Chapter 16

Employees and the

Corporation
 Ch. 16: Key Learning Objectives
 Understanding workers’ rights to organize unions and bargain
collectively
 Knowing how government regulations assure occupational
safety and health and what business must do to protect workers
 Evaluating the limits of employers’ duty to provide job security to
their workers
 Appraising the extent of employees’ right to privacy, when
businesses monitor employee communications, police romance
in the office, test for drugs or alcohol, or subject employees to
honesty tests
 Debating if employees have a duty to blow the whistle on
corporate misconduct, or if employees should always be loyal to
their employer
 Assessing the obligations of transnational corporations to their
employees around the world

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 The Employment Relationship
 Employees are an important market stakeholder
group
 Employees are responsible for carrying out the work
of the company
 At the same time, employees are dependent on the
company for their livelihood
 Nature of the employment relationship conveys rights
and duties on both sides

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 Figure 16.1
Rights and Duties of
Employees and Employers

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 Workplace Rights

 Employees in the United States enjoy

important legal guarantees. They have the
right to:

 organize and bargain collectively,

 have a safe and healthy workplace, and

 to some degree, job security

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 Right to Organize and Bargain Collectively
 In the United States, and in most other nations,
employees have a fundamental legal right to organize
labor unions and to bargain collectively with employers
 Workers have a right to hold an election to decide which union will
represent them

 Labor unions have the right to negotiate wages, working

conditions, and other terms of employment
 Employers are required to bargain with unions in good faith
 If agreement cannot be reached, a strike might occur

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 Right to Organize and Bargain Collectively
 Influence of labor unions has varied during periods in U.S.
history:
 During the 1930s New Deal period unions were very popular
 Since the mid-1950s, there has been a decline in union membership
 In 2008, only about 12% of all U.S. workers are members of a union
 The percentage was higher, 35%, in government employment
 Some predict resurgence of union activity in coming years

 Some unions have departed from adversarial approach to

working cooperatively with management (e.g. AT&T, Kaiser
Permanente)

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 Right to Safe and Healthy Workplace
 Annually, more than 4 million workers in private industry
are injured or become ill while on the job, according to the
U.S. Department of Labor
 Occupational Safety and Health Act, passed in 1970, gives
workers the right to a job “free from recognized hazards
that are causing or likely to cause death or serious physical
harm”
 This law is administered by the Occupational Health and Safety
Administration (OSHA)
 Since the agency’s creation in 1970 the overall workplace death
rate has been halved

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 Right to Safe and Healthy Workplace
 Working conditions remain very dangerous in many
developing countries. For example:
 In Bangladesh’s fast-growing garment and textile industry,
fires and building collapses have killed or seriously injured
more than 2,800 Bangladeshi workers since 1990

 In response, garment workers organized a national half-day

strike to demand tougher health and safety standards and
compensation for victims and their families as well as calling
on international buyers to adopt and enforce codes of
conduct for their Bangladeshi suppliers

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 The Right to a Secure Job
 In the United States, since the late 1800s, the legal
basis for the employment relationship has been
employment-at-will

 Employment at will is a legal doctrine that means

employees are hired and retain their jobs “at the will of”
(i.e. at the sole discretion of) the employer

 The equal employment and other laws prevent

discriminatory terminations as well as those that would
constitute a violation of public policy

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 The Right to a Secure Job
 The commitments that employers and employees
make to each other go beyond mere legal obligations.
Cultural values, traditions, and norms of behavior
also play important roles.

 The term social contract refers to the implied

understanding between an organization and its
stakeholders. This is not a legal contract, but rather a
set of shared expectations

 Should companies have strong or weak bonds with

their employees?

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 Privacy in the Workplace
 An important right in the workplace as elsewhere, is
privacy.

 In the business context, privacy rights refer to primarily

protecting an individual's personal life from an
unwarranted intrusion by the employer

 Key workplace issues where privacy dilemmas often

emerge include electronic monitoring, office romance,
drug and alcohol abuse, and honesty testing.

