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Gather the facts: The company utilizes cheap, foreign labor to produce its product. Up to this point the company has worked with a distributor and therefore has not been exposed to the production methods utilized in manufacture of their product. Felipe aims to save the company money by eliminating the distributor’s approximately 30% mark-up, and coordinating with the factories himself. In his travels to the South China factories Felipe sees working conditions that appear to be unsatisfactory according to basic human rights standards.
The issues include, child labor, overly demanding work schedules, movement restrictions while working, and inadequate equipment to satisfy health and safety standards, non-regulated work environments, and depraved living conditions supported by the factory. Felipe’s peer group and management team have established a paradigm based on industry norms that accept the working conditions as typical and acceptable. In addressing his concerns, his supervisor makes it clear that while minor improvements were permissible, any changes jeopardizing profits were unacceptable.
Clarify Assumptions: The management must have some knowledge of the working conditions but due to financial pressures and industry norms does not consider the situation unethical. Or some do consider it unethical but do not feel confident in speaking up; either way no-one has insisted on re-evaluating the process due to ethical issues. The company could not make an equivalent profit margin if conditions were changed in the factory. For the workers this was a good work opportunity and wanted the work. The workers chose to live in the factory owned housing complex.
The factory owned housing is provided for free or is at least provided at a rate below the worker’s income. So the assumption is that the factory workers are not paying back to the company in the form of rent the equivalent of what they are earning from the company in salary. Felipe does have some leverage and/or resources available to him. He is saving the company money and the company does fund a small charitable initiative. Define the Ethical Issue: Should the business continue to profit from a production process that jeopardizes the health and well-being of manufacturing employees.
Identify Affected Parties Primary Stakeholders: The primary stakeholders are the company, its shareholders and its employees and the factory and its employees (maybe its shareholders? ) All primary stakeholders have a financial interest in this ethical situation. Obviously the company, shareholders and employees are benefitted financially from the low cost production of electronics. The Chinese factory, its employees and its shareholders are also receiving financial benefit from the current manufacturing method.
The negative impacts are primarily focused on the factory workers, which may or may not see them as problematic depending on their impressions of alternative employment options. Secondary Stakeholders: The secondary stakeholders are the other companies that utilize the factory, the community surrounding the factory and the customers who purchase the company’s electronic goods. The other companies that contract with the factory to make electronics benefit financially from the factory conditions and would likely be negatively impacted if Felipe’s company demanded working conditions.
The community surrounding the factory also likely benefits from the factory. The factory attracts workers which spend money in the community, supporting other local businesses and paying taxes. The customers of Felipe’s company benefit financially from the status quo. They are able to buy cheap electronic products and enjoy a more luxurious lifestyle than most of the world’s population. Identify Consequences Positive: If the company continues to profit from the status quo operation they will enjoy prosperity, their shareholders and employees will enjoy continued security and customers will continue to be able to purchase cheap electronics.
Those Chinese factory workers that would be living in situations of poverty and or violence will continue to have an alternative; they will be able to provide for family members living in rural areas and possibly accumulate a small amount savings. Negative: If the status quo is unaltered the most obvious negative impact would be that the factory workers continue to work in a physically and psychologically harmful environment. Their overall quality of life will not improve and most likely they will all suffer from health complications directly related to their work activities.
If the company’s production methods are exposed to the public its reputation might be tarnished due to its acceptance of human rights violations within its production process. Public response might cause the company to experience a negative financial situation, thus impacting their shareholders, employees and customers. Conversely, if public opinion does not punish the company, a second and more harmful consequence would occur; the public’s acceptance of the human rights violations as a normal part of consumer goods production would strengthen and validate this practice and perpetuate the degradation of workers’ rights on a broader scale.
Magnitude The magnitude of possible consequences is the same in either direction. Either positive changes are made and the impact creates a better system that eventually guarantees basic human rights on a global scale or the status quo is accepted and conditions decline on a global scale. The magnitude is the same; it is the positive or negative direction that dictates what kind of world Felipe will live in. Ultimately it depends on employees like Felipe and the consumers of the product. By enjoying financial success, the company has the power to begin to demand incrementally better working conditions for the workers.
