BUSINESS LEADERSHIP & CORPORATE RESPONSIBILITY

ANG PUA XUAN 3157 190181998

1884 words
Table of contents
1.0 Introduction
2.0 Background Analysis
3.0 Option Assessment
3.1 First option
3.2 Second option
4.0 Decision-Making Considerations
5.0 Recommendations
6.0 Conclusion
7.0 References
1.0 Introduction
TCifer is a company that owned three factories to manufacture their
pharmaceutical products in United States. It is a big and well-established company
and have a lot of workers in their company. The workers of TCifer are mostly local
and make up eighty percent of their workforce strength. However, their products are
currently shown little growth on their sales. Their profits are still adequate currently
but also in decline situation too. Therefore, the Board of Directors of TCifer are
thinking over cost reduction plans in order to increase the profit margins. The Board
of Directors had come out with two options.
The first option is outsourcing fifty percent of their production to another
country where the workforce is not just relatively cost-effective, but also having much
more lower of operating costs than their own country. This business practice can be
made by March 2022. TCifer is able to cut down their production costs by thirty
percent if they do so. However, outsourcing production to another country would
implies that some current production workers will be made redundant. Therefore, the
company will need to retrench most of their redundant workforce. This leads to an
ethical dilemma where the company want to increase their profit margin by
outsourcing the production and retrenching the redundant workforce or to keep the
existing workforce and the production in the country in order to protect the benefits of
the workers.
The second option is renegotiating the current collective agreement with in-
house union representatives which will be finish in December 2021. The purpose of
renegotiation is to launch their cost reduction plans in terms of salaries and benefits of
the workers that is now being paid in the existing contract. The company would
obtain favourable advantages in renegotiating the existing terms due to the pandemic
situation. The ethical dilemma in this situation is the company want to launch their
cost reduction plans by cut down the wages and benefits of workers in the coming
collective agreement or to remain the existing terms in the coming collective
agreement to protect the workers’ benefits.

2.0 Background Analysis

Stakeholders  Workers
Reasons of decline in the market  May due to the introduction of better products
 in the market.
Previous and potential  According to the report from ISR, it was
outsourcing contracts found that around two-third of pharmaceutical
manufacturing is outsourced.
(EuropeanPharmaceuticalReview, 2018)
Collective agreement  A lot of companies applied pay cut and
reducing incentives during pandemic.(Stephen
Miller, 2020)
 There is National Labor Relations Act 1935
that allows employees to join trade unions in
order to protect their rights and benefits.
(National Labor Relations Act 1935)

3.0 Option Assessment

3.1 First option
The first option of TCifer is outsourcing their production to another country
and retrench the redundant workers. According to the teleological theory which is also
called consequentialist theory stated that actions are ethical and morally right if those
actions produce good consequences.(Gregory and Giancola, 2003) If the actions of
TCifer can produce good consequences then their actions are ethical. Therefore, the
action of outsourcing production to another country and retrenching redundant
workers can be considered ethical if they are able to reduce cost and increase profit
margin.
A teleological theory consists of two main approaches which are egoism and
utilitarianism. Egoism means that the actions are ethical if the actions are done on the
purpose of getting self interest even if the actions may cause bad influences to other
people.(Shaw and Post, 1993) In this case, as long as TCifer is able to reduce their
cost and increase their profit, then their actions of retrench the redundant workers will
be consider ethical.
The second approach is utilitarianism which have two categories which are act
utilitarianism and rule utilitarianism. Act utilitarianism means that the actions are
correct and ethical if the actions produce more happiness than pain for most of the
people.(Mizzoni, 2017) Therefore, if TCifer is able to produce more pleasure than
pain for most of the people by outsourcing the production and retrenching the
redundant workers, they are ethical to do so. However, it is difficult to measure
happiness and pain. Therefore, the company may apply cost benefit analysis to use the
monetary units to identify the happiness and pain.(Mishan and Quah, 2020) TCifer is
able to calculate the values of each workers, how much benefits they can get and how
much cost they can cut down if they outsource the production to another country and
retrench the redundant workers. Thus, if the benefits are more than the cost, their
actions will be morally right. Undeniably, cost benefit analysis is a good way to
determine the happiness and pain but there are also some cons in it. This is because
placing a monetary value on the life and experiences of a human which is inaccurate
and seems cold-hearted.(Hwang, 2015)
Moreover, there is compensatory justice ethics where the people will be justly
compensated for their damages by those who have harm them.(Cropanzano, R.,et al.,
2015) Therefore, TCifer must compensate those retrenched workers as those workers
will lose their job and stable income. Besides that, the workers will suffer from
finding a new job especially during the pandemic.
However, according to deontological theory, it was held that the ethical or
unethical actions will be based on the conformity to some moral norms or the inherent
nature instead of focus on the consequences.(Abderrahmane Benlahcene, 2018) In this
case, the reduction of cost and the increase of profit margin are not primary for TCifer
but the action of retrenching the redundant workers will be focus on. Therefore, the
action of retrenching the redundant workers in order to increase the profit margin and
reduce cost will be considered unethical. This is because TCifer did not concern and
care about the life of the workers and let the workers suffer for living as they lost their
job and stable income.

