Research Log
Research Question: Is Outsourcing Ethical?
Keywords: Outsourcing and Ethics/Values
In the more competitive business environment these days, outsourcing has become an increasingly attractive option for businesses. Over the last few decades, companies have farmed out more tasks from more and more departments. The trend of increasing outsourcing is spurred on by today’s communications tools and collaborative practices, which make it just as effective to cooperate between corporate entities as within them. However, is outsourcing ethical?
Outsourcing started to enter the business in 1980s. The decision of companies to outsource is often made in the interest of lowering cost, conserving and redirecting energy to the competence of the company, or the need to be more efficient in the use of capital, labor, technology and other resources available worldwide.
Outsourcing often referred as the delegation of non-core operations from internal production to an external entity specializing in the management of operation. Historically, outsourcing is referred to the organization of labor within and between societies. It involves transferring or sharing sharing management control and/or decision-making of a business function to an outside supplier, which involves a degree of two-way information exchange, coordination and trust between the outsourcer and its client. Outsourcing is a dynamic relationship which involves integration and sharing management control of labor process rather than having contract relationships. Business segments typically outsourced include information technology, human resource, facilities and real estate management, and accounting. Many companies also outsource customer support and call center functions, manufacturing and engineering.
Today there seems to be no limit to the variation in client-vendor arrangements, yet there is a persistent misconception that outsourcing comes down to a simple make-or-buy decision (1996). In fact, “outsourcing” is now an umbrella term that encompasses a spectrum of external sourcing engagements, each with unique advantages and its own set of relationships.
Outsourcing is growing in popularity as a means of cutting costs and increasing flexibility. However, it can also entail a variety of unforeseen consequences. The process of outsourcing, which can be defined as the contracting out of functions, tasks, or services by an organization for the purpose of reducing its process burden, needed to acquire a specialized technical expertise, or achieving expense reduction. A key aspect of outsourcing is the substitution of full-time workers with part-time, contract, and other contingent workers who receive few or no benefits. Outsourcing is a complex, multi-faceted process, with implications and consequences that span department, division, and corporate boundaries.
It is also necessary to discuss potential ethical conflicts that may arise between organizations and their workers when outsourcing is implemented. Ethics attests to the differences brought about by cultural, social or organizational limits. Ethical standards provide companies with the ability to resolve global ethical problems, although such standards have never proved easy to define since they deal with abstract terms such as values and beliefs. The most notable problem areas in corporate ethics deal mainly with issues of gender, bribery and corruption as well as the relationships between industrialized and developing nations.
Ethics has never been easy to define because it deals with intangibles like values and beliefs. But ethical standards provide us with an ability to resolve global ethical dilemmas. Without standards, we restrict our ability to do business effectively in a borderless world. And, paradoxically, our search for a universal code of ethics intensifies just as we become increasingly aware of cultural differences.
Rushworth Kidder, from the Institute for Global Ethics, conducted a global values survey and discovered the following common values: love, truth, freedom, fairness, community, tolerance, responsibility and reverence for life. The list is culled from interviews with extraordinary people from all over the world (1994). However, even if there is an underlying agreement on such values, these values are prioritized differently among cultures and might be expressed very differently from culture to culture.
According to (1998), ethical behavior contributes to the bottom line by reducing the cost of business transactions, establishing trust among stakeholders, increasing the likelihood of successful teamwork, and preserving the social capital necessary for doing business. The morals and ethics of employees can be a determining factor in the success or failure of a company. According to (1994), employees with a great work ethic are usually more productive and trustworthy, so employers can mentor them instead of police them. Such environments allow more creativity.
collaborators (2001, 1991) researched on personality and its influence on business management and executive decision making. Their research intensely focused on the individual attitude as an embodiment of ethical behavior. Their theory is that ethical behavior is based on which produces the greatest benefits for the greatest number of people. The basic prescription is to follow the standards which people in the country or the particular society are likely to actually follow and to use them to maximum profit for the firm.
In the social perspective, (1989) acclaimed that ethical algorithm has, at its center, the level of socio-economic development as a bench mark criterion for ethical managerial decision making. The social perspective emphasizes the application of uniform standards and rules to assess international ethical dilemmas. The social perspective, then, seems to be quite close to the view that a business should do only that which is perceived to be universally correct. That is, follow standards which the person or company has decided are to be applied regardless of country.
In the cultural perspective, the focus is developing a holistic understanding of the other culture for the purpose of devising business plans which are transparently compatible. Ethical conflicts must be developed within the context of a comprehensive view of other socio-economic systems. As (1994) indicates “The complication is cultural diversity. International business assumes and appeals to freedom of choice. Imperialism substitutes force for freedom and has nothing to do with free markets. Ethically speaking–and in the not very long run too-imperialism is bad business.” Even more directly to the point is (1992) statement that “In today’s world, there is much to be accomplished and mutually gained through understanding and respect across cultural lines.”
