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SAMPLE ANSWER FOR END-OF-CHAPTER
HYPOTHETICAL QUESTION WITH SAMPLE ANSWER

CHAPTER 2: ETHICS AND BUSINESS DECISION MAKING

2–2 Hypothetical Question with Sample Answer

Shokun Steel Co. owns many steel plants. One of its plants is much older than the others. Equipment at that plant is outdated and inefficient, and the costs of production at that plant are now two times higher than at any of Shokun’s other plants. The company cannot raise the price of steel because of competition, both domestic and international. The plant employs more than a thousand workers and is located in Twin Firs, Pennsylvania, which has a population of about 45,000. Shokun is contemplating whether to close the plant. What factors should the firm consider in making its decision? Will the firm violate any ethical duties if it closes the plant? Analyze these questions from the two basic perspectives on ethical reasoning discussed in this chapter.

Sample Answer:

Ethical and other dilemmas faced by businesspersons are rarely clear-cut choices between good and bad alternatives. This problem is no exception. The questions in the problem indicate some of the issues that businesspersons in such situations should consider. But potentially higher profits and possible negative publicity are not the only considerations—decisions made by businesspersons can have wide-ranging implications. When a firm takes advantage of cheaper overseas labor, it must lay off domestic workers or even close a domestic operation. When workers are laid off, there are repercussions throughout the local economy. Closing an operation reduces the local tax base—property taxes, business taxes, and income taxes—which funds the local infrastructure. Thus, the firm must determine to whom it owes duties (shareholders, employees, or others) and to what degree each group is owed. In addition, all of the factors that exist when business is done internationally must be considered. These include the foreign economic and political situation, and other costs (materials, equipment, foreign taxes, domestic import duties) besides cheap labor. These and other considerations require a balancing known as a trade-off.