Oracle’s Backlash Over Recent Winter Break Policy

 

oracleConnor Walsh

JPM Securities’ Patrick Walravens recently cut his rating on shares of Oracle from Market Perform to Market Underperform citing many developments he referred to as disturbing, specifically mismanagement.2 A string of unpopular decisions has not only negatively impacted external relationships with Oracle’s customers and shareholders, but a recent policy designed to regulate how employees spend their vacation days has created an even more alarming internal rift within Oracle.[1] In a recent memorandum to all employees in the U.S. the co-CEOs, Mark Hurd and Safra Catz, announced a winter break between Christmas and New Year’s 2015. During this time all “non-critical U.S. operations will be closed for business and all employees not supporting critical operations will be on break.” [2]

oracle-ceoWhile this may sound like a benevolent holiday gift for employees, it is quite the opposite. The memo goes on to say that all employees will be required to take the four business days between the paid holidays of Christmas and New Year as vacation days. If an employee had used all accrued vacation time, they will owe the company for these vacation hours. According to one employee this translates into working for six pay periods or 3 months into 2016 to ‘pay back’ Oracle for the vacation used during the holiday season.[3] Employees are justifiably upset. While many tech companies shut down during this holiday week, Oracle is mandating that the employees use their paid time off or vacation time in this way. Employees believe this is just a trick at employee expense for getting accrued paid vacation days off of the balance sheet before the next year.

While Oracle will face no legal repercussions for these actions and it is well within its power to impose such a rule, it does raise many practical and ethical concerns. Whether or not this is a clever ploy to manipulate the balance sheet or not, which itself is an undeniable ethical dilemma, the employees are crying foul and lamenting a lack of institutional justice. Oracle did not announce this policy until September, well after many employees depleted their paid time off for summer vacations. Is it fair to retroactively punish those who planned to work between Christmas and New Year’s Day? While the move may excite shareholders, it has alienated the employees and the media coverage has dealt an unforeseen reputational blow. As the holiday season approaches, Oracle has shown no sign of changing this policy.

Only top management knows the motivation behind this decision, but from the outside, cutting employee vacation days to improve the bottom line has all the necessary characteristics of a firm that believes in shareholder primacy,[4] which as a recent study by MIT asserts, is not only an unpopular decision but also an unprofitable one.[5] Although the immediate fiscal effects will reflect favorably on Oracle, the long-term exposure may not be as friendly. Alienating employees often leads to disengagement and disengagement often leads to a drop in productivity. In the coming year, Oracle may not get the value from these disgruntled employees that it would expect. Only time will tell how this policy will shape the culture at Oracle, but after facing such fervent and persistent backlash, Oracle may choose to reconsider its position next year. Hopefully Oracle can embrace the holiday spirit and perform a little more CSR in favor of their employees

Sources:

[1] Rosenbush, Steve. “Oracle Co-Chief Mark Hurd Says Customer Relationships Progressing.” The CIO Report RSS. The Wall Street Journal, 26 Mar. 2015. Web. 23 Nov. 2015.

[2] Ray, Tiernan. “Oracle: JMP Says Sell on Amazon Competition, Questionable Cloud Deals.” Tech Trader Daily RSS. 14 Oct. 2015. Web. 23 Nov. 2015.

[3] Bort, Julie. “Oracle Employees Fear They Could ‘owe’ the Company Vacation Time, Thanks to a Holiday Furlough.” Business Insider. Business Insider, Inc, 30 Sept. 2015. Web. 23 Nov. 2015.

 

[4] Shareholder primacy is a theory in corporate governance holding that shareholder interests should be assigned first priority relative to all other corporate stakeholders

 

[5] Scott, Ryan. “The Bottom Line of Corporate Good.” Forbes. Forbes Magazine, 14 Sept. 2012. Web. 23 Nov. 2015.

