A Report on Riordan Manufacturing, Assessment Example

Introduction

The following report is based on the 4-page Riordan Manufacturing fax sent to Mr. Mark Nietzel in regards to the Yin Motor Company and the problems associated with carbolic acid in our drinking water. Therefore, this report focuses upon the course of action concerning the legal and ethical responsibilities of Riordan Manufacturing’s business operations in the nation of China.

According to British-based Institute of Export (2015), the nation of China is the greatest economic success story of the past three decades, due in part to economic reform policies initiated in 1978 when the Chinese government began to move furtively away from the former communistic policies of Maoism. These policies, along with political pressure from outside of China, has transformed this immense nation into a “vibrant market-oriented economy” which has helped to raise 600 million Chinese out of poverty. The Institute of Export’s General Director Lesley Batchelor also notes that every business that currently operates in China “constantly needs to catch up with the speed and depth of change” related to China’s ever-expanding global market presence. Thus, when dealing with a nation like China, businesses like Riordan Manufacturing must face a number of business-related issues, especially those concerning legal and ethical practices which to most Westerners would at first seem rather odd and out-of-place but not of course to the Chinese.

The bulk of this report includes the following–1), a description of the ethical and legal issues raised in the company fax to Mr. Nietzel concerning our operations in China; 2), a discussion of possible courses of action available to Riordan Manufacturing as a business entity in the nation of China; 3), the possible ramifications related to the courses of action in regards to company stakeholders and other parties; and 4), some recommendations related to a solid course of action for the Riordan Manufacturing Company in China.

Legal and Ethical Issues and Business Practices

First of all, as noted in the company fax, the problems associated with the Yin Motor Company are outside of our jurisdiction, meaning that however the company operates in relation to its employees is none of our business provided that its practices do not interfere with Riordan Manufacturing’s ability to obtain motors for our electric fans. I should point out that the Yin Motor Company produces all kinds of AC motors for refrigeration units, residential space heaters, water coolers, and some vending machines. I should also mention that Riordan Manufacturing utilizes what is referred to as a make-to-stock system which is based on a forecast concerning the number of fan products that will be requested in the near future. This system has proven to be quite reliable and appears to have pleased many of our customers who often need products within a 24-hour timeframe.

However, I would like to point out that the Yin Motor Company is not conducting ethical business practices. First of all, as I mentioned in the fax, there are certain unidentified individuals linked to Riordan Manufacturing’s activities in China that have family relations working for Yin Motor Company. This equates with nepotism which Nadler and Schulman (2006) define as being related to favoritism or favoring members of one’s family over others who may be more qualified and reliable. In the world of business, nepotism “undermines the common good,” such as when a person is granted a position in a company due to personal connections as contrasted with a person with more adequate credentials and experience. In effect, nepotism negatively affects a business and its customers by offering inferior service; it also undercuts the transparency that should be part of a legitimate business environment (Nadler & Schulman, 2006).

In addition, as described in the local newspaper article, the Yin Motor Company almost demanded that its employees work longer hours without being financially compensated for their labor and time. But fortunately, after the employees participated in a sit-down strike of sorts, the company relented and agreed to pay the employees for their overtime. According to Nadler and Schulman (2006), contracts that provide employee rights are still rare in China and in the case of Riordan Manufacturing, foreign laws and regulations that exist in the United States, Great Britain, and elsewhere in Europe are not binding in China. Therefore, foreign companies like Riordan must make certain that all contracts stipulate that employees will be compensated for their overtime and that they have certain rights as company employees.

This area of concern pales in comparison to Yin Motor Company’s unethical practices related to using child labor. In the newspaper article, it is made abundantly clear that Yin Motor Company does not consider using children as laborers morally or ethically wrong. Today in 2015, it has been estimated that about 10 million children work full-time in Chinese factories and manufacturing centers, even though the Chinese government “forbids child workers under the age of sixteen” (Kwok, 2015). The article states that children as young as fourteen are working at the Yin plant as sweepers who clean up floor debris, some of which is toxic. Overall, the management at the plant refuses to do anything to alter this deplorable situation. But let me make it perfectly clear that Riordan Manufacturing does not condone the use of children as laborers in any of the factories that we do business with in China. As I said in the fax, we are attempting at this time to find another supplier of fan motors, but so far have been unsuccessful, due to the fact that child labor appears to be quite widespread in China.

