Introduction
There have been significant changes in the world of work and the workforce that paved the way for new ways of organizational thinking. These changes along with other trends called for new relationships between organizations and their employees. The centre of these new relationships is employee rights. Along with the development of human resources and the strategic integration of HRM activities and policies with the organization strategies, comes the demand for employee rights.
Ethics
Ethics is a philosophical term derived from the Greek word “ethos,” meaning character or custom. Ethics is a discipline that deals with what is good and bad and with moral duty and obligation. Ethics can also be regarded as a set of moral principles or values (Sims, 2003).
Business Ethics
Business ethics is concerned with good and bad or right and wrong behaviour and practices within a business context. Concepts of right and wrong are increasingly being interpreted to include the more difficult and subtle questions of fairness, justice, and right and wrong behaviour in business (Sims, 2003). According to Vernon (2002), ethics in business usually refers to the study of socially responsible and morally justifiable behaviour in managers and companies (p.76). There are two key branches of ethics. These are normative and descriptive ethics. Normative ethics is concerned with supplying and justifying a coherent moral system of thinking and judging. Normative ethics seeks to uncover, develop and justify basic moral principles that are intended to guide behaviour, actions, and decisions. When applied in the business context, normative ethics seeks to propose some principle or principles for distinguishing ethical from unethical. It deals with “what ought to be” or “what ought not to be” in terms of business practices. Normative ethics is concerned with establishing norms or standards by which business might be guided or judged. Descriptive ethics by contrast, is concerned with describing, characterizing, and studying morality of a people, a culture, or a society. It also compares and contrasts different moral codes, systems, practices, beliefs, and values. In descriptive business ethics, the focus is on learning what is occurring in the real of behaviour, actions, decisions, policies, and practices of business organizations, managers, or specific industries (Sims, 2003).
Business Ethics Case
The case is an example of a situation when business ethics is called for. The case is about the dismissal of more than 560 employees from Visteon, a car-parts manufacturer which was a spin-out of Ford. Administrators from KPMG said they had no option but to shut the factories, given the amount of cash being lost from the business. However, workers are complaining that they were given less than an hour’s notice and they claim that they were given guarantees on pay and conditions when the company was spun out of Ford nine years ago. Workers were not dismissed properly. Furthermore, Visteon and Ford seem to be both unwilling to give the redundancy packages that are due the employees. Visteon and Ford held a meeting to determine who is responsible for providing the redundancy packages.
The agent for the business ethics case is the Human Resource Director of Visteon.
Utilitarian Ethics
According to Barry (1979) Utilitarianism has several features that appeal as a basis for business decisions. These include (1) it provides a basis for formulating and testing policies; (2) it provides an objective way of resolving conflicts of self-interests; (3) it recognizes the four primary claimant (groups in business activity, owners, employees, customers and society); (4) it provides the latitude in decision-making that business seems to need.
Agent Action according to Utilitarian Ethics
In the case of downsizing at Visteon, the company was obliged to close its plant, thereby dismissing 560 employees. The management was compelled to close its plant because of poor sales. The management argues that the decision to close the plant is a cost-cutting measure that aims to save the company from further loses. By closing the plant, the company is able to focus its attention to more profitable plants and avoid other employees from being affected. The decision of the company to close the plant adheres to Utilitarian ethics which calls for action that maximizes the welfare of the maximum number of people. Although closing the plant entailed the dismissal of 560 employees, the action was seen by the management as ethical since the business will be saved. The administrators of the company said that they had no option but to shut the factories given the amount of cash being lost from the business.
Visteon Corporation is a leading global supplier of automotive systems, modules and components to global vehicle manufacturers and the automotive aftermarket. The company is headquartered in Van Buren Township, Michigan, has a workforce of approximately 33,500 employees and has a network of manufacturing sites, technical centers, sales offices and joint ventures located in every major geographic region of the world (Visteon Annual 2008 Report, 2009).
The closing of Visteon’s Enfield plant is part of the company’s strategy to reduce costs. There are different factors that pushed the company to follow this strategy. Difficult economic and market conditions have increased the need to conserve and generate cash in the automotive sector. During 2008, the company completed the previously announced multi-year improvement plan that was designed to sell, fix or close certain unprofitable or non-core business (Visteon 2008 Annual Report, 2009). The company’s strategy to reduce costs and preserve cash includes the following:
· Eliminate excess production capacity and high fixed cost structures (Visteon 2008 Annual Report, 2009).
· Reduce administrative costs – the company continues to implement actions designed to fundamentally reorganize and streamline its administrative functions and reduce overall costs in line with lower customer volumes and weakened economic conditions. Such actions include organizational realignment and consolidation, employee salary and benefit reductions, resource relocation to more competitive locations, selective functional outsourcing and evaluation of third-party supplier arrangements for purchased services (Visteon, 2008 Annual Report, 2009).
· Enhanced financial disciplines (Visteon 2008 Annual Report, 2009).
