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Hyundai Dispatch Workers and Ethical Dilemma Report


Executive Summary

The exploitation of non-regular employees in South Korea has led to trade unions calling for companies to improve working conditions for dispatch workers and other part-time laborers. Hyundai Company is among the organizations that have been affected by employee strikes. Until 2014, the company had not experienced a full employee strike. The staff organized partial strikes to demand enhanced working conditions and better pay.

The trade union representatives and Hyundai’s management engaged in many talks that failed to succeed. Lack of goodwill and dishonesty by the leadership left the union with no option but to call for a strike across all Hyundai’s subsidiaries. The Supreme Court ruled that Hyundai contravened the Act of Protection for Dispatch Workers. The company failed to absorb dispatch workers who had worked for over two years. Moreover, the leadership planned to establish more branches at the expense of employees. The plan angered employees resulting in a massive walkout.

Introduction

South Korea is one of the countries with the highest number of casual laborers. Most organizations prefer to recruit temporary employees as they offer cheap labor and are easy to terminate (Kim & Bae, 2017). Shin (2012) argues that Korean companies do not favor permanent workers as they enjoy extensive social protection. Additionally, it is difficult for the companies to lay off permanent employees in the event of economic challenges.

The exploitation of temporary employees in the country has resulted in occasional standoffs among workers and employers (Hyung-Geun, 2012). One of the companies that have experienced sporadic employee strikes is Hyundai. In 2014, employees staged a full strike after a series of negotiations between their representatives and the management failed to yield results. Workers demanded permanent employment of dispatch employees and improved working conditions. This article will analyze the ethical dilemma that Hyundai faced in its bid to maintain dispatch workers.

Hyundai Case Study

Korean labor laws recognize two groups of employees: permanent and temporary. Permanent workers are full-time employees and enjoy an extensive social safety net. Conversely, temporary or non-regular employees work under fixed terms or on a part-time basis. The labor laws recognize dispatch employees as non-regular (Wol-san, 2013). The non-regular employees are at the mercy of their employers due to a lack of adequate labor laws that protect their rights. However, recent changes in labor laws have come as a relief to the employees. The laws prohibit employers from discriminating against non-regular employees. Jin (2016) claims, “The increased protections have resulted in more disputes between workers and companies, and the trend is expected to accelerate” (par. 5).

The impacts of the amendment of the labor laws began to manifest themselves in major Korean companies. In 2014, Hyundai suffered from employee strike after a series of talks failed to bear fruits (Jin, 2016). The employees protested against poor working conditions and wages. They blamed the increase in workplace accidents on employers’ failure to implement safety management. According to the workers, the leadership of Hyundai was responsible for the safety of the employees at the workplace.

Therefore, the company was to bear the medical costs for employees who got injured at the workplaces. Before the go-slow, the company’s leadership and employee representatives went through 11 rounds of unfruitful negotiations (Nam, 2016). Among the contentious issues were the retirement age and the protection granted to the union executives. The employees demanded the addition of the retirement age.

The representatives of the temporary employees occupied the company requiring changes in the employment terms. They argued that most workers had been with the company for over two years. Therefore, the company should hire them permanently. The company violated the Act of Protection for Dispatched Workers, which required an organization to hire temporary employees who had held their positions for over two years.

Over 20,000 employees from three subsidiaries went on strike. At least 70% of the unionized employees supported the law that protected dispatch workers. The strike was a culmination of multiple unsuccessful discussions between employee representatives and the leadership of the company. In 2013, the Korean Supreme Court ruled that employees were entitled to bonuses regardless of whether they met the set targets (Ahrens, 2016).

The leadership of Hyundai was opposed to the judgment because it increased the recurrent expenditures. Consequently, the management was reluctant to comply with the court’s decision. It insisted that employees could only receive bonuses upon meeting the set targets. On the one hand, the Supreme Court’s judgment favored workers. If implemented, it would have resulted in their income rising by 10%. On the other side, the ruling was insensitive to the company, as it impacted employees’ commitment.

The Supreme Court ruled that Hyundai violated dispatch contracts. The Act of Protection for Dispatched Workers defines dispatch workers as a “situation where an employee is hired by an outside agency but sent to work for a different organization” (Jin, 2016, par. 4). Employees under such contracts receive meager salaries and are hired on a temporary basis. Moreover, dispatch contracts give companies that benefit from the employees a leeway to evade being responsible for their working conditions and remunerations. Numerous employees worked in Hyundai plants, but the company was not liable for their working conditions or salaries.