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 Privacy in the Workplace
 Electronic monitoring
 New technologies enable companies to gather,
store, and monitor information about employees’
activities. A company’s need for information,
particularly about its workers, may be at odds with
an employee’s right to privacy
 Management justifies the increase in employee
monitoring for a number of reasons:
• Employee efficiency
• Fear of lawsuits if employees act
inappropriately

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 Privacy in the Workplace
 Office romance – requires careful balancing between
legitimate employer concerns and employee privacy
 One study showed that one-third of all long term relationships
began on the job, and 30 percent of all managers said they had
had one or more romantic relationships at work during their
careers

 Today most companies try to manage office

relationships rather than ban them outright
 Sometimes consensual relationship agreements are required to
protect against possible harassment lawsuits if the people
involved later break up
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 Privacy in the Workplace
 Drug and alcohol testing
 Drug abuse costs U.S. industry and tax payers an estimated $181
billion a year
 Drug-Free Workplace Act (1988) – required federal contractors to
establish and maintain a workplace free of drugs
 According to the American Management Association, more than
three-fifths of companies test employees and job applicants for
illegal substances

 Drug testing is typically used on three different occasions:

 Preemploymnet screening
 Random testing of employees
 Testing for cause

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 Figure 16.2 Pros and Cons of
Employee Drug Testing

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 Privacy in the Workplace
 Alcohol use and addiction causes twice the problems of
all illegal drugs combined
 About 6 percent of full-time employees are heavy drinkers

 Up to 40 percent of all industrial fatalities and 47 percent of

industrial injuries are linked to alcohol

 U.S. businesses lose an estimated $70 billion per year in

reduced productivity directly related to alcohol abuse

 Employee Assistance Programs – offer counseling,

rehabilitation programs, and follow-up

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 Privacy in the Workplace
 Honesty testing
 Employee theft has emerged as a significant
economic, social, and ethical problem in the
workplace
 Employee Polygraph Protection Act (1988) –
severely limited polygraph testing for employers
and prohibited approximately 85 percent of all
such test previously administered in the U.S.
 Although controversial, many companies have
switched to written psychological tests

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 Whistle-blowing and Free Speech
in the Workplace
 Free speech in the workplace
 Another area where employer and employee rights and duties
sometimes conflict
 U.S. Constitution protects free speech; however, does not
specifically protect freedom of expression in the workplace
 Employees are not generally allowed to speak out against their
employers, due to legitimate interests of the business
 When society’s interests override those of the individual
business, employee may feel the need to speak out or “blow the
whistle”

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 Whistle-blowing and Free Speech
in the Workplace
 Whistle-blowing – when an employee believes his/her
employer has done something that is wrong or harmful to
the public, and he/she reports the alleged misconduct to
the media, government, or high company officials
 4 conditions must be satisfied to justify whistle-blowing
 Organization is doing (or will do) something that seriously
harms others
 Employee has tried and failed to resolve the problem
internally
 Reporting the problem publicly will probably stop or prevent
the harm
 The harm is serious enough to justify the probable costs of
disclosure to the whistle-blower

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 Working Conditions around the World
 Laws and practices that establish fair wages,
acceptable working conditions, and employee rights
vary greatly around the world

 One very public issue is sweatshops

 Factories where employees, sometimes including children, are
forced to work long hours at low wages, often under unsafe
working conditions
 Number of well-known companies have been criticized for poor
working conditions in overseas factories (e.g. Nike, Wal-Mart,
Disney, McDonald’s)

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 Fair Labor Standards

 Labor standards refers to the conditions under

which a company’s employees, or the employees of
its suppliers, subcontractors, or others in its
commercial chain, work

 Universal rules or standards related to these are

called fair labor standards

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 Fair Labor Standards
 In the face of growing concerns over working
conditions overseas, a debate has developed over
how to best establish fair labor standards for
multinational corporations:
 Voluntary corporate codes of conduct
 Nongovernmental organizations labor codes
 Industry-wide labor codes

 Whatever the approach, certain common questions

emerge in any attempt to define and enforce fair
labor standards

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 Common Questions Regarding
Fair Labor Standards
 What wage level is fair?
 Should market set the standards?
 Do multinationals have a responsibility to provide a wage that
supports decent standard of living?
 Should standards apply to just the firm’s own
employees or all workers having a hand in making
the product?
 Responsibility of firm to its own employees is clear,
responsibility to subcontractors employees is indirect
 How should fair labor standards be enforced?
 Who should be responsible for monitoring? The company or
an independent body?

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