GM, HealthCare, and Stakeholder Theory

Here’s an interesting short piece from Forbes blogger Matthew Herper: Could GM’s Union Negotiations Hurt Health Care? Herper quotes analyst Les Funtleyder at the trading firm Miller, Tabak + Co.

“Because of the size of retirees and existing workforce as reduction in benefits could have significant knock-on effects for companies in health care,” Funtleyder wrote in a morning note to investors. “We will be watching to see how severe the cuts to the plan are (which we view as inevitable) to gauge the magnitude of the decline to the sector.”

Interesting thought. It’s also an interesting question to bounce off a couple of the leading analytic frameworks in business ethics.

Take Stakeholder Theory, for example. That theory (or maybe just ‘framework’) says, roughly, that in making decisions, companies should consider the interests of all “stakeholders” — that is, the interests of everyone who has a stake in the fortunes of the company. It’s an idea that lots of people like. The hard part is figuring out who gets to count as stakeholders (there are real dangers in defining that term too broadly or too narrowly) and how to balance the competing interests of those stakeholders. So, to adherents of stakeholder theory: are companies (and employees thereof) in the healthcare sector stakeholders in GM’s negotiations with the union, and if so, how much weight should their interests get?

Alternatively, if you’re an adherent of Corporate Social Responsibility, ask yourself this: do executives at GM have have a social responsibility to consider the effect of their decisions on other sectors of society (e.g., the healthcare industry)? Or are the current negotiations a private matter between GM, its employees, and its shareholders? Either way, why?

4 comments so far

  1. Martin on

    Interesting case.

  2. A voice in the wilderness on

    Lets see, the cost of benefits are calculated as part of the “burdened” hourly rate for employees and that cost is used to calculate the selling price of a product; so the company already charged the customer for the cost of future benefits and banked the money. Now the bill is due and the company is trying to not pay a bill they contracted for but to lay the cost off on the worker who already did the work years ago!Does that meet your test of ethical behavior?

  3. Chris MacDonald on

    Dear Voice:Good question.But I think you’ve under-described the situation a bit. Not enough information to know if the choice passes or fails any reasonably sophisticated ethical “test.”We also need to know, at *least*:a) what expectations (contractual and otherwise) workers had, or can reasonably have had;b) does GM have any other reasonable options? I haven’t followed the case closely, but to the casual observer it looks like GM’s options are few.Then again, we still have my original question: who *else* counts in this decision, and why?Chris.

  4. […] pocket is a dollar taken out of someone else’s pocket. That’s as true for Walmart or GM as it is for the Government of Ontario. « Business, Football, and Incentives […]

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