impact on multinational corporations that operate in many countries, thus experiencing challenges across international borders. Unstable governments prevent business operations, while stable ones allow firms to thrive. Changes in administrations may result in policies that negatively impact businesses, such as tax amendments. Businesses may be forced to pay their workers higher or lower wages depending on tax regimes in different countries. Governments may institute laws that compel a business to engage in environmental protection practices as part of its CSR. Ethics encompass all business operations from procurement to consumption, with expectations that the business will do the right things and avoid harming the people or their environment.
References
Carroll, A.B. & Brown, J. (2023). Business & society: Ethics, sustainability & stakeholder management. 11th ed. Cengage
Kos, A., & Gudowska, B. (2019). Legal and economic aspects of corporate social responsibility. International Journal of Legal Studies (IJOLS), 6(2), 459-476. https://doi.org/10.5604/01.3001.0013.7429.
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