Ethical considerations in the oil multinationals essay

A clear policy on how to sell oil within specified and friendly prices has become an agenda in the third world and has stifled both economic growth and the speed of production due to high costs of production. Many governments are trying to put in place legislative measures and clear policies on this industry to regulate pump prices. This need for change and a clear policy is not merely within the scope of individual country but from an external pressure applied on both OPEC and the Multinationals bodies.

Dietrich argues that ‘Companies have often progressed from simply ‘conducting business within the law’ to doing business that reflects the values underlying their business success or social context. Legal requirements are also becoming more stringent and cover a much wider scope, forcing multinationals to operate in increasingly uniform methods throughout the world, based upon regulations and norms of their home countries. Laws also change and today’s practices may not be permissible in the future.

’ However, after establishing structures and a powerful niche through protectionist regimes with a country and international curtail networks, these multinationals ignore the value of these ethics and use their network to keep flouting laws. Subsequently, they have made more money, sold more oil and employed less as oil production goes up. The ethical aspect of this is not within any legislature or any ethical consideration in spite of legitimate aspects which are purported to give credibility to these unilateral actions.

Simply they get away with it since there are no laws protecting consumers, or legislation on the pump prices control and there are monopolies and minimal information of oil production. Based from more of a legal background and an ethical approach to the context, ethical practices should follow a clear mandate which is based on the contractual agreement during inception of mandate to operate.

A broader definition of stakeholders relates back to the idea of a social contract, a relationship between each set of stakeholders and the corporation. According to the World Bank, “A social contract incorporates a firm’s contractual legal obligations but extends beyond them to include additional expectations or responsibilities that are not (currently) mandatory. The contents of a corporation’s social contract can evolve more rapidly than its legal charter, reflecting a society’s changing social and cultural mores.

When governed parties, such as corporations, are slow to comply with new societal values, those norms may be formulated into legally binding mandates” This is a clear policy on how multinationals should operate and follow the described ethics without infringing the consumer’s rights and abilities in the financial aspect. Dietrich argues that, Multinationals are villains and lack ethics.

Once pressure amounts to pump price regulation or regulation of exploration activities, Multinationals threaten to quit these areas and seek areas where the legislation is less terse. ‘The recent increase in the price of oil is a very positive development for governments which have oil rich fields and export through OPEC. According to current empirical research the ethical consideration here should be that the higher pump prices should allow the oil producing states to capture much higher rents for their petroleum reserves.

World oil prices have risen sharply in the past year, recovering from a steep recession in the oil markets over the past several years. This development has led to Multinational oil companies have scrambled to secure a stake in the potentially vast frontier areas so as to increase their capacity and sell more barrels and satisfy their corporate needs’(Dietrich 2007: 245). The need for transparency and accountability in the oil dealings will ease various constrains rising from the perspective of unethical practices.

The banking sector and governments should uphold the practice of fair and free trade whereby, each multinational it at liberty to practice ethics without coercion to abide to sets of rules put in place by a consortium of conglomerates which force increase of prices. According to Virvilait and Kazokien, ethics is moral value. Ethical breaches were perceived as the means of productivity. An effective solution of moral problems in organizations and outside them was pursued. Not only values and results, but also means used were of interest too (Berk 1998) Ethics is a practical philosophy.

Empirical research on ethics expounds ethics as a tool to examine human actions, deeds, and forms of moral norms that regulate our behavior under different factors of our lives. Business ethics is a comparatively new discipline. Virvilait and Kazokien argue that ‘Government’s owners of organizations, their managers, administration, employees, creditors and all others are interested in ethics. This need is based on simple self-defense, because it is very dangerous to work under unpredictable conditions with potentially unfaithful subjects’ (Virvilait & Kazokien 2005: 78)

(Virvilait & Kazokien 2005: 80) argue that, ‘the existence of any organization depends on local community, customers, suppliers, mass-media, social movements, employees and shareholders, because such multiple social environment is capable of influencing any organization so that it may achieve its goals. That is why all organizations must balance their economic goals with economic and social interests of those belonging to this environment. Organizations are responsible against society where available. E.

Utkin (1998) asserts that “states that business ethics inter-relates not only with socially responsible behavior. Goals and means are in the center of business. Basing on experience it is stated that ethical breaches determine business conflicts or a chance of such conflicts in the economic level of any organization that is measured by income, expenditure and profit and a level of social responsibility that is expressed in obligations to internal staff of organizations and society”. According to Pride (2000) pricing is a very important marketing area. But pricing is not always honest and right.

Kotler highlights a very common ethical breach – unfair price, i. e. when price does not match goods’ qualities. Raise of prices – when prices exceed the real value of goods may be implemented by: • Multinationals raising prices when they know that there is no way out for consumers and they shall purchase goods at higher prices. This is how the monopolist effect is gained and it has become a commonplace practice with oil multinationals. • There is an increased demand for oil and there is minimal information about the cause of the increase in prices and international barrel prices.

Price is too high if: • Solvency of consumers is limited (for example, oil necessary for survival)


Due to lack of enough efforts by governments and international stakeholder, consumers continue to suffer from unduly increase in oil prices which are not ethical. Governments should initiate a policy through pump prices shall be regulated and the percentages which, if a rise in the oil price internationally is experienced, the increase in the pump price should be based on this increase. Sources Berk, J: Managing effectively / J. Berk, S. Berk. New York: Sterling Publishing Co. , Inc. , 1998. 192 p Dietrich H R: Ethical considerations for multinationals in Angola 2007 PP 1-18 Hartley, R. F. Marketing mistakes.

New York: J. Wiley and Sons Inc. , 1992. 362 p Pride, W. M. Marketing: Concepts and Strategies / W. M. Pride, O. C. Ferrel. Boston: Houghton Mifflin Company, 2000. 297 p Virvilait & Kazokien: Manifestation of Marketing Ethics in the Market: issn 1392-2785 engineering economics. 2005. No 2 (42) commerce of engineering decisions