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Business Ethics in the News

A discussion on the week's top business ethics stories by Professor Kirk O. Hanson, Executive Director of the Markkula Center for Applied Ethics, and Patrick Coutermarsh, Fellow in Applied Ethics and recent graduate of Santa Clara University.

The following postings have been filtered by category Labor Regulations. clear filter
  •  LIFE INSURANCE: Betting on the Death of Employees

    Friday, Jun. 27, 2014

    Souce: maorix

    A controversial business practice is on the rise: employers are taking out insurance policies on the lives of their employees, and when they die, are keeping the payout for themselves. The premiums on the policies, along with the payouts, are tax free — giving corporations an incentive to park their money there. The practice, labeled “dead peasant insurance” by detractors, has been around for some time but is now going mainstream. Of the largest 1,000 companies, over one third have policies worth over $1 billion, and more are being added each year. In 2006, the Pension Protection Act limited the practice to only the highest-paid 35% of employees, and only with their consent, but critics think this isn’t enough. Defenders of the policy argue the practice allows them to cover long-term health care costs, deferred compensation, and pension obligations; although, there is no legal requirement to use the proceeds toward these programs. Are these insurance policies unethical? Is it ghoulish to give the company a stake in the early death of its own employees?

      Kirk: I believe this policy violates the rights of the individual. Not only is it bad to give the company a stake in an employee's early death, this is also a violation of the employee’s dignity as a human being. Traditional life insurance provides a valuable service: peace of mind and security for your loved ones. “Dead peasant insurance” does no such thing, and instead is driven purely by profit gains and tax breaks. Shame on the tax code for making this profitable.

      Patrick: Often when we deal with large numbers, we tend to dehumanize the individuals in the collective group. For good reason: we don’t have the bandwidth to empathize with large numbers of people. Often insurance policies, like a general’s battlefied calculations, fall into this category. Still there are some fundamental problems here. For one, corporations should be legally bound to directing proceeds to the employee programs mentioned (pension, health care, etc.) as a matter of distributive justice. Second, these policies shouldn’t be tax free. This would inevitably end the practice -- which says a lot.

    An Employee Dies, and the Company Collects the Insurance (NY Times)

    A Framework for Thinking Ethically (Markkula Center)

     

    NEXT STORY: Wells Fargo's progress toward 2020 CSR goals

  •  ZAPPOS: Another Hoop for Job Applicants to Jump Through

    Wednesday, May. 28, 2014

    Source: StockMonkeys.com

    Zappos, the Amazon-owned online retailer, is removing their job postings from traditional job boards and even the company website. Instead, job applicants will have to join Zappos Insiders, a social network for applicants to interact with current employees and demonstrate their fit with the company. Applicants will be sorted by personal interests and skill sets, be placed in pipelines (e.g. Sales or HR), and will participate in digital Q&A’s and contests. Critics have argued that participating in a meaningful way would require significant time and energy with no promise there would be a return on your time. Zappos argues the new system will allow them to keep a pool of qualified and available applicants at the ready, and will reduce the volume of applications: last year, Zappos received 31,000 applicants, hiring about 1.5% of that number. Zappos hopes that the social network approach will allow their recruitment team to work more purposefully, and give prospective employees a better platform for differentiating themselves. Is requiring job applicants to participate in a social network an abuse of power, or a way to let truly interested and qualified applicants stand out in the crowd?

      Kirk: Depending on how Zappos manages the social network, it could very likely be both exploitative and abusive toward applicants. For one, there is a significant power differential between employers and job applicants, as there are so few jobs available. To quell this dynamic, an increasing number of universities now prohibit personal videos, sample projects, and batches of cookies so they do not start an arms race amongst applicants. My fear is that this will set off such an arms race; not to mention, what happens when an applicant is applying to more than one company? Zappos would do better to describe its needs in such detail that applicants could sort themselves out and not waste their time even applying.

      Patrick: I’m with Zappos on this one. We all can agree that the job application process needs a makeover, and if anything we should treat “Zappos Insiders” as an experiment and wait to see what happens. In theory, this system will allow both applicants and employers to get a better sense whether it is a fit, resulting in more efficient hiring practices. The arms race is a concern, but the currency in play is time, as opposed to money, which everyone has equal access to. And let’s not pretend that searching for a job is a bed of roses as is.