Outsourcing involves a long-term contractual relationship for business services from an external provider. These relationships are increasingly popular in a wide variety of business activities. Firms widely outsource in areas once strictly considered internal domains, such as human resources (1993; 1993; 1994).
Outsourcing adds value in the changing corporate environment, especially when used in combination with reengineering (1994) or a shared-services model.
However, outsourcing has been described as a betrayal of workers by top executives whose salaries on average are 150 times greater than that of average U.S. factory workers (1996). Outsourcing implies substituting vendor services for current internal capabilities. Outsourcing means replacement. It implies replacing business activities traditionally performed internally and eliminating the units that previously provided the services and either reassigning or releasing employees. Replacement distinguishes outsourcing from simple contracting precisely because the organizational implications are significant. Client employees lose such tangible signs of power and status as direct control over staff, budgets, and functions. For some, there is the real and acute loss of employment.
Outsourcing can be especially insidious when it is used as a weapon to exact wage concessions from employees. Not only is this reminiscent of unacceptable management practices of the late nineteenth and early twentieth centuries, but it ignores one of the causes of the perceived inefficiency poor management. Workers are neither inherently indolent nor inefficient. Rather, they are products of a managerial philosophy that for years found it expedient to accede to the demands of labor and pass on higher costs to the consumer. Writing in his autobiography, (1984) describes a management philosophy that prevailed in America’s manufacturing sector for many years: “As long as Detroit was making money it was easy for us to accept union demands and recoup them later in the form of price increases.” It is unethical to ask workers to bear this burden in terms of lower wages and the absence of health insurance in an era of high executive compensation packages.
The call for ethical treatment of workers is not only limited to papal encyclicals. Society recognizes that organizations are not entitled to exercise absolute authority over workers’ behavior either on or off the job, and that workers are entitled to more than economic rewards. Included in these non-economic rewards are self-respect and dignity. (1971) states that perhaps the most important primary good is self-respect, and “without it nothing may seem worth doing, or if some things have value for us, we will lack the will to strive for them. All desire and activity becomes empty and vain, and we sink into apathy and cynicism.” A key aspect of self respect and dignity is the performance of meaningful work. Employment is far more than a measure of income, for many it is the essential measure of self-worth. Increasingly we tend to define ourselves based on what we do.
Outsourcing has become politically sensitive because today many jobs are outsourced abroad, costing local workers their jobs. Some of the most common jobs being outsourced are: “back office” jobs such as data entry and processing forms (New York City parking tickets are processed in Ghana); call centers (many technical support hotlines in the US, especially during the “graveyard shift,” are manned in India or the Philippines), and computer programming.
Outsourcing is redefining business. Once viewed as a cost-saving measure reserved for highly specific functions, companies now see outsourcing as a strategic means for ensuring quality in a variety of non-core areas. Many define non-core as broadly as anything that does not appear on a brochure or invoice ( 1984).
Outsourcing allows a company to focus on its core competencies and create a network of outside experts for critical – but not core – support skills (1989). These companies bring together the best talents of multiple firms and are rapidly replacing traditional, vertically integrated, self-sufficient organizations.
Outsourcing may have various benefits to the company that strategically outsource some of its operations however to the employees that are directly affected with the outsourcing especially those that are terminated is not ethical at all. People that have served the company for years and then just been replaced or been terminated from their jobs are not ethical. As what ethics means, the good of the general, being terminated does not aligned with these good for all. Companies that outsource must consider these issues on ethics before considering outsourcing.
Classical Argument Position Paper
Flat Tax, A Better Way?
Americans are paying the highest taxes. Generally, Americans agree on reformation of tax making it simple, fair and efficient. Currently, the tax system is complex which consists of several inequities. The Congress is now considering flat tax. Debates have been everywhere if flat tax would be a better way. Tax policy is frequently considered by policymakers as a tool for boosting economic performance in various ways, and the likely economic effects of tax policy are often hotly debated.
The flat tax replacement for the current federal income tax – proposed by (1985) and endorsed by House Majority Leader and Senator and Presidential aspirant promise reduced tax rates and simplify the tax code. Many scholars believe the flat tax will reduce the inefficiencies of the income tax, increase incentives for productive behavior, and promote savings.(1985) Proponents add that the flat tax will produce adequate revenue without significantly increasing the tax burden that the personal and corporate income taxes currently impose (1985). For the general public, the most salient attraction of the flat tax lies in its promise of simplicity. Flat tax is any tax with a single rate. And flat tax is a better way for the general.
