Human Resources Issues in Shinecall

MEMORANDUM

PHONE AND BUILD

Date:         May 29, 2018

To:         Belinda Lee, CEO

From:         

Re:         Human Resources Issues in Shinecall

Executive Summary

The purpose of this memo is to analyze the ethical and legal implications involving the joint stock company controlled by Phone and Build, located in Shining Sand, Shinecall.  The executive team of the joint stock company comprises 25 expatriates from the US, one from Germany, and two Shining Sand nationals.  Recently, the Shinecall head of Human Resources mistakenly sent an e-mail which included the salary and benefit package of one of the US executive expats to the two Shinecall executives.  The local Shinecall executives noted their salaries and benefits were considerably lower and different, respectively, than that of their US peers and are understandably upset.  The local head of human resources wants to fire the top ranking local national executive, Ali, because she believes he is the cause of all of the trouble.  She wants to replace Ali with Mohammed, another national of Shinecall.  

John has been managing the issues locally in Shinecall and has attempted to call in two more US expats, one, Dan, 66, with considerable international human resource experience and the other, Sarah, 42, with 15 years of management experience.  Shinecall is holding up the approval of the visas and work permits; Shining Sand requires mandatory retirement at age 65, so the labor office is refusing Dan’s work permit and, while no local laws exist prohibiting women taking management positions, the labor office is also refusing Sarah’s work permit.  

Ethical Perspective

According to Integrative Social Contracts Theory (ISCT), local communities can specify ethical norms for their members through microsocial contracts, which must be grounded in informed consent, supported by a right of exit, forming “authentic norms” (Donaldson & Dunfee, 1994).  In this definition, the community is employees located in Shining Sand.  According to ISCT, a microsocial contract is defined as an agreement or shared understanding about the moral norms relevant to specific economic interactions (Donaldson & Dunfee, 1994).  

As it relates to the employees at Shining Sand, the executives appear to feel that there has been a breach of the microsocial contract, as the authentic norm requires informed consent.  In particular, local Shining Sand executives appear to have been operating without incident prior to the accidental pay disclosure.  Thus, at a minimum, in order to fix the breach of the microsocial contract, executives will need to be educated about why the original pay gap was instituted and be allowed the opportunity to give consent.  Donaldson & Dunfee (1994) note that consent does not need to be specifically expressed.  

The company could create a legitimate norm, as opposed to an authentic norm, by making the contract compatible with hypernorms (Donaldson & Dunfee, 1994).  Hypernorms “by definition, entail principles so fundamental to human existence that they serve as a guide in evaluating lower level moral norms” (Donaldson & Dunfee, 1994).  Hypernorms should include core human rights, including those to personal freedom, physical security and well-being, political participation, informed consent, the ownership of property, etc (Donaldson & Dunfee, 1994).  By looking at hypernorms, Shining Sand could create an obligatory norm with its employees by operating with full disclosure surrounding its salary and benefits packages between local Shining Sand employees and executives and US expats.  Ethically speaking, the main issue under ISCT is surrounding informed consent, so Shining Sand can resolve the dispute in pay differences by disclosing more information, but is not ethically required to close the pay gap.  

In looking at the question of whether ex-pats should be paid more than local nationals of Shining Sand, research comparing business practices among different countries can provide a basis for the application of ISCT by identifying authentic norms for different international communities (Donaldson & Dunfee, 1994).  By comparing statistics from various local nations, Shinecall will be able to ethically adhere to the authentic norms, by paying ex-pats and local nationals similarly to other how other companies pay. Therefore, depending on the results of the analysis, ethically, ex-pats and local nationals should be paid a salary commensurate with competing companies, regardless of pay gap.

Shinecall can explain differences in salary and benefits by noting differences in skills, qualifications, and markets in which they hired.  Furthermore, the US ex-pats are typically hired in the US, not overseas.  Therefore, market wages and benefits for those employees are competing in an environment, which are completely different from the Shining Sand market.  Phone and Build hired employees for the U.S. market and by transferring employees to Shining Sand, ethically, the company couldn’t reduce salary and benefit packages for those employees.  

Legal Perspective

Assuming Shinecall were located in the United States, as opposed to Shining Sand, all employees who work in the U.S. or its territories for covered employers are protected by Equal Employment Opportunity (EEO) laws (UMUC, Employment Discrimination, 2018) EEO laws cover discriminatory employment decisions, discrimination in compensation and benefits, harassment, and retaliation (UMUC, Employment Discrimination, 2018).  Title VII of the Civil Rights Act of 1964 makes it unlawful for an employer to discriminate based on race, religion, sex, nationality, etc. (UMUC, Employment Discrimination, 2018).  The Civil Rights Act of 1964 also established the Equal Employment Opportunity Commission (EEOC), which is charged with interpreting and enforcing the provisions of Title VII and numerous other employment laws (UMUC, Employment Discrimination, 2018)

Dan, 66, is protected under the Age Discrimination in Employment Act of 1967 (ADEA), which prohibits employers with 20 or more employees from discriminating against employees who are 40 years of age or older (UMUC, Employment Discrimination, 2018). The Act protects against dissimilar treatment and policies that have a inconsistent impact on covered employees (UMUC, Employment Discrimination, 2018). Under the ADEA, Dan would not be forced to retire at age 65, and could continue working.  If forced to retire, Dan has to right to demonstrate discrimination based on age, achieve reinstatement, and recover lost wages and damages (UMUC, Employment Discrimination, 2018).