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...

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.
Stakeholder theory & Target's downsizing in Geelong

The stakeholder theory describes that an organization is composed of several loosely connected groups of people, each having different stake in the organization (Freeman, 2010). Thus, within an organization there are different stakeholders and management of the organization is only one stakeholder in the group of stakeholders. Suppliers, customers, employees, shareholders, and larger societal forces are some of the other stakeholders in an organization (Heath & Norman, 2004). The ethical perspective of stakeholder theory of corporate governance states that only those actions and policies are ethical that serves the largest number of stakeholders of an organization. This also implies that as the business owes particular interests and duties to the investor stakeholders, so does the business owes interests to employees as well customers but in different perspective. The theory primarily assumes that there must be an inherent convergence in the interests of all stakeholders of a firm and that corporate governors should serve the interests of all stakeholders. While theoretically this position might be normative in nature, practically stating, the shareholders of a firm get precedence over all other stakeholders (Donaldson, T & Preston, 1995). In case of Target, it seems that the management of the retail intervened and decided to downsize the head office in order to protect and further the interests of shareholders, management, and the owners. Had the company remained unprofitable, it was likely that Target would have to close the regional operation of their stores. To avoid this catastrophic situation, the management intervened and decided to decrease their payroll by firing quarter of their employees. While the corporate managers at Target may be able to defend their policy from a stakeholder perspective of corporate governance, it seems that while serving the interests of shareholders, owners, and the management itself, the interests of fired employees were left unsaved and the firm did not make any effort at all to protect the most fundamental interests of their employees. The employees being fired could have been given unemployment package or compensation for managing their period of unemployment.

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…