As consumers learn of human rights violations they can demand that producers implement changes and gradually conditions will improve. However, if individuals understand the harmful conditions and choose to value access to personal comfort over global equity the negative reality will be magnified. Probability The probability that Felipe’s company will continue with the status quo is fairly low, the probability that change will be slow is very high. Felipe has already initiated the process of change by witnessing and emotionally responding to the working conditions.
The reality is that Felipe will probably either impact change with-in his organization , perform poorly for his organization due to his emotional and psychological pre-occupation with the problem he perceives or leave the organization due to this inner conflict. All of these options would cause change with-in the organization given the current social climate of most consumerist countries, which are increasingly demanding social and environmental justice with their purchasing habits. Felipe is obviously a financially savvy and assertive individual.
His decision to cut out the distributor in order to save money and his inclination to discuss the working conditions with his peers and supervisor show that he is a valuable asset to his company. If he is not fully engaged or if he chooses to leave, the company will be negatively impacted and the status quo will be disrupted. If the company does not eventually adjust to the demands of its consumers it will not survive. Conversely if the company chooses to provide Felipe with some authority to demand incremental change in regard to factory working conditions, slow but positive progress will result.
Regardless of the company’s initial action, change will occur and they will be forced to adapt or die. Short Term Consequences: The short term consequences of maintaining the status quo will be minimal. Felipe may disengage from or leave the company which would have negative implications for its success, but overall no major changes would occur in the short term if factory conditions did not improve. However, this is assuming that no outside forces impact the status quo, such as worker injuries or suicides. As reported on Forbes. com “Suicides at Apple Supplier in China” are “rocking the country. Gordon G. Chang reported in May of this year that “On the evening of May 26 a 23-year-old worker jumped to his death at a factory in Longhua, located in southern China near Hong Kong. The apparent suicide was the tenth since late January at facilities run by Foxconn Technology Group, the world’s largest maker of electronics and computer parts. ” http://www. forbes. com/2010/05/28/foxconn-apple-suicides-china-opinions-columnists-gordon-g-chang. html The South China factory system is already under great scrutiny due to reports such as this one.
If any unforeseen worker safety issue surfaced the company would be in a very difficult public relations position, especially after Felipe’s personal visit to the factory following “a 27 year history of working with a distributor in Hong Kong, during which time no one from the Spanish headquarters had ever visited the actual Chinese factories where their good were manufactured. ” (Gentile, 2010) Long Term Consequences: The long term implications of maintaining the current working conditions are far more impactful.
Eventually, issues related to factory worker health would surface in the media and public opinion would likely force the adoption of improved working conditions or the company’s reputation would be irreparably damaged. However there is the small possibility that consumer priorities would not consider the human rights of factory workers. In this case human rights abuses would be the norm and tolerated in order to maintain the lifestyle of wealthy consumerist countries. While this is unlikely given today’s social climate, it cannot be completely discounted as a majority of today’s consumers do tolerate human ights abuses, either knowingly or not, by purchasing products manufactured under these exact circumstances. Cases such as the Nike corporation have exposed human rights abuses and solicited a strong negative reaction from consumers resulting in improved working conditions and higher human rights standards for Nike factory workers, however as evidenced in the above referenced article about factory working suicides, “the company puts together the iPhone, the iPod, the iPad and the MacBook.
Foxconn also manufactures PlayStation consoles for Sony, motherboards for Intel, and an assortment of products for Dell, Nokia, Nintendo and Hewlett-Packard. ” (Chang, 2010) This shows that while consumers may rail against human rights violations related to some corporations, many extremely popular consumer product companies commit the same violations with little public notice. From the same Forbes. com article we learn that “Workers struggle through mind-numbing 10-hour days and are forced to accept overtime, getting only one day off a week.