The workers received a fraction of the salary that their counterparts who were directly employed by Hyundai earned. Moreover, they did not enjoy job security. These challenges underline the reason the South Korean labor laws are against dispatch work (Shaw, Barry, Issa, & Catley, 2013). Most companies resulted in in-house subcontracting as a way to circumvent the ban on dispatch work.

As negotiations on employee salaries were underway, the workers learned that Hyundai’s chairman, Mong-Koo was planning to establish car manufacturing industries and theme parks in Mexico and China. The chairman did not care about the plight of the workers. All he thought about was how he could expand the company. The move angered the employees and revitalized their demand for good working conditions and better pay.

Utilitarianism theory

According to the utilitarian theory, decisions must be made based on their long-term and short-term benefits to the affected parties (Hayry, 2013). The leadership of Hyundai was less concerned about the happiness of the employees. It underlined the reason the chairman could opt to open new plants and build theme parks instead of improving the working conditions and salaries of the employees.

Moreover, the leadership did not mind the plight of dispatch workers who were not only poorly remunerated but also lacked job security. Failure to address the problems contributed to the industrial action and legal battles amid the company and workers. Eventually, both the management and the employees were not happy. The theme parks that the company intended to build could not add happiness to workers because they had no adequate money to travel (Jones & Felps, 2015).

Moreover, the employees felt betrayed as the money used to establish the parks could have helped to resolve the problems. The executive of Hyundai would have guaranteed the happiness of all stakeholders by offering dispatch workers better working conditions, employment terms, and remunerations. The company’s leadership ought to have demonstrated willingness to address the current stalemate by negotiating in good faith. Addressing the employees’ challenges would have resulted in the happiness of all stakeholders by averting future strikes and litigations.

Kantianism theory

Arnold and Harris (2012) define Kantianism as a “branch of philosophy, which holds that rational beings have dignity and should be respected” (p. 24). The Kantianism theory holds that people should be rational and act out of goodwill (Dierksmeier, 2013). Hyundai Company is renowned for advocating unity among the stakeholders. Nevertheless, leadership does little to achieve the goal of togetherness. It is hard for employees to feel like they are part of the company if poorly remunerated and excluded in decision-making (Belak & Rozman, 2012).

Despite the dispatch workers holding the same position for over two years, the administration was reluctant to hire them permanently. The management called for the ethical treatment of all people but contributed to employees’ misery by not enhancing their working conditions. It was irrational for the leadership to overlook the labor laws and the company’s employment rules. Moreover, demanding that employees must meet the targets for them to receive bonuses was selfish.

Virtue theory

Virtue theory is premised on four critical qualities, which are honesty, courage, fairness, and self-control (Dion, 2012). The theory focuses on the factors that contribute to the success of society (Audi, 2012). Hyundai’s employees showed courage in their fight for better employment terms. The workers’ union was honest about the employees’ demands. The company’s chairman opted to disregard employees’ complaints instead of admitting that there were challenges and looking for solutions. The chairman did not act with integrity as he chose to exploit dispatch workers (Hooft, 2014).

A company cannot experience go-slow if leaders agree to negotiate in good faith (Barcley, Markel, & Yugo, 2012). Failure by the management to exhibit all the four characteristics of virtue theory contributed to Hyundai losing a lot of money during the period that employees were on strike.

Stakeholders

The problem at Hyundai affected numerous stakeholders. They included Mong-Koo (chairman), Chung Eui (vice-chairman), and the board of directors. The company’s management was also at the center of the problem as it handled employee affairs. Other parties involved in the problem were the company’s clients and employees. The strike slowed Hyundai’s production capacity, which had far-reaching impacts on customers. It also affected employees’ motivation and their perception of the company.

Leadership

Despite the board of directors being responsible for making major decisions on matters that affected Hyundai, the Chairman appeared to be the one calling the shots during the strike. The management could not make decisions without consulting the chairman. The decision to establish theme parks and new manufacturing plants at a time when Hyundai was facing industrial action showed that Mong-Koo made all the decisions. The negotiations between employees and the management could not yield results as the latter did not have the power to make decisions.

