Buisness Ethics: The Ethical Dilemma of Solidarity Fund Pension Scheme - Case Study Example

Business Ethics Case Write Up By Table of Contents Content Page No. Cover Page Table of Contents………………………………………………………………………………………………………...2 Executive Summary………………………………………………………………………………………………..……3 Introduction………………………………………………………………………………………………………………..4 Background Information……………………………………………………………………………………………..4 Specific Area of Interest………………………………………………………………………………………………5 Specific Problem or Issue……………………………………………………………………………………………5 Key Stakeholders………………………………………………………………………………………………………..6 Alternative Solution……………………………………………………………………………………………………7 Evaluation and Analysis…………………………………………………………………………………………….7 Recommendation……………………………………………………………………………………………………..8 Action and Implementation……………………………………………………………………………………..9 Key Learning……………………………………………………………………………………………………………..9 Reference…………………………………………………………………………………………………………………10 Summary This paper discusses and analysis the ethical dilemma that the Solidarity Fund pension scheme, a large pension fund operated by the Quebec federation of labour (QFL), found itself in following gross misconduct by Gildan Company, a Company that the Solidarity fund had heavily invested in. The Gildan Company’s exploitation of its workers was blatant form of unethical behaviour in business, and for that reason the Solidarity Fund had to take a decisive action against the Gildan Company, although the Solidarity Fund benefited enormously from the partnership that it had with the Gildan Company. Making such a decision, however, wasn’t easy because the decision would have far-reaching consequences on both the Solidarity Fund and the Gildan Company. Business Ethics Case Write Up Introduction This paper discusses and analysis the ethical dilemma that the Solidarity Fund pension scheme, a large pension fund operated by the Quebec federation of labour (QFL), finds itself in following gross misconduct by one of the Companies that the Solidarity fund had heavily invested in. In this case, Gildan Activewear, a Company in which Solidarity fund had heavily invested in was accused of an array of business misconduct ranging from overworking and underpaying workers, excessively high production quotas, and unconducive working environments. Due to the fact the Solidarity Fund had heavily invested in Gildan Activewear and, also, given the fact that the Gildan Activewear investment was the most lucrative investment for the Solidarity Fund, the management of the Solidarity found themselves in a real dilemma in deciding the best course of action to take in response to the Gildan Activewear’s unethical business misconduct. Background Information The Solidarity Fund was founded in 1983 by the Quebec federation of labour with the aim of investing its members’ savings in the local Companies. The Solidarity Fund Pension scheme had two core goals. The first goal of the Solidarity Fund was to democratize access to professionally managed retirements accounts, and the second goal was to support jobs creation and growth in Quebec, either through investment in long term and medium sized local companies or by investing in outside companies whose activities were beneficial to the Quebec province.In selecting investment partners, the Solidarity Fund used nonfinancial criteria; the Solidarity Fund sought to invest with the Companies that had conducive working conditions, positive relations with local communities, and commitment to environmental responsibility. Before investing in a Company, therefore, the Solidarity Fund ensured that the company observed the above principles of business ethics and community social responsibility. After investing in a Company, the Company played an active role as a shareholder, often by placing their member on the board of directors. One of the Companies that the Solidarity Fund invested in was the Gildan Activewear founded by two brothers, Glenn and Chamandy in Montreal in 1984. When the Gildan Activewear contacted the Solidarity Fund for funding to finance its expansion, the Gildan Activewear had all the hallmarks of being both environmentally and socially responsible, and for that reason the Solidarity Fund gave the Gildan Activewear a loan of $ 3 millions and invested further $ 3 millions. Later, the Solidarity Fund gave the Gildan Activewear more loan and invested more money in the Company. Solidarity Fund’s partnership with the Gildan Activewear proved lucrative, but the Gidan Activewear Company engaged in unethical business practices and for that reason the management of the Solidarity Fund had to make a decision on whether or not to continue partnering with the Gildan Activewear Company. This case, therefore, generally involve the stakeholders of the Solidarity Fund and the stakeholders of the Gilden Activewear Company. Specific Area of Interest The specific area of interest of this case is business ethics and community social responsibility. As we studied in class, any business organizations should observe the demands of business ethics and should also be socially responsible. In this case, the conduct of the Gildan Activewear is clear contrary to the demands of business ethics and community social responsibility. Specific Problem or Issue As multiple sources have revealed including the CBC, the MSN and the EMIH, the Gildan Activewear was clearly involved in gross business misconduct. The main with the Gildan Activewear was that the working conditions of the company in Honduras were deplorable, for instance the cotton dust was a real health threat to the employees of the company working in factories, the employees of the company were under paid and overworked (the employees’ salary did not cover their basic needs), the company also had high production quotas or unreasonably high production expectations, wages based on productivity, illegal firings (the employees of the company were sacked for attempting to form unions to agitate for their rights), and lastly, other inhuman treatments including supervised breaks and firing of pregnant women. These conducts of the Gildan Activewear company, therefore, are clearly unethical and for that reason the Solidarity Fund had to take decisive action because the unethical conduct of the Gildan Activewear company is clearly contrary to the goal and the mission of the