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NANYANG BUSINESS SCHOOL

AB311 STRATEGIC MANAGEMENT

INDIVIDUAL ETHICAL REASONING ANALYSIS

Seminar Group 2

Instructor:

A/P LAI SI TSUI-AUCH

Done by:

CHAN ZHE YING

Word Count: 1,136

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A. ETHICAL ISSUE(S) & DILEMMA

The Foxconn suicides can be viewed from an ethical lens because China’s labour costs have been

kept low for years, while expectations kept increasing. Global companies are tapping on the low-

wage 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 firm’s benefits ahead of the personal well-being of the employees. Being the world’s

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 group’s interest of being the top supplier to most of the world’s electronic brands by

keeping wages low, ahead of the well-being of the factory workers.

1 Hosmer, L.T, 2009.

2 The China Post, 2010.

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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 Foxconn’s share price

experienced an 8.5% drop on the Hang Seng Index.4 Such negative publicity has possibly led to a

decrease in investor’s confidence in the company’s 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.

3 BBC News, 2010

4 Culpan, Tim and Lee, Mark, 2010

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C. DISMISSING THE SUICIDES AND IMPACT

Dismissing the suicides as having nothing to do with Foxconn’s 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 Hai’s 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, Foxconn’s major clients may even

search for alternative suppliers, distancing themselves from Foxconn, affecting the company’s

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 company’s 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, Foxconn’s 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 products

5 Ibid

6 Dean, Jason, 2010.

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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 GUO’S COURSE OF ACTION

By putting the firm’s 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 Foxconn’s factories. Besides increasing wages8, 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

7 Kok, Charmain, 2010

8 Bristow, Michael, 2010.

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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 Foxconn’s measures to address the issue.

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Bibliography

BBC 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-says-

personal-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-for-

us-companies/ [Assessed 4 April 2011]

Rein, Shuan, 2010. Apple’s Foxconn Problems: What Steve Jobs Doesn’t Get At All. [Online]

Available at: http://seekingalpha.com/article/198590-apple-s-foxconn-problems-what-steve-jobs-

doesn-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]