Running head:

Making the Right Decision Sue Machacek Baldwin Wallace

Making the Right Decision Decisions are made daily for a company that reflect the future of the company. When the company decides to expand globally, new issues and concerns can arise for the company. Ethical dilemmas may occur and must be addressed immediately. This paper will analyze the case of child labor being used for a global company and the decisions Mr. Stein must make in regard to renewing the contract with Lahore. The different moral issues will be discussed and possible solutions will be presented. Ethical Issues There are many ethical issues in the Third-World Families at Work: Child Labor or Child Care. Such issues as the use of child labor, human rights, breach of company policies, and unethical behavior of employee. The company has a policy, Global Guidelines for Business Partners prohibiting the use of child labor and upon visiting the factory in Lahore, Mr. Stein sees children working in the factory. The human rights issue entails the fact that the children are entitled to an education and that there is no heat in the factory for the workers. And finally, the unethical behavior of an employee would include the owner of the contractor business and Yusuf Ahmed, the sourcing manager. Different approaches There are three different approaches that may be applied to the issues of concern. The Friedman/libertarianism approach, Utilitarian approach, Stakeholder Management Approach, and the Rights approach. The Friedman/libertarianism approach is a controversial approach created by Milton Friedman who believes people are free to choose for themselves. Human freedom is the ability of individuals to make their own decisions as long as they dont prevent others from making their own decisions. The theory also reflects on the corporate responsibility of a

company and that businesses have only one social responsibility which is to use its resources and engage in activities that increase profits. Businessmen undermine the basis of a society when they promote corporate responsibility. They embrace and advance their social goals in order to please individuals and groups who believe the corporations have social responsibilities such as the Global Guidelines for Business Partners The Stakeholder Management approach is supporting an organization in achieving its strategic objectives by interpreting and influencing both the internal and external environments and creating positive relationships with appropriate management of their expectations and objectives. The objective is usually making money for the stakeholders of the company. A stakeholder is any individual or group who can affect or is affected by the actions, decisions, policies, practices, or goals of the organization (Carroll, 2008, p. 4). This may include employees, customers, owners, or suppliers and they are usually the primary stakeholders. The secondary stakeholders may include media, consumer groups or anyone that is not directly involved with the company. Utilitarianism approach is the greatest good for the greatest number. Its general principle is that morality must depend on balancing the beneficial and harmful consequences of our conduct. It is comparing the benefits and harms. It does have consequences. The Rights Approach is based on the belief that humans have a dignity based on human nature on their ability to choose freely what they do with their lives. Under this approach, one should respect others right.

Options Option 1 Mr. Stein has the option of doing nothing. He could get back on the plane and ignore the fact that the policy for no child labor is happening in Lahore. He could apply the Utilitarian approach by justifying the fact that the company is making a profit and in turn, the employees are able to each much needed money, the contractor is able to keep his costs down, therefore, it is a win-win situation. No one would know that children work there because the companys old vice president of International contracts either did not know or just ignored it. He could use the Rights Approach in ignoring the problem with the reasoning that the children had a right to work and if they didnt want to go to school then that was their choice. For the issue of the working conditions of the plant, the skilled workers were paid fairly and they were fed everyday. The plant is clean and they didnt necessarily need heat for they bundled their clothing and they didnt complain. Using Friedman/libertarianism approach he could justify the girls had a right to work and that was that country practices. The company only created the policy to satisfy individuals who think companies should have social responsibilities but the only responsibility the company has is to use its resources and engage in activities that increase profits. They have done that by outsourcing their work for lower wages and in turn they are able to increase profits. Option 2 Mr. Stein must comply with the policies of the company and enforce the no child labor policy. Using the Using the Stakeholder Management Approach, management is to ensure the business is increasing profits for the stakeholders using their resources available but they must not jeopardize costs to ensure the resources used are ethically sound. The objective is to produce high quality products and have it readily available for their customers. All stakeholders are to act

