ETHICAL ISSUES AFFECTING OUR WORLD

CHILD LABOUR, FRAUD, CORPORATE FRAUD

OVERVIEW

Dear Director General Pascal Lamy,

As a high-ranking official in the WTO, my team of experts and I have come to a conclusion. By analyzing and researching the various ethical issues that impact the business world today, we have complied 3 issues that we deem to be largest threat to modern day business. In the following report we will take you through both the benefits and costs of these issues. Furthermore we will be analyzing these ethical problems from business, government and consumer perspectives in order to give you a better overall understanding. We feel that Fraud, Child Labor and Corporate Fraud are the three largest issues impacting businesses in countries across the world.

CHILD LABOR - SUMMARY - SIMO BECAREVIC

Child Labor is defined as work that harms children both mentally and physically, deprives children of their childhood and potential to grow, as well as takes away there dignity. It is often extremely low-paying, dangerous work that deals with hazardous materials, unhealthy environments and/or unsafe working conditions. These jobs are typically inside the primary or secondary industries, where children deal with extracting or processing raw materials. However, not all jobs that children or adolescents have should be defined as child labor. Often times a child is works for a family business, or works after school for pocket money. These cases should not be classified as child labor as the labor is not forced. In 19th century and during the industrial revolution, many developed nations developed strict laws that protect the right of children and outlaw child labor. However, child labor is still present in many third-world countries today. The worst forms of child labor include slavery and prostitution. The International Labor Organization claims that worldwide, 126 million children work in hazardous conditions, are often beaten, and endure humiliation, are involved in armed conflict or sexual exploitation from their workers. Furthermore, 73 million child workers are under the age of 10 and 22 000 children die every year in workplace incidents. As you can see, child labor is a very disgusting issue, that in today's day and age is absolutely unacceptable.
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The Diagram above shows the Economic Distribution by Industry of Child Labor. (Source: International Labor Organization)

Affects of Child Labor on Business - Simo Becarevic

Child Labor can be very beneficial to businesses. Although it involves exploiting vulnerable and innocent children, it is often times very cheap. By paying their workers lower wages, businesses can reduce their expenses. This will in turn provide the business with a larger profit, and maximizing profit is the goal of every business. More profit will mean more pay off to the shareholders in the business, and will allow the business to grow. In particular, businesses in underdeveloped nations find it extremely hard to successfully and ethically make a profit. This is why child labor has such as presence in these countries.

Furthermore, the business will then be able to sell it's products for a lower price, therefore giving it a competitive advantage on the market. This means their sales will go up, and they will make more profit.

Another benefit from a business stand-point is that child laborers are often very easily manipulated. Children are vulnerable and obey instructions better then adults Since they are not educated or mature enough to stand up for their rights, they will never complain or be able to revolt against the business. In many developed nations, adult workers unionize in order to protect their rights. However such revolt will never occur with child labor, as children can not defend themselves. This saves the business the trouble of having to provide safe working conditions or basic rights to their young employees. This again cuts costs and benefits the business and it's stakeholders. Furthermore, obedient child workers who work continuously without complaint increase the company's productivity.

Furthermore, in some nations families encourage their children to work as laborers in unsafe factories. This makes children an ideal employee for business in underdeveloped nations.

Lastly, child labor helps businesses by providing them with employees that are more physically capable of working in certain environments. For example, child miners in Cambodia are able to enter into small mine shafts and extract raw materials that would otherwise be unattainable by adults. This was also the case for young chimney sweepers in the 19th and early 20th century United Kingdom. This physical advantage provides businesses in the primary industries with a unique advantage, that increases the amount of raw materials they are able to extract


Child labor can also cause damage to a business. Mainly, child labor can ruin a corporation's reputation. In particular, big-name companies from developed nations can have huge loses when reports surface that the company (or one of its suppliers) has been unethically using child labor. When these reports surface, the company's reputation can plummet, causing consumers to stop buying from that company. Recently, this was the case for Apple Inc, who were under scrutiny when the public found out that one of it's suppliers was using child labor. Apple recorded large loses, their stock dropped to record-breaking lows and they made a lot of money. A company's popularity is key to its success and profit. Child Labor is very unpopular for being unethical and can cause a business to fail.


