Reference no: EM13865774

Case: Loss of Manufacturing Jobs 

Widgets, as everyone acknowledges, are very cute and cuddly but not something that is a necessity of life and required by everyone. They clearly fall into the "non-essential" category of goods. The inventory and only source for widgets is the XYZ Widget Company, a privately-held corporation and a long-time American manufacturer. However, the company is no longer as efficient as it once was and it appears as if their profitability and viability could decline significantly in the near future if some change to their business model is not made. There is a possibility that the reduced efficiency might eventually lead to bankruptcy for the company or cause it to suffer serious financial losses.

After an extensive analysis, a consulting firm has proposed to the CEO and Board of Directors that one option to consider is to shut down the older factory in the U.S. and shift the manufacturing operation to a LDC (less developed country) which is interested in giving a boost to its own economy and obtaining work for many of its impoverished citizens. This would basically mean "outsourcing" or "off-shoring" the work presently being done in the older U.S. factory in order to lower labor costs by drastically reducing salaries, eliminating many benefits earned by current workers over years of service.

If a new factory is built in a LDC, it would not be subject to U.S. laws and regulations, thereby reducing the expenses associated with meeting stringent U.S. environmental regulations. Collectively, these changes would reduce the company's expenses and increase its profitability, making it more attractive to investors. It is also possible that such a change could also allow the company's products to be sold at a lower price while also increasing profits. Both of these are very attractive to management.

Most of the long-time employees in the current factory are older and starting to think about retirement at some point. Many have been with the company for many years and have been recognized and rewarded as loyal and dedicated workers. Management has readily acknowledged that because of their efforts, XYZ Widget has been a very successful multi-national corporation. As a result of their hard work, employees have been well-paid, had good health benefits and have built up sizeable retirement accounts. However, the workers were expecting to continue employment at the factory until they retired and the rumor of a plant closing has them very concerned.

The company has a reputation of treating its workers fairly and there has been an excellent working relationship between management and the union representing employees. The union has agreed to modifications of their contracts which reduced production costs for the company and workers feel that they have made adequate sacrifices and management must "share the pain" as well as production workers.

Before a decision is made, you, as the CEO, will want to consider all possible and viable options, including the recommendation made by the consulting firm. What ethical factors should you consider in reaching a decision? Who are the stakeholders who are likely to be impacted by your decision you make and how you would explain to those who would be pleased by your decision as well as who would be less-than happy how you reached that conclusion? What pressures are likely to be brought to bear on you prior to announcing your decision?