Knowledge Area Module (KAM) I



Global Ethics in Manufacturing OutsourcingRobinson, Stone, and ZimmermanMGMT 560 Ethics in Global MarketplaceNovember 4, 2012Dr. Roger FullerGlobal Ethics in Manufacturing OutsourcingChoosing the subject of ethical philosophies as pertaining to manufacturing outsourcing. This highly used and controversial method of production has many facets and there are several supporters as well as opponents throughout the academic, political, philosophical, and business worlds. Although a complete analysis of this subject cannot take place in this medium, certain key points have been chosen. Companies known for their use of outsourcing in three different industries; therefore, this gives a well-rounded discussion of the three ethical philosophies chosen as particularly fitting for this subject. Mattel Inc, Ford Motor Company, and Apple Inc. as the outsourcers were chosen. The use of these companies represents the automobile, toy, and consumer electronic industries as they utilize outsourcing frequently. Each company will be introduced and then evaluated by the authors citing academic sources defending and or opposing outsourcing as a manufacturing method using the moral absolutist, libertarian, and cosmopolitan ethical philosophies. During the research period the authors became aware that in certain outsourcing situations more than one opinion could be formed by some of the philosophies. In this case, the authors may appear to contradict themselves by expressing more than one viewpoint. This is by design the intent of the authors to point out the complications that occur by the conflicting viewpoints within philosophies. In all sections the authors strived to present as much information possible without becoming repetitive. However, similarities may appear due to the same subject matter but different company. In the conclusion, the authors shall provide any fundamental findings or make points that the authors found particularly important within the discussion. Although this discussion should be conclusive there are no limits to the possibilities and opinions. Mattel Inc.Mattel is a toy company that was founded in 1945. With locations in over 40 countries, global ethics is something that the company takes seriously (Mattel, 2005). Mattel has developed rules not only for dealing with their own facilities around the world, but also dealing with their suppliers. While dealing with branches of the company in different countries can be difficult, controlling the conditions of the suppliers can be even more challenging.In the mid 1990’s news stories were breaking that were exposing companies for the exploitation of the workers that were producing their products. These articles targeted companies that exploited workers in terms of age, low wages, work hours, and unsafe work environments; were detrimental to the environment in terms of pollution and contamination. Most of the companies that were exposed for exploiting their workers were companies in the clothing industry. However, Mattel Toy Company was caught off guard by news story that aired on Dateline in mid-December of 1996. This story was about underage workers that were working long hours and excessive overtime to produce products for Mattel (Sethi, 2011). In response to the embarrassment that Mattel suffered in the exploitation of children to produce their product when they were a company that claimed to be family oriented, Mattel developed a Global Manufacturing Principal guide.While many companies at the time were releasing some kind of guild to deal with branches of the company and suppliers that operated in different countries around the world, Mattel approach was slightly different. First released in November of 1997, the Global Manufacturing Principal of Mattel included created detailed standards of compliance, independent external monitoring of the companies compliance, and full and uncensored public disclosure of audit findings and the company’s responses to the findings (Sethi, 2011). Moral Absolutist ViewMattel approached the Global Ethics with a moral absolutist view after the Dateline news article aired. During this time period Mattel approached to their Global Manufacturing Principals as black and white. The detailed standard of compliance, external audits, and disclosure of all audit findings and responses showed that the company view on what they considered right and wrong was clear. The standards that they put into place defined wages and hours, child labor, forced labor, discrimination, freedom of association, working conditions, legal and ethical business practices, product safety and product quality, environment, customs, evaluation and monitoring, and compliance (Sethi, 2011). Mattel worked hard to hold their managers accountable for any violations of their Global Manufacturing Principals and their Code of Ethics. The drive was from the top down with the executives having regular meetings to discuss the issues that were currently affecting the different sites around the world and the solutions that were being applied. With the executives constantly monitoring the progress of each site and taking an interest in the corrective actions that were being applied and effectiveness of the solutions the first line manager were energized in the pursuit of compliance to the newly set principles. With several issues needing