Affects of Child Labor on Government - Simo Becarevic

Child Labor is good for a nation's government in that it helps stimulate a country's economy. As mentioned before, child labor is economically beneficial to businesses as it increases profit and helps the business expand. This in turn creates more business activity and helps build the country's economy. A better economy gives the government more political power. If a government allows child labor, then it will gain support from all the stakeholders in the business that conducts child labor. This allows government to be in power for longer terms.

Furthermore, in some cases, child labor can help reduce crime. Child labor puts children in factories, rather then have them on the street exposed to criminal activity. This decreases the likely hood of children joining gangs and other outlaw groups. This can lead to a safer environment in the country, and less armed conflict. By preventing crime and armed conflict, a government maintains more power.

However child labor can also be very costly for nations. To begin with, a nation that has child labor being practiced in it will have a poor reputation. This will decrease other countries willingness to trade with this nation, and the child labor country will not reap the benefits of international trade. In fact, a country may impose trade sanctions on another country because it's government allows child labor. This can also prevent a country from joining a Trade Agreement or Trade Organization. Organizations such as the EU have strict criteria on labor laws and child rights that need to be met in order for a country to join them. The unethical side of child labor forces governments to lose reputation as well as international partnerships. This ultimately will hurt their country's economy, by reducing the amount of exports and imports and forcing the country to be more self reliant. This poverty will then cause tension within the country causing the government to be lose support.

Furthermore, child labor is bad as it is creates a perpetual cycle of poverty. Child workers grow up without education and are not able to work in developed jobs since they do not have basic numerical or literary skills. Education is the key to societal change, and without it child labor will continue. Child workers grow up to become adults who cannot make a change since they aren't literate, as a result they stay poor their entire lives. Their children then become child laborers and the cycle of poverty in the government's nation continues. This can cause a government to lose its support and ultimately be overthrown.

The International Labor Organization conducted studies that suggest that if child labor was eliminated, the benefits would be seven times greater then the costs. By investing in social programs and education, rather then allowing child labor, a government can lift it's nation out of poverty.

IMPACT OF CHILD LABOR ON CITIZENS/PEOPLE/CONSUMER - SIMO BECAREVIC

Child labor is most beneficial to consumers. The low wages child laborers make cause the price of manufacturing for businesses to go down. This means that the businesses can afford to lower the prices of their goods/services. This affect also increase competition between business which cause prices to drop even more. Of course lower prices means the consumer saves money.

Child labor can in certain cases be beneficial to the workers as it provides them with a means of income to support their family. Many times, a family needs to send it's children to work in order to survive. This type of child labor is not forced, but is rather done out of necessity. Without child labor, citizens in some countries would be too poor to survive.

Also, children in underdeveloped countries who become laborers are often better off than those who don't. As mentioned before, these countries usually have high crime rates and armed conflict. Families would rather have their children become laborers then become involved in drugs or war. Therefore child labor provides a way for the people in an impoverished nation to escape crime.


However there is no doubt that the costs of child labor on people definitely outweigh the benefits. The children's unsafe work environment exposes them to harsh chemicals and toxins that cause life-threatening diseases. Furthermore, they often handle dangerous tools such as saws and axes, and have little to no training or safety clothes. Overall the work is physically demanding, and utterly unhealthy.

Child labor is also a violation of basic human rights and it hinders children's development, and causes them lifelong physical and psychological damage. The mental and physical abuse they endure damages their impressionable minds and ruins their childhood. This abuse turns child laborers into incompetent adults, who will further continue the cycle of poverty.

Lastly, unlike the part-time job opportunities available for adolescents in Canada, child labor involves a child working full time (possibly 16 hours a day). This means that the child does not get to go to school. They grow up uneducated and not empowered with the right skills to break the cycle of poverty in their community.

As you can see child labor has tremendous repercussions on society. I feel that corporations need to step up, and take social responsibility. Child labor is inhumane, and it must come to an end.


