The case of the plant relocation Options Continue operations in US Move operations to Mexico Move operations to Philippines Move operations to South Africa Facts ( Manufacturing of computer components for automobiles. ) Complex hydro-carbons used to clean chips and other parts. Solvent carcinogens must be handled with extreme care. Strike of union workers to raise wages. High wages i. e. $15/hour Safety regulations increasing cost of production. Environmental regulations increasing cost of production.
Expensive waste management increase cost of production. Issues Labor issues Child labor Women labor Union rights Wages Safety regulations of the country Environmental regulations and general public awareness Waste management regulations of the country Child Labor Mexico has not ratified the main ILO Convention on child labor and there is evidence that child labor is a problem in the informal sector.
However, the government is engaged in efforts to address the situation. Mexico has not ratified ILO Convention No. 138 (1973), the Minimum Age Convention.
Child labour laws set the minimum age for employment at 14.
This is fairly well observed in the formal sector, particularly in large and medium-sized companies. Enforcement is less adequate at the many small companies and in agriculture and is virtually absent in the informal sector. The ILO reports that 18% of children aged 12 to 14 work, often for parents or relatives. Only six out of ten primary school children actually complete school. The government has been undertaking efforts to address the problem of child labour, in cooperation with UNICEF.
The number of years of free, obligatory school education was increased from 6 to 9 in 1992 and parents were made legally liable for their children’s attendance. In conclusion, the use of child labour is unlikely to be of a scale such as to make a significant contribution to the price of Mexico’s exports. There is evidence that the government of Mexico is undertaking efforts to reduce child labour in the informal sector. The Mexican Constitution establishes 14 as the basic minimum age for work.
The Federal Labor Law (LFT), which is incorporated into the Constitution, includes special provisions concerning the work of children between the ages of 14 and 16. Among these various provisions, minors in this age group are prevented from work that is “dangerous or unhealthy,” underground or underwater, itinerant, or which “may affect their morals or good behavior. ” In addition, they may not work after 10:00 p. m. in an industrial plant, work for more than six hours per day, or work for more than three hours without a one hour break.
In order to work, children under eighteen are required to have permission from a legal guardian or parent, have regular medical examinations, and their employers must post a list of dangerous tasks not to be performed by minors. International Conventions Mexico is party to the UN Convention on the Rights of the Child. The Government of Mexico has not ratified ILO Convention No. 138 Concerning Minimum Age for Admission to Employment or ILO Convention No. 59 Concerning the Minimum Age for Admission to Employment in Industry.
Freedom of Association and the Right to Collective Bargaining Mexico has a pluralistic trade union situation guaranteed by the 1917 Constitution which provides workers the right to form and join unions of their choice without prior authorization and the right to strike. Collective bargaining is widespread. However, the legal registration of unions in Mexico is impeded by the authorities, specifically by the local Conciliation and Arbitration Boards (CABs) which have sole authority to regulate union elections and handle all phases of labour dispute resolution.
Registration by CABs is necessary for trade unions to obtain legal status but these boards act to withhold or delay registration from unions that are hostile to government policy or to vested economic interests, through the improper use of administrative requirements. Because Mexican labour law makes little provision for the rights of individual union members, workers can be denied access to their own collective agreements and to internal union rules and have few remedies available when internal union procedures are violated in union elections.
Where such abuses lead to employer-dominated trade unions, registration requirements and election procedures have been used to prevent workers from forming new unions. Non-registration can subsequently be used as an excuse for prohibiting, or failing to recognise strikes. Mexican law grants workers the right to strike. But the CABs have the power to declare strikes “legally non-existent” leaving strikers vulnerable to being fired and to suppression of work stoppages by force. Peaceful labour protests are frequently dispersed by the police using force.
Fierce resistance to attempts to organize trade unions by employers, colluding with local officials, remains a major cause for concern at Mexico’s maquiladoras plants. While in theory the same union rights exist in maquiladoras as in the rest of Mexico, the rate of unionization is much lower, at between 10 and 20%. Anti-union attitudes on the part of employers and the existence of “company unions” are considered to account for the low rate of unionization. In contrast to other sectors, few maquiladoras have collective bargaining agreements with unions.
