Reference no: EM132800975

Many computer hardware manufacturers rely on foreign companies to provide raw materials; build computer parts; and assemble hard drives, monitors, keyboards, and other components. While there are many advantages to dealing with foreign suppliers, hardware manufacturers may find certain aspects of their business (such as quality and cost control, shipping, and communication) more complicated when dealing with a supplier in another country. In addition to these fairly common business problems, hardware manufacturers are sometimes faced with serious ethical issues relating to their foreign suppliers. Two such issues that have recently surfaced involve (1) suppliers who run their factories in a manner that is unsafe or unfair to their workers and (2) raw materials suppliers who funnel money to groups engaged in armed conflict, including some that commit crimes and human rights abuses. In February 2009, alarming information came to light about the Meitai Plastics 6 and Electronics factory in Dongguan City, in China's Guangdong province. This factory, in fact, represents an extreme example of a supplier who runs its factory in an unsafe and unfair manner. Meitai Plastics employs 2,000 workers, mostly young women, who make computer equipment and peripherals- such as printer cases and keyboards-for Dell, IBM, Lenovo, Microsoft, and HewlettPackard products. Based on research conducted between June 2008 and January 2009, the National Labour Committee (a human rights organization based in the United States) published a report in February 2009 highly critical of the work environment at the factory. According to the report, young workers were required to sit on hard wooden stools for 12 hours a day, working on an assembly line that never stopped. Workers were prohibited from talking, listening to music, raising their heads from their work, or putting their hands in their pockets. Employees were fined for stepping on the grass of the factory grounds, not trimming their fingernails, and for being even one minute late. A worker who needed to use the restroom had to wait until there was a group break. The average workweek consisted of 74 hours, with a take-home pay of $57.19-well below the amount necessary to meet subsistence-level needs in China. If a worker took a Sunday off, she was docked one-and-a-half-day's wages. Workers were housed 10 to 12 per dorm room. The dorms had no air conditioning, and temperatures in the rooms could reach the high 90s in the summer. Workers were required to walk down several floors to get hot water in a small bucket to use for personal hygiene. Manufacturers who use rare raw materials face another ethical issue related to the use of foreign suppliers: how to ensure that their suppliers do not funnel money to groups that engage in armed conflict or commit crimes and human rights abuses. Manufacturers of computers, digital cameras, cell phones, and other electronics frequently purchase rare minerals such as gold, tin, tantalum, and tungsten for use in their products. Unfortunately, some of these purchases are helping to finance the deadliest conflict in the world today-the war in the Democratic Republic of Congo. The war began in 1998 and has dragged on long after a peace agreement was signed in 2003. During the war and its aftermath, over 5 million people have died-mostly from disease and starvation-making it the deadliest conflict since World War II. In Congo, many mines are controlled by groups that engage in armed conflict and inflict human rights abuses on local populations. The Enough Project's "Raise Hope for Congo" campaign is trying to get large electronics firms to trace and audit their supply chains to ensure that their suppliers do not source minerals from mines in Congo that are controlled by armed groups. This is often easier said than done because of the long, complex supply chain and often disreputable middlemen involved in the minerals trade. As manufacturers struggle with these issues, some are trying to use their influence to demand that their suppliers stop sourcing from mines that continue to fund violence in Congo and elsewhere.

a) What responsibility does an organization have to ensure that its suppliers and business partners behave ethically? To whom is this responsibility owed?

b) How can an organization monitor the business practices of its suppliers and business partners to determine if they are behaving in an ethical manner?

c) Is it good business practice to refuse to do business with a supplier who provides good quality materials at a low cost but who behaves in an unethical manner? How can senior management justify its decision to do business instead with a supplier who provides lower-quality or higher priced materials but behaves in an ethical manner?