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FRAUD - SUMMARY - SHADI MAHROUS

Fraud is the false representation of information or a false claim that results in personal gain for the fraudster, but leads to damage to people who rely on this claim or information. Whether you are a consumer, a corporation, a shareholder or even the government that runs the country, the threat of fraud is always present. Victims of fraud can lose a great amount of money when they commit to the false claims represented by the fraudster. Business and government have lost millions of dollars, sometimes even billions when they became victims. Furthermore, fraud is often committed by an individual wrong doer, or by a corporation. There are various forms of fraud. A common fraud is a Ponzi Scheme, where early investors make money off of later investors, with a cut of each investment going to the head fraudster. There is no real investment or financial activity, therefore when the scheme runs out of investors the whole scheme collapses. Fraud can occur when companies make false financial statements that convince their shareholders the company is doing well. Insider trading, or trading shares and stocks with knowledge that is not known to the public is another common form of fraud. Studies show, that 57% of retailers experience fraud in the 12 month fiscal period and 45% of insurance establishments experience fraud. Credit card fraud in 2011 caused $259.5 million in losses, up from 2010 which was $176 million.
What is Fraud?

AFFECTS OF FRAUD ON BUSINESS - SHADI MAHROUS

Fraud can cost a business millions and billions of dollars. Just last year fraud in the workplace cost Canadian small businesses $3.2 billion. Fraud is one of the top fears for small businesses and big businesses because it can cause a business to shut down its production.


There are many ways a businesses can become a victim of fraud. Some of these examples are; fake or fraudulently obtained credit cards or debit cards, mortgage fraud, and false insurance claims. These forms of fraud can be devastating to the business and to its customers. Since fraud can happen anytime and in many ways, the government and many organizations have been working hard trying to stop these acts of crime. Since technology is being more and more dependent, businesses using the internet to transfer money and other expenses can be highly dangerous because a person who is trying to scam the business can easily snatch everything that is being transferred through online interaction.


Nearly half of the retailers and Insurance businesses do not report to the police about their encounter with fraud. There are many reasons why a business does not want to do that. For example, if the business reports that it has been a victim of fraud, than its reputation will seize down because many customers would have second thoughts about that specific business. The business will slowly start to lose customers because the consumers have a fear that they might get scammed since the company itself got scammed. A second reason why businesses don't report the fraud is because they feel that fraud is a minor issue for the company and the police would do much to help stop the fraud encounter the business again.


Benefits

If a company happens to become a victim of fraud, the business will learn how to avoid fraud if it ever was to happen again. They would take multiple steps and put in money to help detect and stop criminals into stealing their money, and also help consumers not to worry when shopping with their business.


The business will save time by not having to wait for approval from higher positions such as the government. You can perform fraud instantly, and there is no step-by-step process.


A business will save money by taking the "shortcut" way to run a business. Certain rules and conditions are overlooked during fraud, and that saves money. For example, hiring employees in India and firing other employees to save money.


When performing a fraud, you are in charge. You take no instructions from anyone and can do as you like. There's no hassle since its a shortcut and you don;t have to present a plan, have a meeting, check with managers, etc.

IMPACT OF FRAUD ON PEOPLE/CITIZENS/CUSTOMERS - SHADI MAHROUS

Fraud can have a huge impact on the consumer. For example, a victim of fraud can experience physical, psychological, financial and social damage. There is a chance that a consumer can lose all their money, their house, and also their family can be split due to the financial crisis the fraud put on the person.


Just like businesses a consumer does not report the fraud to police. In the United States, only 32 percent of consumers reported credit card fraud in the past 5 years. The consumer also believe that the police would do limited amount of work into finding the criminals.


Victims that are most known for fraud are doctors, lawyers, police officers, and experienced business people. Even when the government falls victim to fraud, taxpayers have to pay the price with the taxes increasing to help pay off the money that the government lost.


Since fraud is starting to increase and happen more often, an act called the Consumer Fraud Act was created. This act allows victims to lodge complaints against the individual or the company that they encountered which caused them to come across fraud.


If a person has a savings account and unfortunately loses all their money because someone stole their card number from a transaction, the bank that the consumer is with will right away give the money they lost back to their account.

AFFECT OF FRAUD ON GOVERNMENTS - SHADI MAHROUS

Every year, the government puts in millions and millions of dollars trying to find the criminals behind these fraud attacks. The government also has to spend a great amount of money and time when having a trial for the person or group that was behind the fraud acts.

