Ethical Dilemma: Because of low costs, your company has established a manufactur

Question

Ethical Dilemma: Because of low costs, your company has established a manufacturing subsidiary in Southern China. At the local minimum wage, employees work 10-hour days (sometimes 12-hour days due to mandatory overtime), 6 days a week. The factory does not adhere to the same standards for environmental protection and employee safety as those mandated in the U.S.A. You are concerned with the substandard working conditions and environmental protection and ask the expatriate manager heading operations if something should be done to improve conditions. He argues that he is complying with all local regulations and laws. Moreover, he notes that the company established this subsidiary to have low-cost manufacturing base. Improving working conditions and environmental standards beyond those mandated by local laws would not be consistent with this goal. Is his position ethical? What are the potential negative consequences of continuing operations in this manner? What benefits might there be to improve conditions beyond local standards? Looking at the business ethic perspective -How would you handle this situation and why?

Explanation / Answer

Is his position ethical?

A corporate has Economic (make a profit), legal and social responsibilities towards the society. Social responsibilities include ethical and philanthropic responsibilities. A Socially responsible corporation does something to society beyond profit making and legal responsibilities. It tries to balance the economic goals with the social needs and goals.

The manager knows that workers working under sub-standard conditions is a not a right thing to do. But he makes sure he obeys the law- legal responsibility. He also points out economic reasons for the sub-standard conditions. Ethically responsible organizations go beyond legal and economic responsibilities. But the manager has restricted himself. His position is not ethical

What are the potential negative consequences of continuing operations in this manner? What benefits might there be to improve conditions beyond local standards?

The company may gain a bad reputation and bad publicity. this may impact the revenue as in the case of Nike. Nike was slammed for operating sweatshops in Asian countries which led to a massive drop in their sales in 90’s.

The workers may strike after some time. Retention of workers may be difficult in the long run. Injury rates, accidents, and health care complaints may increase among workers leading to increased costs due to worker’s compensation and insurance claims

On the contrary, if the company improves conditions, then it may gain local support from government and the community. It may gain goodwill and reputation. It will be easy for them to attract and retain employees. Operations will become increasingly sustainable. Healthcare claims and expenses will reduce.

Looking at the business ethics perspective -How would you handle this situation and why?

I would first analyze the situation and working conditions in the subsidiary. I will do a cost-benefit analysis and make a recommendation to my superiors. I will engage frequent monitoring and auditing to ensure safe conditions. I will look out for innovative methods to reduce costs. I will try to create policies and guidelines for manufacturing plants. I will offer non-financial incentives linked to ethical practices to improve working conditions.

As I sincerely believe in sustainable operations, I believe it is essential for my company to indulge in ethical practices.

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