General Electric Breaks Promises to Retirees (2015)

Controversy

General Electric logo

In 2015, General Electric saved $3.3 billion dollars by cutting their retiree benefits. The benefits that were cut included a Medigap plan that covered the retirees medicare plan. To “make up” for this cut, they are giving the retirees a flat $1,000 as a reimbursement, which will not cover the plans most of the retirees were on. Many of these retirees don't know how to choose a new coverage plan and will end up with less coverage than they need, leading to enormous bills. Gail Zorpette, a previous GE employee and GE enthusiast, expressed how surprised she was that this company would "wash their hands" of the retirees who had worked so hard for them (ctpost). The real controversy about the removal of these health care plans is that just a few years before, GE had promised that "[GE] expects and intends to continue offering these plans indefinitely..." (ctpost) A total of 65,000 people nationwide are being effected by this benefit cut. When GE made the benefit changes, they were not facing any economic hardships. It resulted in an increase of money for the stockholders of GE. Many of the people upset over this controversy pose the following question: "Which one of these groups [retirees or stockholders] is really responsible for GE's success over the years, and which really should be rewarded?" (LA Times)

Stakeholders

The main stakeholders in this case are the GE retirees. As previously mentioned, there are currently 65,000 retirees being effected by this change, and there will be more as other generations begin to work for GE. The current employees and prospective employees will be effected by this eventually, and may even choose not to stick with the company. The stakeholders with positive outcomes are the stockholders and the business itself which has just saved $3.3 billion dollars. Stockholders will be happy to own GE stock and may not care that the reason they are getting more money is unethical. To the left is an image of GE's chair holder and CEO, Jeffrey Immelt. He is a key decision maker in the company.

Jeffrey Immelt, CEO of General Electric

Individualism

The ethical theory of individualism would agree that General Electric cutting retiree benefits is the best option for the company because it will increase profits for the shareholders. Individualism is an "economic model" of ethics because the main focus is profit that goes directly to the owner or shareholders. This theory states that the company should not be spending money on "resources, employees, or donations" (Salazar, 18). This means that they are not worried about being a socially responsible business. This aligns very well with GE's situation. They are no longer worried about giving the retirees the money they worked so hard for, which means somewhere a decision was made that GE would no longer be socially responsible. The second piece of individualism is that everything must be done within the law. According to GE, the right to terminate these benefits is completely legal and they are not alone in this trend. According to Forbes, AT&T, IBM, and Time Warner are cutting retiree benefits as well. Despite their attempts to stay within the law, there are currently two lawsuits being filled against GE for illegal benefit changes. Nine GE unions have brought the issue to federal court and two retirees are filing a lawsuit as well (LA Times). Below is an image of GE Labor Union protesters in Schenectady, NY.

Utilitarianism

Protestors fighting for health benefits for retirees

The theory of utilitarianism focuses on achieving the maximum happiness for all stakeholders (Salazar, 20). Utilitarianism would not approve of the removal of health benefits for retirees. The retirees are not happy because they now need to spend more money and time to find a healthcare plan, and they feel betrayed by the company they had worked for. When balancing out the benefits of keeping retirees happy and the cost of paying them, the utilitarian perspective would say that the happiness of the retirees provides a greater benefit. This is because GE was not having financial troubles before the cut, therefor they would not be losing out by paying the retirees. The benefit would be that retirees would not spread a bad image of the company, they would not submit complaints and file lawsuits, and the current workers would not lose motivation to work hard because they will no longer fear they will lose their benefits. The maximum happiness of the retirees and current employees cannot be achieved when their promised benefits are revoked.

Kantianism

The Kantian perspective of ethics explains that a business should be always honest, respectful of all stakeholders, and not manipulate or harm others to get the company's way (Salazar, 20). A controversial part of this case is that GE is giving retirees a $1,000 annual reimbursement toward the medicare plan of their choice. They are manipulating the retirees to believe that they are still paying for their health plans, when in reality they will be paying much more than that $1,000 covers. GE is also lying to the former employees, ensuring them that they will be able to purchase equal medicare supplement plans for less money, which is untrue and leading many of these retirees to choose plans that are not enough for their medical needs. Retiree Gail Zorpette, pictured above, told the CT Post that GE had promised a "smooth and seamless" transition, which was not the case. She had a hard time reaching someone to help her, and when she did she was not given much clarification on the types of plans available to her. This shows that GE is manipulating the retirees to believe that they are still providing support by giving them $1,000 annually and promising help finding a new plan, however they are really just hurting the retirees and costing them much more money than they were expecting. According to the Kantian theory, the company cannot get credit for acting morally just for giving that $1,000 because there is bad intention in play since retirees are being hurt and manipulated.

