Part 1: Case Related Questions
Q1: Utilitarianism Theory was the underlying principle for firing Gao Feng from the job. The theory advocates that the company’s market position will not be affected, the Chinese government and Chrysler will have same relation, the jobs of the employees will remain intact, and the wealth of the shareholders remain safe by firing him. If we compare the benefits and the cost, we can see that the cost of losing job by Feng is too small than the benefits that everyone is getting. In other words, we always look at the total cost as well as benefits associated with the decision. So, in this case the cost is too small and the benefits are too high relatively so he is fired.
Q2: Chrysler is in the pit of ethical dilemma where he has to make a choice of protecting the human rights of Feng (freedom of religion) and maintaining the partnership with the Chinese government to protect the business. So, he has confronted with two ethical dilemmas based on two different ethical theories. One of such theory is utilitarianism theory focusing on the end results of the decision rather than the intermediate effects. By firing Feng from the job, every stakeholders will be benefitted while only cost will be for Feng. However, there must be some considerations for this decision such as equal treatment of the employees, maximization of benefits and minimization of harms. By firing Feng, following results can be seen:
The existing relation between Chrysler and the Chinese government will not be affected.
There will be no loss in the value of the shareholders’ wealth. will still have their wealth and shares in the company.
On the other side, Kantianism theory focuses more on the intermediate acts and acts rather than the final decision. It is more concerned about the human manners rather than the principles. The moral act is the act that is socially, morally and culturally accepted. When a decision is based on this theory, there are several question and issues to be reviewed like is it a good or a bad precedent to take such decision? What milestone will it create for the future? Do the peoples on cultural, social, ethical and legal grounds accept it?
So, it is very clear that Chrysler was facing two decision options. According to my point of understanding, his decision will be based on the first theory of utilitarianism because it is always good to protect many by sacrificing one. By firing Feng, all the other employees and the organization will be protected. Firing him from the job will protect even the wealth of the shareholders. So, I support the firing of Feng from the job to protect many others but Chrysler can make his decision more acceptable by finding a job for Feng so that he can maintain his normal life and the company remains protected.
Q3: The announcement that came from the chairman is the corporate social responsibility (CSR) rather than the shared value theory (SVT). The aim of CSR is to ensure that the organization cares for the social wellbeing and welfare without the motive of profit and benefit for the company while SVT looks for the corporate benefits rather than social benefits. SVT looks for earning profits along with the solution to the problem, and it too cost money for the company. The company is producing the cars that help to minimize the air pollution and making the world greener and healthier. So, this is the act of CSR not the act of SVT.
Q4: There are 4 parties involved in the case. Each of of them is explained below:
Gao Feng is an employee of Beijing jeep. He breached the Chinese law by organizing the private worship in a place that was not authorized by the government. So, the government arrested him and put him behind the bars for 30 days. The court was not informed about his arrest. Later, the government claimed that he was in the police custody just for three days. Feng could not get justice against this because there was no any proof of his arrest. The work done by Feng was punishable but the action taken by the government is also condemnable.
Chinese Government: The government of China follows totalitarian system. The country is ruled by the communism philosophy. Human rights are least considered here and if one commits offence or breaches the law, then it is very likely that he or she will be punished. The government bans any form of private worship in an unauthorized place. Feng breached this rule, so he was punished as well as Chrysler was forced to fire Feng from the job to give him even harsh punishment.
Chrysler: It is an American transnational company operating in China with the joint venture of Chinese government. Both the American investor and Chinese government can make the management decision so, the Chinese government decided to fire Feng from the job and was pressurizing the company to make it a common decision. However, Chrysler insisted on adhering to the human rights. So, in the eyes of the management i.e. CEO, the worship that Feng did was his human right and there was no mistake in worshipping.
Human Rights: It is the set of principles that provides equal rights for every individual to perform their work and live respectfully.
