Preparing for Employee Terminations

Introduction

This case was happened on the 7th of March 2000. Gordon Gillingham was president and CEO of Northeastern Mutual Life which was the major subsidiary of the Calgary Insurance Group, and this company operated life insurance, reinsurance, general insurance and investment, and other activities in North American and internationally. Since Northeastern Mutual Life's return on common equity had declined steadily during past four years, so he had to decide how to reduce costs, and balance shareholder and employee interests. Therefore Gordon's decision would lead to some problems, such as whether or not cut employees from his company (Ken Mark, 2002, p.4-5).

Ethical issues

No matter Gordon Gillingham did or not reduce cost, it still led to different ethic issues.

1. Employee terminations. If he decided to cut a part of administrative employees without themselves' reason, his behaviors would cause employees feeling unequal treatment, and the company might get several complaints from his employees through the Pension Commission of Alberta.

2. Pension Commission might order a partial windup of the pension fund. Therefore, the company might face dealing with huge pension fund for fired employee.

3. Whether pension surplus belonged to the employer or employees. Assuming pension surplus all belonged to employer; employer had stealing behaviors if employee wanted this pension surplus.

4. Whether or not fired younger or older employees. If fired older employees, older employed might not very easy to find another job. However, fired younger employees, they might find other job easily, but they could be a new power for the company.

Stakeholder

Directly:

Shareholder: they were lost benefit no matter Gordon did any decision for the company. For example, if he decided to do not reduce employees, he would face shareholders' pressure since the company's return on common equity had declined steadily from 11.5 per cent to seven per cent (Ken Mark, 2002, p.5).

A part of administrative staff were facing fired: they were directly affected by owner's decision. If Gordon decided to reduce staff, they were lost job in current fierce competition society. And also they were treated unequal in this personnel change.

The Pension Commission of Alberta: it was substantially revised and new measures were introduced to strengthen the employment pension system in Alberta (Ken Mark, 2002, p.8). It helped long-term pension plan members and ensured the safety of their pension benefits (Ken Mark, 2002, p.9). I thought commission's benefit was making the society more equality.

Indirectly:

Another part of administrative staff were not fired: they were indirectly affected by Gordon's decision. When Gordon decided to reduce staff and avoid the legislation. The company had to share of pension surplus. Might be the pension surplus was also related with employees' benefit in the company.

Sale staff: they were commission-based. And also from table 1, their liquidity was quickly, so they would not be included in the layoff decision (Ken Mark, 2002, p.7). Therefore, they did not have huge impact when the company implemented reducing staff plan.

The company's customers: they had indirectly impact under Gordon's decision. For example, if Gordon did not reduce staff, so return on common equity would continue to decline in the future. Might be there was no more return on common equity, and the company might bankrupt. It was a bad news for customers, because they invested their money into the company and hoped to get ensuring.

U.S-based rival: if Gordon decided to cut 20 per cent and that an acquisition of U.S-based rival would permit additional increased efficiencies (Ken Mark, 2002, p.5)

Alternative

1. Not reducing administrative staff

Not reducing administrative staff would give the company pressure from shareholder since their return on common equity declining four per cent during past four years. However, it was good for employees, because they still have job and did not always be worried about their job problem.

2. Reducing administrative staff and ignoring the pension commission of Alberta

If Gordon would choose administrative