ethically in all business activities. They should never act unethical to cause any embarrassment to the company. The company has a social responsibility to fix social injury which includes activities which violate, or frustrate the enforcement of, rules of domestic or international law intended to protect individuals against deprivation of health, safety or basic freedoms (Simon, Powers, & Gunneman p 89). Using the analysis of the Stakeholder management Approach, he must ask five questions: 1) Who are our stakeholders? 2) What are their stakes? 3) What opportunities and challenges do our stakeholders present to our firm? 4) What responsibilities (economic, legal, ethical, and philanthropic) does our firm have to all its stakeholders? 5) What strategies or actions should our firm take to best deal with stakeholder challenges and opportunities? The stakeholders should be ranked accordingly. This may be customers, employees, and owners. Next might be rights organizations, government, and media. The stakes would be a ruined reputation because their products have a wholesome American feel good look good image. As a result, customers would not buy their products. This would decrease the profits for the stakeholders which would result in lay offs or perhaps the company closing. The opportunities and challenges the stakeholders presented to the firm is working together to achieve the objectives of the company. This requires working together and ethically. His option would be to speak with the current contractor to see if he thoroughly understands the companys policy. Is he willing to employ only person over 18? If the contractor doesnt agree with this, Mr. Stein should look for another contractor who abides by the policies of the company. They have other contractors whom they may be to take on the extra work. The option of joining the UN Global Compact may ensure the company is working with reputable contractors.

Friedmans fundamentalist theory of social responsibility states that corporations have nothing more than obligations to make a profit within the framework of the legal system. He sees corporate social responsibility as a subversive doctrine and as a pernicious idea that shows a fundamental misconception of the character and nature of a free society and that undermines its foundations. Friedmans view on corporate social responsibility could certainly have been strengthened if he had a theory of individual rights. He could have said that the social responsibility of the corporation, through its directors, managers, and other employers is simply to respect the natural rights of individuals. Individuals References Carroll, A. (2008). The Stakeholder Management Concept. In Business and Society: Ethics and Stakeholder Management. 7 ed. Cengage South-Western. Jones, G. (2006). McGraw-Hill. Business ethics and the legal environment of business. In Introduction to Business: How companies create value for people (pp. 139-171). Retrieved from http://highered.mcgrawhill.com/sites/dl/free/0073524565/324445/jon24565_ch05.pdf Santa Clara University. Five Sources of Ethical Standards. (2010). Retrieved from http://www.scu.edu/ethics/practicing/decision/framework.html United Nations Global Compact. (2008). Corporate Citizenship in the World Economy. Retrieved from www.unglobalcompact.org United Nations Global Compact. (2008). Overview of the UN Global Compact. Retrieved from http://www.unglobalcompact.org/AboutTheGC/index.html Yale University Press. (1972). Simon, J. G., Powers, C. W., & Gunneman, J. P. The Ethical Investor. The responsibilities of corporations and their owners. Younkins, E. W. (2006). Milton Friedmans Pragmatic and Incremental Libertarianism. Retrieved from http://www.quebecoislibre.org/06/00423-5.htm

Wikipedia, the free encyclopedia. (2010). Stakeholder management. Retrieved from http://en.wikipedia.org/wiki/Sakeholder_managment in a corporation have the legally enforceable responsibility or duty to respect the moral agency, space, or autonomy of persons. This involves the basic principle of the non-initiation of physical force and includes: the obligation to honor a corporations contracts with its managers, employees, customers, suppliers, and so on; duties not to engage in deception, fraud, force, threats, theft, or coercion against others; and the responsibility to honor representations made to the local community. Beyond the above, a corporation and its managers are not ethically required to be socially responsible. If managers, as agents of the stockholders, were to breach an agreement with the shareholders to maximize profits in order to give one or more groups more benefits than they freely agreed upon, they would be violating the rights of the owners. Managers should not divert corporate funds for other purposes. Of course, the idea that a corporation should respect rights leads to the same conclusions as Friedman reaches.

