Managers' Forum ~ Business Case Reviews

Shifting production among countries such as from South Korea to Indonesia  raises human rights concerns. It is a human rights concern if you lose your source of income, and have no chance in finding employment.

In the United States when companies have folded operations and moved to cheaper labor force in a third world country the American workers have opportunity for retraining, finding another job, or receiving government subsidies. However, in third world countries such alternatives are not always possible. Losing a job can lead to destitution and desperation, which in turn can lead to political unrest.

For a company to close and move on to another country with an even cheaper labor force, such as from South Korea to Indonesia, shows a lack of commitment to the people of South Korea. Can the 380,000 unemployed laborers in Pusan state that their human rights had been violated when the shoe manufacturer for which they worked moved to Indonesia simply because labor was cheaper? If they are left destitute they can.

Multinational Corporations, especially American Companies, had the image and traditions of "The Ugly American." When these Multinationals moved to an underdeveloped country with capital resources several times bigger than the country’s GDP, and advanced technology, very often they became the center of the economy and the political power brokers.

During the time when United States labor unions and civil rights movements were forcing changes to improve the quality of life of the work force, and Congress was passing laws to get rid of discrimination and human rights abuses, the Multinational in the host country in many cases failed to change and adjust to the new policies. This outdated and unjust practice increased and hardened the resentment of the local labor force. In the 1970’s, with the support of the international communist party, the labor unions became very militant and initiated a movement to oust multinational companies. This movement culminated in the nationalization of some of the companies, and in other cases the multinational moved out.

In today’s world of instant communication it is very important for multinational companies to show consistency in the way in which they conduct business at home and abroad. The American consumer is more sensitive to environmental issues, and if the multinational company does not bear this in mind then any environmental violations that come to light in the host country can have serious repercussions at home.

Multinational companies have an obligation towards the host country not only to provide employment but also to improve the standard of living of the work force. This must include fair wages, fair labor practices, improvement of the environment, and most of all restraint from corrupt and dishonest practices.

Philip M. Rosenzweig, " International Sourcing in Athletic Footwear: Nike and Reebok",  1994 Harvard Buisiness School case 394-189.

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