The government loses billions of dollars each year trying to find the fraudsters and also putting in a whole amount of money trying to find the people behind the frauds. Since money is being lost from the government, taxes would have to increase for the citizens of the country to make up for all the money the government is using to find the criminals.

Technology is great when it comes to finding the perpetrators. With the internet being the greatest resource, the government can track a persons IP address and can also detect what kind of activities a person is doing. If the person or group have suspicious activity happening on their computers that is related to fraud acts, than the police have a right to arrest the criminals and further their investigation.

Poor Work Conditions Summary- Kabilan Thevaranjan

Poor work conditions aren't such a big issue around us, or it may seem that someone that works in a office has the same work conditions as someone who works in a factory. However most of the time, this is not the case, work conditions have standards and some companies don't even match the bare minimum. They put rules and regulations on work conditions so that not everyone can come and complain that they work in a poor work condition because then everyone would do so. So they had to draw the line, working conditions have 3 major rules. These rules were suggested by Health Canada, the National Quality Institute, the Ontario Healthy Workplace Coalition and the Forum on the Advancement of Healthy Workplaces. Once people start complaining about how they work in very harsh conditions they had to draw the line somewhere. This was to say that citizens needed at least these certain conditions to have them work legally. You may be thinking why make the people suffer when you can just give them a air conditioned room and make them happy since they are working for you at the end of the day. It's all about the money, everything that a company does for it's workers from insurance to places where they have to work all costs the company money. Sometimes the company may be going through a rough time and they will not have money for them to give their workers good working conditions, which is how it all starts. Psychophysically when A manager cuts down working conditions he will realize that he is saving as well as making a lot of money, and he will continue to put his workers through the struggle of harsh working conditions just so that he doesn't have to spend much money, by still being able to make the same amount of money as before. This is why the organizations came up with 3 rules that companies had to follow in order to classify their workers as having good working conditions, the three rules are as follows:


1. Organizational Culture


Organizational Culture is basically how a worker is being treated at the place that he is employed, meaning that a worker can't just be kicked around and treated like a dog. Some examples might be


  • Respect
  • Appreciation
  • commitment to balanced workloads and job enrichment
  • decision latitude
  • employee involvement
  • support for work-life harmony

These are some key examples that employees should gain around the work place. Respect would be the most important one because in a lot of work places, people aren't rewarded for their outstanding efforts or congratulated which often leads them into depression or working late hours so they can do better and better. This can also cause stress for the employee forcing them to have a chain reaction that ends up in poor productivity.


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The diagram above shows the chain reaction that is caused by a simply situation, stress and how it leads to poor productivity.

2. The Physical Work Environment


This just insures that the employee has safe physical work conditions meaning that if they are dealing with water and electricity right next to each other without using the proper clothing it would be considered unhealthy. Some other unhealthy work conditions would be chemical or electrical and machine hazards.


3. Personal Heath Resources


Personal heath resources is basically the company giving their employees benefits so that they can keep their physical life healthy. A lot of business just sit in a chair all day and stare at a monitor but they don't get to go outside and get exercises done, however this rule puts a lot of pressure on that and insuring that the work force promotes a healthy lifestyle. This can be done by the following:


  • flex time so employees can exercise
  • fitness club or equipment subsidies
  • immunization clinics
  • smoking cessation programs
  • stress management training
  • healthy food choices in the cafeteria and vending
  • machines
  • “Lunch & Learn” talks on various health or disease
  • prevention topics


Affects of poor work conditions on the business- Kabilan Thevaranjan

Poor work conditions benefit a business in positive ways. For businesses it is all about the money, and how they can make money faster and faster and still be able to increase profit. When you think about it it may cost a company far more money to provide insurance for all their employees and just hope for the best that nothing drastic happens to any of them. You may be thinking why is it so hard to provide insurance for all their employees, well it's because when providing insurance the business has to pay for it. So if the business is just starting up and they have a lot of workers, it will take awhile for them to start making a profit if they have to pay all of these extra costs. So here would be an example, if an employee works in an air conditioned room (that would cost the company $300 to set up) and the employee was a very productive fellow and made the company $1000 a day. Now if the same employee were to work in a cramped cubicle without air condition it would cost the company $20 but the employee would still be productive and make the company $1000 a day. In this one example going with cheaper working conditions save the company over $200 dollars. Now you were to multiply that by 100 workers for instance that would equal roughly $20 000 that the company would not have to spend and could just save. Don't forget that this is just per day, on a bigger scale taking a company like Toyota for instance where they have thousands and thousands of people working there, it would be smart for them to have poor work conditions so that they could save thousands and thousands maybe even millions of dollars on just employees. This is why a companies would have poor working conditions, because it is all about the money and how one can make money faster without spending an extra dime.


