You are the CEO of a large, U.S.-based corporation that manufactures electronics for the appliance industry. Your corporation is in the midst of joint venture negotiations with Mitsamatsu Ltd. in Asia. Mitsamatsu Ltd. is a very large electronics manufacturer with multiple plants in China, Taiwan, Thailand and Singapore. This joint venture could open up the Asian market for your corporation and would likely prove to be extremely profitable for both venture partners. It may also save or perhaps even expand U.S.-based jobs in your corporation in customer service, sales and marketing and engineering in order to design products that meet new requirements in a foreign market. In short, it looks like a win-win.
However, you have just received some worrying information about this proposed joint venture. Apparently there have been some media reports of possible child labor and payment of substandard wages in some of Mitsamatsu's factories. You are fully aware how critical this joint venture is to your corporation's shareholders and employees. However, you're afraid that, if your company goes ahead with the joint venture, there may be considerable criticism in the media.
As CEO, what should you do? Explain your reasoning. As you ponder your answer, consider the following:
- What will be the effect of your decision on your shareholders?
- What will be the effect of your decision on your employees here in the United States?
- What will be the effect of your decision on the Mitsamatsu workers in Asia? Is there a trade-off between providing employment for citizens in a Third World nation vs. employment conditions that may not meet our U.S.-based standards?
If I were the CEO in this situation, I would go ahead and do the joint venture. However, I would insist that our agreement would have clauses that stipulate that we would work to eradicate child labor and that we would study the issue of wages to see if our wages are truly substandard. By doing this, I would hope to allow my company to make money by expanding while avoiding controversies that would be bad for us economically.
As the CEO of this company, I could not simply walk away from this joint venture. I could not do that because it would be harmful to just about everyone involved. If we do not expand into Asia, we are likely to lose money (or, at least, we are unlikely to expand and make more money). This will hurt our shareholders. It will also hurt our American workers because the joint venture would save jobs and might even increase the number of jobs we could provide in America. Finally, walking away from the joint venture would hurt (or at least would not help) the workers in Asia. If we walk away from the joint venture, it would not improve their pay or reduce the prevalence of child labor among them. Instead, it would be more likely to reduce the number of jobs available to people in Asia.
There truly is a tradeoff between providing employment for people in poor countries and giving them employment conditions that meet our standards. American consumers want the lowest prices and so it is important to keep costs low. If we do not keep costs low, we will lose customers and our workers will be out of jobs. In other words, keeping costs low might make workers have low pay, but at least it allows them to have jobs. What we must do is to work to minimize the tradeoff as much as possible. We need to make sure that our wages are as high as they can feasibly be and we need to ensure that our workers are not having to cope with any truly dangerous working conditions.
As the CEO, I would publically announce the steps that we would take to eradicate child labor and to be fair to our workers. Having done this, I would go ahead with the joint venture.