You are member of the board of international operations for a large pharmaceutical firm that manufactures an anti-malarial drug. You have been invited to participate in an important board meeting where the chairman will inform the board of the upcoming developments in your firm. The chairman of the board in that meeting started addressing the members saying:
“Our firm is considering closing its factory in the U.S. and outsourcing the work by opening up a factory in a small Central American nation where malaria is still extremely common. Our firm is planning to do just what many other companies have already done, reducing labor costs by shifting work to low-wage countries such as China, India, Mexico, and Central American nations.
The operation will be a joint venture between our firm and the local government. Prevailing working conditions and labor law directives in that country report 20-hour workdays, pay lower than the minimum wage, overcrowded living conditions, and confiscation of passports of expatriate workers”.
He continued saying; Based on intelligence reports Foreign Companies and government officials say that local labor laws are adhered to and enforced, though abuses, appear widespread.
A labor-advocacy group claims that supervisors coached workers to lie to labor inspectors about conditions, and threatened workers with time in makeshift jails without food if they talked.
As regards the citizens in this country,based on the public relations director of our company, the majority of the people in that country cannot afford the medicine because of the high import tariffs.
Yet if our plan goes through, over 200 jobs will be created and the drug’s international price will drop by over 50 percent. He concluded addressing the board disclosing the following incidence. “In a final meeting with a senior government official, the gentleman informed our CFO that if we pay him $500,000 cash, the deal will go through.
The chairman ended his introduction asking every member to focus on the agenda and be prepared to discuss the following-but not limited to- emerging issues and provide their views freely and openly in coping with the issues from the situation described.
Your assignment as an ‘Insider board member’ of the pharmaceutical organization is to put forward your views in each and every item of the agenda that follows.
1) How do we deal with media and labor unions of the home country if we implement the manufacturing unit relocation? What issues must we consider? What do we do?
2) Would it be reasonable for our company to take advantage of the prevailing working conditions in that Latin America nation? Can we deprive ourselves of the “cost efficient” practices such as exploit child labor, force women to work 75-hour weeks, even if we might destroy family units?
3) Assume we go ahead, do you believe it will be possible to uphold a U.S. management style in this small Latin America country? Or should your company be prepared to adjust to the local managerial style and human resource practices?
4) Regarding the “gentleman’s” request from the government for facilitation fee: How do we handle this situation? Do we give in considering it mandatory to help establishing the factory? Or withdraw from our business plan and do nothing? How our selected action would affect our relations with the factory owners and our ability to do business in the country?