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#2. Sand Customers --
#3. Women in Mgt --
#4. Product Dumping --
#5. Bribery? --
#6. Child Labour
It was late afternoon on February 8, 1997. Scott Clifford, VP of the Control Systems Division of ProTech, Inc., had returned to his office. His desk was a sea of telephone messages. Several were from Exxon's chemical plant in Beaumont, Texas. ProTech had submitted a bid to provide a highly sophisticated, computer-based process control system for the Beaumont plant. The competition was in its late stages and Exxon was nervous about ProTech's commitment to its control system business. Clifford threw himself into his chair and began thinking about what to tell Exxon. A knock at the door interrupted his thoughts. It was Joanne Lembert, the plant manager for ProTech's control systems plant. Clifford sank further into his chair.
Lembert entered. "Scott, do you have a minute?" she asked. "I'm concerned about our handling of the control systems product line. With these inventory cutbacks you've imposed, it looks like we're trying to dump our product and move out of this line. Scott, we've worked together and been friends for a long time. I really need to know what's going on. What is our strategy for control systems? Are we dumping the business? Should I be looking for another job?"
Clifford knew that corporate was thinking seriously of eliminating the control systems line. The company was under heavy financial pressure, and management wasn't sure it could continue to fund the business until it reached break-even in 1999. Efforts to find a strategic partner, while encouraging at times, had foundered.
Clifford still believed in the product line and its eventual success, but he had to keep Joanne and all his best managers on board to make the business work. He didn't know how to respond to all these inquiries. Should he tell Joanne the truth? Should he stall? What should he tell his customers and potential customers?
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Joe Raymond's position as sales manager for Granite Rock and Sand was in jeopardy. His unit had been low performer in terms of sales for the last seven quarters. Joe's supervisor, VP Tom Haws, told Joe that he had through the next quarter to pull his unit out of last place. Haws also told Joe that Joe would have to be replaced if the improvement did not occur.
Joe and his wife had just purchased their first home. With their mortgage payments totaling $1,200 per month, the loss of Joe's salary would mean the loss of their home.
Following Tom's warning, Joe began interviewing candidates for a vacant sales position in his unit. Joe had conducted three interviews when the final candidate, Jessica Morris, arrived. During the interview with Morris, Joe learned that she was the victim of a layoff by a competitor, Silt, Sand and Such. Joe was not terribly impressed with Morris, but just before she left, she opened her briefcase and offered Joe a sheet of paper bearing the name of an official in the Saudi Arabian government. Morris explained:
When I was with Silt, Sand and Such, we started a program for finding innovative markets for our products. You know, we wanted to tap markets no one had ever thought of. After a lot of research, we discovered that Saudi desalinisation plants need a particular type of sand they don't have over there, but we have here. We're the only firm that knows about this. If you hire me, I can see the sale through for Granite.
Morris added: "Look, I need this job. You need your sales up. Think about it and call me."
After Morris left, Joe sat in his office and felt his problems were solved. Or were they?
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International management consulting firm Burns & McCallister is listed by Working Mother magazine as one of the top fifty firms in the United States for employment of working mothers and by Working Woman magazine as one of the top ten firms for women. The firm has earned this reputation for several reasons. First, nearly 50% of its partners are women. Second, it has a menu of employee benefits that includes such things as flex hours, sabbaticals, family leave, home-based work, and part-time partner-track positions.
However, B&M recently has been the subject of a series of reports by both the Los Angeles Times and the New York Times that scrutinise its policy on female executives in certain nations. B&M has learned, through its years of consulting, that certain countries in which it negotiates for contracts prohibit the use of women in the negotiation process. The cultures of many of these countries do not permit women to speak in a meeting that includes men. Consequently, B&M has implemented a policy prohibiting women partners from being assigned these potential account negotiations and later the accounts themselves. Clerical help in the offices can be female, but any contact with clients must be through a male partner or account executive.
