Eloctrocorp Plant Relocation

Table of Content

The options for moving the plant include either staying in the US or shifting operations to Mexico, the Philippines, or South Africa. The facility is in charge of manufacturing computer components for automobiles and utilizes complex hydrocarbons in the cleaning procedure of chips and other components. It is crucial to handle carcinogenic solvents with care, and a strike by union workers demanding higher wages has occurred. Currently, salaries are at $15 per hour. Increasing production expenses are linked to safety protocols and environmental rules.

Higher production costs are a result of expensive waste management. The industry is also affected by labor issues such as child labor, women labor, union rights, wages, and safety regulations. Waste management is further influenced by environmental regulations and public awareness. In Mexico, the informal sector shows evidence of prevalent child labor despite the non-ratification of the main ILO Convention on this issue. However, the government is actively addressing this concern. Additionally, Mexico has not ratified ILO Convention No. 138 (1973), which determines the minimum age for workers.

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Child labour laws usually stipulate that individuals must be at least 14 years old to work, a requirement typically adhered to by formal sectors and larger companies. However, enforcement of these laws is less stringent in smaller businesses and agriculture, and virtually non-existent in the informal sector. The International Labour Organization (ILO) states that approximately 18% of children between the ages of 12 and 14 are employed, often by their own family members. Furthermore, only six out of ten primary school children successfully finish their education. To tackle this problem, the government has collaborated with UNICEF in efforts to combat child labour.

In 1992, Mexico increased the mandatory duration of schooling from 6 to 9 years, making it legally binding for parents to provide education for their children. Consequently, the effect of child labor on export prices in Mexico is anticipated to be negligible. The Mexican government has implemented measures aimed at reducing child labor in the informal sector and has set the minimum working age as 14 in accordance with the Mexican Constitution.

The Federal Labor Law (LFT) sets regulations for children aged 14 to 16, prohibiting them from engaging in hazardous, unhealthy, underground, or underwater work. It also restricts them from itinerant work or any job that may affect their morals or behavior. Additionally, minors are not permitted to work in industrial plants after 10:00 p.m., exceed six hours of daily work, or go without a one-hour break for more than three hours.

In Mexico, children under 18 are required to have parental permission, undergo regular medical examinations, and be given a list of prohibited tasks that their employers consider dangerous. However, despite being a party to the UN Convention on the Rights of the Child, Mexico has not ratified ILO Convention No. 138 or ILO Convention No. 59, both of which aim to set a minimum age for employment.

The 1917 Constitution of Mexico protects Freedom of Association and the Right to Collective Bargaining, ensuring that workers can form unions and participate in collective bargaining without needing prior authorization. It also allows for the right to strike. Although collective bargaining is prevalent in Mexico, challenges arise because local Conciliation and Arbitration Boards (CABs) have sole authority over union elections and overseeing labor dispute resolutions. This hampers the legal registration process for unions.

Registration by CABs is necessary for trade unions to obtain legal status, but these boards use administrative requirements to withhold or delay registration from unions that oppose government policy or vested economic interests. Mexican labor law offers limited protection for individual union members, denying them access to collective agreements and internal union rules. Additionally, workers have limited recourse when internal union procedures are violated during union elections.

In cases where employer-controlled trade unions are a result of such abuses, requirements for registration and procedures for elections have been employed to hinder the formation of new unions. Failure to register can then be used as a justification to disallow strikes or refuse acknowledgment of them. The law in Mexico permits workers to go on strike. However, the CABs possess the authority to declare strikes as “legally non-existent,” making strikers susceptible to termination and the use of force to suppress work stoppages. The police often resort to using force to disband peaceful labor demonstrations.

Fierce opposition from employers and collusion with local officials continue to be a significant problem at Mexico’s maquiladoras plants in terms of organizing trade unions. Despite the existence of union rights in maquiladoras similar to the rest of Mexico, the rate of unionization remains notably lower at 10 to 20 percent. The prevalence of anti-union sentiments among employers and the presence of “company unions” are attributed to this low unionization rate. Compared to other industries, very few maquiladoras have established collective bargaining agreements with unions.

Despite Mexico’s ratification of ILO Conventions on discrimination, women in the maquiladoras sector still experience clear instances of discrimination. Although strike attempts have been rare and resolved quickly, some strike leaders have been fired when the strikes were deemed illegal by labor courts.