This brings us to the problems associated with the drinking water which the Chinese Centers for Disease Control (CCDC) declares is contaminated with carbolic acid, a low-grade type of acid that is usually found in common rainwater because of passing through CO₂ in the atmosphere. The local newspaper article stipulates that the alleged contamination has been traced to a local business that contaminated the water system with carbolic acid. Let me assure you that this local business entity located in Hangzhou is not Riordan Manufacturing. In addition, although a thorough examination of our manufacturing plant would probably reveal the existence of a number of contaminants, such as phenol which is used to make certain kinds of resins, the CCDC would not accuse Riordan Manufacturing of unethical business practices related to polluting the natural environment.

This is because of the existence of the Sustainability Study that we conducted several months ago which demonstrates our commitment to good ethical and legal business practices as an operating business entity in China. As noted in our Sustainability Study which has become standard practice for businesses operating in foreign markets, Riordan Manufacturing is dedicated to creating an enduring balance between our economic activity and practices, our responsibilities to the natural environment, and to making certain that society, in this instance the people of China both locally and nationally, enjoy some of the benefits that come from being ethically responsible. As the founder of the Tata Steel Company explains it, sustainability is about “meeting the challenges of ensuring that future generations can enjoy the same kind of lifestyles that people enjoy today” (Business Ethics and Sustainability in the Steel Industry, 2015), such as maintaining a balance between good and bad business practices.

Our Sustainability Study also points out Riordan Manufacturing’s commitment to corporate social responsibility (CSR) in relation to how our presence in the Chinese market affects the people and the environment. Much like Tata Steel, Riordan Manufacturing is no longer viewed by our customers and stakeholders merely as a company that delivers goods and services on a timely and efficient basis but also for the way that we deliver our goods and services in relation to our customers, stakeholders, and the natural environment (Business Ethics and Sustainability in the Steel Industry, 2015).

Lastly, at this point in time, I still do not know how thorough the CCDC is when it comes to their inspections, but it is clear that they take their responsibilities seriously. According to the Public Health Institutes of the World website (2015), the Chinese CDC focuses heavily on local and national infectious diseases like HIV/AIDS and tuberculosis. It also mandates border screenings and quarantines and regulates Chinese immunization efforts. In addition, the Chinese CDC is responsible for public health management related to food safety and occupational health. Therefore, as I noted in the fax, if Riordan Manufacturing is hit with an inspection by the CCDC, we could be in trouble. Perhaps it would be a good idea to contact the people in San Jose and alert them to this possibility.

Possible Courses of Action

Before commencing to outline our possible courses of action in regards to the continuing problems at the Yin Motor Company and the growing drinking water crisis associated with the Chinese CDC, it would be best to create some type of framework as a guide. First of all, we must ask ourselves several important questions–1), do we believe that what is transpiring at the Yin Motor Company is right or wrong?; 2), are we fully aware of the legal aspects related to unethical practices in China?; and 3), are we unsure about the ethical course of action concerning the Yin Motor Company and the health problems associated with possibly contaminated drinking water?

The answers to these questions are as follows–first, from a personal standpoint, I feel that what is occurring at the Yin Motor Company is wrong and unethical. I also feel that most of my colleagues at Riordan Manufacturing would heartily agree with me. Second, we need to do some hard research on the legal aspects of unethical practices in China as they relate to child labor laws and forcing employees to work overtime without financial compensation. And third, it is obvious that the ethical course of action is to advise the Yin Motor Company that the managers and stakeholders of Riordan Manufacturing are not pleased with what is happening at the plant.

Therefore, as suggested by the Price-Waterhouse-Coopers (PWC) International Limited Company (Framework for Ethical Decision Making, 2015), we must first determine our responsibilities, then review all of the relevant facts and information, followed by an assessment of the risks and how we can reduce them. Then, we will be able to arrive at the best course of action.

