57894384 Ethics Analysis of Foxconn International

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<p>NANYANG BUSINESS SCHOOL</p> <p>AB311 STRATEGIC MANAGEMENTINDIVIDUAL ETHICAL REASONING ANALYSIS</p> <p>Seminar Group 2</p> <p>Instructor: A/P LAI SI TSUI-AUCH</p> <p>Done by: CHAN ZHE YING</p> <p>Word Count: 1,1361|Page</p> <p>A. ETHICAL ISSUE(S) &amp; DILEMMA The Foxconn suicides can be viewed from an ethical lens because Chinas labour costs have been kept low for years, while expectations kept increasing. Global companies are tapping on the lowwage labour market in China to keep costs low, but many fail to fully understand or accept the moral implications. These problems are complex because they result in benefits for some and harms for others, because the exercising of the rights of some usually results in denying the rights of others.1 The main ethical issue from the Foxconn case would be: whether it is ethical for Mr. Terry Guo, to place the firms benefits ahead of the personal well-being of the employees. Being the worlds largest contract manufacturer of computers and electronics2 serving huge companies such as Apple, Dell, Sony and more, Foxconn may not be able to serve its clients if it is unable to maintain its aggressive cost-management policies. However, Guo and the management of Hon Hai Precision have a moral obligation to address these issues and criticisms. The ethical dilemma (and decision) Guo faces is whether he should place the groups interest of being the top supplier to most of the worlds electronic brands by keeping wages low, ahead of the well-being of the factory workers.</p> <p>1 2</p> <p>Hosmer, L.T, 2009. The China Post, 2010.</p> <p>2|Page</p> <p>B. KEY STAKEHOLDERS AND JUSTIFICATIONS The factory workers are one group of key stakeholders which Guo should consider in the decision making process. The well-being and morale of the workers are clearly affected due to the low wages and work environment. An troubling prospect is that workers may be motivated by money to commit suicide, as the employment contracts compensates RMB100,000 the families of anyone who dies on site. The amount is 50 times of the monthly pay of an average employee. 3 If this issue is not adequately addressed, more suicides could ensue. Guo must also consider the shareholders of Hon Hai and Foxconn. When news of the suicides broke, share price of Hon Hai fell as much as 5.1% in Taipei, while Foxconns share price experienced an 8.5% drop on the Hang Seng Index.4 Such negative publicity has possibly led to a decrease in investors confidence in the companys ability to handle the situation, which resulted in a drop of the share prices. Finally, Guo should think about the clients which Foxconn serves. Foxconn is able to be the supplier to major electronic companies is because it has managed to keep its costs low. If Guo decides to increase the wages and provides more facilities to the workers, Foxconn may inadvertently be forced to pass on some of the increased costs to its clients, which may ultimately result in Foxconn losing its clients to its competitors offering lower costs.</p> <p>3 4</p> <p>BBC News, 2010 Culpan, Tim and Lee, Mark, 2010</p> <p>3|Page</p> <p>C. DISMISSING THE SUICIDES AND IMPACT Dismissing the suicides as having nothing to do with Foxconns working conditions is not a viable option for Guo as it may signal to the key stakeholders that Foxconn does not fully understand the moral issues and is not willing to take any responsibility for the suicides. In a briefing to Hon Hais investors, Guo attributed the suicides to the workers personal issues and the compensation packages offered to the families of the victims.5 He also assured investors that the company broke no laws in its operations. Though this may help to address the concerns of the shareholders, the continued negative media coverage on the suicides will only decrease public perception of the company. If the situation goes out of control, Foxconns major clients may even search for alternative suppliers, distancing themselves from Foxconn, affecting the companys ability to continue as a going concern. By ignoring the issue, Foxconn may be sending a negative signal to the current workers that the company is not acknowledging that the problem of low wages and tough working environment. The companys operations might be affected if its workers leave to work for its competitors. What will be ultimately worse is that the financial motivation for committing suicide may be exploited by the workers if it does not adequately address this issue. Finally, Foxconns clients may not accept this position as their reputation maybe affected. Foxconn may face increased pressure from its clients if it were to dismiss the suicides lightly. Companies such as Apple Inc, Hewlett-Packard and Dell have reportedly launched independent investigations on Foxconn over the spite of suicide cases. 