to be worked and the support of the top level executives in the company, employees were excited to make changes to the processes of the company. The employees felt like their work toward being a more ethical company was important and was making a difference not just in the facilities that they were working in but also the communities that they were in and the industry as a whole. This feeling of achievement coupled with the accountability of the audit finding not only being seen with in the company, but also to the general public shaped up the companies facilities and resulted in few audit finding from the external auditing company. Mattel kept Global Ethics as a main company concern, revising the Global Manufacturing Principles in 2001 to make zero tolerance provisions (Sethi, 2011).Libertarian ViewMattel’s Libertarian view came out after the company was able to implement the Global Manufacturing Principals in their own facilities across the globe. Implementing the principles within the Mattel facilities, there was a since of pride and accomplishment that accompanied the push for ethical responsibility. Any violation of the ethics principals that were set forth was a direct reflection on the company. Not only were the policies promoting basic human rights, workers’ rights and safety, it also protected the company against embarrassing news stories like the one in 1996. Abiding by the Global Manufacturing Principles had the biggest effect on the culture of the company. After the cultural shift, Mattel did not see a dramatic effect on the bottom line to implement these changes (Sethi, 2011). This win/win situation made it an easy sell to implement and stay compliant within their facilities; however the supply base provided a new set of challenges. The suppliers that Mattel was currently using were not as committed to making these changes. To ensure that the supplier companies were compliant would take a great deal of oversight from Mattel and limit the suppliers that they were able to use. The additional oversight to ensure that the suppliers that produced their products by the principles that had been outlined was increasingly complicated. Supplier that practiced policies that fell outside of Mattel’s Global Manufacturing Principles either had to be replaced or monitored to ensure that Mattel’s products were not produced using those policies (Sethi, 2011). Another issue that complicated supply chain monitoring was the fact that much of the work was no done by the company that Mattel had contracted with, but one of their suppliers. Trying to monitor the suppliers several tiers under the original supplier proved to be costly and time consuming. By trying to monitor to this level of compliance when Mattel’s competitors were not the company was becoming in jeopardy of not being able to keep cost competitive. Without the public outcry to drive change in their competitors Mattel had to choose between being profitable and having a higher ethical standard. Mattel realized that to survive the company needed to be profitable and was reluctant to follow through with disciplinary action to the violating suppliers, leading up to the massive recall of 2007 (Gilbert, 2010).Cosmopolitan viewFrom a cosmopolitan view, Mattel supported the idea that all of the people should enjoy basic human rights in labor and safety and natural resources. The Mattel Company is a very family oriented company that promotes family values and ethical responsibility. Mattel created the Mattel Children's Foundation was established in 1978, to make a meaningful difference, one child at a time. To reinforce its commitment to the children, in 2005 Mattel also partnered with a number of other children’s charities. The charities that Mattel partnered with; Special Olympics, Save the Children, the Mattel Children's Hospital at UCLA, the National Association of Children's Hospitals and Related Institutions (NACHRI) and the Children Affected by AIDS Foundation (CAAF) all focus on the health and well-being of children (Mattel, 2005). Despite the highly publicized ethical issues that Mattel had in 1996 and 2007, Mattel is a leader in corporate responsibility. Mattel acted to correct the child labor issue of 1996 with new policies and guidelines, and corrected the safety issues of 2007 with a massive recall and stricter supplier oversight (Gilbert, 2010). Not only was Mattel name one of the best companies to for in 2009, it was named one of the world’s most ethical companies in 2009 and 2010 by fortune magazine (Mattel, 2010). Mattel’s constant work toward human rights especially with the involvement of children has earned them a leadership role in corporate responsibility that is shared by few other companies in manufacturing.Ford Motor CompanyAccording to Ford Motor Company (2012), they are global leaders in the automotive industry with 65 plants spread across six continents, and employing 168,000 employees.? Ford was founded in 1903; they shipped their first cars to Europe in their first year and in 1911 manufacturing in Europe began.? Due to “a more than 20% drop in total industry demand in Europe since 2007” (Ford Motor Company, 2012, par 4) they are closing the Belgium manufacturing plant, which will be a loss of 43,000 jobs; however, this is a required move to strengthen Ford’s business and return them to profitability in Europe.? The Belgium plant