With all of this in mind, I would like to present a short list of all the possible courses of action that Riordan Manufacturing could follow:

• Completely sever our business relationship with the Yin Motor Company until they fix the problems related to their underpaid employees and use of child labor
• Send a team of professional advisors to the Yin Motor Company in relation to addressing their problems concerning underpaid employees and the use of child labor
• Conduct a thorough investigation at the Riordan Manufacturing plant in Hangzhou in relation to what types of chemicals (if any) are currently polluting the water system and which are negatively affecting the natural environment of Hangzhou
• Notify the Chinese CDC that Riordan Manufacturing is more than willing to open its doors to an investigation. In this way, the reputation of the company will be increased as will its reputation with our customers and stakeholders

Stakeholder Ramifications

By definition, a stakeholder is an individual, a collective group, or some other type of organization (e.g., an import/export company) that “has an interest in the activities and affairs of a company.” Internally, stakeholders includes company employees, particularly if they are part owners of the company, managers, and administrators; externally, stakeholders includes customers, parts suppliers (i.e., the Yin Motor Company), company creditors (i.e., banks and other financial institutions), and in some instances, the local government, in this case, the city-based government of Hangzhou (Kokemuller, 2015).

For our purposes, the most important stakeholders are Riordan’s customers and suppliers. This is because of the fact that customers are the lifeblood of any company and for the most part determine if a company succeeds or fails. The same could be said for suppliers like the Yin Motor Company which in today’s complex and highly competitive global business environment are critical to a company’s expansion and reputation, especially if a company’s products are mostly bound for the homes of consumers.

Therefore, our customers in the United States would become very upset if they became aware of the fact that the Yin Motor Company underpays its employees and utilizes child labor in some very hazardous jobs throughout their plant in Hangzhou. They would also be upset over our alleged problems with the drinking water in Hangzhou, due to many Americans being greatly concerned nowadays over pollution problems associated with the natural environment. Also, if we were to cancel our relationship with the Ying Motor Company as our major supplier of fan motors, the ramifications for the company would be quite obvious.

Recommended Course of Action

After reviewing all of the information and data concerning the Yin Motor Company and the drinking water scenario in Hangzhou, I have come to the conclusion that the Riordan Manufacturing Company can pursue two courses of action–1), completely sever our business relationship with the Yin Motor Company until they fix the problems related to their underpaid employees and use of child labor; or 2), take the old-fashioned American approach to a problem and sit back and wait to see how things develop in relation to the Yin Motor Company and the problems associated with the drinking water pollution in the city of Hangzhou.

If we choose to sever our relationship with the Yin Motor Company, this holds the potential to disrupt our logistics program and our stock of products for company customers all over the globe. But most importantly, exactly how long it would take to locate a new fan motor supplier is unknown at this time, but it is clear that our responsibilities lie with our customers who depend upon Riordan Manufacturing for quality products and excellent service. In my opinion, the risks associated with severing our relationship with Yin are too high.

Thus, I would hope that the upper-level managers of the Riordan Manufacturing Company will decide to play the old-fashioned waiting game to see what transpires with the Yin Motor Company and if the Chinese CDC decides to initiate a full-blown investigation into the alleged presence of carbolic acid in the drinking water system of Hangzhou. My reason for making this suggestion is due to the fact that jumping to conclusions often creates more problems than solutions and since we are discussing our operations in a foreign nation, the best route for Riordan Manufacturing would be to position itself as a non-interfering observer.

References

Business ethics and sustainability in the steel industry. (2015). Retrieved from http://businesscasestudies.co.uk/tata-steel/business-ethics-and-sustainability-in-the-steel-industry/what-are-business-ethics-and-sustainability.html#axzz3ikJ7DD00

China: Center for Disease Control and Prevention. (2015). Retrieved from http://www.ianphi.org/membercountries/memberinformation/china.html

Doing business in China. (2015). Institute of Export. Retrieved from http://www.china.doingbusinessguide.co.uk

Framework for ethical decision making. (2015). Retrieved from http://www.pwc.com/gx/en/ethics-business-conduct/ethical-decision-making-framework.jhtml

Kokemuller, N. (2015). Who are the external stakeholders of a company? Retrieved from http://smallbusiness.chron.com/external-stakeholders-company-64041.html

Kwok, S. (2015). The crime of child labor. Southern California University. Retrieved from http://webpages.scu.edu/ftp/multimedialearning/wkwok/printable%20version.htm

Nadler, J., and Schulman, M. (2006). Favoritism, cronyism, and nepotism. Santa Clara University. Retrieved from http://www.scu.edu/ethics/practicing/focusareas/government_ethics/introduction/cronyism.html