6 As the products of these giant electronic firms are being shipped all over the world, consumers may not purchase their products5 6</p> <p>Ibid Dean, Jason, 2010.</p> <p>4|Page</p> <p>if consumers perceive that these firms are not doing enough to help improve the working conditions and reducing the suicide cases. Firms such as Apple also have its own Supplier Code of Conduct which it expects its suppliers to adhere to.7 D. EVALUATION OF TERRY GUOS COURSE OF ACTION By putting the firms interests ahead of the well-being of the workers, Guo is likely basing his decision on the ethical principle of economic efficiency, where the firm always act to maximize profits in the most efficient manner, within legal and market constraints. Foxconn had implemented a series of actions in an attempt to reduce the suicide cases and to improve the working conditions of the Foxconns factories. Besides increasing wages 8 , Guo invited members of the media and its suppliers for an open tour to the Foxconn factory to allow public scrutiny of the working conditions. This action seems to be founded upon the principle of personal virtues, where any actions taken should be honest, open and truthful. Guo is showing that he has confidence in the working conditions in the Foxconn factory. These measures are a good start and should be supported. However, more need to be done to better address the ethical issue as Guo may not be giving sufficient attention to the ethical principles of utilitarian benefits where any action taken should be for the greatest good for the greatest number of people, and distributive justice where any action taken should not harm the least among the poor and uneducated workers. Guo should have strict policies to ensure that its workers are not forced to work overtime above the maximum allowed hours and uneducated workers are not being exploited. More can be done</p> <p>7 8</p> <p>Kok, Charmain, 2010 Bristow, Michael, 2010.</p> <p>5|Page</p> <p>to meet workers satisfaction, such as offering better incentives and listening to the workers feedback, instead of dismissing the workers complaints. Regular unscheduled checks on the factories will help ensure that the working conditions are well kept. Prescheduled checks are not as effective as things may be hidden by the factory managers. Finally, Guo can engage in open and transparent reporting to its investors and suppliers to raise confidence in Foxconns measures to address the issue.</p> <p>6|Page</p> <p>BibliographyBBC News, 2010. Foxconn suicides: Workers feel quite lonely. [Online] Available at: http://www.bbc.co.uk/news/10182824 [Assessed 3 April 2011] Bristow, Michael, 2010. Foxconn gives workers second pay rise. [Online] Available at: http://www.bbc.co.uk/news/10252344 [Assessed 2 April 2011] Culpan, Tim and Lee, Mark, 2010. Foxconn Says Personal Issues, Not Wages, Led Workers to Suicide. [Online] Available at: http://www.businessweek.com/news/2010-06-08/foxconn-sayspersonal-issues-not-wages-led-workers-to-suicide.html [Assessed 1 April 2011] Dean, Jason and Tsai, Ting-I, 2010. Suicides Sparks Inquiries Apple, H-P to Examine Asian Supplier After String of Deaths at Factory. [Online] Available at: http://online.wsj.com/article/SB10001424052748704026204575267603576594936.html [Assessed 2 April 2011] Hosmer, L.T, 2009. The Ethics of Management, Sixth Edition, Chapter 1: Moral Problems in Business Management, pp 7, [Book] The McGraw-Hill Companies, 2009. Kok, Charmain, 2010. Deaths at Hon Hai Could Raise Questions for U.S. Companies. [Online] Available at: http://blogs.wsj.com/digits/2010/05/25/deaths-at-hon-hai-could-raise-questions-forus-companies/ [Assessed 4 April 2011] Rein, Shuan, 2010. Apples Foxconn Problems: What Steve Jobs Doesnt Get At All. [Online] Available at: http://seekingalpha.com/article/198590-apple-s-foxconn-problems-what-steve-jobsdoesn-t-get-at-all [Assessed 1 April 2011] Summer, 1994. Strategic Management Journal, Vol. 15, Special Issue: Strategy: Search for New Paradigms, pp. 17-34. [Online] Available at: http://www.jstor.org/stable/2486874 [Assessed 6 April 2011] The China Post, 2010. Suicides at Foxconn raise troubling issues. [Online] Available at: http://www.chinapost.com.tw/editorial/taiwan-issues/2010/06/02/258977/p1/Suicides-at.htm [Accessed 1 April 2011]</p> <p>7|Page</p>

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