Production costs are rising. Your company can make more money for shareholders by relocating your plants to a country with lower labor costs and fewer regulations
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Business Ethics
CASE (20 MARKS)
Production costs are rising. Your
company can make more money for shareholders by relocating your plants to a
country with lower labor costs and fewer regulations. Using this case, Stan
Raggio, senior vice president for sourcing and logistics at The Gap, and Karen
Musalo, then director of the Markkula Center for Applied Ethics International
Human Rights and Migration Project, discussed the ethical issues companies
should consider at an Ethics Roundtable for Executives. You are the chief
executive of Electrocorp, an electronics company, which makes the onboard
computer components for automobiles. In your production plants, complex hydrocarbon
solvents are used to clean the chips and other parts that go into the computer
components. Some of the solvents used are carcinogens and must be handled with
extreme care. Until recently, all of your production plants were located in the
United States. However, the cost of production has risen, causing profits to
decline. A number of factors have increased production costs. First, the union
representing the workers in your plant waged a successful strike resulting in
increased salary and benefits. The pay and benefits package for beginning
employees is around $15/hour. A second factor has been stringent safety
regulations. These safety procedures, which apply inside the plant, have been
expensive in both time and money. Finally, environmental regulations have made
Electrocorp's operations more costly. Electrocorp is required to put its waste
through an expensive process before depositing it at a special disposal
facility. Shareholders have been complaining to you about the declining
fortunes of the company. Many of Electrocorp's competitors have moved their
operations to less-developed countries, where their operating costs are less
than in the United States, and you have begun to consider whether to relocate a
number of plants to offshore sites. Electrocorp is a major employer in each of
the U.S. cities where it is located, and you know that a plant closure will
cause economic dislocation in these communities. You know that the employees
who will be laid off because of plant closures will have difficulty finding
equivalent positions and that increased unemployment, with its attendant social
costs, will result. However, you are aware of many other corporations,
including your competitors, that have shut down their U.S. operations, and it
is something that you are willing to consider. You have to decide how you would
like to proceed. Your options are to further investigate one or more of the
overseas sites or to simply continue all operations within the United States.
Examine each possibility and the factors you will consider in weighing
the pros and cons.
Answer
the following question.
Q1. Give
an overview of the case.
Q2. If
you were the chief executive of Electrocorp, what would be your decision with regard
to shifting the plant to other locations? Justify your answer.
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