There is a strict ban on communication on the shop floor, and labor activists complain of production lines that move too fast. Workers live 12-to-a-room in company dormitories. ” (Chang, 2010) Obviously these conditions would be illegal in the countries that consume the products made in these factories. Additionally it has to be obvious that some portion of the consumer population is aware of this inequity and does nothing but perpetuate the practice by continuing to purchase these high demand brands.
Systemic consequences tied to symbolism and secrecy: The systemic consequences tied to this situation are that generations of consumerist societies accept this inequity as normal and appropriate and in so doing perpetuate intolerable living conditions for most of the world’s population in exchange for convenience and excessive comfort for themselves. For Felipe and his co-workers the symbolism communicates that the company is concerned foremost with profit building and that individual human rights are secondary, if considered at all.
Ultimately, this practice explicitly tells company employees that they too are a means to an end, that their utility is employed for the sole benefit of the company and that if they do not fit into the “production line” of the company’s operations, the company does not value their individual human rights enough to adjust its process to accommodate those rights. It is merely a matter of luck that Felipe and his fellow employees were born in Spain and not China, otherwise the company ould utilize their efforts in accordance with the legal and societal norms of the Chinese system instead of the human rights respecting, legal and societal norms of the Spanish system. Continuing to operate under the status quo means that the company accepts the risk of this symbolic truth being exposed in painful clarity to all of their stakeholders; customers, friends, family and community.
Conversely, if the company chooses to initiate gradual improvements it is communicating that it values the individual human rights of all of its contributing members and can handle any unforeseen public relations situation with a positive, pro-active stance. Cognitive barriers or biases: Proximity: Felipe eliminated a massive barrier to change by simply witnessing the conditions at the factory. Up to this point the company had no proximity to the working conditions.
While Felipe will have a hard time convincing management and co-workers with no proximity to the situation, he has a better chance of impacting change than if he had had no knowledge of the situation at all. It will be easy for the company to continue the status quo without increasing its proximity to the issues through direct efforts to learn more about the human rights violations and possible solutions, but if Felipe continues to communicate his concerns the company’s proximity will inevitably become greater over time.
Confirmation trap: If the company does decide to evaluate the factory working conditions it may easily fall into a confirmation trap in order to protect the status quo just as the representatives from other companies that worked with this factory had done. By focusing on the justifications mentioned in the case the company might decide that, while not ideal, the factory conditions were far superior to alternative conditions such as “more difficult work in the fields, or in the case of the young girls” pressure to enter into prostitution.
The company could easily agree with these industry peers “that working in the factory was a way out of poverty for these young people, even if conditions were a little rough. ” (Gentile, 2010) By focusing only on the negative alternatives and not on justifications to improve conditions the company would be working to justify their more profitable and biased assumptions. Sunk costs: Choosing to rock the boat would be a risky proposition for the company. If the relationship with the factory disintegrates the company ould lose money in the transition to a new factory and might even have a hard time finding a factory that could do such high quality work for at the same price point. Considering the long term relationship with this factory and the high level of quality it produces, it would be unwise, from a business perspective to jeopardize the company’s investment in this supplier relationship. Self-interest: It is in the best short term interest of the company to maintain the status quo; however the company’s long term success will depend on its ability to improve working conditions in the factory.
If the conditions bother Felipe they would most likely offend the company’s customers if the conditions were exposed to the public. For the sake of their long-term reputation it would be in the company’s best interest to begin evaluating how to best improve working conditions in the factory. Decision based only on consequences: Based on consequences alone the company should continue its relationship with the factory. Modifying the partnership in any significant way might disrupt the company’s profitability and, or its ability to influence factory conditions.
The consequences of dramatically altering the status quo could be bad for all stakeholders. A plan that gradually introduces improved conditions to the factory with charitable assistance from the company and then moves to a system of standardized working conditions over time will create the most favorable outcomes for all stakeholders. Relevant Principles Do no harm: The principle of do no harm is violated if the company chooses to continue operations without addressing the deplorable working conditions.