    Zappos Zaps Its Job Postings (WSJ)

    A Framework for Thinking Ethically (Markkula Center)

     

    NEXT STORY: Walmart Hosts Inaugural Sustainable Product Expo

  •  WORK ENVIRONMENT: Kids in the Workplace

    Saturday, Apr. 26, 2014
    Source: Pixabay

    As American women continue to exit the workforce at an increasing rate, talk is turning to ways of making working and having children more compatible. The proposed solution? Allowing employees to bring kids to the workplace. In a recent survey asking whether employers should let workers bring kids to work, 61% responded yes, with limits; 26% responded no; and 13% yes. Proponents argue that the added flexibility for parents would quell the exit rates and increase productivity through relieving stress. While just about anyone could agree that a group of loud kids running the office isn’t preferable, others point to another concern: fairness to workers without kids. Many feel that parents should not receive special privileges, so to level the playing field, nonparents should be permitted to adapt the workday to their lifestyles as well. Should kids be allowed in the workplace? Are employees with kids entitled to more flexibility than those without children?

      Kirk: Maybe it’s my age, but this trend leaves me cold. I don’t see how a worker with children to care for could at the same time concentrate and be productive. I applaud firms that offer daycare, particularly onsite daycare; but please, not in the office. Then again, I do think parents are should receive extra help from the company; child rearing is a common good that benefits the whole community.

      Patrick: I think the answer to this question comes down to the particular company and their culture, not to mention their facilities (cubicles and kids don’t go well together). The key here should be to get everyone at the company on the same page and coming to a clear understanding of where the line is. Management should take into account the lifestyle and wellbeing of their employees, along with the demands of the job, and look for measures that are mutually beneficial: whether that be offering onsite yoga or daycare.

    Kids should be welcome in offices, with limits (Al Jazeera America)

    A Framework for Thinking Ethically (Markkula Center)

     

    NEXT STORY: Paying Employees to Quit

  •  AMAZON: Paying Employees to Quit

    Tuesday, Apr. 22, 2014
    Source: Softpedia

    Amazon has made headlines recently for a surprising policy: it pays its workers to quit, but not in order to reduce the size of its workforce. Amazon believes that an employee who takes the offer should not be at the company in the first place. CEO Jeff Bezos explained the program by stating, “In the long-run, an employee staying somewhere they don’t want to be isn’t healthy for the employee or the company.” The cost of poorly motivated workers is well documented, with Gallup estimating that $450 to $550 billion a year is lost in the United States alone — Amazon’s “Offer” starts at $2,000 and tops off at $5,000. A few have suggested this policy may reduce the likelihood that employees will press for that are really needed, and will instead take the money and run. Is “paying employees to quit” a practice that should be accepted and widely adopted?

      Kirk: I think this gimmick is a terrible idea. I believe a company has an obligation to create a healthy environment that motivates its workers. This approach would seem to reject that responsibility, preferring to shed anyone who does not like the existing conditions. Companies need the ideas and suggestions of workers who see troublesome cultural practices and policy problems. By driving them away, the company signals that it does not want employees' input. This will not create a culture of constant improvement and mutual respect.

      Patrick: I share Kirk’s concerns, but I also think that Amazon might be on to something here. For one, paying dissatisfied employees to leave signals to other workers that Amazon is serious about protecting its culture and success. On the financial side, the policy will likely save Amazon money in recaptured productivity as well as avoiding more expensive severance packages. The fear is that companies will completely outsource culture management with these “pay to quit” deals — and at that point, workers will quit for free.

    Why is Amazon paying workers up to 5K to quit? (USA Today)

    A Framework for Thinking Ethically (Markkula Center)

     

    NEXT STORY: Unilever announces sustainable living program

  •  AUTOZONE: Employee Theft, Coercion, and False Confessions

    Tuesday, Mar. 11, 2014

    Take the suspect to an isolated place. Make sure the conversation isn’t being recorded. Engage in small talk to build rapport. Commence interrogation. These steps, outlined in a manual used by loss prevention specialists to question employees expected of theft, are a common practice in the retail space. Employee theft costs American retailers $16 billion a year, and it’s difficult to stop. Rarely is there any physical evidence, only an imbalance in the books or missing merchandise. To address this, retailers are increasingly turning to internal investigations headed by specialists trained in police interrogation techniques. These interrogations include insisting that the company knows the suspect is guilty, pointing to “bulging files or videocassettes,” and an array of psychological tricks to get the confession. But these techniques are often too effective, resulting in a false confession from the employee. The interrogations are often held while the employee is “on the clock,” meaning leaving could result in losing their job, and the retailers don’t allow them to be videotaped. A slew of recent lawsuits brought against AutoZone have shined light on this problem, even revealing that one of the loss prevention specialist received confessions in 98% of his cases. Given the growing evidence of this problem, should retailers abandon the use of police interrogation techniques in their investigations?