First, the greatest advantage of a flat tax is its neutrality. It taxes all forms of income only once and does so at a single rate. It taxes individuals’ labor income at a single rate after allowing for personal exemptions, and it taxes business’s net cash flow at the same rate that applies to individuals. The flat tax thus gives no relative advantage to any means of earning income. It favors neither capital nor labor, neither physical nor intellectual capital, neither manufacturing nor real estate.
Second, the flat tax is also vastly simpler than the current system and thus virtually transparent to taxpayers, that is, taxpayers need not become lawyers or CPAs to understand the intent and application of the tax system. Such transparency is important for individuals and businesses making economic decisions, for taxpayers’ confidence in the fairness of the system, and for assuring taxpayers that the tax code will not become a tool of deliberate or accidental oppression by government.
Third, a flat tax is that it eliminates the special deductions, phase-outs, and credits in the federal income tax, ensuring that most individuals could calculate their tax liability easily hence the claims by flat-tax advocates that a tax return could be filed on a postcard which is the most striking feature of the system.
Fourth, the flat tax may also reduce the tax burden on investment by eliminating the double taxation of corporate income and allowing businesses to deduct in full the cost of their plant and equipment purchases.
Proponents of the flat tax (and of many other tax reform proposals) often suggest that lower (nominal, after-tax) interest rates would ensue. If a flat tax raises saving levels as promised, the amount of capital available for domestic and foreign investment would increase and, if everything else were held constant, this could reduce interest rates under certain circumstances. Everything else is not held equal, however.
Fifth, the flat tax may also improve investment opportunities by reducing the marginal tax burden on capital income.
The flat tax converts the income tax into a national tax on consumption, whose economic effects resemble those of a value-added tax. It consists of two parts, a tax on individuals and a tax on businesses. According to (), if the two taxes are taken together, it will create an “airtight” system for including income in the tax base once and only once, as close to the source as possible. The rate is the same for both taxes. It hovers around 20% and varies with the proposal ( 1985).
The tax on individuals generally includes only wages and other compensation paid in cash and pensions. Correspondingly, business may deduct these payments. Dividends, interest, rent, and capital gains are not taxed to individuals. Nor may individuals claim the personal deductions currently available for mortgage interest, state and local taxes, charitable gifts, medical expenses, and the like. The individual tax becomes progressive at the lower end through a personal allowance or standard deduction. The earned-income credit, however, would disappear.
According to (1985), the business tax, on the other hand, is intended to act as a comprehensive withholding tax on all types of income other than wages. The business tax covers all businesses, including partnerships and sole proprietorships. Accounting for business transactions is intended to follow cash receipts and disbursements. The tax base consists generally of gross receipts from the sale or exchange of property, or services less the cost of business inputs, wages, and retirement contributions. The tax provides current expensing of all property purchased for a business; thus, if a corporation purchases a factory, it may deduct the cost of the land, buildings, and equipment. The tax eliminates depreciation and inventory accounting, defers deductions until payment, and repeals percentage depletion. According to (1992), the current deduction of all business inputs has the effect of exempting from tax the future income derived from business assets, calculated at a normal rate of return. Current expensing of business investment essentially converts the business income tax base into a value-added tax base. Businesses may claim no deduction for interest or dividends paid and do not include financial income when received. A special set of rules applies to banks and other financial institutions to tax income on services “bundled” with lending transactions. Any excess of deductions over income carries over into the following year with interest added at the 3-month Treasury bill rate.
As this brief description suggests, the flat tax would eliminate at least four features of the current income tax system that create statutory or transactional complexity. First, the single tax rate does away with bracket arbitrage, where taxpayers with different marginal rates seek to create or use deductions at high rates and include income at low rates.
Second, current expensing of investment obviates the need for the existing rules to recover investment over different time periods, such as depreciation and basis.
Third, elimination of the capital gain-ordinary income distinction makes it unnecessary for tax planners to seek favorable characterization for transactions.
Fourth, accounting for transactions on a cash basis eliminates arbitrage between different accounting systems. For taxpayers who keep their books on an accrual basis, however, the flat tax may require an extra set of accounting books, an increase in taxpayer compliance cost.
As an additional feature, by reducing the marginal tax rate, a flat tax would reduce the incentive for taxpayers to complicate their transactions for tax savings. This benefit could be duplicated under the existing income tax by reducing marginal rates without conversion to a national consumption-based tax.
Credit:ivythesis.typepad.com
0 comments:
Post a Comment
Click to see the code!
To insert emoticon you must added at least one space before the code.