Physical, mental, societal and environmental harm is being done by the factory’s operations and the factory’s operations are being funded by Felipe’s company. The working conditions negatively impact the health of the workers which, in some cases, will render them unable to contribute fully to their community and become a burden on society. The mindset that the workers are subhuman and viewed as machines to “run” and “maintain” is also a harmfully pervasive world view that could impact the society at large and could contribute to crime and violence with in the community.
Lastly, from the case it is apparent that factory employees are not even adequately protected from the dangerous chemicals used in production and so it is safe to assume that the factory’s environmental impact is not monitored in any significant way to reduce environmental harm. Golden rule: As mentioned above it is merely a matter of luck that Felipe and his Spanish counterparts were born in Spain and not China. It is only due to legal and social norms that the Chinese workers are denied some of their basic human rights.
If Felipe’s Spanish counterparts were to switch places with the Chinese workers for one hour they would clearly see that their lifes’ work is placing the Chinese workers in harmful situations that they themselves would never tolerate. If they could only experience how they were doing unto others in a way that they would most definitely not want done unto themselves, they would demand improved working conditions or refuse to be associated with such a company.
Kant’s Categorical Imperative: If Kant’s Categorical Imperative were employed and it became a universal law that all societies, companies or individuals with greater fortune were required to violate the rights of those societies, companies or individuals with lesser fortune only the slightest number of people would live in a world that was safe, just and bearable. Everyone would be lesser to someone else and thus subject to whichever human rights abuses favored the limited scope of those with the greatest fortune. Essentially everyone would be a slave of some sort and individual liberty would be no more. Rights
Primary vs. Secondary Rights: While the company and the factory have the right to operate according to their own will in accordance only with the local rule of law, the factory workers have individual, human rights which should guarantee them freedom, safety and overall protection of their well-being. While some societies and government may grant priority to corporations or organizations over individual rights, it is the basis of our evolutionary progress that we value the rights of the individual over the rights of some group. It is the individual that must ultimately contend with his or her struggle to survive.
Every individual is entitled to the opportunity and resources with which they may sustain themselves; from food, water and shelter to life, liberty and the pursuit of happiness, these basic rights may be defined differently depending on one’s cultural or societal context but the same basic understanding is universal; that evolutionary progress is dependent on individual access to the tools of survival. Without this primary value on our own existence the concept of community would be impossible and thus the group’s basic rights are secondary to the rights of the individual.
Positive vs. Negative Rights: The factory workers have the negative right to be spared harm in their working environment. The limit on their ability to move freely, to avoid harmful chemicals and to eliminate undue strain and stress on their eyes are all negative rights that are being violated by the factory’s current working conditions. While the factory and Felipe’s company also have a negative right to avoid the harm of financial or organizational degradation, they do not have the right to protect their secondary rights by abusing the worker’s primary rights.
Virtues Sound moral character: In this situation Felipe is having an internal conflict between his personal moral character and the incompatible actions of the company for which he is a representative. Felipe’s moral character values equity, compassion, empathy and fairness while his company’s actions support inequity and ignore compassion. If the disclosure rule were applied Felipe would be embarrassed and ashamed to be associated with a company that acts in direct opposition to his definition of moral virtue.
Specific virtues: Felipe would like the individuals within his company to realize this discrepancy between their ideals about sound moral character and the actions of the company they represent. If the company’s actions could be brought in line with the typical human aspirations for equality and compassion the company could begin to communicate their value of equity to the factory’s management. This communication could start a process to change the working conditions.
By getting in touch the their natural inclination to be compassionate the company employees could advocate for the company to adopt human rights standards and apply them to all aspects of the production process. Cognitive biases In this situation if each of the company’s employees were made aware of the situation they would probably think first of their moral superiority and fall morally short by doing nothing to rectify the situation. They would lament that the management or some other responsible party were morally inferior in neglecting to protect factory workers’ rights.