Few strikes have been attempted; most have been quickly resolved, while others have resulted in the dismissal of strike leaders in cases where the labour courts have declared the strikes illegal. Discrimination and Equal Remuneration While Mexico has ratified both the main ILO Conventions on discrimination, there is extensive evidence of discrimination against women, including in Mexico’s maquiladoras sector. In 1952, Mexico ratified ILO Convention No. 100 (1951), Equal Remuneration and in 1961, ILO Convention No. 111 (1958), Discrimination (Employment and Occupation).
However, there is extensive evidence of discrimination. There is no provision in the Constitution of Mexico, nor in the law, for the principle of equal remuneration for work that is of equal value but of a different nature. The government of Mexico indicated to the ILO Committee of Experts on the Application of Conventions and Recommendations that it was not necessary to legislate in favour of equal remuneration since there was no problem of inequality. But it is well-documented that women are generally paid less and concentrated in lower paying occupations.
In addition, a further reply of the government of Mexico to the ILO indicated that at the higher levels of the public administration, there were almost three times as many men as women. Discrimination in recruitment does not seem to be addressed in labour law. It is reported that many employers discriminate against pregnant women in order to avoid maternity protection costs. Many employers require women to certify they are not pregnant at the time of hiring while others test applicants for pregnancy.
There are further well-documented reports that in order to escape from the cost of the maternity protection provided by the law, employers deliberately expose pregnant women to difficult or hazardous conditions to make them resign. This is particularly evident in the low-wage, low-skill, high-turnover maquiladoras. State labour inspectors and federal health and safety authorities are unable to enforce these provisions, partly because the number of maquiladoras far exceeds the capacities of the labour inspection services.
In response to discrimination against women, the government is engaged in actions to improve the situation within the framework of the National Action Programme for the Integration of Women in Development and the activities of the National Commission for Women. CONCLUSIONS The record of Mexico with regard to core labour standards is mixed. Freedom of association is provided for in law but the right to organize and the right to strike are not always respected in practice.
Mexico’s law and practice therefore require further government efforts with regard to the exercise of the right to freedom of association in order to respect the commitments to fundamental workers’ rights supported by Mexico in the Singapore WTO Ministerial Declaration. Respect for core labour standards in the maquiladoras sector is a major cause for concern, not least because it appears to be part of a general strategy to prevent workers from bargaining for a fair share of export revenues. Companies in Mexico’s maquiladoras are thus able to gain competitive advantage over firms in other countries that do respect core labour standards.
Mexico still faces serious discrimination against women and needs to step up its actions to comply with the ILO conventions on non-discrimination and promote equality for women. Mexico also has a problem with child labour in the informal sector. Mexico should therefore provide reports to the WTO and the ILO on its intentions and actions in order to comply with internationally recognized labour standards in the areas of freedom of association, discrimination and child labour and provide a report to the WTO General Council on the occasion of the next trade policy review of Mexico.
Furthermore, Mexico should initiate urgent steps to ratify ILO Conventions 98 and 138. What should be done? Most foreigners who come and live in Mexico think they can hire and fire an employee “just like back home”. This line of thoughts can only bring situations that are not so pleasant and even situations of “legal extortion” in the short and long haul. In Mexico one who hires a physical person must know the consequences of his or her act otherwise will be surprised by a “demanda” (lawsuit) in front of the appropriate labor authority.
First of all let us look at the hiring portion and then how one can protect himself from x-employees. Hiring means exactly what it means everywhere in the world and this can be applied to hiring a physical person (great ape with large brain = human) or a moral person (one who can be called= Partnership, business, corporation). When one hires a moral person one must have a contract to establish the duties and responsibilities of each parties. When one hires a physical person one should do the same and be aware of other “things to do”.
