The Lack of Social Responsibility Surrounding the Demise of Asian Rattan, Inc. Jennifer Linnabary October 4, 2002 BIS 402 Professor David Wells In order to maintain an economically strong presentation of social responsibility, a business owner must adhere to the moral values of others. Of course, a company must have strong, core values when faced with the moral beliefs of these associations of people, or stakeholders. Aided with government support and guided by clear stakeholder concerns, the employees of Asian Rattan, Inc. unionized in retaliation of living conditions and moral conflict, which caused Jun-Jun Hernandez to lose his business. Lacking proper communication and proactive interest, Jun-Jun confronted a problematic issue after the damage had already occurred. His employees had decided to strike for a higher wage, and Jun-Jun complied with their requests only after serious debate. Due to minimal social responsibility, Jun-Jun may have prevented the collapse of Asian Rattan, Inc. if he would have adopted stakeholder management principles, established sincere corporate values, and implemented a marketplace of morality. Because Jun-Jun Hernandez abstained from effectively practicing stakeholder management, he lost his company, Asian Rattan, Inc. In a slight attempt at considering the interests of others, Jun-Jun provided housing, church services, and medical care for his employees. However, despite the services rendered, Jun-Jun’s lack of communication among business associates and employees became his ultimate downfall. In “The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications,” Donaldson and Preston informatively reveal that “Through the social reporting process, the corporation will gain and understanding of its stakeholders, and the stakeholders will gain an understanding of the corporation as well as its relationship with the other stakeholders” (319). In the Asian Rattan case, Jun-Jun is described as using “intermediaries” when communicating with the employees, in order to avoid any open 2 conflict (56). Because he chose to relay messages through others, he transmitted and received inaccurate information pertaining to employee morals and corporate values. In short, Jun-Jun neglected his social responsibilities to his employees by abstaining from effective interaction, which caused the downfall of Asian Rattan, Inc. Although, he supposedly could not afford to raise the wage, he could have communicated this dilemma to the employees prior to the resulting problematic conflict. Through effective communication and dialogue, Jun-Jun and Asian Rattan, Inc. would have been most successful by using stakeholder management principles. In contrast to stakeholder management, Jun-Jun was conducting business with an economic set of values rather than personal morality. Because he displayed corporate values, Jun-Jun showed a focus on shareholder-wealth-maximization. In “Defending the Stockholder Model: A Comment on Hasnas, and on Dunfee’s MOM,” John Dobson describes the stockholder model as an avenue “through which the actions of managers are disciplined by both the expectations and beliefs of stakeholders,” and of society at large (21). Asian Rattan, Inc., had little stockholder association, yet Jun-Jun followed the model because he focused on maximizing his personal wealth while justifying his actions as morally disciplined. In essence, the less money awarded to workers, meant more money for Jun-Jun and Asian Rattan, Inc. In short, he displayed a personal interest with success and wealth, rather than considering the destitute conditions of his employees. Due to his lack of stakeholder consideration and wealth-maximization intentions, Jun-Jun Hernandez exercised a minimal degree of corporate social responsibility. As mentioned earlier, Jun-Jun focused more on the profitability of his company rather than making the employees his primary responsibility. However, he did share some 3 compassion for the employees, and may have considered his personal actions as being “socially responsible.” For instance, he may have hired people with fewer skills and knowledge rather than more qualified employees, in order to reduce poverty. In “The Social Responsibility of Business is the Increase Its Profits,” Milton Friedman remarks, “It may well be in the long-run interest of a corporation that is a major employer in a small community to devote resources to providing amenities to that community” (18). However, despite their destitute living conditions, the employees voluntarily chose to work at Asian Rattan, Inc. with the option to leave at any time. Therefore, Jun-Jun assumed some responsibility for his employees, but made profit maximization his ultimate priority, which minimized social responsibility. Aside from the various approaches toward social responsibility, a marketplace of morality (MOM) slightly evolved within the walls of Asian Rattan, Inc. Jun-Jun responded to the moral issues and concerns of his stakeholders with economic values or judgments. Therefore, a MOM did exist, although Jun-Jun did not express a proper reaction to the warning signs. He failed to align the corporate values with the moral beliefs and preference of potential stakeholders (Bowie and Dunfee 27). In order to survive, Asian Rattan, Inc. needed a set of core moral values in order to establish a strong corporate culture. When confronted with moral pressures, Jun-Jun failed to “incorporate the interests of relevant stakeholders into decision making” (Linowes 29). He proactively responded to moral concerns after he had lost the battle. Due to the lack of communication, Jun-Jun was not informed or prepared to evaluate the moral expressions of his employees. The eventual emergence of problematic morality could have been prevented, and loss may have substantially been recovered at Asian Rattan, Inc. Hence, a 4 marketplace of morality would have maintained the company, but Jun-Jun and Asian Rattan lacked essential core values to address the morals of stakeholders. Because Jun-Jun dishonestly responded to legal pressures from the union and government, he abstained from establishing social responsibility even further. In “Corporate Social Responsibility,” the case states, “As a member of society, a firm must abide by the laws and regulations governing society” (17). Jun-Jun knew his workers were being paid less than the minimum government requirement, and he still maintained his standards. Aside from his lack of compliance with the government, he refused to open his “books” during negotiations with the union (Linowes 58). By withholding the necessary documentation to support his financial claim, Jun-Jun projected a dishonest image. Without a clear presentation of corporate social responsibility, Jun-Jun lost a battle he inevitably created through self-serving actions. While Jun-Jun failed to follow stakeholder management principles, the stockholder model, and neglected to adequately follow the “social responsibility” guidelines, he did manage to address a few of the article contents in some way. The Stakeholder Management Approach would have been the most preferred management choice for Jun-Jun, because he would have acquired a mutual respect and constructive communication between the company employees. By thoroughly exploring and responding to the interests of stakeholders, Jun-Jun would probably still be managing Asian Rattan, Inc. successfully today. 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