Ethical dilemmas in Target's 2013 Geelong employee redundancies

Target Geelong Staff Layoffs

Target employee redundancies in Geelong: Ethical and corporate governance dilemmas

Ethical dilemmas for Target

Kantian Model of ethical thought

Principle of rights theory

Stakeholder theory & Target's downsizing in Geelong

Managerial insights

Target employee redundancies in Geelong: Ethical and corporate governance dilemmas

Corporation and large enterprises have faced ethical and corporate governance dilemmas due to staff layoffs and redundancy programs. Target Australia is one such brand that has recently faced this dilemma. Due to increased operating costs and decreasing sales, many in retail and manufacturing industry had to close their operations in developed countries. While such decisions are not easy to make, there are many ethical dilemmas and implications involved in businesses making downsizing decisions.

Background

In early May, 2013 Target started experiencing decreased sales and increasing stocks of unsold products. This caused the management to initiate a downsizing program in its head office at Geelong and as an initial measure; the company's managing director Stuart Machin announced laying off 217 permanent employees and 432 contractors (Lucas, 2013; Baxendale, 2013). The downsizing plan was implemented with immediate and shortlisted employees to be made redundant had to leave their jobs within two weeks of the notice. The news of Target downsizing at its head office was not welcome by Mayor Keith Fagg who announced that city government will make all-out efforts to provide employment to fired employees. The decision by Target gloomed the already declining labor market in Geelong as Ford Company had also announced closing down its production site at Geelong after 88 years of operations. News of Shell closing down its oil refinery in the area also caused much worry in the city administration. People were seen crying and sobbing while leaving from Target, having packed their belongings in boxes and other cases. The company's MD tired to pacify the audiences by stating that this hard decision will allow the company to operate profitably.

Ethical dilemmas for Target

There have been ethical dilemmas for the organizations while having to fire several or several hundred workers (Weinstein, 2008). The corporate managers are faced with challenges to cut cost and increase return over net assets (Henke-Hadley, 2008). This is also evident in case of Target when the company had to fire 217 employees as a means to make the firm sustainable. Employees such as Mary Ramia were found helpless as mortgage payment and other running expenses were to be borrowed by such employees now made redundant.

Kantian Model of ethical thought

This utilitarian ethics model called the Kantian model expects from the firm that full disclosures regarding layoff policy, effected community are delivered. According to their view, the employees are considered as means to an end rather an end in itself (Wood, 2008). Individual is a main unit. According to the Utilitarian point-of-view, if the consequences of an action are good, the action is also good in itself. Thus, utilitarian point-of-view aims at gauging the action from the results perspective rather than action itself. It also holds true that ethical actions are those that result in greatest happiness (Hovland & Wolburg, 2010).

If analyzing from the utilitarian perspective, the decision by Target is not ethical as the number of people that are left jobless will increase in Geelong. There already are mass layoffs in the city for instance those initiated by Ford and Shell. The families of such employees will also suffer due to the downsizing.

There is another perspective as well that until the company who hires these employees is not profitable, it would not be possible for them to focus on providing employment to the existing staff even. This is also supported by the concept called moral relativism. This perspective accommodates other possibilities in given condition and promotes toleration in society. In case that the layoff decision by Target is analyzed with moral relativism perspective, it is clear that the company acted out of the greater good as there were more people employed with the company in threat of close down than were fired by the firm to sustain.

Principle of rights theory

The principle of rights theory supports the notion that any such position is right for an individual that protects the rights of individual. Emmanuel Kant proposed this theoretical position hereby arguing that the rights of an individual are inherently valuable and not because that these rights grant him/her freedom or happiness. The principle of rights theory established that how the individual may be treated (Garcia, 1999). With respect to this theory, it can be assumed that Target's executive management acted unethically as only two weeks period was provided for the employees to leave their year's long association with the firm. A more prudent approach was adopted by Ford Company that made the employees redundant in their Geelong production plant but these employees would remain on the payroll till 2016. This means that the employees of Ford would have ample time and resources to find and qualify for other jobs in the market. On the other hand, Target employees would be left unemployed without money to meet their basic housing and education needs. It can be stated that while the company Target may not be held totally unethical in their downsizing, since they were acting out of the greater good of firm and people, it can be stated that the firm did not protect the principle of rights of Geelong employees.

Managerial insights

The impact of globalization has been immense over the corporate governance practices in the U.S. And Europe. While multinational companies (MNCs) to increase their operational footprint and profits through internationalization, there are several dilemmas attached to these policies. Firstly, the researchers have started arguing that whether corporations can act as socially conscientious citizens or they have a greater obligation to improve profitability. A manufacturer moving out the production operations to a developing country might be able to decrease production costs and thus improve profitability but may leave thousands of local workers jobless. This in return will create economic, social, and political issues in the domestic market. The benefits of globalization are such vast that firms have come across different strategies to present themselves as socially responsible corporate citizens in domestic markets. Large Corporation outsource their production and customer services functions to developing economies in the hope of saving millions of dollars. To offset the business and social implications of enabling unemployment in domestic market, these firms are heavily investing in social causes in their country of origin. This may present the opportunity of offsetting the negative perception that people develop about these firms. The free market economy is based on the principle that resources will flow towards areas and industries that provide greater return. Thus, economically stating, the transfer of capital, production functions, and other operational divisions to other countries might be most economical alternative.

Conclusion

The case of Target store having to fire a quarter of their head office employees at Geelong might present several ethical dilemmas for the management of the company. The theorists also may exploit the case to state that Target did not act as a socially responsible citizen and many normative values of stakeholder theory or utilitarian theories were disregarded. However, it should also be considered that the management of a firm, as in case of Target stores, has to protect the interests of most number of stakeholders of a company. Their decisions should further the interests of majority and not the minority. Minority's rights shall be protected in case stakeholder theory of corporate governance, but not at the cost of majority stakeholders. On the other hand, this also does not mean to further the notion of 'tyranny of majority'. To protect the principle of rights of individuals, the management has to provide reasonable space to the employees for managing their unemployment. For this, a notice of only two weeks can be held unethical (but not illegal). There is an inherent conflict in the phenomenon of globalization and ethical compliance. This conflict can only be resolved once the management is mindful of their duty towards majority of the stakeholders while not being in-sensitive to the rights of minority stakeholder. These cases and some others, as in case of Ford motors in Geelong, do provide us with socially responsible governance by the management. While Ford definitely served the interests of majority stakeholders by closing down the economically infeasible plant in Geelong, the company did not immediately retire all the employees and some period of time was provided as fully paid to let the employees adjust and find new jobs.