Title: Balancing Stakeholder Interests: Layoffs vs.

Long-Term Sustainability in
Economic Downturns
Rahul Vajpayee
T00689234
Course: Ethics and Corporate Social Responsibility (BUSN6011)
 Table of Contents

Part 1: Ethical Dilemma Description 3

PART 2 4
1. Ethical Standards Analysis 4
2. Proposed Alternative 1: Workforce Reduction through Layoffs 5
3. Proposed Alternative 2: Implement a Salary Reduction Plan 6
4. Proposed Alternative 3: Implement a Furlough Program 7
Part 3: Optimal Solution 8
PART 4: References 8
Part 1: Ethical Dilemma Description

The company has faced a number of economic difficulties over the past two years, most of
which can be attributed to a generalized market downturn. Since drastic cuts in spending have
been required due to lack of funds, there may be shifts in management and personnel (Paine,
2007).

The chief executive officer (CEO) is at the center of our ethical dilemma because he or she is
responsible for guiding the company through these challenging times. Reducing the size of
the company's workforce is one of the most important options being considered. This
proposal makes sense monetarily, as it accords with the requirement to reduce costs and
safeguard the firm's financial health. It's possible that layoffs will provide the financial relief
necessary to survive the market downturn (Trevino and Nelson, 2011).

Such a move could provide temporary cover for the business, but it would raise serious
ethical issues. Workers and their families are the company's lifeblood, so any layoffs would
be devastating to them. Besides the obvious effects on their bank accounts, the company
could suffer from a rise in stress levels, a drop in morale among the remaining workforce, and
even reputational harm (Crane and Matten, 2007).

The CEO is caught in a difficult moral bind and must make a decision between two good
options. Shareholders and the company as a whole have a strategic and fiduciary
responsibility to keep the business running. Strong fiscal stewardship is required for this
responsibility, which may necessitate unpopular measures like laying off employees
(Northouse, 2018).

On the other hand, the CEO is responsible to the company's employees for their actions, as
they are the ones who have made the company successful in the past. This obligation entails
ensuring their safety, encouraging job stability, and creating a welcoming atmosphere for
them to keep making valuable contributions to the business (Ciulla, 2004).
 The ethical dilemma results from the competing interests of ensuring the company's
continued success and looking out for the welfare of its employees. Finding a workable
solution that can uphold the CEO's responsibilities to the company and its employees while
also satisfying these competing imperatives is difficult (Paine, 2007).

This situation presents an ethical conundrum because it requires a choice between competing
moral imperatives. The CEO needs to find a way forward that helps the company thrive while
also minimising negative effects on employees' lives and careers (Trevino and Nelson, 2011).

PART 2

1. Ethical Standards Analysis

Best
Organisational practice on
Ethical Duties to this Rights of precedent on this this kind of Additional Commitment
Stakeholder(s) Standards party this party kind of issue issue
Industry
best practice
suggests
exploring
Shareholders alternatives
: Ensure the like
company's furloughs,
survival and Make salary
prosperity; informed In past downturns, reductions,
Employees: decisions the company has or voluntary
Maintain job for the attempted to reduce retirements Maintain trust and
security and company' operational costs before confidence among
Fiduciary a healthy s future before resorting to layoffs employees and
Duty, Duty working (Ciulla, layoffs (Crane and (Northouse, shareholders (Yukl et al.,
CEO of Care environment 2004). Matten, 2007). 2018). 2013).
 CEO:
Continue to Industry
contribute to best practice
the company suggests
till last day Fair giving
of treatment adequate
employment; , job notice,
Company: security, In past downturns, providing
Provide timely the company has fair
proper communi tried to give ample severance
severance cation notice to employees packages,
and support (Carrol and provided and offering
during and adequate severance job Continual dedication and
Employees set Duty of transition(Pa Buchholt packages (Trevino placement effort in their roles till the
to be laid off Loyalty ine, 2007). z, 2014). and Nelson, 2011). services end of their tenure
CEO: Keep Industry
working and best practice
supporting suggests
the company maintaining
during these open
challenging communicat
times; A stable ion,
Company: work supporting
Maintain a environm employee
stable work ent, open In past downturns, morale, and
environment communi the company has ensuring job
and job cation, focused on security as
security job maintaining morale far as
(Beauchamp security and job security for possible Maintain dedication to
and (De remaining (Donaldson their roles and the
Remaining Duty of Childress, George, employees (Crane and Dunfee, company during difficult
Employees Loyalty 2001). 2010). and Matten, 2007). 1994). times
Industry
best practice
Expectati suggests
on of the clear
company' communicat
s survival ion with
and shareholders
prosperit about
CEO: Make y, and financial
decisions prudent In past downturns, decisions
that protect decision- the company has and Expectation of prudent
and enhance making focused on financial strategies financial management and
Duty of company by the stability and (Northouse, decision-making (De
Shareholders Good Faith value CEO shareholder value 2018). George, 2010).
 2. Proposed Alternative 1: Workforce Reduction through Layoffs

This involves downsizing the company's workforce through layoffs to reduce expenses and
ensure the company's survival.

Likely Consequences Positive Likely Consequences Negative

Stakeholders (short and long term) (short and long term)

Short-term, there could be costs associated with

Immediate reduction in operational costs. Long- severance pay. Long-term, company could face
term, financial stability could be regained loss of talent and lower morale among
Company (Donaldson and Dunfee, 1994). remaining employees (Yukl et al., 2013).