Actually replace the word “should” by “must” The “other things to do” are: A) Having the future employee present a job application form along with a good conduct letter which is emitted by the police authorities. B) Make sure the future employee has his “Seguro Social” (IMSS) number and card. In the event that he / she does not have said number do not hire. C) Register the new employee at IMSS. D) Have the employee sign a letter stating that he will pay the taxes on his income. In the event that the taxes are paid by the employer have the accountant keep a record of such payments.
E) Have the accountant make a report called “Libro de Nominas” which is the record of payment of salary paid. F) Provide a letter stating the conditions of work: Type of job, responsibilities, duration of a daya€™s work etc. , and have the new employee sign it and receive a copy. Once the hiring is done: 1) Make the employee sign in and out (time record). 2) Make sure that vacation pay and Christmas bonus are paid and in the event that the “boss” is a business pay on time the 10% of the profits to be paid to an employee. 3) Have the employee sign for every payment made to him. ) In the event that the employee does not do his job or respect the working hours: Present him with a letter stating the complaint and have him sign a copy that must be keep for 5 years. 5) In the event that the 8 hour working day must be extended, work on sunday or “dias festivos”: Pay overtime as per the law. Firing: 1) In the event that the employee must be fired one has to have a just cause. This “just cause” must be in writing with a witness attesting it. 2) Make sure the employee is removed from the IMSS records on the same day. 3) A full report must be filled at the appropriate labor board.
Employee not reporting to work: In the event that the employee does not come to work without any explanations an employer must file a report to the appropriate labor authorities to protect himself. More than five employees can be syndicated by onea€¦this means that a “union shop” is createda€¦ “During this day and age when people want it now and want it fast, one can only envision how to make the fast honest buck. Given the situation with shareholders demanding a higher return on their investment, the only feasible solution is to relocate certain facilities to give the company a chance to survive.
With unions wanting more money and United States regulations becoming stricter; if there are other alternatives to reduce cost and increase profit companies must make a difficult decision to move operations to another state and possibly another country. With Electrocorp needing to alleviate rising costs in labor and production, a strategic and well-developed relocation is key to minimize bad publicity and maximize opportunity for a large company that provides on-board electronics of vehicles. The first step in a major reconstruction of production must involve a key step in social responsibility.
Bad publicity can really damage a company’s image and clients can be lost in the process. Moving operations to Mexico would be out of the question because it will raise suspicion when it is known that people will work for less money and more birth defects happen because there is less strict regulations for business operations in that country. Since there are a few plants located in the United States, we would close down the smaller facilities and try to consolidate operations into a larger facility.
We can then offer a relocation package for employees willing to relocate to another part of the country where a plant will remain open in the United States. This exhibits that Electrocorp shows that they know that a maj … ” Another judgement: “The United States located electronic company Electrocorp faced the problem of declining profitability due to rising production costs, specifically high wages, costly worker’s safety and environmental standards. In order to solve this problem Electrocorp is deciding whether to relocate some of their lants to South Africa, Mexico, or the Philippines. The first alternative of keeping the plants in the US would mean that Eletrocorp obeys the strict environmental and safety regulations, pays its workers $15/ hour, but avoids the loss of jobs in the US. The company would incur high production costs. The second alternative of relocating plants to South Africa would create a job loss in the US. The company would save costs by hiring workers for $10/ day and obeying less strict safety and environmental standards.
The strong labor union could cause problems in the future. The third alternative of relocating to Mexico would have the same effects as relocating to South Africa, except that the wages for workers are $3/ day. A larger amount of costs could be saved, although Electrocorp would have to pay attention to citizen health groups which could cause bad publicity. The last alternative of relocating to the Philippines offers the highest cost savings due to the least strict safety and environmental regulations, no activist groups and the market pay rate of $1/ day.
The evolving ethical issues can be summarized as follows: Is a relocation of Electrocorp’s plants ethical considering the loss of jobs in the US, workers’ exploitation in the host country, and the harmful impact on the host country’s environment? In addressing this issue, we have to start with the stakeholders’ interests. The shareholders are interested in the profitability of the corporation. According to them, if profitability cannot be achieved in the US, Electrocorp needs to relocate to countries that offer cheaper production. The US employees are concerned about them loosing their jobs if plants are relocated.
