Ethics is defined as the philosophy that deals with concepts of right and wrong conduct for people in various situations. In this era of globalisation, the business practices have defined that the decision-making process is based on both financial and ethical elements, thus conceiving the concept of business ethics (Gangone, 2010). Also known as “corporate ethics”, it examines the ethical problems arising in a business domain. Business ethics surfaced in 1970s but due to increase in international trade, there was a need for a wider ethical outlook for international business domain. This resulted in development of international business ethics in late 1990s (Carpenter & Dunung, 2011).
International business ethics is becoming more crucial due to globalisation. Development of technologies led to the feasibility of international business and many companies are expanding into new markets. Domestically the business ethics have developed in accordance to major businesses, as a result of which it becomes vital for the international business ethics to take over and set its guidelines in the business realm.
In simple terms, ethics is defined as a system of moral principles. It is derived from the Greek word “ethos” which means habit or disposition. Ethics and morality have slight variation while defining them and are not always related. Ethics is more of professional codes of conduct, while morality is based on an individual’s conduct. However, they can be used interchangeably to define how humans ought to act in any situation.
In this modern world where many ethical situations arise, ethics provide a moral map to tackle such problems. But ethics doesn’t necessarily provide the right answer to a given moral problem. There is no right or wrong defined in its framework. Its principles are applied to a moral problem to get a clear understanding of the situation; after which each individual derive their own outcome.
The ethical principles are not limited to just one area of ethics. Different cultures have their own moral values. What seem to be right in one culture, maybe wrong in another. There is no specific area where all these ethical theories converge. Ethical and social morals are culture bond. Similarly the psychological principles of ethics vary from person to person. The thought process of a person is based on his/her virtues and the external stimuli. The course of moral actions in a particular ethical situation depends on the disposition of an individual. A person’s moral values and character plays an important role in tackling a moral problem. There can be clashes between the moral values between two people while encountering an ethical situation. This leads to more confusion and inability to resolve the problem. Thus, it is advisable to have a broader spectrum of reasoning based on moral ethics to get a solution.
When it comes to international business, the ethical conduct is considered to be above the legal conduct. Both ethical and social conducts are desirable in the business activities. However, the expectations arising from these conducts differ in cultures of different countries (Godiwalla & Damanpour, 2006). Businesses should follow social conduct and rise above the economic motives, and be socially responsible.
Tambogrande is a Peruvian town in Piura province of San Lorenzo Valley. This was an arid area which was made economical by the development of irrigation systems. It depends on its agricultural lands to generate income. Mangoes, lemons, rice, cotton, potted marigolds and corn are produced, making Tambogrande the most extensive agricultural production in the country (Echave, 2005). Mango and lemon are the main productions of this town, where a part of mango produce is sent for export, and the lemons are used for a Peruvian delicacy known as “ceviche”. The inhabitants of this area have access to running water and electricity which is an advantage over its neighbours. Due to agriculture, the town is completely employed. This town sits over thick deposits of valuable metal, where above the rich copper and zinc deposits are the gold and silver present (Wilson, 2002). This attracted the Canadian mining company “Manhattan Minerals” in 1996. It sought to extract US$1billion worth of minerals. The company formally proposed a mining project to the Peruvian government, which was refused by the local community.
Tambogrande was one such town that successfully opposed the mining operations. Initially when Manhattan Minerals proposed the project it received a lot of flak from the locals, leading to various ethical issues for the business and its stakeholders. Manhattan Minerals had invested around $350million in an estimated $1billion project (Kline, 20015). They also had concessions in Tambogrande for five years. Yet the project wasn’t approved due to pressure from locals. This was mainly because the mining project required significant displacement of locals from their land, loss of agriculture and exploitation of water resources. In return, the company guaranteed new homes for displaced people and 300 mining jobs for the locals (Wilson, 2002). Will monetary factor satisfy the local people? Are we quantifying “way of life” financially? The company’s business relied on the cost outcomes of the project. This raised ethical issue on how the cost outcome is measured? In two years; ten years; or when gold deposits exhausts? A different outcome is concluded in each point of time (Kline, 2005).
The Peruvian government played an unethical role by backing the mining project without the consent of the locals. The government supported the proposal only to gain monetary benefits and to increase foreign exchanges (Feyen et al, 2015). This raised ethical issues on the corruption occurring in the governing system. Does the government decision always give right answers? Should new policies be made to stop injustice? Though a local referendum generated 90% votes against the mining project, it was treated illegally by the government. Was it ethical to neglect those votes? (Kline, 2005) This affected the indigenous groups and caused mistrust amongst different stakeholders.
Local people were marginalised from the development processes of the project resulting in discord with the mining firm and government (Feyen et al, 2015). Locals formed a group called “Defense Front of Tambogrande” backed by many foreign NGOs to fight against the mining firm and corrupt government. The main concern for locals was the exploitation of natural resources and loss of supremacy. Ethical issues that could arise were:
- Ignorance of locals while reaping mining revenues.
- The inability of the government to handle conflicts, regulate political wills and redress grievances (Feyen et al, 2015).
The mining company used unethical ways to operate its project resulting in mistrust with locals. Monetary gains were considered more important than the needs of the people. A lot was at stake for the company and the government, which they considered more important than what was at stake for the local community (Wilson, 2002).
Conflict is defined as the conjunction of different ideologies, interests and worldly facts that cannot be met concurrently and leads to increase in tension (Franks et al, 2014). Any mining proposal requiring a large scale of agricultural land, to develop its mining activities attracts a lot of controversies (Moran, 2001).
