ELE-3e: Sample Answers for End-of-Chapter
Question with Sample Answer
Chapter 3: Ethics and Business Decision Making
3–3. Question with Sample Answer
Shokun Steel Co. owns many steel plants. One of its plants is much older than
the others. Equipment at that plant is outdated and ineffi cient, and the costs of
production at that plant are now two times higher than at any of Shokun’s other
plants. The company cannot raise the price of steel because of competition, both
domestic and international. The plant employs more than a thousand workers
and is located in Twin Firs, Pennsylvania, which has a population of about
45,000. Shokun is contemplating whether to close the plant. What factors should
the firm consider in making its decision? Will the firm violate any ethical duties if it
closes the plant? Analyze these questions from the two basic perspectives on
ethical reasoning discussed in this chapter.
Sample Answer:
Ethical and other dilemmas faced by businesspersons are rarely clear-cut
choices between good and bad alternatives. This problem is no exception. The
questions in the problem indicate some of the issues that businesspersons in
such situations should consider. But potentially higher profits and possible
negative publicity are not the only considerations—decisions made by
businesspersons can have wide-ranging implications. When a firm takes
advantage of cheaper overseas labor, it must lay off domestic workers or even
close a domestic operation. When workers are laid off, there are repercussions
throughout the local economy. Closing an operation reduces the local tax base—
property taxes, business taxes, and income taxes—which funds the local
infrastructure. Thus, the firm must determine to whom it owes duties
(shareholders, employees, or others) and to what degree each group is owed. In
addition, all of the factors that exist when business is done internationally must
be considered. These include the foreign economic and political situation, and
other costs (materials, equipment, foreign taxes, domestic import duties) besides
cheap labor. These and other considerations require a balancing known as a
trade-off.