Implications

The industrial action had many implications for Hyundai. The strike affected the company’s image negatively. The media was awash with news about how the company treated its employees poorly. Eventually, the value of the company’s shares went down significantly. The majority of the investors did not want to be associated with the company. Moreover, it was difficult to predict if the strike would end shortly. According to Jung-a (2017), the strike resulted in the company losing over $2.5 billion in 2016. The sales volume of the company went down significantly as customers developed a negative attitude towards the company.

Future Issues

The South Korean president pledged to introduce new labor laws that would protect the rights of dispatch workers (Kang, Cho, Park, Lee, & Mandel, 2017). The laws would guarantee that dispatch workers enjoy good working conditions. Thus, Hyundai is bound to face employee strikes in the future if it does not address the prevailing conditions. The new labor laws will change the duties of part-time and full-time workers. Thus, in the future, Hyundai will not be able to allocate safety-related jobs to dispatch workers. The company’s operations costs are bound to rise. Moreover, Hyundai should brace for more disputes as unions compel the leadership to hire non-regular employees.

Conclusion and Recommendation

Failure to enhance employment conditions and hire dispatch workers led to Hyundai’s employees going on strike. The union representatives and the company’s management had engaged in a series of negotiations that did not bear fruits. The employees demanded better pay and improved working conditions. Moreover, they required the company to assume responsibility for all accidents that occurred in the workplace.

In 2013, the Supreme Court ruled that Hyundai violated the Act of Protection for Dispatch Workers. The rule requires a company to absorb dispatch workers who have worked for over two years. Hyundai was unwilling to hire such workers because it would have increased operations costs. The decision by the company’s chairman to open new branches in China and Mexico did not augur well with the employees. It showed that the company was not experiencing financial challenges as the leadership wanted the employees to believe. Lack of goodwill and dishonesty on the side of the administration contributed to the stalemate.

The strike had negative impacts on the company’s brand. The value of Hyundai’s shares went down tremendously as customers avoided purchasing its cars. Moreover, the company incurred a significant loss due to a reduction in production capacity. The South Korean president has promised to change labor laws to safeguard the rights of non-regular workers. Hyundai’s leadership requires abiding by the current labor laws to avoid future strikes.

Additionally, Mong-Koo should involve employee representatives in decision-making and consider absorbing existing dispatch workers. Future negotiations should be conducted in good faith to avert potential disagreements that might lead to industrial actions. It is the high time that Mong-Koo consulted the management on matters that affect employees. Changes in labor laws will increase the cost of hiring dispatch workers. Therefore, Hyundai should avoid contracting dispatch workers to prevent future legal charges and minimize operations costs.

References

Ahrens, F. (2016). . Forbes. Web.

Arnold, D., & Harris, J. (2012). Kantian business ethics: Critical perspectives. Northampton, MA: Edward Elgar.

Audi, R. (2012). Virtue ethics as a resource in business. Business Ethics Quarterly, 22(2), 273-291.

Barcley, L., Markel, K., & Yugo, J. (2012). Virtue theory and organizations: Considering persons with disabilities. Journal of Managerial Psychology, 27(4), 330-346.

Belak, J., & Rozman, M. (2012). Business ethics from Aristotle, Kant and Mill’s perspective. Kybernetes, 41(10), 1607-1624.

Dierksmeier, C. (2013). Kant on virtue. Journal of Business Ethics, 113(4), 597-609.

Dion, M. (2012). Are ethical theories relevant for ethical leadership? Leadership & Organizational Development Journal, 33(1), 4-24.

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Jones, T., & Felps, W. (2015). Shareholder wealth maximization and social welfare: A utilitarian critique. Business Ethics Quarterly, 23(2), 207-238.

Jung-a, S. (2017). Hyundai shares slide as union launches strikes. Financial Times. Web.

Kang, H., Cho, S., Park, J., Lee, S., & Mandel, C. (2017). Mondaq. Web.

Kim, D., & Bae, J. (2017). Employment relations and HRM in South Korea. London, UK: Routledge.

Nam, I. (2016). . The Wall Street Journal. Web.

Shaw, W., Barry, V., Issa, T., & Catley, T. (2013). Moral issues in business (2nd ed.). Melbourne, Victoria: Cengage.

Shin, K. (2012). Economic crisis, neoliberal reforms, and the rise of precarious work in South Korea. American Behavioral Scientist, 1(1), 17-29.

Wol-san, L. (2013). . European Solidaire Sans Frontieres. Web.

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