Looking at the situation of Visteon and the different factors that are affecting the company, the agent becomes aware that the company has no other option but to close plants that it considers as unprofitable. Looking through a utilitarian ethical perspective, the agent is compelled to judge the moral worth of the action based on the amount of happiness or suffering they are likely to cause for all who can be affected by them, compared with the amount of happiness or suffering likely to be caused by alternative actions. The agent must be aware that the company has different stakeholders who will be affected by the decision. Every business has an ethical duty to its stakeholders. Stakeholders affect organization and are affected by it, with certain expectations as to what the organization should do and how it should do it.
- A company’s duty to employees arises out of respect for the worth and dignity of individuals who devote their energies to the business and who depend on the business for their economic well-being. Principled strategy making requires that employee-related decisions be made equitably and compassionately, with concern for due process and for the impact that strategic change has on employees’ lives. At best, the chosen strategy should promote employee interests as concerns compensation, career opportunities, job security, and overall working conditions (Sims, 2003).
- The duty to the customer arises out of expectations that attend the purchase of good and service (Sims, 2003).
- An organization’s ethical duty to suppliers arises out of market relationship that exists between them. They are both partners and adversaries. They are partners in the sense that the quality of suppliers’ parts affects the quality of a company’s product in the sense that their businesses are connected. They are adversaries in the sense that the supplier wants the higher price and profit it can get while the buyer wants a cheaper price, better quality, and speedier service (Sims, 2003).
- A company has a duty to shareholders who rightly expect a return on their investment. Even though investors may differ in their preferences for profits now versus profits later, their tolerance for greater risk, and their enthusiasm for exercising social responsibility, business executives have a moral duty to pursue profitable management of the owners’ investment (Sims, 2003).
- An organization’s duty to the community at large stems from its status as a member of the community and as an institution of society. Communities and society are reasonable in expecting businesses to be good citizens – to pay their fair share of taxes for fire and police protection, streets and highways, waste removal, and so on, and to exercise care in the impact their activities have on the environment, society, and the communities in which they operate (Sims, 2003).
Utilitarian ethics calls for cost-benefit analysis. Utilitarianism suggests that decision makers should only undertake those actions where the benefits exceed the costs. By doing so, the decision maker will be sure that the organization and its stakeholders will benefit. The decision procedure that the agent must follow in utilitarian ethics will be:
1. Identify all possible options for the action.
2. Identify the groups and individuals on which these possible options will have an impact.
3. Evaluate the benefits and negative consequences that each possible option will have on all of these groups and individuals.
4. Choose the possible option with the greatest net benefit.
There are two options that the agent can take – one is to close the Visteon plant in Enfield and the other is to not close the Enfield plant and suffer severe financial losses. These two options will be considered in detail.
Option 1: Close Enfield Plant
Going with the first option will result in the dismissal of 560 employees. These employees will be negatively affected by the decision, on the other hand, going with this option meant that the company will be able to cope with economic difficulties and be able to reduce costs that will enable the company to use the financial resources that it saved in improving its products and services, positively affecting its business, customers, employees and business partners.
Option 2: Do not Close Enfield Plant
Going with option two will positively affect the 560 employees at Enfield plant since they will not lose their jobs. However, the company will fail in reducing cost and therefore will not be able to solve its business problems. The company’s employees will be affected since the company will suffer loses. Its business partners and suppliers will also be affected since the company may be pushed to terminate its partnership with them. Employees will also suffer due to the decline in product and service quality.
Utilitarianism requires an equal and impartial consideration of interests. The morally right action is the one that is most likely to maximize happiness, considering equally the interests of all affected by it, no matter who these people are.
Kantian Moral Theory
Deontological ethics, according to Geisler and Moreland (1990), are sometimes associated with divine command theories of morality (what is right or wrong is a matter of what God commands) and with the moral theories of the philosopher Immanuel Kant (p.15). As Immanuel Kant argued, people should be treated as members of the kingdom of ends. People are objects of moral worth and should be treated as ends in themselves, never merely as a mean to some other end. We often treat each other as means to an end – for instance, a student may treat a teacher as a means to gaining knowledge – but we ought not to treat people merely as means. Such treatment dehumanizes persons by treating them as things. Persons are not bundles of pleasant and unpleasant mental states, nor are they merely valuable because of their social utility. A human being is a person with intrinsic value simply because that person is a member of the natural class “human being” (Geisler and Moreland 1990, p.16). Kantian moral theory is a deontological ethical theory. The word ‘deontological’ comes from the Greek word ‘deon’ meaning duty. Deontological theories see morality in terms of duties to do or to not do certain types of action – regardless of the likely consequences. These moral theories assert that the moral rightness or wrongness of an action is not determined by its likely consequences but the principle of the action.
