Read some of the text from Chapter 10 below from our textbook:

Trevino, L. K., & Nelson, K. A. (2021). Managing Business Ethics: Straight Talk about How to Do It Right (8th ed.). Wiley Global Education US. https://online.vitalsource.com/books/9781119711018

The Financial Disaster of 2008

The implosion of the financial markets in 2008 was largely not the result of illegal behavior. For the most part, the activities that brought down the U.S. economy and others around the world were not against the law, at least not yet (government regulators and the legal system often play catchup after ethical debacles in business). Many of those activities, however, were unethical in that they ultimately produced great harm and were contrary to a number of ethical principles such as responsibility, transparency, and fairness. Let's start with some of the factors that laid the groundwork for the disaster in the United States.

Managing Stakeholders

Business wasn't always as complex as it is today. At the end of the nineteenth century, many of the country's largest corporations were privately held; consequently, their owners had very few constituencies to answer to. The magnates and robber barons of a century ago ruled their companies with an iron hand. There were no unions or laws to protect workers, and the sporadic media attention of the era left the public largely unaware of most corporate abuses. Also, most average, middleclass citizens did not invest in stocks and bonds. Investing in those days was largely a rich person's game. Of course, all of that has changed.

Conflicts of interest

Although we usually think of conflicts of interest as situations involving individuals, they can also involve organizations. As we've seen over the last few years, conflicts involving organizations are even more damaging than those that involve individuals. Many people think the poster child for corporate conflicts is Arthur Andersen and other large accounting firms that simultaneously offered both auditing and consulting services to the same clients. It's hard to believe that the company executives didn't see how gargantuan consulting fees might color the judgment of auditors in favor of the client. However damaging those accounting firm conflicts were, they are dwarfed by what happened at Enron. One part of Arthur Andersen's businessthe consulting business, which was posting millions of dollars in profits from Enron every monthcurtailed the efforts of another part of Andersen's businessthe auditorswho were charged with finding fraud and corruption. The result of this very basic conflict between two sides of Andersen's business contributed to Enron's implosion and eventually to Andersen's.

Ethics and Employees

Certainly, one of the key stakeholder groups in any corporate situation should be the employees of the organizations involved in the case. Organizations have myriad ethical obligations to their employees. Some of these could include the right to privacy, the right not to be fired without just cause, the right to a safe workplace, the right to due process and fair treatment, the right to freedom of speech (whistleblowing), and the right to work in an environment that is free of bias. We've addressed a number of these rights in other chapters. In this section, we focus on two specific rights: a safe workplace and the right to keep a job unless just cause can be found for a firing.

Employee safety

The most basic of employee rights is the right to work without being maimed or even killed on the job. In 1970, the Occupational Safety and Health Administration (OSHA) was created in an attempt to protect workers from hazards in the workplace. OSHA's mission is not only to protect workers against possible harm but also to ensure that employees are informed of the hazards of their particular industry and job.

Some of the most egregious cases of workers being injured or killed on the job involve heavy manufacturing companies and mining companies. So often these cases involve workers who know conditions are unsafe, have complained about those working conditions, but have few employment alternatives. As a result, they often stay where they are, continuing to work in spite of the danger.

Industries that were not previously thought of as being high risk faced special threats during the COVID19 pandemic. Entire classes of workers were deemed "essential"not only healthcare workers (doctors, nurses, ambulance drivers, EMT workers, etc.) but also people who worked in a variety of organizations providing needed services, including delivery companies like FedEx, UPS, Instacart, and individual truck drivers who delivered goods far and wide; fulfillment companies such as Amazon and Walmart; grocery chains such as Costco; pharmacy chains such as CVS and Walgreens; utilities and telephone companies, and many more. At the start of the pandemic, a critical shortage of personal protective equipment such as masks and gloves put many essential workers at risk for contracting the virus.

Can you think of examples in other industries where employee safety and health are major issues? Are there health and safety issues in service (nonmanufacturing) industries? Are employers responsible for conditions such as carpal tunnel syndrome, in which the wrist is injured as a result of repeated movements like entering data into a computer? What recourse do employers have in situations where the performance of a job, in itself, can cause injury? If a company discovers that its employees are at risk for injury, is it under any obligation to inform the public?

Employee downsizings

Employee downsizings or layoffs can result from many business conditions, including economic depressions, the desire to consolidate operations and decrease labor costs, and increased competition and unmet corporate objectives, to list just a few.26 However justifiable the reason may be, the result always involves human misery. Organizations may not have an ethical obligation to keep labor forces at a specific number. They do, however, have an obligation to hire and fire responsibly.

Employees have the right to be treated fairly, without bias, and on the basis of their ability to perform a specific job. If a layoff or downsizing is necessaryif it involves one person or manythe layoff should be done with respect, dignity, and compassion. How can companies differ philosophically on the subject of layoffs? How could companies become more like Lincoln Electric? What are the pitfalls of Lincoln's approach? What are the pitfalls of the much more common approach (i.e., laying people off)? If you had to lay off employees, what factors would you consider in structuring a plan that would be as fair as possible to all involved?

Suppose the country experiences a recession. Should companies begin to lay off employees in order to maintain expected growth rates? How about to satisfy Wall Street's profit and growth expectations? What other stakeholder groups are affected? Are companies in business only to make a profit for shareholders? Are employee stakeholder groups more expendable than customer stakeholders? How can a company reconcile longterm obligations to all stakeholders with shortterm financial crises?

Instructions:

Discuss the reading content for employee downsizing in relation to the organization's obligations to their shareholders. Have you been through downsizing before? Did you notice anything you can connect to the text above?