Financial giants and moral pygmies? Multinational corporations and human rights in emerging markets Shaomin Li Department of Management, Old Dominion University, Norfolk, Virginia, USA, and Ajai Gaur Department of Management and Global Business, Rutgers University, Newark, New Jersey, USA Abstract Purpose – How should a multinational corporation (MNC) from a mature democracy deal with the human rights issues in a country with a poor human rights standard? The paper aims to discuss these issues. Design/methodology/approach – The authors develop a mathematical model to depict MNC’s behavior in response to human rights violations in the host country. Findings – The authors show that, first, in a country with a high level of human rights abuses, a firm will have to lower its human rights standards to survive; but, second, a collective effort by all firms is essential to improve the human rights conditions in the host environment; and third, a firm’s human rights practices may have a multiplicative effect that can significantly affect the momentum of human rights development in a host country. Originality/value – This study is one of the first attempts to provide a theoretical framework on the issue of MNCs and human rights in host countries. Keywords Human rights, Dynamic model, Institutional duality, MNC-host country relations Paper type Research paper Introduction In 2004 the Chinese authorities asked the Hong Kong subsidiary of Yahoo!, a US-based company, to submit the private email records of Shi Tao, a Chinese journalist. Yahoo! Obliged, and the Chinese authorities used the records to sentence Shi Tao to ten years in prison for “endangering state security”. Yahoo!’s compliance with the Chinese authorities was heavily criticized back home in the USA. During a congressional hearing in which Yahoo! executives testified, Tom Lantos, the late US congressman, blasted Yahoo! CEO Jerry Yang and company lawyer Michael Callahan: “technically and financially, you are giants, but morally, you are pygmies” (WIRED, 2007a). In his congressional testimony, CEO Yang hinted that his company was in no position to defy an order from the Chinese authorities (Yang, 2007). From this incident, an important question for ethics and international business scholars emerges: should MNCs uphold high human rights standards and help to improve human rights in countries with poor records or should they comply with local standards? The issue of MNCs and human rights has become highly relevant as MNCs continue to grow and expand their influence in a variety of sectors that were previously The current issue and full text archive of this journal is available at www.emeraldinsight.com/1746-8809.htm International Journal of Emerging Markets Vol. 9 No. 1, 2014 pp. 11-32 q Emerald Group Publishing Limited 1746-8809 DOI 10.1108/IJoEM-09-2013-0143 Financial giants and moral pygmies 11