Deontological theories maintain that the concept of duty is, in some respects, independent of the concept of good and that some actions are right or wrong for reasons other than their consequences. Kantian ethics fall into this category. Kant argues that what makes an action right or wrong is not the sum of its consequences but the fact that it conforms to moral law. Moral laws of duty demand that people act not only in accordance with duty but for the sake of duty. It not good enough to perform a morally correct action, because this could stem from self-interested motives that have nothing to do with morality. Rather an action is moral if it conforms to moral law that is based not in intuition, conscience or utility, but in pure reason (Mabey, et al 1998).
Agent Action according to Kantian Ethics
In Kantian ethical decision-making, the agent must follow the following steps:
1. Determine the facts of the matter.
2. Identify the ethical issue.
3. Develop alternative for solving the ethical issue.
4. Define the stakeholder for each alternative – identify any individual or group who will be affected to a significant degree by the choice of one alternative or another.
5. Evaluate the ethics of each alternative according to the tenet of Kantianism – the rights and duties perspective (what are the rights and duties of the moral actors in the situation).
The ethical issue from the case is the termination of employment of 560 employees of Visteon, the failure of the company to give appropriate notice to the employees and the hesitation of the company to grant redundancy packages to the displaced employees. Kantianism gives considerable emphasis on rights and duties. The agent, being the HR director of Visteon needs accomplish its duties to the employees and needs to respect the rights of the employees.
Rights and Duties
There are two group of moral actors in the case – employees and the Visteon management. The employment laws in the United Kingdom (where the case happened) identify the rights of the employees and the duties of the organization (its management). Employees at Visteon’s Enfield plant were dismissed due to redundancy cause by the intention of the company to cease its operation in Enfield because of continued economic problems, continued loss of profits and as a means to reduce cost. The plant was chosen because the company considered it as unprofitable. Under United Kingdom’s employment law, the company must pay a “statutory redundancy payment” (www.compactlaw.co.uk). According to the statutory redundancy payments scheme, employees that will be dismissed that are caused not by their own fault must be compensated (Department for Business Innovation and Skills, 2009).
Duties of the Company
The company under United Kingdom laws has a number of duties in situations where employees have been deemed as redundant and dismissed. In the case, the cause for dismissing the employees is because of redundancy due to the closure of the workplace.
1. The employer needs to make a plan of who will be dismissed and who will retain their posts. The reason for redundancy must also be explained.
2. It is required that the employer communicates with the affected employees and informs them of the redundancy.
3. The employer must determine the number of people that will be made redundant.
4. The employer is also required to consult with the representatives of the employees in cases where more than 20 employees will be dismissed due to redundancy.
5. The employer is required to discuss the criteria which were chosen in identifying the employees that will be dismissed due to redundancy.
6. if the company failed to properly consult the employees, it can be directed to pay a “protective award” to the employees by the Employment Tribunal (www.compactlaw.co.uk).
Employee Rights
Employees are entitled to receive redundancy payment if they have been working in the company for at least two years. Those employees that are made redundant are entitled to a number of rights. First, they must be consulted in advance in order to offer suggestions or discuss alternatives. Employees also have the right to be informed why their were chosen and what were the criteria employed. The employees have the right to be subjected to a fair process. Employees may also be offered with alternative jobs in the organization, if this is the case, they have the right to try out any alternative offer of suitable work for 4 weeks. Employees also have the right to search for alternative work and allowed by the organization to do so with pay.
Conclusion
It is clear from the discussion above, that Visteon has unethically dismissed its employees in the Enfield plant. The company did not only failed to properly inform the employees about the impending redundancy, it also did not consult with the employees. Employees were informed about the redundancy only minutes before they were dismissed. To make matters worse, the company seems to ignore the employees’ demands for a redundancy package. Kantian ethics call for adherence with the law, the fulfillment of one’s duties and respect of others’ rights. All of these were violated by the company.
References
Annual Report (2008). Visteon. Retrieved January 07, 2010, from http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MzM1Mzg1fENoaWxkSUQ9MzE4OTQ2fFR5cGU9MQ==&t=1
Barry, V. (1979). Moral issues in business. Belmont, CA: Wadsworth Publishing Company.
Employer’s responsibility – redundancy. (2009). Compact Law. Retrieved January 07, 2010, from http://www.compactlaw.co.uk/free_legal_information/employment_law/empf24.html.
Geisler, N. L. and Moreland, J. P. (1990). The life and death debate: Moral issues of our time. Greenwood Publsihing.
Mabey, C., Skinner, D., and Clark, T. (1998). Experiencing human resource management. SAGE.
Redundancy entitlement statutory rights: a guide for employees. (2009). Department for Business Innovation and Skills. Retrieved January 07, 2010, from http://webarchive.nationalarchives.gov.uk/+/http://www.berr.gov.uk//employment/employment-legislation/employment-guidance/page15686.html.
Redundancy policy. (2009). Compact Law. Retrieved January 07, 2010, from www.compactlaw.co.uk.
Sims, R. (2003). Ethics and Corporate Social Responsibility: Why Giants Fall. Westport CT: Praeger.
Vernon, M. (2002). Business: The key concepts. New York: Routledge.
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