Shutdown at Eastland - Assignment Example

Section 1 Does the closing of a plant when it ceas­es to be profitable violate the "moral minimum"? Corporate, have over the years evolved from mere profit-making entities to organizations with social responsibilities too. A set of internal policies meant to signify that the businesses no longer operate in vacuum and that the various decisions taken while carrying out the wide range of business operations have quite significant impacts on the society as well. This framework of thought process gave rise to the concept of Corporate Social Responsibility (CSR). CSR identifies to what extent a company extends its resources so as to benefit the society at large beyond the realm of its own stockholders.1 CSR is basically supported by three schools of thought: (a) Managerial Capitalism: According to this view, a firm should concentrate on maximizing its shareholders’ profit which in turn will automatically benefit the stockholders and society in general through increased employee salaries, tax revenue and payment to all those directly or indirectly associated with the company. (b) Stakeholder Theory: This theory believes that a company has certain duties and responsibilities towards its stakeholders such as employees, suppliers, customers, stockholders and community. (c) The Moral Minimum: This theory lies between the two extremes of capitalism and stakeholder theory. Under it, a corporation should maximize its profits; however, in the process it should avoid causing harm to others. “The moral minimum standard holds that firms should not produce products or services or engage in activities that inflict avoidable harm on others. At minimum, corporations should design, manufacture, distribute, and sell safe products that will sell while following this standard.”2 Now, talking of the case, the ‘Speedy Motors Company’ has the right to close plants and relocate and transfer operations to a place of their choice in situations varying from cheap operating costs to lower taxes, no unions, any other business advantages or in case of financial losses, loss of competitiveness and other valid economic reasons. To this extent it is not wrong. However, such an act without warning, and without due notice at a justifiably prior time would be unethical towards the employees and the communities that depend on their jobs and would then amount to violation of ‘The Moral Minimum’. Thus, a prior notice before closing operations and an opportunity to find an alternate employment while still on payroll would mean that the corporation is taking care of its business needs while avoiding any potential harm caused to its stakeholders in the process and hence following in principle, the law of “Moral Minimum. Section 2: Who are the affected stakeholders, and how should their interests be considered? A stakeholder is “any individual or group who can affect or is affected by actions, decisions, policies, practices, or goals of the organization.”3 According to R Edward Freeman, a company has six stakeholders: Employees, Customers, Managers, Suppliers, Local community and Stockholders. However, if we look at the stakeholders of a company, we can also classify them as primary and secondary stakeholders. Primary Stakeholders would be all those who are directly related to the interests of the company and are directly affected by its performance and decisions whereas, secondary stakeholders would be all other interest groups who are indirectly associated with the company for example, media, government, society etc. With regards to the case, the affected stakeholders are: (a) Primary (such as the workers and employees who have lost their employment due to the closure of the plant) (b) Secondary (such as the communities and other dependants who were depended on the jobs of the employees of the company). Closure of plants and factories impact the jobs and careers, the families and local tax revenues. All these in turn gradually lead to an adverse effect on the regional and national economies depending on the scale and size of the shut down. The interest of the above mentioned affected stakeholders can be taken care of in various ways: By ensuring that the closing out factories give a sufficiently prior notice to those workers and employees who are associated with the factory and would thus lose jobs when it closes down. “Since August 1988, companies with more than 100 employees must by law give 60-day notice to workers before closing.”4 Employees should have a fair, equal and just treatment in cases where companies decide to relocate or close down. “Employees have a right to be compensated for the costs of retraining, transferring, and relocating; they have rights to severance pay and to outplacement and support programs that assist them in finding alternative employment; and they have right to have their pension, health, and retirement plans honored.”5 In order to move beyond the employees of a company and think about the welfare of the community at large where the plant was operating, there could be an attempt to find an alternate owner for the company which would give a second chance to the lifeline of company and all the others directly or indirectly associated with it. The option of employee ownership of the plant can also be considered and for those companies where the unions are significantly active, they might also be given an opportunity to consider taking up the ownership of the plant. Section 3 Who should take primary responsibility for those laid off or terminated because of a plant closing? How much ever genuine the motivation for the closure of factories big/small, or even for relocation and transfer of operations geographically; the welfare of the employees and the communities associated with them ought to be paid due consideration. In this particular case of aggrieved workers were terminated owning to the shutdown of the plant at Eastland. Now the issue of who should take up the primary responsibility for these arises, for which we first need to study the circumstances under which the responsibility arises. According to an article on "The Responsibilities of Corporations and Their Owners"6, there are four major criteria which decide this responsibility: (i) Critical Need: Talking particularly of this case, termination of a job leads to loss of livelihood for workers and would bring hardships for the families and communities associated with them; thus in this case the need to fairly compensate them is critical and the onus lies on the company so as to ensure that they receive their dues on time and in justified amount. (ii) Proximity: The principle of proximity argues that proximity refers to whether the injury caused to someone is in knowledge of the person/ institution causing the harm or not. If it is so, then the particular entity is to be held guilty because he is aware of the distress caused due to it and still does not attempt to remedy the situation to the extent he can at best help. Thus, according to this principle, the ‘Speedy Motors Company’ has full knowledge of the suffering that the terminated workers would have to undergo, and hence should make due arrangement for pacifying their situation. (iii) Capability: Although the responsibility to help out the aggrieved workers lies with the Speedy Motors Company, however, the principle of capability argues that unless a person/ institution can reasonably be expected to do something to assuage the condition of the victimized party, it should not be held responsible. However, large corporations like Speedy Motors Company which employed nearly 2,000 workers and had been in operation for more than 20 years, it would not be very unreasonable to ask it to mitigate the injury caused to its workers due to the termination of such a long alliance. (iv) Last Resort: This principle explains that a person/ institution might decide to wait for some other help to the injured party until it seems clear that none other exists. However, in this case some other mode of help might be an NGO or some form of regional government help, and all these would be secondary mode of aid. The primary responsibility still rests with the employer and it should not wait till the last resort. Read More