Financial Strategy Essay

8246 Words Jan 27th, 2011 33 Pages
Questions
1. Ethical Standards
a. Can a multinational firm adopt varying ethical standards [such as with regard to product safety (Pinto), employee benefits (Nike) and “kickbacks” to win business (Siemens)] in its global operations? Why or Why Not? Discuss in depth based on the goals of multinational corporations? (Be sure to identify the merits and demerits for both options). (Read: Class notes and discussions)

- A multinational corporation (MNC) is a business firm incorporated in one country that has production and sales operations in several other countries.
- Multinational corporation’s main goals are to improve revenue and profits by keeping the costs down, and to maximize profits for its shareholders.
- Additionally,
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The company defended itself on the grounds that it used the accepted risk/benefit analysis to determine if the monetary costs of making the change were greater than the societal benefit. Based on the numbers Ford used, the cost would have been $137 million versus the $49.5 million price tag put on the deaths, injuries, and car damages, and thus Ford felt justified not implementing the design change. This risk/benefit analysis was created out of the development of product liability, culminating at Judge Learned Hand's BPL formula, where if the expected harm exceeded the cost to take the precaution, then the company must take the precaution, whereas if the cost was liable, then it did not have to. However, the BPL formula focuses on a specific accident, while the risk/benefit analysis requires an examination of the costs, risks, and benefits through use of the product as a whole. Based on this analysis, Ford legally chose not to make the design changes which would have made the Pinto safer. However, just because it was legal doesn't necessarily mean that it was ethical. It is difficult to understand how a price can be put on saving a human life.
- There are several reasons why such a strictly economic theory should not be

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