Ethics in international business: multinational approaches to child labor

How do multinationals address conflicting norms and expectations? This article focuses on corporate codes of ethics in the area of child labor as possible expressions of Strategic International Human Resource Management. It analyses whether 50 leading multinationals adopt universal ethical norms (related to exportive HRM) or relativist ethical norms (related to adaptive HRM and multidomestic strategies). Child labor is not an issue where universalism prevails. Although some multinationals adhere to universal ethical norms, HRM practices are largely multidomestic. To manage the ethical dilemmas, shown from case material, strategic trade-offs (concerning strategy context, process and content, and particularly organizational purpose) are outlined. # 2003 Elsevier Inc. All rights reserved. Managing across borders increasingly includes difficult ethical dilemmas, as pointed out in large numbers of publications on this topic (e.g., Bansai & Sama, 2000; Buller & McEvoy, 1999; DeGeorge, 1993; Donaldson, 1989; Enderle, 1999; Van Tulder & Kolk, 2001). The field of business ethics, which aims to formulate requirements for companies and the managers who act on their behalf (Kaptein & Wempe, 2002), therefore also pays attention to multinationals. Recent attention has, following the resource-based perspective, focused on the potential of ethical capabilities to improve multinationals’ competitive advantage (Bowie & Vaaler, 1999; Buller & McEvoy, 1999; Litz, 1996). Bowie and Vaaler (1999) emphasize the high asset specificity of certain ethical commitments and the importance of avoiding their dilution, leading to the argument for universal moral standards for multinational corporations. According to such a ‘market morality,’ markets would induce multinationals to refrain from cultural relativism. Buller and McEvoy (1999) take a different approach, outlining the need to gear ethical capabilities to overall corporate strategy and the vital role for strategic human resource management (HRM) in this respect. Building on the integration/responsiveness grid (Bartlett & Ghoshal, 1989; Prahalad & Doz, 1987) and Taylor, Beechler, and Napier’s (1996) Strategic International Human Resource Management approach, they distinguish three possible configurations. A global strategy might be accompanied by exportive HRM and universal ethical norms; multidomestic strategies by adaptive HRM and relativism; and a transnational strategy by integrative HRM and cosmopolitan ethics. This tripod is, however, not seen as rigid and excluding other options. Using child labor as an example, Buller and McEvoy (1999) suggest that for such an ethical issue multinationals might follow a Journal of World Business 39 (2004) 49–60 * Corresponding author. Tel.: þ31-20-525-4289; fax: þ31-20-525-5281. E-mail addresses: akolk@fee.uva.nl (A. Kolk), rtulder@fbk.eur.nl (R. Van Tulder). 1090-9516/$ – see front matter # 2003 Elsevier Inc. All rights reserved. doi:10.1016/j.jwb.2003.08.014 universal approach (e.g., through a corporate code of ethics), even in the case of a multidomestic, adaptive strategy. At the same time, gift giving could be an example where local traditions are respected, even by multinationals that strive for global consistency. In spite of strategic HRM and ethics, a ‘moral free space’ thus still exists, in which context matters, and where managers have to deal with conflicts of relative development and cultural traditions. As Donaldson (1996: 56) put it, ‘In this gray zone, there are no tight prescriptions for a company’s behavior. Managers must chart their own course.’ This moral free space is likely to be issue-specific as well (cf. Husted, 2000). Child labor is such a topic where host-country and home-country (international) norms sometimes diverge, with different perceptions of what constitutes child labor, the position of children in society and the standards that must be adopted (Kolk & Van Tulder, 2002a). Donaldson (1989) also points at the fact that views of ‘minimally sufficient education’ for children depend on countries’ levels of economic development. In that sense, child labor might be less susceptible to universalism than Buller and McEvoy (1999) suggested. This paper examines how multinationals address these dilemmas related to conflicting norms and expectations, focusing on corporate codes of ethics as the instruments for expressing HRM strategies. It conceptualizes universalism versus relativism in the case of child labor codes, and analyses multinational policies in this regard as well as the degree of consistency between norms and their specific company-internal application. Existing research on codes of conduct has concentrated on descriptive surveys and content analysis, with rather limited attention to the peculiarities of multinationals. If multinationals are studied, a sectoral and/or country approach is generally followed, so far with scant interest in finding firm-specific factors that might explain differences. Finally, this research has focused on aspects that determine whether companies adopt codes of conduct or not. The search for explanations for ethical/HRM configurations is therefore by necessity more exploratory, with emphasis on suggestions for further research directions. Furthermore, the more managerial implications can be explored by relating corporate decision-making on child labor to companies’ strategic choices in general. In order to assess the effectiveness of Strategic International Human Resource Management, it can be positioned in a number of fundamental strategic trade-offs, which includes universalism/convergence versus localism/diversity (or particularism, as it has been called, see e.g., Hampden-Turner & Trompenaars, 2000), but also the extent to which companies want to focus on planning and control or a more incremental approach to organizational change, and aspire to be industry leaders or rather follow mainstream developments. Pettigrew (1992) distinguishes three logically distinct, yet related areas of strategy: strategy context, strategy process, and strategy content. To these three basic categories, De Wit and Meyer (1999) have added ‘organizational purpose,’ identifying, for the resulting four areas, ten ‘tradeoffs’ or strategy tensions (Table 1). In the final section of this paper, these ten trade-offs will be used to explore the strategic managerial aspects related to child labor codes, on the basis of the ethical dilemmas emanating from the analysis. It is in the organizational purpose where the tension between profitability and responsibility, and between shareholder and stakeholder values finally crystallizes, as the paper underlines. 1. Child labor codes To examine multinationals’ approach to child labor, we collected corporate codes of ethics (frequently also designated as ‘codes of conduct’ to distinguish such external, societal, usually international documents from the more internally-oriented ethical ones). From a set of approximately one hundred codes of the largest multinationals and companies that have been pioneers in the field of corporate social responsibility, those codes were selected that explicitly addressed the issue of child labor (Kolk, Van Tulder, & Welters, 1999). Only 13 large companies turned out to have a code with such provisions. Therefore, we added a set of slightly smaller firms that are known as pioneers in the adoption of codes (Van Tulder & Kolk, 2001; Wolfe & Dickson, 2002). These appeared to have a substantially higher share of child labor provisions. The sectors in which these leading companies operate are the ones with the highest likelihood of child labor: retail and apparel (Kolk & Van Tulder, 2002a; Wolfe & Dickson, 2002). The selection procedure resulted in 50 A. Kolk, R. Van Tulder / Journal of World Business 39 (2004) 49–60