was underutilized and all manufacturing functions were moved to other European locations (Ford Motor Company, 2012).? In 2011 [Ford] signed a four-year agreement with the United Auto Workers that will help us improve our global competitiveness. “As a result, we will be investing $16 billion in the U.S. and adding new jobs at our U.S. manufacturing facilities” (Mulally, 2012, p. 4).? Over the past 20-years Ford Motor Company have had financial highs and lows, due to economic struggles and massive product recalls whether it be cruise control causing electronic fires or vehicle roll-overs cause by Firestone tires.? It is easy to think that the delay in Ford and Firestone recalling the tire, which had caused the vehicle roll-overs was a flaw in ethics—the statement if it is legal it must be ethical—in the past decade they have focused more on how they conduct business.? The tire recalls began in Europe in 1993, the delay in America was related to a legal determination; before Firestone and Ford recalled faulty tire, 88 Americans lost their lives in violent vehicle roll-overs.? “An ethical culture starts with clear and unequivocal goals setting at the top, spreads throughout the organization, and is reinforced through frequent use in everyday decision making” (Verschoor, 2000, para. 12). Moral Absolutist ViewFord’s outsourcing of tire manufacturing increased the likelihood that the tires produced would not be fitting for the vehicle. The moral absolutist would be shocked to see a safety risk being imposed on the public to increase profits. Under the concept of moral absolutism, there is only right and wrong with this being a definite wrong. Even though this is a slightly one sided argument, a person can see a certain amount of logic in it. What is right is right and what is wrong is wrong. Placing profits above safety concerns and then dragging the recall out is indeed wrong. The authors do not see a viable defense of Ford’s actions under the moral absolutist view but only see criticism for the entire debacle. Although most objections to outsourcing usually rage around human rights, the Ford tire problem adds a whole new dimension to the outsourcing debate. After all who would willingly pay less for a product that they know could end up in a deadly accident? Libertarian ViewLibertarians believe in self-ownership and the personal freedom to act as one pleases. A libertarian would defend Ford’s right to outsource tire manufacturing as well as other parts. This is long as it served top transfer wealth to areas where it is needed, for example to India. This idea was documented by James as expounded on the views of Kant. The duty of more affluent people or corporations is to transfer jobs and wealth to the less affluent (James, 2005). However, even the most militant libertarian would not have approved of the deaths caused by the outsourced tires. This would go against the duty of care that is often found in libertarian thought. Cosmopolitan ViewThe cosmopolite would consider two different facts in this case. First, the question is whether or not the outsourcing is the best for all stakeholders. Ford provided people in the developing markets of South America through outsourcing. It follows that jobs increase wealth amongst the citizens and therefore is a type of re-distribution. The unfortunate circumstances surrounding the outsourcing events would have disturbed the cosmopolitan thinkers but the overall gain for all stakeholders would have created an ethical dilemma. Although no one condones death of consumers, the cosmopolitan would probably weigh the good of the stakeholders. Even though the deaths toll is relatively high, the cosmopolitan may determine that it is a small price to pay contrasted with the societal good that occurred.Apple Inc.Apple Inc. became the iconic company for developing computers and other consumer electronic products. These products are innovative in function, look, and feel. Apple also motivates other entrepreneurs to develop products that enhance the capabilities of the Apple products. In order to accomplish the production of Apple products, outsourcing in foreign countries is used as a production strategy. Baljko wrote about Apple’s use of outsourcing as primarily to reduce costs, increase manufacturing flexibility, and increase efficiency (Baljko, 1999). This strategy appears to be in-line with most consumer electronics manufacturers. De George greatly criticized this fact while giving statistics about the jobs lost in the U.S. to outsourcing heavens like China, Korea, India, and Taiwan. According to De George’s research, the U. S. will lose more than 3.3 million jobs in this sector by 2015. De George was also careful to point out that some authors estimate that by 2015 the sector will have created more than 138 million jobs in the U.S. This makes the outsource loss appear relatively minor contrasted with the overall increase (De George, 2006). The challenge for Apple as well as others in this industry is to balance the economic ramifications with profit motives while considering stakeholder needs. Critics will always charge Apple with profiteering while moving U.S. jobs overseas while proponents of outsourcing will count the U.S. jobs created. Then there is the ethical discussion of working conditions in foreign factories and the corporate responsibility of the home company to the