Sunday, November 16, 2014

Hyundai: Wage Issues & Illegal Dispatching of Workers (2014)

Hyundai company logo

Korean automobile manufacturing company, Hyundai, recently underwent a series of negotiations and employee outcry after experiencing a strike back in August. On August 14, 2014 over 20,000 unionized workers in all three of the Korean Hyundai plants staged a walkout and strike after 70% of the 47,262 members voted in favor of the act. The strike occurred after seventeen rounds of negotiation meetings resulted with little progress in amending issues between employees and management. Following a 2013 Korean Supreme Court ruling that bonuses should be part of regular pay, unions are asking for Hyundai to implement this as opposed to bonuses only when targets are met. This change would increase their earnings by 10%. Hyundai also is experiencing problems with their dispatched workers. Under the Act of Protection for Dispatched Workers in Korea, temporary workers must be hired if their position is held for more than two years or if the dispatch is found to be illegal. Hyundai was not acting in accordance to this act and the Courts found all dispatching within the company to be illegally contracted. The court ruled in mid September 2014 that there was no connection between the subcontracted workers and the subcontractor, therefore they were regular Hyundai employees.
Adding to this, many of the temporary workers were employed for over two years without receiving any benefits or full employment status. Dispatched workers comprise 16% of Hyundai’s total manpower. As of September negotiations were heading into the nineteenth round and wage discussions had been underway since June. When news came out that the chairman, Mong-Koo, had plans to build resort style theme parks and plants in China and Mexico, employees became further enraged. They argue Mong-Koo should be investing in his employees right now instead of spending money elsewhere while there is an abundance of turmoil within the company.

Chung Mong-Koo, CEO of Hyundai

The influential stakeholders of this case include the Chairman Mong-Koo, his son the Vice Chairman Chung Eui-son who is the only son of Mong-Koo, and the rest of the Board of Directors of the Korean plants. The management officials of the plants were also involved because they were in control of the direct treatment and authority of the dispatched, union, and full time workers of the Hyundai plants in Korea. Customers of Hyundai are affected by this case as well because of the production changes and halts that occurred during the controversy. Lastly, the entire Hyundai company was affected by the media stories and production issues that were encountered as a result of the issues facing the Korean plants.

Machan’s Individualism focuses on the motivations of the company while stressing making a profit as being the number one goal of a company while not breaking any laws. Chairman of Hyundai Motors, Mong-Koo Chung, certainly was thinking about maximizing profits when he was paying dispatched employees less than regular employees, because he saved more than half of a full time employees earnings by doing so. However, at the same time he was not following the legal act made in regards to dispatched workers. So while he is saving money and increasing his profit, he is breaking the law in order to do so, making his actions unethical. According to the ideals of individualism, Chung would have been acting ethically if he had hired dispatched employees before the two year mark of their time at Hyundai as full time employees who receive benefits, proper pay, and union rights. Chung’s company could have potentially been losing profits because of lack of incentive existing among the dispatched workers since they were working for little pay without any benefits. Therefore, they may have not worked to their full capability.

Hyundai workers strike against low wages and dispatch of workers
With Utilitarianism, matters need to be analyzed to determine the max amount of happiness that can be obtained in the short term and long term pertaining to the business’ stakeholders. Hyundai’s main focus was not on the happiness of their workers in the short term or arguably the long term. Hyundai ignored the grievances of their Korean plant workers and disregarded the proper way to handle dispatched workers. These pressing matters left unattended to resulted in legal matters and unhappiness for both workers and management. Although Chairman Mong-Koo is involved in the land bid for the resort style plants with theme parks incorporated into the design, it is unlikely that the Korean workers would find happiness out of this since they have little money to spare on travel. Also, they feel the money on the land bids could be better used to help handle their problems. Giving dispatched workers full time jobs with benefits and paying full time employees their bonuses regularly would solve many issues within Korean Hyundai. It is best for both management and workers to handle the negotiation meetings quickly and make compromises. By doing so Hyundai would avoid future strikes while maintaining the happiness of all involved and continued production.

Hyundai and KIA motors headquarters in Seoul, South Korea

Under Kantianism, the formula of humanity expresses the value of everyone’s rationality and the ethical treatment of people. While being rational it is important to act consistently, be respectful of others, and be motivated by the Good Will. Hyundai Motors strongly publicizes its desire for a sense of togetherness and community within the company. However it has been proved that they need to work on reaching this goal. The management was not properly informed of distress among employees, nor did they express rational thinking when keeping dispatched workers employed under illegal conditions. Hyundai did not follow the rules they set for the company. They preach for the just and ethical treatment of people yet allowed their employees to become so unhappy that they staged a walkout. It was not rational for the company to ignore the rules they set for themselves as well as the rules of the government at the same time. Also, keeping bonuses as a reward only given to employees when targets are hit is a selfish act. Agreeing to making bonuses part of regular salary would be from pure motivations to keep workers happy and Hyundai would not be losing a significant profit from the change.

Virtue Theory
Virtue theory is centered around four main characteristics courage, honesty, self control, and fairness. It also focuses on what makes an object function well and what helps society to flourish.The workers of the Hyundai Motors plants demonstrated courage when they stopped their work days in order to strike. The union was honest about the changes they wanted made to their employment terms and annual pay. Hyundai, especially Chairman Chung should have come out and admitted to the problems early on, but they instead chose to lie and hide. He lacked the integrity to follow the laws concerning dispatching and therefore ended up treating his employees poorly. If the negotiations were to go smoothly and result with a plan of action that appeases all those involved the company community will flourish increasingly. So while there is some evidence of the four main virtues being displayed within the Hyundai company, it would be best for all stakeholders to exhibit each of the four main characteristics of the theory. The chairman needs to be more transparent with his actions within the company and encourage management to be courageous and fair when it comes to handling issues.

"Conflict within Labor Unions." Business Korea. September 11, 2014. Accessed October 2,2014.
"Court Finds All Hyundai In-house Subcontracting Illegal." The Hankyoreh. September 19, 2014. Accessed October 2, 2014.
Courtenay, Vince. "Korean Labor Skirmishes." Ward's Auto. August 19, 2014. Accessed October 1, 2014.
France-Presse, Agence. "Hyundai Kia Strike Could Cost $100 Million." Industry Week. August 28, 2014. Accessed October 1, 2014.
"HQ Plan Provokes Workers To Strike." September 1, 2014. Accessed October 2, 2014.

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