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Teaching Tip: Ethical Issues Facing Ikea and Darden

November 20, 2012

The Ethical Dilemmas in each chapter in our OM text are a popular teaching feature–perhaps driven by AACSB’s desire to integrate ethics into business courses. The Dilemmas range from Nike shoes made abroad by 10-year olds (Ch.1) to pigs locked in tiny stalls their whole lives (Ch.7) to selling ineffective ERP software (Ch.14). In these exercises, students are forced to address the unpleasant tradeoffs faced by operations managers every day. Here are two more current topics to consider.

The first involves Darden Restaurants’ (Olive Garden, Red Lobster, Longhorn brands) approach to Obamacare. Under the new health care law, companies with 50 or more workers could be hit with fines if they do not provide basic coverage for full-time workers and their dependents. Darden, which operates more than 2,000 restaurants in the U.S. and Canada, employs about 180,000 people. The Wall Street Journal (Sept.26,2012) reports that Darden is using the new health law to cut the hours of  full-time hourly workers to under 29.5 hours, thus redefining them as part-timers (while its CEO drew $11.5 million in compensation in 2011– equivalent to 585 workers’ salaries).

The second item for your class is the Swedish firm Ikea’s revelation that it manufactured furniture parts 25-30 years ago using forced prison laborers in the former East Germany. The Wall Street Journal (Nov.19,2012) writes: “Alexander Arnold, 51, claimed to have been forced to make office chair legs while detained in Naumburg during the early 1980s. He described how forced laborers who didn’t meet a stringent production quota were confined to a dark cellar. Those who refuse to work, he added, were bound by their feet and hands to a bed for days at a time.”  Ikea’s admission is expected to fuel demands by victims for compensation and a debate over which present-day Western companies may have also benefited from forced labor behind the Iron Curtain.

Discussion questions:

1. Ask your students to take positions justifying and opposed to Darden’s cost-saving measure.

2. What is Ikea’s responsibility at this point?

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