foreign workers. This debate does indeed have many facets and the authors’ goal is to analyze certain outsourcing actions conducted by Apple Inc. using three ethical philosophies. In the end weather Apple’s outsourcing is a good or bad development, depends on the personal opinion of the evaluator. There are in this case no clear answers. Moral Absolutist ViewThe authors see two different views within the moral absolutist realm that fit into this discussion. First is the argument for due to an absolutist view of Apple’s actions that because the competition outsources Apple must outsource to stay competitive. Under this argument, is also the underlying tone that whatever is good for the bottom line is ethical. This extreme view is what also creates the most criticism of outsourcing no matter who is doing it. This was also the view of Apple when the Foxconn problems first began to become public. According to He H., Apple waited until the Fair Labour Association (FLA) published their report of labor abuses before taking steps to eliminate them (2012). These labor abuses ranged from illegal overtime to unequal pay amongst the employees. There were also health and other violations cited in the FLA report. These types of situations create the feeding ground for criticism of outsourcing practices.Second, a moral absolutist view could take on that because things like Foxconn do happen when companies outsource, then outsourcing is always bad. This follows a more traditional theory that things are always good or bad and never change their characteristics. The authors must admit that this is a rather simplified and closed minded view to any issue but it does exist. These are also usually generalizations made that discount any positive effects of Apple’s outsourcing. Frequently, outsourcing critics pose that outsourcing is bad for all stakeholders concerned. However a closer review of literature such as He (2012) and Mishra (2012) one gets the sense that many improvements in working conditions as well as job creation in low income lands is a definite benefit of outsourcing. However a moral absolutist is not capable of seeing these advantages. Libertarian ViewUnder a deontological view, Apple’s decision to outsource is defensible that they have a duty to cut costs and increase the efficiency of their operations. Furthermore, a deontic person could argue the duty of a corporation to provide jobs and wealth in places where it is needed in the world. This global view also goes with the underscores a belief that ethics is a form of following a sense of duty rather than the consequence of the actions. An example of this would be the to ignore the U.S. jobs are outsourced overseas because the company was following a duty to transfer its wealth into a region that needs it more. According to James this portion of libertarianism supports distributive justice in a global economy where there is no sovereign rule. This is in agreement with Kant’s argument that a world government cannot exist and therefore corporations will have to redistribute because they have a duty to do so (James, 2005). The consequentialist would argue that corporations have the right to outsource as long as it increases profits and efficiency. This highly mathematical view justifies the actions of Apple since according to Bajko Apple has done just this. Regardless of which libertarian view, the argument for outsourcing is very effectively made by either. After all, lowering of trade barriers; the common currency in the European Union; the redistribution nature of outsourcing; and the economic motives provide strong arguments for the libertarian in favor of outsourcing. The authors’ also conclude that companies should at least be supported to outsource when in the libertarian view all conditions are met. Furthermore, by utilizing a libertarian, many of the arguments against Apple’s outsourcing made in during the discussion of absolutism are nullified. However, a person should consider the libertarian view a very limited scope as there are many factors to be considered when justifying or refuting Apple’s outsourcing practices. Cosmopolitan ViewOf all the ethical views expressed so far, cosmopolitism is perhaps the best way to defend Apple’s outsourcing. The idea behind cosmopolitan view is that all humans are citizens of a common society and therefore are entitled to the same rights, resources, and wealth as all other humans without regard to nation-state. This philosophy sees Apple’s outsourcing as a way to increase human rights in foreign countries as well as a non-governmental redistribution of wealth. The downside to this defense of outsourcing is stated by Bederman (2007) as being a wonderful idea but lacking in the possibility of enforcement. However, that is exactly the concept that makes cosmopolitanism such a popular idea; the fact that humans do not need any regulation other than the need to treat everybody equally. This philosophy is based also on the pure will that all people would do this without any other motivation. Still this philosophy is based on a should-be-situation instead of reality. Although the authors agree that probably the world would be a better place if everyone thought and acted in a cosmopolitan manner; there are individuals and corporations that don’t. Of course there, is also the libertarian argument, is there not a duty to