However poor working conditions can also have a negative impact on the business, when we are thinking about poor working conditions, we have to think of how bad it can get. Let's just assume that a construction business is making their employees work in dangerous conditions without the proper gear. Now assuming that the odds of something bad happening are 1:10 per day the company decides not to provide any insurance for any of it's employees. This then back fires on the business and employees start to breath in bad air or get injured and they have no coverage. This is when it is considered poor work conditions, when one thing leads to another and in the end it could risk in someone loosing their life while they were on the job. The city of Mississauga provides $3,000,000 coverage for everyone that works in the aquatic section if they were to get sued. This is good but not all places provide insurance like that, poor working conditions can also effect someone who was on the job and just got cancer because of something on the work field. This will all come back and target the business and cause it to have a bad reputation. A company would always try to insure that they have good working conditions just so their employees feel safe working there and they have a productive work force, but when one thing happens to someone, people start to realize and quit or refuse to work. The Canadian law states that if you are uncomfortable with handling a situation at work you are able to say no without getting penalized for it. Which will then force the business to slow down manufacturing and have a major decrease in productivity, however the employee still gets paid by the hour, so in this case the business would spend more money than it is making which is horrible on the business end. This is how poor working conditions effect business negatively.

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The diagram above shows the risk of things that can happen at a work place

Affects of poor work condition on the government- Kabilan Thevaranjan

The government benefits greatly on poor working condition because the government makes all their money on taxes. Similarly to business for the government it is all about the money. Think about it this way, for pizza delivery if it comes after a certain time for certain pizza stores the pizza is free. Now on the consumers end no matter what time it comes, they still get the pizza but if it comes late they get it for free. Just like that the government makes their money as long as someone is working, if they work in a large office or in a tiny shed. No matter what working conditions as long as the employee is getting paid, taxes will get cut from their pay checks and it will go to the government, so either way poor working conditions or not, the government gets paid.


However the government can also suffer greatly from this because when people realize that they aren't being treated right or get injured on the job, they will resign their jobs and usually go for unemployment. Unemployment is basically a pension when you don't have a job because of medical issues or just aren't at that level to have a job yet. Unemployment comes straight from the government every month for year until you have to work again. Usually countries have their unemployment rate under 7% but if poor work conditions continue and people start to quit their jobs they will sign up for unemployment and it will come out of the governments pocket. This also means that the countries GDP will drop meaning that the country has less to spend when it comes to wars or innovation that is happening throughout the country.

Impact of poor work condition on people/citizens/customers- Kabilan Thevaranjan

Impacts of poor work conditions can effect the employee's more negatively rather than positively. One of the main things that effect the employee's positively is that if the work condition is classified under poor, then the employee will still get paid but won't have to do that certain job. However if it is too late for that and the employee is already injured or has been effected by the poor work conditions then they can stay at home and sign up for unemployment with a valid reason of getting injured on the job.


However the negative effects of poor work conditions effect the employee's as a whole much more than it effects the government or business. This is because if for example someone gets injured on the job and just manages to loose a leg. If they have poor work conditions and they aren't insured like the city of Mississauga insures you then they will have to pay for all their medical expenses. Not only that but they won't be able to work again, however at this point it comes down to the consumer where they want to draw the line, Would they rather go to work everyday afraid of getting injured and not being able to work and provide for them and their family or if they want to just quit and find a better job. Now more often than others it isn't that easy, people only work in poor working conditions because they aren't educationally up to standard to work in an office and they will do whatever it takes to earn money for their family. Poor work conditions effect consumers more than anyone else because of the struggle they have to go through just to be able to bring food to the table for them and their families for the night.

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