International Business Ethics Case Study

Far-East DesignsPrepared by Seyi Akanbi

Offshoring Shifting business functions from one country to another because of:

• lower labor costs• favorable economic conditions• favorable government regulations, • lower taxes.

• Also a strategic move to explore a new market

Offshoring

It is all about customers….

Companies offshore to offer customers maximum value at a reduced cost

…in order to serve them better

Where we standCompensation and benefits is one the major ways to motivate employees

Workers would feel appreciated when they are adequately remunerated and compensated. • wages and salaries, • incentives, bonuses, and commissions, • indirect compensation -em ployee recognition programs,

awards, etc

Where we stand

Our approachWe adopt equity theory in our compensation plan: external, internal, individual, and procedural.

Equity theory states that people are strongly motivated to maintain a balance between what they perceive as their inputs or contributions and their rewards

Our approach

Our methodA baseline compensation for every employee above what is obtainable among industry competitors

In-country and international managers to be paid similar base salary company-wide, plus allowances that depends on country’s cost of living

*To Reduce the risk of perceived inequities

Our method

Our measures

A balanced international compensation and benefit plans that considers every stakeholder - the management, expatriates, local hires, and the community where the company operates

To efficiently accommodate different types of employment terms and conditions

Our measures

The factors we consider

Skills and QualificationsEconomy: exchange rates and cost of living among othersSalary Scales: Every country has different salary scales based on skills, education, and certification Taxation: Some countries have no income tax, while others have income tax in excess of 50% % differences in taxable incomeLaws and Regulations: such as work hours and compulsory time-off, minimum wage, overtime, compulsory bonuses, etc.*These factors differ in every country

VietnamVietnam is the 2nd largest exporter of garments to the U.S. in the world after China.

The garment and textile industry is Vietnam’s largest single source of formal private sector employment, with a direct labor force of more than 20million workers

Vietnam

Common labor conditions in Vietnam, most especially in apparel and textiles

industryWage theft: non payment of overtime, minimum wage violations, employee misclassification, illegal deductions, working off the clock, or not being paid at all

Unsafe Working Conditions: 80% of factories surveyed from 2009-2011violated safety requirements

Forced labor: 60% factories do not provide workers with the legal minimum of four rest days per month

Labor conditions

Child labor: factory owners pay parents $50-$100 to send their children to the city to work.

Low wages: Vietnam’s 2014 minimum wage averages just 52 cents an hour. This is less than ½ of China’s minimum wage and just 8% of the U.S. minimum wage.

Labor union: prosecutions and retaliation aimed at workers who attempt to form a labor organization in Vietnam

Common labor conditions continued

Labor conditions cont’d

How Far-East Designs fair in Vietnam

We have very high ethical standards

Our code of ethics, policies and procedures form the organizational culture and baseline of our actions and decisions

How we fair

Higher pay rates

We pay workers at a level that is above minimum wages set forth by the national government

The current minimum wage ranges between 107 to 156 US dollars depending with the region.

Our minimum salaries range from 110 to 120 US dollars

Higher pay

Equal employment opportunity

Our company is among very few organizations in Vietnam promoting equality among workers

All of our employees are equally treated regardless of race, region, color, and even culture. Our firm provides equal opportunities for our workers to grow and develop their careers as well as well as talents

Equal opportunity

Safe workplace

Safety of our workers is our major concern. We have organizational culture which puts employees’ welfare first

We provide clean water and safe workplace environment for all our employees

80% of the employees are housed by the company; the rest are compensated in terms of rental fee.

Safe workplace

Working hours

The usual working hours in Vietnam as per the local government is from 7:30 a.m. to 4:30 pm i.e 9 working hours with no provision for overtime payment

Our company, working hours are as from 8:00 a.m. to 4:00, hence working for 8 hours a day

We allow all our employee an additional 15-day vacation during the period of one year unlike stipulated 12 days by the government

Working hours

Allowances & Benefits

Our company provides allowances for all our employees under different situations and conditions

We offer over time allowance of 6 to 15 US dollars per hour as compared to 5 to 10 of the local government

Allowances & Benefits

Job security

We ensure workers position is secure upon their recruitment to join our firms.

Long term contracts that ranges from 5 to 10 years.

In the situation where the firm feels that it no longer requires employees’ services, he or she is compensated as per the initial contract.

Job security

Insurance and Social Security benefits

We provide medical covers for all of our workers

Workers are entitled to free medical check-ups twice a year

We have a well-defined social security fund program

Insurance & SS benefits

Social Responsibility

We are one of the few companies in the garment and apparel industry that is compliant to international labor standards and labor best practices.

We also offer scholarships for students, never defaults in payment of tax, and contributes to social and economic development of Vietnam.

Social responsibility

Conclusion

Far-East Designs is sets good precedence for other players in the industry to follow

We can confidently say that we are not taking advantage of foreign workers

Rather, our company is working harder to eradicate poverty in Vietnam.

Conclusion