Mexico ratified ILO Convention No. 100 (1951) on Equal Remuneration in 1952 and ILO Convention No. 111 (1958) on Discrimination in Employment and Occupation in 1961.

Despite the absence of constitutional or legal provisions for equal remuneration in Mexico, discrimination is prevalent. The government has argued that legislation supporting equal pay is unnecessary as there is no inequality. However, it is widely recognized that women often earn lower wages and are more likely to work in lower-paying jobs.

The ILO has highlighted Mexico’s acknowledgement of a significant gender imbalance in higher levels of public administration and the ineffectiveness of labour laws in addressing discrimination during recruitment. There are widespread reports of employers engaging in discriminatory practices towards pregnant women to avoid maternity-related expenses, including demanding proof of non-pregnancy or conducting pregnancy tests.

Maquiladoras, which are notorious for their low wages, unskilled workers, and high turnover rates, commonly employ a strategy of intentionally placing pregnant women in challenging or hazardous situations with the aim of forcing them to quit their jobs. By doing so, employers avoid the costs associated with providing maternity protection. The large quantity of maquiladoras poses a challenge for labor inspectors and health authorities in effectively enforcing regulations due to their overwhelming workload.

The government is addressing gender discrimination through the implementation of the National Action Programme for the Integration of Women in Development and by supporting the National Commission for Women. Nevertheless, Mexico’s dedication to upholding basic labor standards is questionable, as there are occasional instances where rights regarding organizing and striking are not upheld despite legal protection for freedom of association.

Further government efforts are necessary in Mexico to ensure the exercise of the right to freedom of association, in line with the commitments to fundamental workers’ rights supported by Mexico in the Singapore WTO Ministerial Declaration. The lack of respect for core labour standards in the maquiladoras sector is a significant concern, as it seems to be a deliberate strategy to hinder workers from negotiating for a fair portion of export revenues. This allows companies in Mexico’s maquiladoras to gain a competitive edge over firms in countries that do adhere to core labour standards.

Mexico needs to improve its efforts to combat discrimination against women and comply with the ILO conventions on promoting equality. Additionally, Mexico must address the issue of child labor in the informal sector. To ensure compliance with internationally recognized labor standards on freedom of association, discrimination, and child labor, Mexico should submit reports to the WTO and the ILO detailing their intentions and actions. It is also recommended that Mexico provide a report to the WTO General Council during the next trade policy review.

Furthermore, it is imperative for Mexico to take immediate action to ratify ILO Conventions 98 and 138. The actions that need to be taken involve clarifying the misconceptions held by many foreigners who relocate to Mexico regarding their ability to hire and terminate employees in a manner similar to their home countries. Such misperceptions can lead to unfavorable situations in both the short and long term, including instances of “legal extortion”. Those who employ individuals in Mexico must fully comprehend the repercussions of their decisions; otherwise, they may find themselves facing a lawsuit, or “demanda,” before the appropriate labor authority.

Firstly, let’s examine the hiring process and strategies for safeguarding against former employees. Hiring encompasses the same principles, whether it pertains to a human individual or a legal entity like a partnership, business, or corporation. When hiring a legal entity, it is vital to have a contract that outlines the responsibilities and liabilities of all parties involved. Similarly, when employing an individual, it is imperative to adhere to the same procedures and exercise additional precautions.

If an employee fails to show up for work without providing any explanations, the employer must report this to the appropriate labor authorities to protect themselves. It is possible for multiple employees to come together and form a syndicate, leading to the creation of a “union shop”. In our fast-paced society where people desire immediate satisfaction and swift outcomes, individuals can only contemplate ways to earn money quickly and in an ethical manner. Given the circumstance where shareholders anticipate higher returns on their investments, relocating certain facilities becomes the sole viable option for ensuring the company’s survival.

Unions in the United States are requesting increased wages and stricter regulations, leading companies to contemplate moving their operations elsewhere. This is done with the aim of decreasing costs and increasing profits. In light of rising labor and production expenses, Electrocorp, a prominent supplier of on-board vehicle electronics, must carefully plan and carry out a relocation. It is essential that this relocation prioritizes social responsibility in improving overall production.

Negative publicity can harm a company’s reputation and cause the loss of clients. The negative perception of employing people at lower wages in Mexico and the higher incidence of birth defects due to less strict regulations make us reluctant to relocate operations there. Instead, we plan to close smaller facilities and concentrate our operations in a larger facility within the United States.