They would fail to recognize their own responsibility, as a part of the company, in the creation and or maintenance of the current production process. They would also fail to connect the dots and see that their financial benefit was due to this series of human rights violations. This bias is partly used as a protection from the frustration felt in not perceiving one’s own power to improve the situation, because an attainable path to change is not apparent, the tendency is to put the responsibility and blame on others for being inferior or inadequate to address the situation.
If Felipe can provide an actionable plan and provide it to his peers it is more likely that they would take responsibility for their part in that plan and help him to advocate for change. Justice Issues Procedural – fairness of decision making, employee input, fair criteria, no bias, explain decision making process to employees Distributive –Equity vs. Equality, Social Comparisons, disadvantaged individuals react in a strong negative manner, advantaged adjust perception to justify advantage
Ethical Guidelines for multinationals as outlined by De George and elements of the Global Compact’s dimensions DeGeorge Produce more good than bad in host country Do no intentional direct harm Respect employees’ human rights Pay fair share of taxes Respect local culture Contribute to host country’s development Work with local gov’ts to develop and enforce just institutions such as taxes, health, safety standards Global Compact The company is not protecting the internationally proclaimed human rights standards, they are complicit in human rights abuses and they are utilizing child labor.
It is not apparent from the case and highly unlikely that the company is protecting against employment and workplace discrimination or acting with precaution or advocacy concerning environmental responsibility. Support for freedom of association Elimination of forced & compulsory labor Development and diffusion of environmentally friendly technologies. Businesses should work against corruption in all its forms, including extortion and bribery. Formulate appropriate decision or action based on analysis of these ethical frameworks Consider Character and Integrity
Definition of an Individual of Integrity based on views of relevant community members Identify Specific Virtues relevant Consider the Disclosure Rule- others’ perceptions of your actions Cognitive biases/barriers Confirmation trap is looking for facts that support your preferred choice People simplify their decisions and make them more manageable by reducing the number of consequences they consider Decision makers ignore consequences that are thought to only impact a few people People tend to make decisions in a self-interested manner
People also underestimate the extent that they are self-interested People tend to underestimate potential risks because of illusion of optimism Illusion of control is the belief that we really are in charge of what happens to us Escalation of commitment is to continue to be committed to the previous course of action even if that has been a bad one. Sunk costs. People have an illusion of superiority where people think they are more ethical, fair, and honest than most people Scripts can be problematic for ethical decision making. Decision based on character considerations
Think creatively about potential actions Formulate 3 separate options based on satisfying the interests of the primary stakeholders Check your Gut- evaluate based on Intuition – knowing something is not right Summarize the different decisions based on the Consequences Ethical Frameworks Character Considerations Were they similar? Does character and ethical framework influence or check the consequences decision? How can individual rights be protected while maximizing good for all stakeholders? Which arguments are most compelling in justifying your decision?
How will you respond to opposition? Means to effectively managing ethical behavior in organizations: Hiring and Work Assignments: Diverse Workforce: The company can hire individuals with the sensitivity to collaborate with diverse partners and place them in work assignments that will increase opportunities for progress. By hiring people with the language, cultural and interpersonal skills to evaluate culturally and ethically appropriate partnership arrangements the company can utilize certain skill sets to improve international business relationships.
For instance, Felipe had the skills to do the job and to replace the distributor which had been increasing the proximity of the company from its partners, thus eliminating opportunities to identify areas for improvement and advocate for better conditions. By placing these culturally sensitive employees in the appropriate work assignments, companies can encourage face to face collaboration with foreign partners and capitalize on the power of human interaction.
If employees are given assignments in which they identify with the experiences of their foreign partners they will be more likely to advocate for equitable treatment and be better able to identify and capitalize on the strengths that the foreign partner may have to offer the partnership. Additionally a diverse workforce will help to encourage the cultural sensitivity of all employees. A co-worker of Chinese descent will