You are a US Citizen employed by Hot Feet a US shoe manufacturer. You are the CFO for its subsidiary in Sri Lanka you
You are a US Citizen employed by Hot Feet a US shoe manufacturer. You are the CFO for its subsidiary in Sri Lanka you have lived there for twenty years. A major part of your satisfactionis derived from the knowledge that your company's presence has greatly benefited the local populace. At a meeting your boss indicates your firms cost of capital has risen making your firm return on investment inadequate to satisfy thier goal of maximizing shareholder wealth and your location is being considered to be closed or relocated to another country due to not meeting acceptable levels of profit. In part due to the Asian Financial crisis particularly in Japan.
Your boss tells he would prefer to close the facility and relocate but gives you six months to figure out how to cut costs or improve profits to keep your facility running. This means you will need to reduce the workforce, cut wages and find lower cost supplies without sacrificing quality. You have looked at the numbers and profit targets. You know that politically it will be very difficult to fire or lay off people in Sri Lanka, which means wage cuts of 50% or more will be necessary. This will reduce many families to just enough income to survive. You know that your reputation is on the line with your decision. if you try and cant make this go your career with this company will suffer and you will not only lose your shot at managing the new facility, but will probably lose your job.
Part A: Does this decision involve ethics or is it a business decision? Please explain.
Should the shareholder wealth goal be paramount in this situation? Why or why not?
The decision is up to you. What do you do? Either of the following:
Continue operations and try to cut costs within six months.
Decide to shut down now.
Please tell why you made the decision you did.