Solidarity Fund pension scheme. Key Stakeholders The following are the three stakeholders in this case. The first stakeholders in this case are the management and all the employees of the two Companies. The management and all the employees of these two companies will be affected by any decision or action that may result from the unethical conduct of the Gildan Activewear Company. The second stakeholders in this case are the investors or the stakeholders in these two companies. The investors or the stakeholders in both the Solidarity Fund and the Gildan Activewear Company will be affected by any decision or action that will result from the unethical behaviour of Gildan company; for instance, if the Solidarity Fund decides to severe relationship with the Gildan company, the investors in the two companies will experience the financial loss that will result from such an action. The third stakeholder in this case is the whole community. Being the consumer of the products and services of these two companies, the community in which these two companies operate will inevitably be affected by any action that may result from the unbecoming behaviour of the Gildan Company. Alternative Solution The following are the alternative solutions that are available to the decision makers in this case. Firstly, the Solidarity Fund decision makers may decide to end their relationship with the Gildan Company and to sell their share in the Company. In this case, both the Solidarity Fund and the Gildan Company will lose because the partnership between the two companies is mutually beneficial. The second alternative that the decision makers of the Solidarity fund may take is to use their leverage to influence the behaviour and the conduct of the Gildan Company, so as to ensure that the Gildan Company operates in an ethical and socially responsible manner; this action will not mean financial loss to any of the two companies. The third course of action that the management of the Solidarity Fund may take is to remain passive and let the Gildan Company to conduct its businesses as it feels fit; this action may mean financial loss to the two companies because, given the public outcry about the unethical behaviour of the Gildan Company, the members of the public are likely to lose confidence in the Company, unless the management of the Gildan Company takes drastic measures to address the ethical concerns raised about the operations of their company. Evaluation and Analysis I would analyse this case by using the main principles of business ethics and the principles of corporate social responsibility. The principles of business ethics demands that any business organization should treat its employs in a humane manner, without exploiting the employees for undue advantage; on the other hand, the principles of corporate social responsibility demand that business organizations should business organizations should act in socially responsible manner by ensuring that the activities of the business organizations contribute to the common good of the society and the environment. An analysis of the conduct of the Gildan Company in light of these principles shows that the Gildan Company’s is both unethical and socially irresponsible. To reach a recommendation, I would therefore recommend the Gildan Company to align its conducts and its operations to the principles of business ethics and the principles of corporate social responsibility. This is because failure to conform to the principles of business ethics and corporate social responsibility can prove costly to the Gildan Company. Recommendation My preferred solution to this case is that, the Solidarity Fund should not end its partnership with the Gildan Company, but it should use its leverage to influence the behaviour and the conduct of the Gildan Company. There are two factors that have made me to reach this decision. Firstly, given the fact that the Solidarity Fund has a big share in the Gildan Company and has even the ability to place their member in the managing board of the Gildan Company means that the Solidarity Fund Company has big influence on the Company and it can effectively use this leverage to overhaul the management and the operations of the Gildan Company. The Solidarity Fund can use various means to achieve this end; for instance, the Solidarity Fund may blackmail the Gildan Company that it will end its partnership with them unless they change their business conducts. The second reason why I have reached this decision is that this decision is the only decision that will mean no significant financial loses to the two Companies; all the available alternatives will mean financial loses to both of these two companies. Action and Implementation The main obstacle to implementing my recommendation is that the forces of status quo in the Gildan Company may strongly oppose changing the operation model and the business conduct of the Gildan Company. Given that the Gildan Company is benefiting from their unethical conduct, it is highly likely that some senior managers of the Gildan Company will oppose any move aimed at changing the operations and the business conduct of the Gildan Company. To overcome this obstacle, I would make the change-resistant managers to understand that overhauling the operations of the Company is for the long term advantage of the Company; I would also make the management of the Company to realize that failure to end the unethical practices will have severe negative consequences to the company in the long-run. Key Learning In conclusion, this case is a case of blatant violation of the principles of business ethics and corporate social responsibility. By exploiting its employees so as to maximize its profits, the Gildan Company acted in an unethical way. Gildan Company’s conduct is morally unjustifiable because it does not regard the individual interests of its employees. The Solidarity Fund Company, on the other hand, has steadfastly stood by its vision and mission of abiding by the principles of business ethics and corporate social responsibility. We learn this from the fact that management of the Solidarity pondered ending partnership with Gildan following its unethical practices. Reference Ferrell, & Fraedrich. (2008) Business Ethics: Ethical Decision making and Cases.USA: Cengage Learning. Read More