This is unacceptable to them unless they are adequately compensated for the job loss and supported through programs that assist them in finding new employment. With respect to Electrocorps customers, an reduction in operating costs through relocation is in their interest because it could mean lower prices. On the contrary, if costs increase product prices might climb so high that customers will switch their supplier and turn away from Electrocorp. Stakeholders in the host countries can be divided in the government, the environment, and the community.
The government welcomes the relocation of Electrocorps plants because their economy will be stimulated through direct foreign investment and employment. But the government will also ensure that local policies and regulations will not be violated. Additionally, the stakeholder environment has the right of not being harmed. Likewise, the local community has the right to healthy and habitable living conditions. The workers in the host country have the right to fair compensation and save work conditions. In their decision, Electrocorps executive managers have to consider the interests of these stakeholders.
Analyzing the issue based on ethical frameworks, we start with the theory of deontology. Since a deontologist acts responsibly and respectfully to all individuals based on rules and principles, he would choose the alternative of keeping the plants in the US. A relocation to one of the mentioned countries would not be responsible nor respectful to the US employees (they loose their jobs), to host country workers (they work under unsafe working conditions), and to the environment (harmed by the corporation). A utilitarian decides based on a cost/ benefit analysis.
He chooses the decision that offers the greatest good for the greatest number of people. Therefore, a utilitarian chooses to relocated to the Philippines due to the highest cost savings, job creation in the Philippines, and to avoid bankruptcy. US employees will be compensated for their job loss and assisted with their job search. According to the theory of justice (fair and equal treatment of all stakeholders), we have to choose either a relocation to South Africa, or a modified relocation to Mexico or the Philippines. Modified means higher wages as well as stricter safety and environmental standards.
That way, Electrocorp would have moderate cost savings, employees earn moderate wages, and the environment would be less polluted. Land ethics is founded on the preservation of the environment. Base on this theory, the first alternative of keeping the plants in the US must be selected because of the least harm to the environment (stricter regulations). We come to the same conclusion of keeping the US plants when considering the social contract between the employer (job security) and the employee (work duties). Only this alternative will uphold the social contract.
Our final selection will be relocating some plants to the Philippines. With this alternative a potential bankruptcy can be avoided, it is the most efficient use of the company’s resources, and it creates jobs in the Philippines. By increasing workers’ wages to $3/ day as well as by increasing safety and environmental standards above the required minimum and by offering laid off US employees severance pay and support programs, the interest of all stakeholders are satisfied equally. ” References Financial Times, various articles and surveys.
Human Rights Watch, Mexico: No Guarantees – Sex Discrimination in Mexico’s Maquiladora Sector, 1996. ICFTU, Annual Survey of Violations of Trade Union Rights, various editions including 1997, 1996 and 1995. ICFTU, Behind the Wire: Anti-Union Repression in the Export Processing Zones, 1996. ILO, Lists of Ratifications by Convention and by country, 1997. ILO, Reports of the Committee of Experts on the Application of Conventions and Recommendations, editions from 1990 to 1997. ILO, Reports of the Committee on Freedom of Association, 1996. International Metalworkers’ Federation (IMF), North American Integration, 1996.
International Organization for Migration (IOM), Foreign Direct Investment and Migration: the case of Mexican maquiladoras, report by Philip L. Martin, 1992. National Administrative Office of the North American Agreement on Labor Cooperation, Follow-up Report on NAO Submission #940003, 1996. National Administrative Office of the North American Agreement on Labor Cooperation, Public Report on NAO Submission #9601, 1997. OECD Development Centre, The Informal Sector in the 1980s and 1990s, report by Harold Lubell, 1991. Upham, Martin, Trade Unions of the World, 1994. US Department of State, Report on Human Rights Practices for 1996, 1997.
Cite this Eloctrocorp Plant Relocation
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