      Kirk: We’ve always known there was a danger of false confessions when employees, criminals, or preschoolers are browbeaten by an overzealous questioner. Criminal investigators have addressed this by videotaping every interview with clear consequences for misconduct. Corporate investigations still operate in the dark with few protections for suspected employees. It’s time to bring the process to light and build in employee protections. Beware the investigator who finds fraud in 98% of his cases.

      Patrick: I understand the reluctance of retailers to acknowledge this problem. Employee theft results in significant losses, and having no other recourse, it’s easy to see why they defer to strong-arming their employees. But these interrogations aren’t addressing the problem, and the resulting lawsuits aren’t doing the retailers any favors. The losses in productivity from employee dissatisfaction and resentment are enough for these practices to be sidelined. Not to mention, happy employees don’t steal.

    When Employees Confess, Sometimes Falsely (NY Times)

    Framework for Thinking Ethically (Markkula Center)

     

    NEXT STORY: Are Tech Firms Responsible for the Misuse of Their Products?

  •  KELLOGG: Is the Two-Tier System Ethically Problematic

    Wednesday, Feb. 12, 2014
    Image Source: Flickr

    The 226 workers at Kellogg’s Memphis plant have been “locked-out” from their jobs producing Frosted Flakes and Froot Loops for over 3 months. Company management and the union representing the workers — the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union — reached a stalemate in negotiations in October, resulting in the lockout. The primary issue is Kellogg’s demand of dramatically increasing the amount of temporary workers, who would earn $6 less and be entitled to much fewer benefits: effectively creating a two-tier system at the plant. Under the current agreement, Kellogg has the right to use temporary workers for up to 30% of the workforce, but the union claims Kellogg is now pushing for 100%. The workers, who have had their health insurance suspended by Kellogg, fear that their jobs will either be replaced entirely by temporary workers, or they will be forced to take lower wages. Kellogg, in the midst of a 4-year cost reduction effort labeled, “Project K,” claims that the change is necessary to remain competitive and that current employees will be unaffected by the change. Are two-tier systems ethically problematic?

      Kirk: Kellogg has ignored lessons learned by the airline industry that dividing employees into two classes of citizens won’t work for very long. American Airlines, with a host of others, started a plan in 1983 that instituted a two-tier system separating current employees from future hires into different pay scales. By 1987, the company had to significantly overhaul the program. Two-tier systems create tension between the employees, resentment of management, higher turnover, and further complicate union relations. In the long run, these programs are not sustainable. They undermine the concept of shared sacrifice, shared reward, and make development of a strong corporate culture exponentially more difficult.

      Patrick: I don’t think tiered systems are inherently unethical, although it is largely a matter of fairness. In the case of American Airlines, and most likely the Kellogg lockout, new hires will be doing the same job as existing employees but will get paid significantly less. “Treat similar cases similarly” goes a long way here. Anything else will create an imbalance and undermine the company in the long run. On the flip side, Google famously uses a tiered system, assigning different color “badges” for full-time employees, contractors, and interns. Yes, they create divisions between the groups, but they also strengthen the group identity of the subgroups and incentivize employees to “climb the ladder.” It’s Darwinian, but fair.

    Labor Battle at Kellogg Plant in Memphis Drags On (NY Times)

    A Framework for Thinking Ethically (Markkula Center for Applied Ethics)

     

    NEXT STORY: CVS TO PULL TOBACCO PRODUCTS FROM ITS SHELVES 

  •  IMMIGRATION REFORM: Retraining vs. Hiring Abroad

    Friday, Jun. 28, 2013

    Thursday, the Senate passed a comprehensive immigration bill, which among other effects will allow Silicon Valley companies to hire more foreign engineers. Tech firms have long been voicing concerns about the shortage of skilled workers in America, and have lobbied for the ability to import more foreign talent by increasing the cap on H1-B visas. Labor groups have been pushing back by arguing that equally qualified Americans be offered jobs before firms look abroad. They also argue that firms should retrain current employees before looking abroad for the most up-to-date workers. Some studies, such as one published by the Brookings Institution, have found that the presence of high-skilled guest workers does not have a negative impact on the employment levels of college educated-Americans of that area. Do tech firms have an obligation to hire Americans over foreign talent?

