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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:
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Culpan, Tim and Lee, Mark, 2010. Foxconn Says Personal Issues, Not Wages, Led Workers to
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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
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[Assessed 2 April 2011]
Hosmer, L.T, 2009. The Ethics of Management, Sixth Edition, Chapter 1: Moral Problems in
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The China Post, 2010. Suicides at Foxconn raise troubling issues. [Online] Available at:
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[Accessed 1 April 2011]