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Thursday, February 10, 2011

How much responsibility should companies have?

Imagine you are in a deal with a woman named Gillian. Gillian is given $100 and must offer you a portion of that $100. If you decide to accept her offer, the two of you will split the money. However, if you refuse the portion she offers you, neither of you will get any money. Now, assume Gillian offers you only $5. Do you accept or reject?

Now, let’s say a number of oil companies are bidding on a piece of land in country X, which is a developing country. Often, in the developing world, governments are corrupt. A few top people in the government of country X are very rich and powerful, and neglect the needs of the country’s citizens. The majority of the winning bid money would surely remain with the top people in the government, while only a small portion of that money would benefit the citizens.

So I’ll ask again, would you accept or reject Gillian’s offer of $5? If you were a citizen of country X, would you be thankful for the small portion of the winning bid money that the government gives you? Would you think that something is better than nothing? Or, if it were possible, would you refuse that bit of money if it meant that the Government would also receive nothing? Some would argue that citizens would accept the money because, being poor, they will focus on satisfying their short-term needs.  Perhaps they would receive an unfairly low portion of the money, but that bit of money would allow them to eat more than if they received nothing.
On the other hand, others would argue that the citizens would not accept the money in favour of the government receiving nothing. One reason is that the more money the government receives, the greater disparity that exists between the people and the government, which only leads to further problems and corruption due to enhanced power.

Now, let’s change viewpoints. You are the manager of one of the oil companies bidding on country X’s piece of land. You know that a few people at the top of the corrupt government will keep most of the money for personal use, and allocate only a tiny portion of it towards helping the poor citizens. Do you still decide to invest in this land? Is it your responsibility to worry about what is going to happen with your bidding money? Will you try to do something about the situation and, if so, what will you do?

I believe that while companies must focus on what will make them profit, they have responsibilities that extend beyond this. When a company enters another country, it should be aware of and show interest in the political and social environment. I think that this is especially true when a large company enters a developing country where it will have a large impact on the country’s GDP and thus could significantly influence the standard of living. So, I do not think the oil company should not merely run away from investing in country X due to corruption. This wouldn’t be a smart choice for the company financially, nor would it actually help the situation in country X. Rather, I think that the company should invest and use the power it has to enforce rules, open opportunities, and alter ways of life in order to help improve the citizens’ lifestyles. 

GlassFrog blogger, Sherisse


  1. Correct me if I am wrong but do the civilians even have the power to reject the money? The corrupt govt will take the money regardless of what the civilians want (in cases of selling oil fields or accepting aid)

    However, your post reminds me of Nigeria's situation because they are one of the few remianing third world countries with significant amounts of oil. And the biggest reason for this seems to be Gov't corruption, like you said.

  2. No, sorry, I was not trying to suggest that the civilians have that power. I was getting you to think about how they feel about receiving such a tiny portion of the money. This is so you could think,as a company, if you thought the civilians would prefer you didn't enter and give significantly more power to the government that would only work against them, would you still enter? Or, would you assume they would be thankful for the bit of money and enter anyway?

  3. Well on a parallel, if only slightly related topic, the situations in Egypt and Tunisia seem to show that citizes are- very slowly- starting to demand the power to accept or reject choices made my their governments. While Maslow's hierarchy of needs might suggest that the people will happily accept any small amount of money to eat and satisfy basic needs, it's encouraging to see that at a certain point, the people will understand that action has to be taken to ensure a brighter and more democratic future for their country.

    That being said, corruption runs deep in these countries, and as we saw with Haiti- corrup government after corrupt government- there is no guarantee that the next regime will bring anything better. Comapanies investing in developping nations should absolutely understand that with the great power they have (ie. money), they are in a position to shape the countries in which they invest. They should absolutely be held accountable for their actions, and for where there investments are going. It isn't good enough anymore to say "well, whatever small amount of money is trickling down to the population is more than they would have otherwise". In the same way as governments put regulations on greenhouse gas emissions and so forth, governments in the developped world need to start holding companies accountable for their dealings in third world nations. Things like the OECD anti-bribery convention (,3355,en_2649_34859_1_1_1_1_1,00.html) are a start, but more needs to be done.

    However, it is easy to blame governments and companies, but as individual citizens, we need to take responsibility as well. I'm thinking of my parents taking a stand when I was young "I don't buy Nike" and "you can buy any chocolate bar that isn't Nestle with this dollar (" throughout my childhood- habits that have carried through to my adult life. It's important for us to stay informed. It doesn't even have to be as complicated or time consuming as writing letters to government officials- on a mass scale, simple actions like staying informed, choosing one company's product over another send very important messages to companies, and help shape future policies.

  4. "I believe that while companies must focus on what will make them profit, they have responsibilities that extend beyond this." This is, in a Utopian world, put into practice. The problem is, nowadays, companies SHOULD have responsibilities that extend beyond making money, but don't. Even UNICEF makes profits, and are mainly around to make money. Sure, SOME of the money goes to impoverished nations and people around the world, but a lot of it lines the pockets of the people who run UNICEF. This article, on the other hand, opens up discussion on the power of corporations and how much pull they have with governments, which, in certain cases, could benefit people of poorer countries. Great article.