Deck 8: The Future of the Transnational: An Evolving Global Role

Question 1

Responsive MNEs act in a way that is sensitive and responsive to the needs of all its immediate stakeholders.

Answer 1

True

Question 2

Which, if any, of the following business activities are likely to be acceptable to business ethicists:

A) following local custom and paying bribes to local government officials to secure legal concessions and subsidies.
B) negotiating aggressively with suppliers to secure low input costs.
C) relentlessly pursuing low-cost labor by investing in countries with weaker labor regulations and standards.
D) seeking market expansion, regardless of the likely resulting economic, social or cultural damage.

Answer 2

B
(Global exploitation is often manifest in activities such as bribery and corruption (regardless of the amount paid and regardless of local custom), as well as the abuse of under-developed labor standards in foreign markets. While businesses have an obligation to their stakeholders to generate returns (which envisions negotiating effectively with suppliers and customers), pursuing growth without regard for the economic, social and cultural damage attendant with the firm's business activities would not be deemed acceptable by business ethicists).

Question 3

Exploitive MNEs are often able to extract substantial concessions from host country governments because host countries are eager to secure which of the following in connection with new investments made by MNEs:

A) access to the MNEs' sources of international commercial credit.
B) employment and increased tax bases.
C) business intelligence pertaining to the nature of concessions being offered by other host countries.
D) complex financial instruments developed in first-world financial markets.

Answer 3

B
(Understanding that because most countries are actively working to develop employment, increase their tax base and capture spin-off benefits from new investments, the exploitive MNE will not hesitate to play countries against one another, demanding more and more concessions to guarantee their investment).

Question 4

Transformative MNEs are sensitive and responsive to the problems and the needs of the developing world but the freedom of these MNEs to lead broad-scale efforts to deal with their root causes is often limited by governance issues and the need to generate profits.

Question 5

The World Bank estimates that approximately one-third of the world's population subsists on less than $2 per day.

Question 6

Some transformative MNEs go beyond commercial relationships with their consumers and offer their products and services to those who most desperately need them, regardless of their ability to pay.

Question 7

The relationship between transactional MNEs and non-governmental organizations (NGOs) is frequently characterized by confrontation and accusation.

Question 8

Excessive pressure from all of the following groups has caused exploitive MNEs to close down manufacturing operations and move to a new location, except:

A) governments.
B) non-unionized employee interest groups.
C) nongovernmental organizations (NGOs).
D) supranational agencies.

Question 9

The primary difference between transactional MNEs and exploitive MNEs is that the former employs an approach that tends to be legally compliant and non-oppressive in its emerging market dealings.

Question 10

Transformative MNEs commit to leading initiatives to bring life-enhancing changes to their home countries.

Question 11

Experience has shown that encouraging foreign direct investment by MNEs in developing economies has been less effective than government-funded aid programs in efforts to reduce global poverty.

Question 12

MNEs that internationalize in developing countries have encountered all of the following differences pertaining to the labor force, except:

A) lower wages and fewer restrictions on living standards.
B) greater number of hours worked per week.
C) higher standards with respect to working conditions.
D) lower standards for human rights.

Question 13

To buttress the arguments of activists who have demonstrated against increasing globalization, a former chief economist at the World Bank has argued that the actions and policies of all the following groups have often damaged developing countries' economies more than they have helped them, except:

A) the International Monetary Fund (IMF).
B) the United Nations Global Compact (UNGC).
C) the World Trade Organization (WTO).
D) the World Bank.

Question 14

Progress in reducing global poverty has been observed to be more closely associated with investments by MNEs than it has with the foreign aid efforts of national governments and non-governmental organizations that have historically demonstrated a lack of business experience.

Question 15

The exploitive approach to managing MNEs is now considered to be a relic from the past and has been essentially non-existent since the late 1980s.

Question 16

Which of the following four adjectives are not typically used to describe the manner in which MNEs might respond to developing world needs:

A) transformative.
B) transactional.
C) exploitive.
D) compensatory.

Question 17

Government-funded aid programs flowing between developed and developing countries have failed to reduce global poverty primarily due to the creation of overly-detailed accountability systems and the excessive volume of feedback.

Question 18

MNEs have successfully insulated themselves from the accusations associated with entering regulatory environments that permit sweatshops by outsourcing manufacturing to arm's-length suppliers.

Question 19

In the past, many MNEs exhibited behaviour that was significantly exploitive or transactional.

Question 20

In the 1970s, Nobel economist Milton Friedman advocated all of the following behaviours by MNEs, except:

A) focusing only on the interests of shareholders.
B) avoiding pollution.
C) maximizing profits.
D) leveraging cross-country differences in wages.

Question 21

Which of the following principles are not consistent with the behavioral standards advocated by the United Nations' Global Compact

A) businesses should uphold the freedom of association and the legal right of collective bargaining.
B) businesses should support a precautionary approach to environmental challenges.
C) businesses should work against all forms of corruption, including bribery and extortion.
D) businesses should comply with their legal duty to act in the best interests of their shareholders and maximize profitability.