 

Japan’s Stagnant Economy and Mishandled Gender Reform

David Robinson

Japan has fallen into its second recession in as many years, which seems to be a trend it has fallen into since the bursting of its bubble economy. Of further concern is how its population is aging while shrinking. It is commendable Japan has managed to keep its unemployment rate at roughly 3%, but it has done so by increasing the occurrence of part-time employment, of which 90% are comprised by women. Women have been given greater roles in the workforce as of late than has been allowed during the earlier phases of Japan’s modernization, but while this may seem like a progressive step, Japan has far from embraced gender equality. In fact, this course of action is hurting its economy far more than helping, for their intense devotion to work is undermining Japan’s raising of families and the cultivation of the next generation, by both men and women. Everybody is expected to devote themselves to their work, and women in Japan are not exempt from the undue societal pressure to work long hours and devote themselves to work over living, or alternatively devote themselves wholly to just being a housewife. The assumption that once women marry, they will leave for childrearing discourages hiring women. Alternatively this discourages women from marrying and having families altogether.

The logo (L) of NTT DATA Corporation is displayed in Tokyo on March 28, 2016. Japan's NTT Data said on March 28 it had agreed to buy computer giant Dell's IT service operations for 3.0 billion USD in a bid to expand in North America. / AFP PHOTO / KAZUHIRO NOGIKAZUHIRO NOGI/AFP/Getty Images
NTT DATA Corporation displayed in Tokyo | March 28, 2016 (Getty Images)

The dismal state of work/life balance in Japan only exacerbates this issue. And while companies, like NTT, have taken measures to improve this by offering things like flextime and childcare services to allow for some semblance of a balanced livelihood, it is far from standard. And this should occur across the board, not just in regards to women. One of the issues is that Japan traditionally seems to expect childrearing to be undertaken solely by the wife, but that scenario is unfair. Consider Rawls’s ethical theory of justice, which argues that equality of opportunity indicates fairness. For this to occur, companies should therefore treat all employees, regardless of age or gender with the equal opportunity to live a life that allows them to both enjoy themselves and undertake parenthood. This should occur not only for the sake of worker happiness, but also for the benefit of Japan as a whole. Despite the utilitarian means, such as their postwar surge in growth, which has established the cultural norms regarding Japan’s business, it does not ethically allow women in the society even remotely the same opportunity for decision making. Given the slow rate with which changes occur within Japanese companies, however, it seems this will take significant time for proper adoption (Hagihirian). But Japan lacks the time for that to develop naturally, and as a bigger issue, corporations have been hoarding money due to their lack of faith in available investment opportunities. They are sitting on a value equal to $2.9 trillion, and it goes without saying how that amount could benefit their economy, with its current growth rate of a mere 0.5% (Back).

Japan’s aging society is also straining its economy with the pressures of social security. Their debt is almost thrice their GDP, and a significant portion of their youth is either unwilling or unable to find work. The country is in a dire situation where the most feasible long-term solution is resolving the issue of their low birth rate of 1.41. Prime Minister Shinzo Abe seems to take no interest in opening immigration, but that leaves the only alternative as promoting marriage in a healthy feasible way. Belgium and France faced similar issues and managed to increase their birth rates up marks of 0.3-0.4 by enacting reform that provides women equal opportunity in the workforce, and equal treatment for childrearing. The Japanese people are not marrying. Many women, given some semblance of financial independence have found they prefer either waiting to marry or simply not marrying altogether. Instead of raising children for an oft-absent husband, they live for themselves, since raising a family inhibits their personal liberties in ways they should by no means put up with (Hagihirian). What saved Japan after WWII has now come to hurt it. The standard of lifetime employment, still common at many Japanese companies, unfairly rewards employees simply for aging, which wastes a significant portion of revenue while harboring inefficiency of operation. The fiscal policy laid out in the prime minister’s “Abenomics” is a last ditch effort to increase government spending and increase consumer purchases to jumpstart the economy, but it will not benefit Japanese citizens much if they cannot prove signs of extended growth (WSJ-N/A-11/17). The pressure it is putting on companies is also facilitating a detrimental scenario, like in the recent Toshiba scandal. Their malfeasance was a byproduct of a utilitarian pressure to turn profit, to be a last bastion of hope in the sinking ship of their economic downturn (Nagata). Compare this to US companies like Enron and WorldCom whose misdeeds were driven solely by greed, and while that may also have been the case with Toshiba, it seems they were more concerned with the positive outcome of looking good amongst Japan’s poor economic standing. If they could maintain their ruse, perhaps the country will retain investors and eventually recover. Instead it has torn down any evidence of hopefulness for Japan’s economy to recover of its own accord. Their economy has reached a point of stagnancy where actions further than they seem willing to put forth must be taken for any positive, discernible effect to be made.


