There are two parts to look into the above case. The first is
the outsourcing aspect wherein in spite of the Corporation being
situated in the US, it does away with part of its work with the
labor force outside the nation and the second being, offshoring the
entire production process to lessen the manufacturing and
investment costs. The simple logic of outsourcing is to concentrate
on the core activities while delegating the non-critical activities
to a third-party so that efficiency in the system is maintained at
a lower input cost for the same. Hence, if the labor costs at
overseas are low, it is natural for the Companies to consider
outsource their manufacturing activities in order to avail the
cost-advantage and offer goods at a more competitive price to the
consumers.
However, although a good strategy, in terms of ethical and
regulatory difficulties ,such a Company has an ethical obligation
to try to preserve jobs for workers in their home country markets
as well. With the view to maximize profits, the Multinational
companies outsource their activities to other countries employing
cheaper labor source. As a result, there is an impact over the
potential employment in the home market. Even the talented work
force get failed to be absorbed by these Companies as the
outsourcing serves them with better revenues. Hence, at a state
where a home country would itself be facing with the issues of
unemployment, the behavior of Companies to outsource the job
activities results into dearth of employment opportunities for
their home country workers.
Hence the following could be advised to such Multinational
Companies that consider to outsource or offshore:
- If the Corporate cannot offer jobs to the workers of the home
country due to the application of ‘Globalization’ concept that
resorts to cheaper cost of production, then such Multinational
Corporations should also be discouraged from playing any role in
the times of Global recession impact the home country where the
outsourced employees from other countries resort to emerging
markets to work in rather than in a saturated market with no
potentialities of growth and income.
- Few policies could also be so designed that it should be
mandatory for the Parent company of the Multinationals to hire a
certain portion of local workers from the home markets before
outsourcing the same entirely, to some other country.
- Application of Rights theory in ethics could help dealing with
this issue better. The Multinationals should be asked to explained
if they are comfortable closing down their entire operations in the
home country to operate in the place where they actually outsource
their activities. The resultant conclusion would itself be able to
guide the Multinationals in the scenario of this ethical
dilemma.
- The theory or Utilitarianism could also be applied in this
perspective to make the Multinationals realize as to how in the
long run, outsourcing of the activities could influence negatively
the overall economic state of the home country thereby affecting
their operations in the home markets in the days ahead.
- The impact of transfer pricing techniques on the Treasury
deficit by way of loss on earning by way of international taxes,
upon the country could hit it hard in the future to the
Multinationals, making them difficult to run their business in a
given scenario. The economic and financial scenario may prove to be
adverse if the Multinational companies resort to lower tax rates
nations for undertaking various businesses with them. When the end
impact is resting upon the Multinationals, the latter would be
forced to balance their activities by employing more of the local
workers than relying upon the external ones.
- Ideally, the profits earned in the abroad cannot be taxed in
the home nation unless it is repatriated to the home country. This
gives an opportunity to the Multinationals to earn and utilize the
profits in the host country itself thereby helping to contribute in
their economy than in its home market. Hence if possible, there
could be change done in the taxation law that can at least charge a
nominal margin of the income accrued abroad but not brought back to
the home country so that it discourages the multinationals from
hiring the workers from other countries and relying more upon the
home ones.
In this manner, the ethical issues could be at least curbed to a
certin extent.