provide good working conditions? He wrote about the poor working conditions that occurred in China with Foxconn which manufactured IPads and IPhones for Apple (He, 2012). The cosmopolitan would probably respond that Apple did insist that Foxconn change its hiring, payroll, and work-hour conditions. The cosmopolitan would also argue that without Apple’s involvement, Foxconn would have continued its abusive labor practices. The fact is that without the investigation and public report through the Fair Labour Association, Apple as well as the rest of the world may have never found out about those abusive labor practices. This fact leads the authors to conclude that the cosmopolitan, although based on human good, is not a realistic validation for Apple’s outsourcing. ConclusionIn conclusion there are many different ways to view outsourcing. Depending on the view used to analyze the decision of a company to outsource its work, the decision can be made to look ethical or unethical. With a global economy it is imperative for companies to be multinational so that they can take advantage of labor and resource advantages by having work done in different countries across the globe. The three companies that we looked at for this paper were all companies that were started and based in the United States. In order to increase volume each of these companies opened facilities in other countries in order to support sales to these countries as well as others with in the region. These companies are not only competing with other United States companies within their industry, they are also competing with companies from other countries. This competition led these companies to move much of their manufacturing overseas in order to compete with foreign companies for sells not only overseas but also in the United States. As shown above there is no absolute right or wrong to the decisions that the companies make. Looking at the situation from another point of view or ethical theory can reverse the outcome of weather the company was acting within their ethical responsibilities. These companies have attempted to take the ethically responsible path but at one time or another have found themselves on the wrong side of the line according to the public consumer’s point of view. These companies walk a line of what their ethical responsibilities are and what they are able to do and still remain competitive. It can always be argued that there is more that each of these companies could have done toward a standard global ethics policy, but these choices do have an effect on the company’s bottom line. The theory of sustainable development says the ethical development needs to be sustainable (Hutchings, 2010). When companies are not able to compete because of their advanced ethics policies, then they can be driven out of business leaving the policies of their competitors. While advanced ethical policies are what companies should strive to provide to the communities that they operate in, they can’t do it at the cost of being driven out of business. Businesses should strive to create sustainable and lasting change when put policies in place, or they could do more harm than good to the communities that they are operating in. References:Baljko, J.L., (1999). Apple outsourcing assembly work -- Company's initiative is one of several aimed at improving operations and lowering costs. Electronic Buyers' News (1147) (4). Retrieved from , D.J., (2007). Diversity and permebility in transnational governance. Emory Law Journal, 57(1), 201-231.Retrieved from /ehost / pdfviewer/pdfviewer?sid=e743e949-d0a8-4f41-b8a3 bb7a67f9b21d%40sessionmgr104&vid=95&hid=116.De George, R., (2006). Information technology, globalization and ethics. Ethics and Information Technology, 8, 29–40. DOI 10.1007/s10676-006-9104-4Ford Motor Company. (2012, October 24). Ford investor relations. Retrieved from, J., & Wisner, J. (2010). Mattel, lead paint, and magnets: Ethics and Supply Chain Management. Ethics & Behavior, 20(1), 33-46. He, H. h. (2012). Foxconn abuses 'not fully revealed' responding to US NGO's report on conditions at key Apple supplier, scholars say it has not made promised pay rise and uses students as cheap labour. South China Morning Post (Hong Kong edition) march 31, 2012, 3. Retrieved from , K. (2010). Global ethics: An introduction. Cambridge: Polity PressJames, A. J. (2005). Distributive justice without sovereign rule: the case of trade. Social Theory & Practice, 31(4), 533-559. Retrieved from . Mattel Announces Signature Partnership With Save the Children. (2005). PR Newswire,Mattel, Inc.; Mattel named one of the "world's most ethical companies" again in 2010. (2010). Telecommunications WeeklyMishra, P., (2012). Apple CIO O'Connor visited Bangalore in January: will it be India after iPhone, iPad?, The Economic Times (Online), Feb 14, 2012. Retrieved from , A. (2012, March 14). Ford motor company / 2011 annual report. Retrieved from , S. (2011). Mattel, Inc.: Global Manufacturing Principles (GMP) - A Life-Cycle Analysis of a Company-Based Code of Conduct in the Toy Industry. Journal Of Business Ethics,99(4).Verschoor, C. C. (2000, October). Legal Compliance and Ethical Blunders at Ford/Firestone. Strategic Finance, 82(4), 22. Retrieved from GALE%7CA66528460&v=2.1& u=winf31552&it=r&p=AONE&sw=w. ................
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