Immediate loss of income and employment.

Employees subject Eligible for severance pay and possibly Long-term, potential financial and emotional
to layoff unemployment benefits (Paine, 2007). distress (Northouse, 2018).

Potential fear and decreased morale, leading to

Remaining Job security, at least in the short-term (Crane decreased productivity. Long-term, increased
employees and Matten, 2007). workload (Trevino and Nelson, 2011).

Minimal immediate impact. Long-term,

possible reduction in service or product quality
Customers/Clients due to reduced workforce (Ciulla, 2004).

3. Proposed Alternative 2: Implement a Salary Reduction Plan

Instead of layoffs, the company could implement a temporary reduction in salaries for all
employees.

Likely Consequences Positive Likely Consequences Negative

Stakeholders (short and long term) (short and long term)

Company Immediate cost savings without loss of staff. May cause negative impact on employee morale.
Long-term, the company retains skilled Long-term, if financial condition does not
employees (De George, 2010). improve, layoffs may still be necessary
 (Donaldson and Dunfee, 1994).

Immediate reduction in income. Long-term,

Retain their jobs but at a reduced salary potential financial distress and decreased morale
Employees (Northouse, 2018). (Crane and Matten, 2007).

Less likely to experience decrease in Potential reduced service/product quality if

service/product quality due to maintained staff employee morale and productivity decline due to
Customers/Clients levels (Paine, 2007). salary cuts (Trevino and Nelson, 2011).

4. Proposed Alternative 3: Implement a Furlough Program

As described earlier, a furlough program could be an alternative to layoffs. Furlough is a

mandatory, temporary, unpaid leave of absence from work.

Likely Consequences Positive Likely Consequences Negative

Stakeholders (short and long term) (short and long term)

Immediate cost reduction without the need

to re-hire and re-train employees when May cause negative impact on employee morale.
financial condition improves. Long-term, Long-term, if financial condition does not
the company retains skilled employees improve, layoffs may still be necessary (Yukl et
Company (Carrol and Buchholtz, 2014). al., 2013).

Temporary financial disruption but with

the promise of return to work. They may
be eligible for unemployment benefits
Furloughed during the furlough (Donaldson and Immediate loss of income. Long-term, uncertainty
employees Dunfee, 1994). about job security.

Potential increased workload, lower morale due to

the uncertainty surrounding the company's
Remaining Less worry about job loss (Crane and financial stability. Long-term, potential burnout
employees Matten, 2007). (Trevino and Nelson, 2011).
 Less impact on service/product quality due
to the temporary nature of furloughs Potential reduced service/product quality due to
Customers/Clients (Paine, 2007). reduced staff numbers during furlough period.

Part 3: Optimal Solution

After giving careful consideration to the moral conundrum at hand, the best course of action
becomes clear; one that balances commercial necessity with sympathy for workers' worries.
Due to financial restraints, it appears that layoffs will be necessary at the company. However,
a set of preventative measures designed to lessen the blow of job loss could make the process
more bearable for workers.

The first option is to provide departing employees with a generous severance package. This
would give them some breathing room financially while they adjusted and looked for work.
Salary extensions, health insurance, and a lump sum payment are all possibilities. Such a
package would show appreciation for the workers' contributions and sympathy for the
difficulties they've faced as a result of the layoffs (Trevino and Nelson, 2011).

Second, the organization might offer job-search assistance in the form of placement services.
A few ways to accomplish this goal include forming a partnership with a recruitment agency
that focuses on the industry, or making available career guidance and resume writing
resources (Paine, 2007).

Finally, providing retraining programs could give affected workers marketable new skills.
Those who may have trouble finding comparable work in the current labor market may
benefit greatly from this (Crane and Matten, 2007).

The proposed solution aims to find a middle ground between the company's continued
existence and the happiness of its workers. This choice is the result of careful deliberation
over all relevant factors, including the moral duties owed to various parties. Since some
workers will unavoidably be negatively affected, this decision does not fully satisfy the gut
feeling. Nonetheless, in light of the gravity of the situation, it appears to be the best option
(Northouse, 2018).

PART 4

Beauchamp, T. L., and Childress, J. F., 2001. Principles of biomedical ethics. Oxford
University Press.

Carrol, A. B., and Buchholtz, A. K., 2014. Business and society: Ethics, sustainability, and
stakeholder management. Nelson Education.

Ciulla, J. B. (Ed.)., 2004. Ethics, the heart of leadership. Praeger.

Crane, A., and Matten, D., 2007. Business ethics: Managing corporate citizenship and
sustainability in the age of globalization. Oxford University Press.

De George, R. T., 2010. Business ethics. Pearson Education India.

Donaldson, T., and Dunfee, T. W., 1994. Toward a unified conception of business ethics:
Integrative social contracts theory. Academy of management review, 19(2), 252-284.

Northouse, P. G., 2018. Leadership: Theory and practice. Sage publications.

Paine, L. S., 2007. Ethics: A Basic Framework [Note 307059]. Harvard Business School.

Trevino, L. K., and Nelson, K. A., 2011. Managing business ethics: Straight talk about how
to do it right. John Wiley & Sons.
Yukl, G., Mahsud, R., Hassan, S., and Prussia, G. E., 2013. An improved measure of ethical
leadership. Journal of Leadership & Organizational Studies, 20(1), 38-50.