For example, Japan still has a two-track hiring system with only 3% of professional positions open to women. The remainder of the women in the Japanese corporate workforce become office ladies who file, wear uniforms, and serve tea. Dentsu, Inc., a large Japanese ad firm, had a picture of the typical Dentsu "Working Girl" in its recruiting brochure. Surrounding the photo are comments primarily about her physical appearance: such as (1) her breasts are "pretty large"; and (2) her bottom is "rather soft."
In response to criticism regarding B&M's posture, the head of the firm's New York office has explained:
Look, we're about as progressive a firm as you'll find. But the reality of international business is that if we try to use women, we can't get the job. It's not a policy on all foreign accounts. We've just identified certain cultures in which women will not be able to successfully land or work on accounts. This restriction does not interfere with their career track. It does not apply to all countries.
The National Organisation for Women (NOW) would like B&M to apply to all its operations the standards that it employs in the United States. No restrictions are placed on women here, NOW argues, and other cultures should adapt to our standards; we should not change our standards to adapt to their culture. NOW maintains that without such a posture, change can never come about.
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Once the Consumer Product Safety Commission (CPSC) prohibits the sale of a particular product in the United States, a manufacturer can no longer sell the product to U.S. wholesalers or retailers. However, the product can be sold in other countries that have not prohibited its sale. The same is true of other countries' sales to the United States. For example, Great Britain outlawed the sale of the prescription sleeping pill, Halcion, but sales of the drug continue in the U.S. The British medical community reached conclusions regarding the pill's safety that differed from the conclusions reached by the medical community and the Food and Drug Administration in the U.S. Some researchers who conducted studies on the drug in the U.S. simply concluded that stronger warning labels were needed.
The CPSC outlawed the sale of three-wheeled all-terrain cycles in the U.S. in 1988. While some manufacturers had already turned to four-wheel models, other manufacturers still had inventories of three-wheel cycles. Testimony on the cycles ranged from contentions that the vehicles themselves were inherently dangerous, to arguments that the vehicles were safe but drivers were too young, too inexperienced, and more inclined to take risks. Still, the three-wheeled vehicle can be sold outside the U.S.
For many companies, chaos follows a product recall because inventory of the recalled product may be high. Often, firms must decide whether to "dump" the product in other countries or take a write-off that could damage earnings, stock prices, and employment stability.
If you were a manufacturer holding substantial inventory of a product that has been outlawed in the U.S., would you have any ethical concerns about selling the product in countries that do not [yet] prohibit its sale? To what extent will your decision be affected by the level of the write-down in income you must take.
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Geletex, Inc., is a U.S. telecommunications corporation attempting to expand its operations worldwide. As Geletex begins its operations in other countries, it has discovered cultural, governmental, and ethical standards that differ significantly from country to country and from those in the U.S. Geletex has had a code of ethics for its U.S. operations since 1975. The company's director of compliance, Jed Richardson, provides ongoing training for employees, runs a hotline through which employees can report problems, and is well known and respected throughout the company for his high standards and trustworthiness. As Geletex's international operations grow, Jed is becoming increasingly uncomfortable with what appear to be double standards for the company's U.S. operations and its operations in other countries. Jed, who has been traveling to each of the Geletex international offices, has found the following situations, which since have been causing him sleepless nights:
In Lima, Peru, Jed reviewed financial records and discovered that the commissions expense for the branch was unusually high. Geletex pays its salespeople commissions for each commercial customer they recruit for cellular or long-distance services. Jed knows from experience that some companies pay unusually high sales commissions to disguise the fact the sales personnel are paying kickbacks in exchange for contracts. In the U.S., such payments would be commercial bribery and a clear violation of Geletex's code of ethics. When Jed confronted the Lima district manager and questioned him about the high commissions, he responded, "Look, things are different here. We've got a job to do. If the company wants results, we've got to get things moving any way we can."
In Stockholm, Sweden, Jed noted a number of college age student employees who seemed to have little work to do. Again, Jed questioned the district manager, who responded, "Sure, Magnus is the son of a telecommunications regulator. Caryl is the daughter of a judge who handles regulatory appeals in utilities. Andre is a nephew of the head of the governing party. They're bright kids, and the contacts don't hurt us. In the Scandinavian culture, giving jobs to children is part of doing business."
