Closing Case Ethical Dilemma Cut Salaries or Cut Jobs? As a Japanese expatriate in charge of US operations of Yamakawa Corporation, you scratch your head when confronting a difficult decision: Cut salaries across the board or cut jobs when dealing with the horrific post-COVID economic downturn with major losses? Headquarters in Osaka has advised that earnings at home are bad and that you cannot expect headquarters to bail out your operations. Too bad US government bailouts are only good for US-owned firms and are thus irrelevant for your unit, which is 100% owned by the Japanese parent company. As a person brought up in a collectivistic culture, you instinctively feel compelled to suggest across-the-board pay cuts for all 1,000 employees in the United States. Personally, as the highest-paid US-based employee, you are willing to take the highest percentage of a pay cut (you are thinking of 25%). If implemented, this plan would call for other executives, who are mostly Americans, to take a 20% to 25% pay cut; midlevel managers and professionals a 15% to 20% pay cut; and all the rank-and-file employees a 10% to 15% pay cut. Indeed, in your previous experience at Yamakawa in Japan that survived the 20082009 financial crisis, you did this with positive results among all affected Japanese employees. This time, most executive colleagues in Japan are doing the same. However, since you are now managing US operations, headquarters in Osaka (being more globally minded and culturally sensitive) does not want to impose any uniform solutions around the world and asks you to make the call. As a conscientious executive, you have studied all the booksin both Japanese and Englishthat you can get your hands on for this tough decision. While you understand that US executives routinely undertake reduction in force (RIF), which is a euphemism for mass layoffs, you have also noticed that in the recent recession, even some bona fide US firmssuch as AMD, Disney, FedEx, HP, and New York Timeshave trimmed the base pay for all employees. If there is a time to change norms moving toward more across-the-board pay cuts in an effort to preserve jobs and avoid RIF, this time may be it, according to some US executives quoted in the media. You have also read that some experts note that across-the-board pay cuts are anathema to a performance culture enshrined in the United States. The last thing you want is for your A playersor people in key strategic positions delivering the most valueto leave because you have mismanaged your compensation system, said Mark Huselid, a Rutgers University professor and a leading expert on human resource management, in a media interview. You have also read in a Harvard Business Review survey that 20% of high-potential players in US firms voluntarily jumped ship during the 20082009 recession, in search of greener pastures elsewhere. Naturally, you are worried that should you decide to implement the across-the-board pay cuts, you may lose a lot of star performers and end up with a bunch of mediocre players who cannot go elsewhere. At the same time, you have read that some Japanese firms have used mass layoffs to trim the workforce. Nissan, led by a non-Japanese executive, was famous for initiating RIF about two decades agounprecedented for a large firm like Nissan until then. Following Nissans example, some Japanese firms have done that. Clearly, employment norms are changing in both Japan and the United States. After spending three days reading all the materials gathered, you still do not have a clear picture Case Discussion Questions What are the pros and cons of across-the-board pay cuts in the United States? In Japan? What are the pros and cons of massive layoffs in the United States? In Japan? Why and how do societal norms change? ON ETHICS: If you were this Japanese expat, how would you proceed? ON ETHICS: Conversely, if you were an American expatriate in Japan, how would you proceed when facing a similar decision