Allegations Present Trade Challenges (Jeff Hankins' Publisher's Note)

by Jeff Hankins  on Monday, May. 7, 2012 12:00 am  

Most of the time I'm delighted not to be part of a company that is national or global in nature.

Being local means operating within - and keeping up with - the laws and customs of a single state and country. Rarely do we think about currency issues, political unrest in Russia, recession in Spain or drug cartels in Mexico.

But global companies like Wal-Mart Stores Inc., Tyson Foods Inc. and Murphy Oil Corp. must live and breathe this stuff. Stockholders in U.S. companies demand growth in revenue and profits, and expansions in the world economy are a must. The opportunities for growth are substantial and can't be ignored.

The playing field is radically different on the world stage. Government, culture and morality vary from one continent to the next. U.S. companies have to adapt to the environments in which they are operating.

That's where the challenges begin.

Labor is the big issue that gets most of the attention, with U.S. companies that do business overseas taking heat through the years in regard to working conditions, excessive work hours, exceptionally low pay and use of child labor. Apple Inc. comes to mind as the most recent high-profile case, in which plants manufacturing parts for the iPad were shown to use labor practices that outraged Americans. We insist that U.S. companies follow U.S. laws, customs and morals wherever they operate in the world, even if they are contrary to the way other countries operate.

Now comes news out of Mexico, through reporting in The New York Times, that executives for Wal-Mart's operations there engaged in bribery activities to enable the company to expand and gain market share. Apparently certain executives in Bentonville were made aware of the situation and chose to do nothing about it. Investigations are under way.

My first reaction was, "Seriously? Somebody is surprised or outraged by the news that bribes are somehow used in Mexico, a country run by the drug cartels?"

I wonder how many U.S. companies operating globally were alarmed by the story. How many of them are holding their executives in Mexico, China and Russia to the same business practice standards that are required and expected in the United States?

We know Wal-Mart is an easy target. That's what happens when you're the largest employer in the world and the world's largest non-oil company. It's public enemy No. 1 for unions. New York has hated Wal-Mart ever since founder Sam Walton chose to keep the company based in Bentonville.

Wal-Mart will take some additional public relations heat, individuals will accept punishment (internally and externally), the company will announce some changes in its international business practices, and The New York Times will probably win a Pulitzer Prize for investigative journalism. That's a predictable and maybe reasonable short-term outcome.

But where will we draw the line on acceptable international business practices for U.S. companies long-term? Holding them accountable to all U.S. standards in countries with few or no standards seems not only unreasonable, but also impossible. How do they keep their moral compass steady while at the same time trying to produce jobs and products in the United States and keeping stockholders satisfied? Are the use of child labor and offering money under the table for a building permit equally bad and unacceptable?

The international business spotlight may be on Wal-Mart, but this revelation will force every U.S. company to re-evaluate its global operations and reassess the risk-reward proposition for competing and growing abroad.

Jeff Hankins can be reached via e-mail at JHankins@ABPG.com, followed on Twitter @JeffHankins and connected with at Facebook.com/Jeff.Hankins and Linkedin.com/in/JeffHankins.

 

 

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