In Mumbai (Bombay), India, Jed noted that many different payments had been made to both the Indian government and government officials. When Jed voiced his concern, the district manager responded, "I can explain every payment. On this one, we needed the utilities [water and electricity] for our offices turned on. We could have waited our turn and had no services for ninety days, or we could pay to get moved to the top of the list and have our utilities turned on within 48 hours. On the check for licensing, again, we could have waited six months to get licensed or pay to expedite it and be licensed."
Jed is an expert on the Foreign Corrupt Practices Act (FCPA). The act permits "facilitation" or "grease" payments, but prohibits bribes. Facilitation opens doors or expedites processes; it does not purport to influence outcomes. Jed is unsure about Geletex's international operations and compliance with the law. He is very unsure about Geletex having an international code of ethics. What ethical standards should Jed develop and apply to Geletex's international operations?
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With the passage of NAFTA, many clothing manufacturers found themselves challenged publicly for their use of child labour. In a practice that is widely accepted in other countries, children aged ten to fourteen labour in factories for fifty or more hours per week. Their wages enable their families to survive. School is a luxury, and a child attends only until he or she is able to work in a factory. The Gap, Levi Strauss, Esprit, and Leslie Fay have all been listed in social responsibility literature as exploiting their workers. In June 1994, the following item appeared in the New York Times as a quarter-page ad placed by the International Ladies Garment Workers Union :
Marie Whitt is fighting to keep the job she has held for 17 years at a Leslie Fay plant in Wilkes-Barre. Marie earns $7.80 an hour -- hardly a fortune. On June 1st, she and 1,800 co-workers were forced to strike because Leslie Fay plans to dump them. Ninety percent are women whose average age is 50. They have given their whole working lives to the company and losing their jobs would be a disaster. Marie knows she will never find a comparable job in today's economy. Without her union benefits, she and her husband won't be able to pay for his anti-cancer medication. "What Leslie Fay wants to do is so rotten," she says. "You've got to draw the line somewhere and fight."
Dorka Diaz worked for Leslie Fay in Honduras, alongside 12- and 13-year old girls locked inside a factory where the temperatures often hit 100F and where there is no clean drinking water. For a 54-hour week, including forced overtime, Dorka was paid a little over $20. With food prices high -- a quart of milk costs 44 cents -- Dorka and her three-year-old son live at the edge of starvation. In April, Dorka was fired for trying to organise a union. "We need jobs desperate," she says, "but not under such terrible conditions."
Leslie Fay executives claim they can only "compete" by producing in factories like Dorka's. But identical skirts -- one made by Dorka, the other by Marie -- were recently purchased at a big retail chain here. Both cost $40. Searching the world for ever-cheaper sources of labour is not the kind of competition America needs. Leslie Fay already does 75% of its production overseas. If it really wants to compete successfully in the global economy, it would modernise its facilities here in the U.S. as many of its competitors have done. But Leslie Fay wants to make a fast buck by squeezing every last drop of sweat and blood out of its workers. Marie Whitt and Dorka Diaz don't think that's right, and they know it's a formula for disaster -- for all of us.
You can help by not buying Leslie Fay products. . . . Boycott all clothing made by Leslie Fay and sold under these labels: Leslie Fay, Albert Nipon, Theo Miles, Le suit, Nolan Miller, Castleberry, and Castlebrook.
One executive noted, "We're damned if we do because we exploit. We're damned if we don't because these foreign economies don't develop. Who's to know what's right?"
Levi Strauss & Company, discovering that youngsters under the age of 14 were routinely employed in its Bangladesh factories, could either fire 40 underage youngsters and impoverish their families, or allow them to continue working. Nike has shoe factories in Indonesia, and the women who work in those factories net $37.46 per month. However, as Nike points out, their wages far exceed that of other factory workers. Nike's Dusty Kidd notes, "Americans focus on wages paid, not what standard of living those wages related to."
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The ProTech case is adapted from the Harvard Business School series in business ethics; the remaining cases are adapted from M.M. Jennings' collection of cases originally published by West.