Tambogrande constitutes about 37.5% of the agricultural area, where the mining project required the displacement of locals from their lands and diversion of Piura river in the mining area. Around 85%-99% deposits of iron sulphite in the area raised the risk of surface and underground water contamination leading to acidic waters (Echave, 2005).
Another conflict was related to the possible waste generation by the mining activities. Mines are environmentally risky and create a tiff between the “national interest” and local communities. In view of stakeholders, the environmental conflicts can be used to envisage alternative economic activities to increase local income (Muradian&Correa, 2003).
From the beginning of the proposal, the mining company had received negative vibes from the locals, due to their unethical behaviour. This was a small mining company having no projects in their country leading them to set their foot in Tambogrande. Due to the weak governance, it was easy for the company to get approvals for the project and get hold of 75% of land shares. That led to trust issues with the indigenous groups. Moreover, the company had hidden most of its motives leading to doubts among the locals. Misleading information on mining, environmental damages and bias opinion on the co-existence of mining and agriculture, led to more suspicions. There was no transparency and honesty regarding environmental studies, information about their shareholders and other false promises which led to their failure.
Miscommunication was a reason for conflict between the locals and the government in alliance with the company. The locals were frustrated with them as nobody could understand their point of view. One of the major problems was the language used by different stakeholders. The government officials and the mining representatives usually used technical jargon, which intimidated the locals about their incapability to participate in discussions (Echave, 2005). Better knowledge of the local culture, customs, values; involving them in company’s activities and pictorial explanation of complex matters would have bridged the communication gap.
After studying the case carefully, I observed that in a lot of instances the rights of the Tambogrande community were being exploited from the very beginning of the mining controversy. The corrupt government had exploited the right to be informed and consent when they initially approved the mining proposal. They used the innocence and illiteracy of the locals. Not just legally but morally it was unethical. Furthermore, the company had plans to turn the urban land into a mining pit. This would have been unfair to the right to life, property and environment.
The indigenous groups too had been unethical when they vandalized the property of Manhattan Minerals. This move was uncalled and as responsible citizens, such step should have been avoided. They could have used their freedom of expression in peaceful protests; since many foreign NGOs media interactions backed them could have handled the situation. In turn, the leader of the local gang was murdered. This was very barbaric and against the human rights. Monetary gains and worldly pleasures drive people to commit such heinous crime.
Weaker political and legal policies along with corrupt governance had a negative impact on the rights of the locals. An important observation made on this basis was when a local referendum gained 90% votes against the mining activity only to be declared invalid by the government. The locals had no rights legally and as an individual. Only if there were a stronger legal framework, the foreign companies would have known their limit. Moreover, the company had concealed major motives that were unfair to the locals both legally and morally. It was very unethical the way company behaved and indiscriminately disregarded the locals. Furthermore, the right to be treated equally should have been practised by the firm which would have bridged the gap, rather than focusing on the profits.
In my opinion, if the human rights were taken into consideration, preached and practised, the locals would have been strong. The entire community would have been unified on the human rights and claimed their justice much before all those controversies. Not just the legal rights but the moral rights of an individual shall be considered. That is what that differentiates us from the animals and makes us more human.
Another example where the indigenous communities faced problems from foreign companies is the Paracatu or Morro do Ouro case.
Morro do Ouro is Brazil’s largest gold mine situated on the outskirts of Paracatu. This area was heavily exploited by a Canadian mining company named Kinross Gold. Inhabiting the Morro do Ouro were the indigenous community called “Quilombolas” (Alforte et al, 2014). A case similar to Tambogrande, the quilombolas too faced unethical situations and exploitation.
The quilombolas went through a tough phase when the company started buying licenses and land for the mining operations. Not only were the locals intimidated to sell their land, but also assaulted physically and sexually for opposing the mining activities. In my view, the company has committed a serious crime, not just legally but morally too. Such uncivilized and barbaric attitude should have been stopped by the Brazil government. Instead of resorting to such acts, Kinross should have respected the locals and created a trusting environment.
Another important situation that I came upon was the weak political and legal framework of the host (Brazil) country, and the Canadian government which had no rules on their company regarding the safety of locals and environment. It was a very unethical conduct of business and the foremost duty of the government is the development of their respective ethical and legal laws. The quilombolas should have had access to the legal advisory, human rights and support by its federal government.
Canadian government further behaved unethical and biased when it supported Kinross in its mining activities, knowing the fact that the quilombolas were treated badly. This was purely a profit based interest. I strongly oppose this move since no business is above humanity. Business yields cannot compromise human life and the environment. Businesses should be done in a way that causes no harm to the surroundings. Kinross should have responsibly taken measures to improve the relationship with quilombolas and protection of the environment.
After studying these cases, I suggest that the foreign mining companies not only abide by the host nations legal and social policies but also develop a sense of responsibility towards the local communities and environment. The locals should be treated equally and their rights should be respected. Better communication and knowledge would help build a trustable relationship between the company and locals. Environmental precautions should be taken care of and sustainable development concept should be practised.
My opinion is based on how a firm should behave ethically and responsibly in a given ethical dilemma. Ethics not only applies legally but also justifies a person’s moral behaviour. Thus, the code of conduct in business should be maintained ethically and morally.
Ethics plays a crucial role in day to day life and the business domain. Any situation that arises needs a clear understanding to avoid conflicts. Our morality defines the person we are today. Our moral values along with the right decision-making can help us to live in a world of peace and harmony. In Tambogrande case, Manhattan Minerals project was cancelled by the reformed government. This was a great victory for the locals. In 2002, the Tambogrande people were awarded by the National Coordinator of Human rights for their courageous struggle. Hence, ethics should not only be practised legally, but morally.
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