Electrocorp, an American electronic company, experienced a decline in profitability due to increasing production expenses such as high salaries, expensive worker’s safety measures, and environmental regulations. To tackle this problem, Electrocorp is contemplating moving some of their factories to South Africa, Mexico, or the Philippines. If they decide to keep the factories in the US, they would comply with stringent environmental and safety rules and compensate employees $15/hour but face elevated production costs. On the other hand, relocating to South Africa would lead to job cuts in the US; however, the company would save money by hiring workers for $10/day while adhering to less rigorous safety and environmental standards. As a resolution, Electrocorp is also offering relocation assistance for employees willing to transfer to another region where a factory will continue operating within the United States.

The strong labor union may pose future difficulties. If the company chooses to relocate to Mexico, it will encounter the same consequences as relocating to South Africa, with the exception that workers will be earning $3 per day. While this move could result in greater cost savings, Electrocorp must remain mindful of citizen health groups that may generate negative publicity. On the other hand, relocating to the Philippines is the final option, offering the highest potential cost savings due to relaxed safety and environmental regulations, absence of activist groups, and a market pay rate of $1 per day.

The evolving ethical issues revolve around whether it is ethical for Electrocorp to relocate its plants, considering the consequences such as job losses in the US, exploitation of workers in the host country, and harm to the host country’s environment. To examine this issue, we must consider the interests of stakeholders. Shareholders prioritize the corporation’s profitability and believe that if it cannot be achieved in the US, Electrocorp should relocate to countries with lower production costs. Conversely, US employees are worried about losing their jobs if plants are moved.

The stakeholders in the host countries can be divided into three groups: the government, the environment, and the community. For Electrocorp’s employees, job loss is unacceptable unless they are adequately compensated and supported in finding new employment. Electrocorp’s customers, on the other hand, are interested in a reduction in operating costs through relocation as it could result in lower prices. However, if costs increase, product prices might rise to a level where customers switch their supplier and turn away from Electrocorp.

The government supports the relocation of Electrocorps plants. This will benefit the economy through foreign investment and job creation, while ensuring local policies and regulations are respected. The well-being of stakeholders is a priority, including protecting the environment and providing healthy living conditions for the community. Moreover, workers must receive fair compensation and safe working conditions in the host country. Electrocorps executive managers should consider these stakeholder interests when making decisions.

When analyzing the issue using ethical frameworks, we can begin with deontology. According to this theory, a deontologist acts responsibly and respectfully towards all individuals by following rules and principles. In this case, a deontologist would choose the option of keeping the plants in the US. Relocating to one of the mentioned countries would be irresponsible and disrespectful towards the US employees, who would lose their jobs, the workers in the host country, who would be subjected to unsafe working conditions, and the environment, which would be harmed by the corporation. On the other hand, a utilitarian makes decisions based on a cost/benefit analysis.

The decision to relocate to the Philippines is made based on the principle of maximizing overall benefit for a larger number of individuals. This choice is driven by factors such as higher cost savings, employment opportunities in the Philippines, and the desire to prevent bankruptcy. In order to ensure fairness and equality for all parties involved, employees in the US will be compensated for their job loss and provided assistance in finding new employment. In line with the theory of justice, there are alternative options that can be considered, including relocating to South Africa or implementing a modified relocation plan in Mexico or the Philippines. A modified relocation would entail offering higher wages and implementing stricter safety and environmental regulations.

Electrocorp could achieve moderate cost savings, employees could earn moderate wages, and the environment could be less polluted if they choose to keep the plants in the US. This choice aligns with land ethics, which prioritizes the preservation of the environment. The first alternative, which is selecting to keep the plants in the US due to stricter regulations, causes the least harm to the environment. Considering the social contract between the employer (job security) and the employee (work duties), we also reach the conclusion that keeping the US plants is the best option. This alternative upholds the social contract effectively.

Our ultimate choice involves transferring certain plants to the Philippines. This option allows us to prevent potential bankruptcy, utilize the company’s resources most efficiently, and generate job opportunities in the Philippines. By raising workers’ wages to $3 per day, exceeding the minimum safety and environmental standards, and providing severance pay and support programs to laid off US employees, we ensure equal satisfaction of all stakeholders’ interests.

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Eloctrocorp Plant Relocation. (2018, Jun 10). Retrieved from


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