      Kirk: I believe companies should commit to some level of retraining. Too many Silicon Valley companies see foreign engineers as the solution to all hiring needs, and even as low-cost temporary labor. At minimum companies ought to be working with academic institutions, including online learning companies, to prepare American engineers for the latest technologies.

      Patrick: Companies should invest in their people, but those people do not necessarily have to be American. While Americans do not have a special claim to jobs at American firms, the rate at which American employees are being left in the dust by new technology is problematic. Firms must embrace that there is a dual responsibility in keeping employees up-to-date: it’s on the firm to offer the opportunity for continued training, and on the employee to take them up on it.

    A Bill Allowing More Foreign Workers Stirs a Tech Debate

    A Framework for Thinking Ethically

     

    NEXT STORY: CORPORATE TRANSPARENCY IN HIGH PROFILE TERMINATIONS

  •  INTERNSHIP SWAPPING: Is It Unethical to Trade Internships?

    Thursday, May. 30, 2013

    Small business owners and corporate executives have long faced the problem of whether to hire their children for summer internships and entry-level positions. On one hand, executives know the importance of gaining “real-world” experience at an early age, but on the other, hiring direct family raises many concerns of favoritism and conflict of interest. In response, a recent trend has emerged: “internship swapping.” The quid pro quo arrangement works something like this; “I’ll hire your daughter for the summer at my law firm, if you give my son an internship at your accounting agency.” Taken at face value, it appears to be an elegant solution as neither firm has a familial connection to the new hire. Still, some argue that this is just another way of protecting the special opportunities for the well-connected. Should top executives be engaging in internship swapping?

      Patrick: Internship swapping is unethical as it involves manipulating company resources for personal gain. The company misses out on hiring the best available candidate, or worse, the position is created solely for the sake of “the swap” adding to bloat and inefficiency at the company. Hiring based on reputation and personal endorsements will always have a place in business, but internship swapping crosses the line.

      Kirk: Every company with a limited number of internships should develop a way of allocating those spots without favoritism. There is little difference between a top executive telling the head of internships to "hire my son" and "hire my friend's son." Either grants special treatment to the sons and daughters of the wealthy and well-connected. This is but a fig leaf to disguise the exercise of privilege.

    The Great Internship Swap

    A Framework for Thinking Ethically

     

    NEXT STORY: ETHICAL MARKETING AT COCA-COLA

  •  AMAZON: Should Labor Practices of Multinationals be Judged by the Standards of their Home Country or the Country of its Operation?

    Friday, Mar. 8, 2013

    Last Thursday, a group of representatives from ver.di, one of Germany's largest labor unions, marched on one of Amazon's eight German distribution centers. Armed with 37,000 petition signatures, the group demanded a meeting with Amazon executives to negotiate a union wage contract for its German workforce. Amazon, which employs 8,000 people in Germany, has refused to communicate with union officials, emphasizing that it already pays above the union rate. The union has protested the "Big Brother" atmosphere where "everything is measured, everything is calculated, everything is geared toward efficiency." The union is also protesting the treatment of the 10,000 temporary workers that Amazon buses in from Spain and Romania to meet Christmas demand, citing German legislation, introduced in 2005 that lowered labor regulations, as a main contributor to the problem. Amazon is quickly becoming despised for personifying the qualities of American-style management that Germans despise: "People want to be treated with respect," argues the union leader. Should Amazon operate by more generous worker policies than it does in the US?

      Kirk: Amazon and other multinationals must operate with sensitivity to local standards and expectations. They cannot just operate by their home country practices. In this case, however, the union seems unhappy with recent German legislation as with Amazon. Nonetheless, Amazon needs to resist the temptation to "race to the bottom," and should refrain from enacting more aggressive policies towards workers and the union. But in this case, refusing to negotiate with the union may be the only way to retain enough flexibility to operate profitably in Germany.

      Patrick: While I agree that Amazon and other multinationals must operate under local standards, demanding that they adhere to local expectations has too many problems associated with it. The union is by no means an objective measure of cultural expectations as they have both political and economic interests; which leads to the question: Where can Amazon turn to decipher the expectations it should meet? The labor laws and regulations of the country. Legal code offers a clear set of rules for multinationals allowing them to know what they are getting into before they invest, as well as ensure that their current operations are compliant.

    Amazon's Labor Relations Under Scrutiny in Germany

    A Framework for Thinking Ethically

     

    NEXT STORY: IS THE DELL BUYOUT A CASE OF INISDER TRADING?