Virtue Theory

A former General Electric worker protesting

the changes in health benefits

Virtue theory consists of four main virtues courage, honesty, temperance, and justice. According to these virtues, GE is violating virtue theory. They are not taking a stand for what is right for the retirees, rather they choosing profits, violating courage. They were not honest when they told the employees that they will not take away their benefits, and they were not honest when they told employees the $1,000 per year stipend will cover the cost of their medicare gap plan. They do not hold the value of temperance either because they are not providing fair outcomes to the retirees. Lastly, they are not providing justice to these retirees. A majority of these people have worked at GE for a good part of their life and contributed to the company. However, the company is more worried about raising the money given to share holders than they are about giving the well deserved retiree benefits. To follow virtue theory, GE needs to reevaluate the way they hold these main virtues. For example, they need to start by being honest with their retirees and let them know exactly what is going on with their retirement benefits and why they are doing that. They also need to give the retirees some justice by giving them the benefits that they were promised and that they deserve.

Justified Ethics Evaluation

This case cannot be considered ethical because according to the majority of the ethical perspectives, there are many components of this controversy that are not ethical. It is unethical to take away the promised benefits that the retirees believed they had a right to. Although they were trying to make it up to them by providing a yearly subsidy of $1,000, they are overall hurting those retirees that were depending on the medicare gap. This could have been avoided if GE cut retiree benefits for future retirees and not the ones who have been receiving it all along. These are the retirees that did not have a chance to plan what they would do without the benefits and have been depending on them since their retirement. GE also had no immediate need to save the money.
Cutting retiree benefits is becoming a trend in big businesses today because of the Affordable Care Act (2010). People are able to purchase health insurance on publicly run exchanges, therefor they have more options. The life expectancy has also increased, meaning GE will have to pay for these employees even longer than they expected when they made the promise (ctpost). These are valid reasons for GE to begin cutting retiree benefits, however, should not have taken it straight away from those who were depending on it. Even giving the retirees a few years notice could have avoided a lot of the upset individuals and possibly even the two major lawsuits GE is now facing.

Action Plan

General Electric workers 

accompanied by the CEO of the company

The mission statement representing GE from their website is now: "GE works on things that matter. The best people and the best technologies taking on the toughest challenges. Finding solutions in energy, health and home, transportation and finance. Building, powering, moving and curing the world. Not just imagining. Doing. GE works." This really does not address employees at all, besides "the best people." To add to this mission statement, a new mission statement specifically about employees and the workplace should be added. This may include motivational language like "Our employees have our upmost respect and provide us with a successful business. We strive to employ happy and successful people, as an equal opportunity employer." This shows that the company is thankful for their employees and even retirees, which many may not have thought after this incident. It also shows new employees that they will be respected and that GE will make efforts to help them succeed.
There are many things that GE can do to undo the harm that they have caused many retirees and their families. The first thing they should do is publicly apologize to any retirees who are upset by the recent changes made to their benefits. Then, send letter to each individual retiree with information for their local GE health insurance specialists. Hiring these specialists would be cheaper than offering every retiree their original plans back. Since there are many areas where lots of GE employees reside, there would be many specialists available for consultations. These would be professionals that could actually sit down with these employees and help them to choose the insurance that is right for their needs. It would be someone they could easily access when they have any questions. This would replace the help-line system that is currently in place and has many complaints about. An increase of an extra $1,000 would be dispersed to retirees per year for the next two years while they figure out which insurance works with the budget they will be provided with after the two years. This would hopefully convince the retirees that GE is not trying to harm them like they think right now. They would also see that GE is making a real effort to help their well being, while still increasing the shareholder's income.




References

Bailey, Hugh. "Changes to GE Health Plans Leave Retirees Stunned." Connecticut
Post. N.p., n.d. Web. 22 Sept. 2016.

GE Retirees. (n.d.). Retrieved September 15, 2016, from http://www.ge.com/retirees/

Hiltzik, M. (2016, March 14). GE shows how to make shareholders richer and retirees
Poorer. Los Angeles Times.

Jaspen, Bruce. "GE's $3B Retiree Health Cut Escalates Employer Exodus."
Forbes. Forbes Magazine, n.d. Web. 22 Sept. 2016.

Passeri, James. "GE Saved Billions by Cutting Retirees' Benefits." The Fiscal Times.
N.p., n.d. Web. 25 Sept. 2016.