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Post to the discussion board your response to question 4 of the Etch-A-Sketch Ethics case on pages 172-173. Include in your post personal observations as well as concrete examples from the readings to support your views. Initial posts should be several paragraphs, include direct references to the readings, and word choice and sentence structure should be suitable for graduate level work. Responses to your classmates should be constructive in nature.
I have attached the reading from the book and highlighted question 4, that is opinion based. please have done by 7/10/13 9:30pm eastern standard time.
172 CasesPart 2
Etcb”,A=Sketch Ethics
The Ohio Art Company is perhaps best known as the
producer of one of the top-selling toys of all time,
the venerable Etch~A~Sketch. More than 100 million of
the familiar red rectangular drawing toys have been sold
since 1960 when it was invented. The late 1990s, how-
ever, became a troubled time for the toy’s maker. Con-
fronted with sluggish toy sales, the Ohio Art Company
lost money for two years. In December 2000, it made the
strategic decision to outsource production of the Etch-
A~Sketch toys to Kin Ki Industrial, a leading Chinese
toymaker, laying off 100 U.S. workers in the process.
The closure of the Etch-AvSketch line was not unex-
pected among employees. The company had already
moved the production of other toy lines to China, and
most employees knew it was just a matter of time before
Etch~A~Sketch went too. Still, the decision was a tough
one for the company, which did most of its manufactur-
ing in its home base, the small Ohio town of Bryan
(population 8,000). As William Killgallon, the CEO of
the Ohio Art Company, noted, the employees who
made the product “were like family. It was a necessary
financial decision we saw coming for some time, and we
did it gradually, product by product. But that doesn’t
mean it’s emotionally easy.”
In a small town such as Bryan, the cumulative effect
of outsourcing to China has been significant. The tax
base is eroding from a loss of manufacturing and a popu-
lation decline. The local paper is full of notices of home
foreclosures and auctions. According to former employ-
ees, the biggest hole in their lives after Etch~A~Sketch
moved came from the death of a community. For many
workers, the company was their family, and now that
family was gone.
The rational for the outsourcing was simple enough.
Pressured to keep the cost of Etch-Avoketch under $10
by big retailers such as Walmart and Toys “R” Us, the
Ohio Art Company had to get its costs down or lose
money. In this case, unionized workers making $1,500 a
month were replaced by Chinese factory workers who
made $75 a month. However, according to Killgallon,
the main savings came not from lower wages, but from
lower overhead costs for plant, maintenance, electricity,
and payroll, and the ability to get out from the soaring
costs of providing health benefits to U.S. manufacturing
employees.
The choice of Kin Ki as manufacturer for Etch-A.
Sketch was easy-the company had been making
pocket-sized Etch-AeBketch toys for nearly a decade
and always delivered on cost. To help Kin Ki, the Ohio
Art Company shipped some of its best equipment to the
company, and it continues to send crucial raw materi-
als, such as aluminum powder, which is hard to get in
China.
The story would have ended there had it not been for
an expose in The New York Times in December 2003. The
Times reporter painted a dismal picture of working condi-
tions at the Kin Ki factory that manufactured the Etch-
A-Sketch. According to official Kin Ki publications:
Workersat Kin Ki make a decent salary,rarelywork
nights or weekends,and often “hang out along the
streets,playingPing Pong and watchingTV.”They all
have work contracts, pensions,and medicalbenefits.
The factorycanteen offerstasryfood.The dormitories
are comfortable.
Not so, according to Joseph Kahn, the Times reporter.
He alleged that real-world Kin Ki employees, mostly
teenage migrants from internal Chinese provinces, work
long hours for 40 percent less than the company claims.
They are paid 24 cents per hour, below the legal mini-
mum wage of 33 cents an hour in Shenzhen province
where Kin Ki is located. Most do not have pensions,
medical benefits, or employment contracts. Production
starts at 7:30 a.rn. and continues until 10 p.m., with
breaks only for lunch and dinner. Saturdays and Sundays
are treated as normal workdays. This translates into a
workweek of seven l Zvhour days, or 84 hours a week,
well above the standard 40~hour week set by authorities
in Shenzhen. Local rules also allow for no more than
32 hours of overtime and stipulate that the employees
must be paid 1.5 times the standard hourly wage, but
Kin Ki’s overtime rate is just 1.3 times base pay.
As for the “comfortable dormitories,” the workers
sleep head to toe in tiny rooms with windows that are
covered with chicken wire. To get into and out of the
factories, which are surrounded by high walls, workers
must enter and leave through a guarded gate. As for the
tasty food, it is apparently a mix of boiled vegetables,
beans, and rice, with meat or fish served only twice a
month.
The workers at Kin Ki have apparently become rest-
less. They went on strike twice in 2003, demanding
higher wages and better working conditions. The com-
pany responded by raising wages a few cents and allot-
ting an extra dish of food to each worker per day (but
still no more meat)! However, Kin Ki simultaneously
made “fried squid” of two workers who were ringleaders
of the strike (“fried squid” is apparently a popular term
for dismissal). Johnson Tao, a senior executive at the
company, denies that the two ringleaders were dismissed
for organizing the strikes. Rather, he noted they were
well-known troublemakers who left the factory of their
own accord. Tao acknowledges the low wages at the
company, stating, “I know that I need to increase wages
to comply with the law. I have the intention of doing
this and will raise all wages in 2004.”
eanwhile, in Ohio, William Killgallon, Ohio Art
‘any’s CEO, stated to the Times reporter that he
dhed Kin Ki’s executives to be honest and that he
hoknowledge of labor problems there. But he said
tended to visit China soon to make sure “they un-
tand what we expect.”
jWas it ethical of the Ohio Art Company to move
production to China? What were the economic and
social costs and benefits of this decision? What would
have happened if production had not been moved?
Assuming that the description of working condi-
given in The New York Times is correct, is it
Ye1thi,calfor the Ohio Art Company to continue us-
Kin Ki to manufacture Etch-A-Sketch toys!
it possible, as Killgallon claims, that the Ohio
Company had no knowledge of labor problems
Cases 173
at Kin Ki? Do you think company executives had
any knowledge of the working conditions?
4. What steps can executives at the Ohio Art
Company take to make sure they do not find the
company profiled in The New York Times again as
an enterprise that benefits from sweatshop labor?
1. Joseph Kahn, “Ruse in Toyland: Chinese Workers’
Hidden Woe,” The New York Times, December 7,2003,
pp AI, A8; Joseph Kahn, “An Ohio Town Is Hard Hit as
Leading Industry Moves to China,” The New York Times,
December 7,2003, p. A8; Carol Hymowitz, “Toy Maker
Survives by Moving an leon from Ohio to China,” The
Wall Street Joumal, October 21,2003, p. Bl; and John
Seewer, “Etch A Sketch Enters Fourth Decade,”
Columbian, November 22, 2001, p. E3.
Owner
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Owner
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