Question

For the following case situation, address the following issues in short essay format.

1. Identify the ethical dilemma--Identify and analyze primary and secondary issues related to this ethical dilemma and impact on various stakeholders.
2. Analyze the ethical alternatives--Analyze alternative resolutions to this ethical dilemma, the impact on various stakeholders, and the reasons specific stakeholders prefer each alternative.
3. Resolution of the ethical dilemma--Use an ethical framework to determine the most appropriate resolution of this ethical dilemma.

George Hawkins is the controller of Okie Auto, Inc., which manufactures automobile parts at several plants in Oklahoma, and is a subsidiary of a national firm. Okie has had disappointing financial performance in recent years, because of pressure for lower selling prices.   Corporate headquarters has threatened to close the Oklahoma plants because of decreasing profit margins. One of George’s responsibilities is to present the Oklahoma plant’s financial plans for the coming year to the corporate officers and board of directors. In preparing for the presentation, George was intrigued to note that the focal point of the budget presentation was a profit-volume graph projecting an increase in profits and a reduction in the break-even point. Curious as to how the improvement would be accomplished, George ultimately spoke with Amanda River, the plant manager. River indicated that a planned increase in productivity would reduce variable costs and increase the contribution margin ratio. When asked how the productivity increase would be accomplished, River hinted that increasing the speed of the assembly line would increase productivity. George was afraid that speeding up the assembly line could lead to labor problems because the speed of the line was set by union contract. River responded that she was afraid that if the speedup were opened to negotiation, the union would object and that could result in the plant being closed. River indicated that she believed the speedup was the “only way to save the plant, our jobs, and the jobs of all plant employees.” She did not believe employees would notice a 2 or 3 percent increase in speed. River concluded the meeting observing, “You need to emphasize the results we will accomplish next year, not the details of how we will accomplish those results. Top management does not want to be bored with details. If we accomplish what we propose in the budget, we will be in for a big bonus.”

Answer 1

Hi,

Here is the suggested short write up.

Ethical Dilemma

1.Speedup the Assembly process- by 2 to 3% unnoticed by the Labor/Union may resist if known

a. Primary Issue- Closing up the Oklahoma factory due to low profit margins

b. Secondary Issue-Labor union resorting to resist due to speeding up the assembly line

Analyzing the alternative ethical alternatives-Alternative ethical resolutions

Impact on stake holders”-reasons each prefer alternative.

Ethical Dilemma

Management- Due to shrinking profit margins- they have to close the plants

Labor- Higher productivity with same wages-a Challenge and normally resist

Shareholders-Lower profit margins and market reputation share price may dip. Low ROI

Government-Against labor laws, Higher retrenchment compensation to be paid.. Low respect for company and management for not managing the issues properly.

This is an interesting case study.

The Management is emphasizing that profit margins should go up and the only way is to improve productivity. Hard pressure on selling prices (due to competition) has resulted lesser profits for the Oklahoma plants. Unless profits improve, the Management does not want to continue the plants here and it may result in loss of jobs, and investment and shifting loyalty for the shareholders.

George Hawkins is in a dilemma. He has two points to address:

(1) Whether to please the management for higher wages by way of overtime/extra wages for speeding up or

(2) To convince the labor to speed up productivity at the same cost

Both are challenging issues.

The unethical question is-to increase the speed of the assembly line without the knowledge of labor, which increases productivity and in turn profit, thereby retaining the plant, job and in turn earn bonuses for all.

George to think on these ethical issues:

From the perspective of the Labor:

Is it Legal, is it Fair, How would I feel if I were to be in the shoes of the labor?

Is it Legal:

Enforcing the labor to speed up the process without their knowledge is not Legal

Is it Fair:

Enforcing speeding up is fair, as the question of survival is looming on the plant, jobs and future..

How would I feel:

Naturally, let down.. because more work and same pay..(less pay per unit produced)

Same three logic questions from the Management perspective:

(1) Is it Legal:

No.. It is not legal.. Any violation of an agreement is not legal.

(2) IS it fair?

Yes. Since it is the question of survival, the only remedy is speeding up.. Extra cost.. No.. Since the profit margins are already down, no question of incurring higher overheads..

(3) How would I feel..

Bad.. But no remedy.. the only hope is higher bonuses if productivity increases.

Same three questions to shareholders:

(1) Is it legal/Fair/Empathy—They are not concerned.. They want their return on investment. They can switch their loyalty and investment can be moved to another company

Government—Is it legal-No

                              Is it fair-No

                              How I feel-Bad.. Government would not allow it to happen

What is the alternative to George:

Possible Resolution: Scene 1

Call up the Union Representative and discuss the issue openly and clearly. Explain the consequences.. Request for co operation in the interest of the Company, employees, shareholders, management and the future of the family of the employees.. At times, sacrifices are to be made.. for a better future.. When survival is the question, sacrifices have to step in..If productivity improves, higher profits and good bonuses and smiling faces and bright future with rewards and recognitions..promotions for efficiency and hardwork..It would be win-win situation..

Possible Resolution : Scene 2

Call on the TOP management, take them into confidence, to assure that there would be a slight increase in rewards, immediately for speeding up the process may be 1 to 2% . Higher the productivity, higher the rewards.. Talk to management that, the ethical way to approach is to negotiate with the Labor representatives and convince the labor to willingly contribute so that, there are no hard feelings.. and that they are not kept in dark. This may be a bit difficult to but,not impossible..Management may also be aware of the repurcussions of closing down of a plant is not all that easy. Setting up a plant is difficult but closing down is very very difficult.. Lot of procedures and systems to be done and it leaves a very bad reputation for the company in the long run..

Possible resolution would be:

Rights approach-Treat humans as humans and not an end to means..Protect human dignity and moral rights.

There should be a standard of fairness that applies to everyone. Labor is certainly not on same terms of Land, Material and other factor of production.

Common good approach-An approach that will apply for the welfare of all

Virtue approach-What kind of a person I would be if I take this action..

The best possible resolution would be to call take the Management and Labor into confidence, and assure that they willingly speed up the assembly process, which would result in higher productivity and that the would be rewarded well if the company performs well and make profits. The CEO can address the employees about the situation in a video call and emphasise the need for the urgent action. Present the credentials of other plants and how they are performing, and stress the need for the Oklahoma plants to follow suit..

This way, it is a fair ending to this ethical dilemma, making it open and fair to all and willing contribution with an assured promise from the Management would diffuse the situation for the benefit of all. There would be more production at same cost, higher profits, higher pay/bonuses and better future.. With this, Management, Employees and shareholders and the Government would all be happy, as everyone has got their share..

Hope this is useful.

All the best.