3.2 Second option

The second option of TCifer is renegotiating the collective agreement with in-
house union representatives to cut down the wages and benefits of workers.
According to the teleological theory, the action of TCifer to renegotiate the collective
agreement to cut down the wages and benefits of workers is ethical and morally
correct as the company is able to reduce their cost and improve profit margins.
 Besides that, according to the act utilitarianism, the action of TCifer in second
option provides more happiness than pains for all of their workers. This is because all
workers is able to keep their job and get stable income during the pandemic.
However, according to the deontological theory, TCifer should not cut down
the wages and benefits of workers as the workers are doing the same job as before. It
is the responsibility of TCifer to pay their workers according to their effort.
Moreover, according to the rights ethics, the ethical actions must uphold the
rights of people.(Arnold et al., 2010) Therefore, workers have their rights to get what
the wages and benefits they deserve to get for the works they done.

4.0 Decision-Making Considerations

The better option for TCifer is the second option. This is because according to
Carroll’s pyramid, a company has to fulfill their responsibility at four levels which are
economic, legal, ethical and philanthropic. The lowest level of the pyramid is
economic responsibility which is the primary responsibility of a company where the
company needs to be profitable.(Carroll, 1991) The company needs to survive in
order to pay wages and benefits for their workers. TCifer needs to reduce their cost
and earn more profit in order to make sure their workers will be paid. Therefore,
renegotiating the existing collective agreement to cut down wages and benefits in
order to reduce their cost and increase profit margins especially during pandemic
situation are their economic responsibility.
The third level of the pyramid is legal responsibility which implies that the
company is obligated to follow the laws and rules.(Carroll, 1991) The company must
follow the employment laws and other legal regulations when they want to cut down
the wages and benefits of the workers in order to reduce the cost and improve profit
margins. TCifer cannot straight away cut down the wages and benefits of the workers
but to negotiate with the representative of trade union and get mutual agreement in
their collective agreement. If TCifer failed to do so, they might be sued and damage
their company image.
The second level of the pyramid is ethical responsibility where the company
do the correct and ethical actions, and avoiding harm and damage to others. Unlike
the legal responsibility, the company is not obligated to have ethical responsibility.
However, public and society will be more willingly to buy the products from a
company which is good and ethical.(Carroll, 1991) In the second option, TCifer did
not retrench any workers but only renegotiate the collective agreement with trade
union to reduce the wages and benefits of the workers. Even though the wages and the
benefits of the workers will be cut down, but they are able to keep their job and have
stable income during the pandemic situation. It is lucky for the workers to be able to
keep their job as there are a lot of people losing the jobs during pandemic. In United
States, there are around 9.6 million of workers lost their jobs.(BENNETT, 2021)
The highest level of the pyramid is philanthropic responsibility where the
company is ‘giving back’ to the society.(Carroll, 1991)

The diagram above is the Carroll’s pyramid of corporate social responsibility.

(Thacker, 2019)

5.0 Recommendations
 Since the sales have little growth and the profits are in decline, TCifer may
innovate and introduce new and better products to the market which may promote
their sales and increase profits. Thus, the company is no need to retrench the
workers or cut down their wages and benefits anymore.
 During the renegotiation of collective agreement with the representative of trade
union, TCifer must provide clear evidence that the company is suffering and
needs to reduce their cost in order to make sure the company can survive during
pandemic. If the workers insisted refuse to reduce their wages and benefits, the
company may bankrupt and close down, and the all the workers will lose their
job.
 Moreover, TCifer can make an agreement with the trade union that they can
negotiate the collective agreement again to change back to the original wages and
benefits once the pandemic is over.
6.0 Conclusion
In conclusion, both options for TCifer have dilemmas in it. TCifer or the
workers must understand each other’s difficulties. The second option is a greater
option than the first option not just for TCifer but also to the workers themselves. The
second option can help both parties the most in that circumstances. Unlike the first
option, there are some workers can keep their job and most of the workers will need
to be retrench for the greater good of the company. The retrenchment of redundant
workers not only affects the workers’ life but also affected the image of the company.
The society or public will think that the company do not have compassion for the
workers and do not care about the benefits of their workers but only concern about the
more profits they can get. It may cause the consumer refuse to buy their products
because of their actions.
7.0 References
Arnold, D., Audi, R. and Zwolinski, M., 2010. Recent Work in Ethical Theory and Its
Implications for Business Ethics. Business Ethics Quarterly, 20(4), pp.559-581.

BENNETT, J., 2021. Fewer jobs have been lost in the EU than in the U.S. during the
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Carroll, A., 1991. The pyramid of corporate social responsibility: Toward the moral
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Cropanzano, R., Ambrose, M., Mullen, E. and Okimoto, T., 2015. Compensatory
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Gregory, W. and Giancola, D., 2003. World ethics. Australia: Wadsworth/Thomson

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Mizzoni, J., 2017. Ethics. 2nd ed. Malden, MA: Wiley-Blackwell.

Mishan, E. and Quah, E., 2020. Cost-benefit analysis. 6th ed. London: Routledge.
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Stephen Miller, 2020. Pandemic Forces Employers to Cut Pay. [online] SHRM.
Available at:
<https://www.shrm.org/resourcesandtools/hr-topics/compensation/pages/pandemic-
forces-employers-to-cut-pay.aspx> [Accessed 9 December 2021].

Shaw, B. and Post, F., 1993. A moral basis for corporate philanthropy. Journal of
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Thacker, H., 2019. Understanding the Four Levels of CSR - The CSR Journal.
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