Part 2: Essay Questions
Q1: The cause of survival in the market could be taken as regulator intervention. When markets go down, there is regulator interference so that market movements can be caught up and savings can be increased before collapse. The approach of regulators towards a problem is to restructure the laws and regulations for problem solving. For the case of US, there is policy loosening so that competitive market can be created and more investors can be attracted as what happened with the Europe market about the deregulation case for raising the market. SEC was the market controlling hand for the US Government. Their duties include monitoring the risks of the Company however they fell short on performance. Banks also use strategies such as using a shadow entity for their investing activities in real estate and other portfolio sectors in the market so that the bank does not have to be involved directly. This way, the Government could not track these practices of shadow banking, which later went on to become a problem.
Rating agencies are also a major problem for this issue as there is non-activity on their part towards regulations of security. Systemic risks could also be taken as the reason, which created a problem because of its nature of protecting the corporations and individuals. These practices that are deterring the market are inconsistent with the regulation and law changes, which create a gap. In the moment of crisis, novel regulations are taken as a solution. Deregulation is undertaken thinking that loosening of policies will act as a self-healer for the market. There was a major default in assets put up as securities as rating agencies over rated these assets. The job failure of CSE and SEC can also be accredited to the dynamism persistent in the market. The cycle is thus renewed, when deregulation increases with market and loosens with downturn of market. There must be high level of change responsiveness from the side of Government so that a healthy market can sustain, keeping intact its dynamism.
We can trace the example of 1930, where the Government could not provide for the problem of information to a customer on joining or not joining a certain bank. Given the slow movement of regulation, there was a panic in the market and there was a shutdown of banks with individuals losing their jobs. Loans could not be paid back as salaries stopped and banks went into crisis mode. Some banks increased their risks with their role as intermediates. The banks were then acting to be commercials and again also indulging in investments, which was out of their scope. The difference between investment and commercial banks became confusing, when it is that commercial banks should not invest in deals that are risky. The Government did its bit to contribute to this situation by building a federal deposit insurance corporation, which provided insurance for deposits in banks. JPMorgan Bank can be taken as an example to study the differences between the two banks.
The Government made a decision that the empire of the two banks would be separated into two banks. The market thus became stable again and there was reinvestment from different parties. The banks then paid insurance so that risks could be covered and risky engagements could be deterred from. Another component to note is the time when investors were being given information for advice regarding buying of securities. There is obligation from Companies for auditing the statements from renowned firm agencies of auditing so that they can be certified and power can be gained. By this law implementation, the efficiency was deemed to increase and more investments could be attracted.
In 1984, the market also witnessed the concept of too big to fail as there was collapse of the Illinois national bank, which was taken as one of the biggest IS market failures in history. The energy market had dropped and as the bank collapsed the whole synergy in the banking industry got affected. The two problems that this incident highlighted were that innovation should be continuous for market improvement and the too big to fail idea. Regulation update is thus a lesson that should be learnt. There will always be ways for corporations to find a legal loophole. There needs to be legal intervention so that performance of the market can be enhanced and the market can be saved. Thus, the cure for the too big to fail could be Dodd-Frank Wall Act. One of the instances could be that of Kuwait where the stable market was established by creating “Capital Markets Authority”.
Q2:
The intention of laws and regulations is the control and monitoring of market so that a favorable environment can be established. A free market means that minimal laws and regulations are regulating that market. The inside information is thus trapped, there is no data manipulation and there is market transparency. The result is thus increased growth, more investors and stability in the market. The primary and secondary security trading are regulated so that systematic errors can be prevented and investors can be protected by inducing transparency. The regulation framework in the primary markets is for the purpose of placements in private and public. The same for secondary markets is for takeovers and the activities of insider trading.
The purpose of these regulations is the maintenance of market health and there is implementation of penalties by punishing the non-complying institutions. There is creation of rule based regulations so that there is advantage for being certain, definite and clear. The characteristics of these regulations are agility, flexibility and responsiveness. However, there may be times when companies engage in fraud and fool the regulations. Some firms believe that rule based regulations are complex as the level of freedom is reduced, while at the same time independence is increased. The other concept to note is the principle based regulations.
This regulation has more flexibility and is highly responsive to the market transactions. It is highly unpredictable in case of changes because of high importance to first line employees for decision taking. This is the type of regulation that organizations adore as it is easier, less complex and improves performance. Thus, it seems that there can be no one system that is aggressed by everyone and so a mixture system could work.