Question 22

Which of the following are not characteristic of the attitudes of transactional MNEs in the context of their relationships with stakeholders

A) obeys local laws and regulations but uses country differences to gain competitive advantage
B) makes product adaptations if they are economically viable and can increase market share
C) defers responsibility for its social or environmental impact
D) focuses on shareholder returns.

Question 23

Which of the following are not characteristic of the attitudes of transformative MNEs in the context of their relationships with stakeholders a) develops products or services specifically to meet local needs.
B) persuades investors of the need for the corporation to be part of the solution to problems in the host country.
C) committed to upgrading the lives of its employees inside and outside the workplace.
D) willing to unilaterally make decisions against the best interests of the shareholder where they conflict with the interests of other stakeholders.

Question 24

Responsive MNEs contribute to the development of the poorest nations by engaging in all of the following activities, except:

A) creating jobs and wealth.
B) focusing on maximizing profitability.
C) catering underserved customers.
D) investing in developing markets.

Question 25

Which of the following accusations is least likely to be levied against exploitive MNEs

A) they may collude with political elites.
B) they may be willing to ignore the welfare of employees.
C) they may subvert the interests of their shareholders.
D) they may violate environmental norms.

Question 26

You are employed by a large national chemical manufacturing firm that is considering its first investment in an emerging market. Your boss is concerned - while she senses an unprecedented opportunity to grow the firm, she is also mindful of the demonstrations surrounding a recent gathering of world leaders in which activists voiced a wide range of concerns over the perils of globalization. She appreciates the need to position the chemical manufacturing firm in the eyes of prospective stakeholders, but is unsure where to target. In the hopes of establishing a position that is neither overly exploitive, nor overly transformative, your boss has asked you for a report detailing the two most extreme positions that the chemical manufacturing firm could occupy. Compare and contrast these two characterizations of the MNE-stakeholder relationship in emerging markets, providing examples you think will illustrate your position.

Question 27

MNEs that subscribe to the Labor Standards advocated by the United Nations' Global Compact could be expected to do each of the following except

A) prohibit any children from being employed by the company.
B) prohibit unruly or militant employees from trying to convince other employees to join a labor union.
C) prohibit workplace discrimination against female employees.
D) prohibit managers from engaging unemployed individuals in compulsory labor.

Question 28

As the geographic (country) manager for a rapidly expanding multinational industrial manufacturer, you are responsible for managing the manufacturing operations in a developing economy. Business is fantastic. Pursuing the mandate given to you by your boss ("your job is to win at any cost"), your annual bonus alone has grown at a compounded annual rate of 50% over the past three years. Yet, your conscience has also been growing heavy. You have come under increasing local pressure as a consequence of an indigenous newspaper reporter's efforts to investigate the following incidents associated with your operations: (i) the high incidence of infant mortality experienced in households situated adjacent to a lake into which your plant is discharging effluents; (ii) the recent attempted suicide of two employees who were told that they would lose their jobs if they did not agree to extend their workday by four hours, despite already working eleven hours per day during a six day work week; and, (iii) the allegation that your domestic managers regularly secure expedited customs clearance for the raw materials
needed at your manufacturing plant by taking local officials on jaunts to a nearby casino. A telephone conversation with a trusted mentor-professor from the college where you earned your business degree leads to the professor urging you to consider either leaving the company or, initiating an appeal to headquarters to change its exploitive ways in favour of becoming more responsive in its foreign business dealings. You choose to accept the challenge of appealing to headquarters and decide to write a memo to initiate your efforts. However, you are cognizant that while you are familiar with the distinction between exploitive and responsive approaches adopted by MNEs, headquarters may dismiss these terms as "academic mumbo jumbo." What should you say in your memo to headquarters?

Question 29

While the two extreme characterizations of the MNE-stakeholder relationship (exploitive and transformative) tend to garner the most media attention, it is the more moderate perspectives of the MNE-stakeholder relationship (transactional and responsive) that tend to predominate in the context of FDI in emerging markets. However, given that these two perspectives represent the middle ground along the spectrum between exploitive and transformative, the distinctions between transactional and responsive characterizations of the MNE-stakeholder relationship in emerging markets are occasionally blurred. Clarify the differences between the transactional and responsive perspectives by comparing and contrasting the two characterizations, using examples that you think illustrate your position.

Question 30

Which of the following characteristics are not typically associated with transactional MNEs

A) they are generally sensitive not to promote socially or economically unsuitable products towards emerging market consumers.
B) they tend to conform to labor laws and workplace regulations but avoid sweatshop-like conditions.
C) they strive to employ non-exploitive attitudes towards the local communities in which they operate.
D) they acknowledge the need to restrain their profit-maximizing behaviour when engaged in negotiations with indigenous suppliers.