Milton Friedman wrote The Social Responsibility of Business is to Increase Profits in the September 13, 1970, issue of the New York Times Magazine. This seminal article, along with several more to follow, contained Friedmans thoughts regarding the nature of corporations and the responsibilities of the parties involved with them. Friedman explains that corporations do not exist in physical reality, that only people can have responsibilities, and that businesses have no responsibilities as such. He maintains that there is one and only one social responsibility of businessto use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game. To earn profit is the purpose of the corporation, which should engage in open and free competition without deception or fraud. Friedman also contends that corporations do not and cannot have any objectionable degree of power except for that power which is received through government intervention. He says that there is a need to curb government power that contending interest groups attempt to use for their own advantages. He does not blame businessmen for going to Washington to attempt to get special privileges (within the rules of the game), but rather blames all of the citizens for adopting rules of the game that permit that to occur. He says that the corporate executive is an employee of the owner of a firm and that the relationship between shareholders and the manager is an employee-owner or principal-agent one. His direct responsibility to his employers is to conduct the business in accordance with their desires. By implicit legal contract, salaried executives of a corporation have a fiduciary responsibility to the shareholders of the firm ,who assign them the right and duty to use corporate resources to increase the wealth of those shareholders by pursuing profits. Under this contract, they do not have the right to act on their own preferences by making discretionary decisions to spend the firms resources to attain social goals which cannot be demonstrated to be directly related to gaining profits and to their fiduciary responsibility. Managers should use available assets to make investments to maximize the shareholders wealth. They have no right to dispose

of the shareholders profits in any manner that does not directly benefit the corporation. The critical question is whether or not some action or project is enough in the interest of the corporation to justify the expenditures. According to Friedman, if a corporation makes a donation to charity, it is actually the managers who are making donations of assets that belong to the shareholders. They would be spending others money, unless those shareholders express their desire to make such a donation. He explains that managers should not substitute their judgment for the judgment of the shareholders. Friedman maintains that another reason against managers' spending funds for social causes is that insofar as those actions increase consumer prices, they are effectively spending customers money. Similarly, when such actions lower the wages of employees, they are disbursing their money. Corporate executives, when acting in their official capacity and not as private persons, are agents of the corporations shareholders. Friedman explains that the corporate executive is also a person in his own right and as a private person may voluntarily assume responsibilities and spend his money, time, and energy on them. Many supposed corporate socially responsible actions are actually a disguised form of the managers own self-interest, where they donate corporate funds to their own favored schools, hospitals, community organizations, or cultural associations. Friedman maintains that by maximizing corporate profits, executives contribute much more to social welfare than they would by spending shareholders money on what they as individuals view as meritorious projects. He also says that the tax laws should not permit corporate contributions to be deducted and should abolish the capital gains tax (or at the very least index the basis for capital gains). Friedman explains that it is better to return money to shareholders in the form of dividends (or as capital gains when they sell their stock), thus permitting them to decide which charities to support. He has argued for the abolition of all corporate taxes and for returning all corporate profits to the stockholders, who can then decide as individuals how they will use their money. Individuals could be directly taxed on both their distributed and undistributed earnings and could then decide whether or not to reinvest their profits in that company, depending upon their prospective returns from their alternative investment possibilities. According to Friedman, businessmen undermine the basis of a free society when they espouse "corporate social responsibility." He explains that many executives embrace and advance their social goals in order to please individuals and groups who believe that corporations have social responsibilities and thus should set social goals. Friedman says that the only legitimate way of enlisting the help of business in solving social problems is to frame laws that enable businesses to profit by providing for social needs. Friedmans fundamentalist theory of social responsibility states that corporations have nothing more than obligations to make a profit within the framework of the legal system. He sees corporate social responsibility as a subversive doctrine and as a pernicious idea that shows a fundamental misconception of the character and nature of a free society and that undermines its foundations.

Friedmans view on corporate social responsibility could certainly have been strengthened if he had a theory of individual rights. He could have said that the social responsibility of the corporation, through its directors, managers, and other employers is simply to respect the natural rights of individuals. Individuals in a corporation have the legally enforceable responsibility or duty to respect the moral agency, space, or autonomy of persons. This involves the basic principle of the non-initiation of physical force and includes: the obligation to honor a corporations contracts with its managers, employees, customers, suppliers, and so on; duties not to engage in deception, fraud, force, threats, theft, or coercion against others; and the responsibility to honor representations made to the local community. Beyond the above, a corporation and its managers are not ethically required to be socially responsible. If managers, as agents of the stockholders, were to breach an agreement with the shareholders to maximize profits in order to give one or more groups more benefits than they freely agreed upon, they would be violating the rights of the owners. Managers should not divert corporate funds for other purposes. Of course, the idea that a corporation should respect rights leads to the same conclusions as Friedman reach