Sources:

Pressure to Show Profit Caused Toshiba Scandal.” Kazuaki Nagata. Fortune. Sep. 18, 2015. Web. Nov 20, 2015.

Why Japan Keeps Falling Into Recession.”  Aaron Back. Wall Street Journal. Nov. 16, 2015. Web. Nov 20, 2015.

Abenomics Sputters in Japan.” N/A. Wall Street Journal. Nov. 17, 2015. Web. Nov 20, 2015.J-Management. Parissa Hagihirian. iUniverse. 2009. Print.

 

 

Can We Trust Car Companies?

Eileen Carrera

Millions of Americans lose their lives to car accidents every year, but what if a fraction of these deaths were not “accidents”? What if companies like General Motors are somewhat responsible for some of these deaths? John Rawls developed a theory of justice as fairness. There is a need for society to cooperate for mutual benefit. Consumers want effective cars, and car companies want profit. Car companies should invest the time into testing their cars to a more rigorous degree because in the long-run, they are providing a very effective product to the consumers. In result, General Motors will always be able to retain its profit and revenue.

General Motors did not fix an ignition-switch defect that caused more than 100 deaths and more than 200 injuries (WSJ). The company is relatively financially affected by this matter and has settled for $900 million with the Justice Department for the criminal case back in September (WSJ). As of November 2015, General Motors may face punitive damages from the thousands of plaintiffs with injury claims who have not gotten their compensation. Although General Motors did not pull the trigger on 100 people, they did conceal a safety problem that led to these deaths. The company will continue to operate by simply paying off settlements like the $625 million that they claimed they would pay to the victims (WSJ).

Another situation that resembles this GM case is the notorious Ford Pinto Case. Ford, a publicly traded company, marketed this car called the Pinto. Soon, people started to notice that the Pinto would explode upon collision. This case got attention because three teenage girls died in a Pinto. Due to the extensive media coverage of this case and the social backlash towards Ford, the company was finally put into the spotlight and forced to recall the car.

Similar to the Pinto Case, General Motors overlooked a safety problem because their testing was not rigorous. It was cheaper to pay settlements than to change the car itself. General Motors is a publicly traded company that serves the shareholders’ priorities first, even though they do not have to. Companies like General Motors and Ford tend to focus on what is most profitable.

If GM was completely transparent and honest as soon as it realized that there was a problem with its ignition-switch defect, the company would have lost millions in profit and credibility. Fixing the recalled vehicles would have cost the company billions of dollars, which GM is now paying in both repairs and paying settlements.

If the public does not hold a company responsible for its mistakes or make it face criminal repercussions, are we in a way allowing this behavior to continue? Ultimately, GM is now facing punitive damages concluding that there ARE consequences to the lack of transparency that multi-billion dollar companies often portray. The attorney dealing with settlement cases against General Motors stated, “Lives were taken and families were devastated, and there is no way to ever change that sad fact” (USA today).

John Rawls’s notion of justice suggests that cooperation makes life better for everyone. General Motors is reliant on whether consumers buy its product or not. In order to assure fairness and mutual benefit in this transaction, General Motors will need to provide effective products in an efficient manner.

Sources:

http://www.wsj.com/articles/general-motors-may-face-punitive-damages-over-ignition-switches-1447124534

http://www.nytimes.com/2015/11/10/business/those-suing-gm-over-defect-can-seek-punitive-damages.html?ref=topics&_r=0

http://www.usatoday.com/story/money/cars/2015/09/17/gm-justice-department-ignition-switch-defect-settlement/32545959/