Economics Questions and Answers

Issue#1

You make some good points (see below in italic) about the company having some duty to their US employees.

1. What about the company’s duty as a fiduciary to the shareholders of the company’s stock?
2. If they could increase stock prices in the long run and lower overall costs of their products for consumers, does this change the analysis?
3. What is the balance that companies should make when considering all of these variables?

I believe that company A should keep all positions in the United States. Company A is making a profit with their current operation methods and the only benefit would be to increase the company’s profits. The employees that would lose their position due to the outsourcing would create a hardship on them personally and effect the economy. Company A owes it to the workers and to the US.

Strictly speaking, the company (directors and officers) is responsible to its owners – the shareholders of its stock. In this respect, the profit motive aspect of the company is brought into the forefront. Higher revenues lead to better profits which in turn boost investor confidence in the company’s stock. The company must at all time strive to ensure profitability is not affected. It must opt for those short and medium term strategies that will ensure its long term growth.

If the company can increase its stock prices in the long run and lower overall costs of their products to consumers, then this does change the analysis because long term survival is important not only for the company but also its stake holders

The company must look at all variables when deciding whether to outsource or not. It must keep into account all its stakeholders interests – employees, shareholders, creditors, government etc. It must achieve a fine balance of all these interests in order to ensure that they are not adversely affected.

Issue#2

Do you think that the ethical expectations of companies change based on what is excepted in a culture? Does a company operating in Europe have a different standard based on the culture there than we would here in the US? Since we know that regulations vary by country and the laws are a representation of the culture can we apply that to the ethical practices of companies? Ethical for a Chinese company could be considered unethical in say Germany, what are your thoughts?

Cultures do have a strong effect on ethical expectations in that they mould the very governing laws and regulations in which a company operates. A Chinese company may have a more orthodox stringent method of doing business with very well defined business policies. On the other hand, companies in Europe or USA might be more flexible and responsive to the environment around them and hence more adaptable. It is for this very reason that some companies are able to expand beyond their national boundaries faster than others.