Center for Systems Development Hanoi National University

California Miramar University U.S.

Vietnam National University Center for Systems development

California miramar UNIVERSITY (hoa k)

FINAL EXAM
HRM 6180 - Human Resource Management
Full Name: Hong Xun Linh Date of birth: 22-04-1990 Grade: MBA-CMU12 Total pages: 7

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Center for Systems Development Hanoi National University

California Miramar University U.S.

THE DISSIPATION OF SOCIAL WELFARE

PART 1: CASE SUMMARY
Amid the current dismal economy of the U.S, there are quite a few loss-making enterprises, one of them is United Airline (UAL), an enterprise is on the edge of bankruptcy. Employees of the enterprises who are at the age of retirement are confronting with a big problem. It is that the Pension Bnefit Guaranty Corporation informs that it will not guarantees any loans of this airline anymore. It means that all retired employees are unable to receive their pensions worth 1.200 USD per month as their company pledged. In the period that more and more enterprises are attempting to reduce or eliminate expenses relating employees welfare, employees and the government have been contributing capital together to pay pensions instead of letting enterprises provide capital for pension payment as before. Apart from pension plan, health insurance and health care for retired people are even more easily eliminated. Because expenses for health care has soared day by day, the elimination of health insurance helps enterprises save a huge amount of money. It leads to the fact that a large number of enterprises have removed completely health insurance plans for retired employees. Even an enormous and profit-making corporation like IBM is having changes in its retirement plan and health care program for retied employee.

PART 2: ANSWER TO THE QUESTION Question 1: When an enterprise made commitment to provide welfare subsidies then failed to fulfill it, did it violate principles of morality?
According to E-Vietnamese dictionary, Morality is standards, principles that are acknowledged by the society; they are stipulated to become behaviors, relationships of human being to each other and to the society. Just like morality, business moralities notion has been approached and examined in many respects. Until now, there have been scores of debates over the notion of business morality. In an extract from the book Business Culture by Duong Thi Bich Lieu, it is stated that Business morality is a set of principles and standard regulating, evaluating, instructing and controlling behaviors of business entities. So, principles are considered to be
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California Miramar University U.S.

business morality are: honesty, human being respect, the benefit inherence among enterprise, customers and the society, the link between the enterprise performance and social responsibility, secret protection and loyalty to special responsibility. According to Associate Professor cum Doctor Mr. Nguyen Manh Quan, Business morality includes standards and principles having an effect of instructing behaviors in business relation, they are used by concerned people ( for instance: investors, customers, administrators, employees, representatives of legislative bodies, communities, partners, competitors ,) to judge whether a particular behavior right or wrong, moral or immoral So, based on the 2 above mentioned notions of business morality, we can see that in order to judge whether an enterprises violates morality principles or not when it pleaded to subsidize social welfare but failed to fulfill it, we need to consider if they contravened 2 most important morality including honesty and human being respect. During recruitment process, except factors such as work environment, promotion opportunity, other factors including treatment regime, salary, social welfare are regarded as the most important in attracting and retaining employees. So many employees consider treatment and welfare regime to be the number one criterion when choosing a job appropriate to their expectation. Hence, the commitment of employers during recruitment process is the basis that creates confidence in employees, encourages them to make their effort and contribution for the enterprise development. Let take the case of IBM as an example. The corporation provided a very attractive commitment Job market is in a difficult period, and IBM messages is that though your salary is possibly not the highest, we still take care of you even you are jobless. Nevertheless, this corporation, itself broke its initial commitment to those who devoted their best to the corporation. This case reveals that when an enterprise fails to fulfill its initial commitment about welfare subsidy, it is not honest to its commitment, and doesnt respect employees. For this reason, this enterprise obviously violated principles of morality Besides, social security is one of three mandatory welfares under the U.S law (the two others are workers compensation and unemployment insurance). Along with pensions, saving money and overtime pay, social security was born with a view to helping retired people expand their income to cover their living costs. Retired people enjoying social welfare are wealthy individuals and living independently. Meanwhile those who have middle income usually live
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California Miramar University U.S.

with their relatives, and poor people often move to almshouses (extracted from Human resource management textbook). Thus, retired people who are entitled to receive social welfares are depending largely on their very limited pensions. Broking promises and failing to fulfill commitments to provide pensions for retired people shows that the enterprises ignores negative impacts that possibly happened to employees and their family. Because of the dissipation of social welfare, the homeless elderly or those who dont hold any saving money and lost their work ability become penniless and lonely fight against years of illness. They are unable to pay medical expenses and routine fees. Without a doubt, the enterprises did violate principles of morality when decided to break the promise regardless of negative outcomes that might happened to its employees.

Question 2: Should the government pay pensions for employees?

From my point of view, the government should not pay pensions for employees for some following reasons: First, in the current dismal economy, the government cant handle the plan of paying pensions for all employees in long term. The plan is just only seen as short-term, situational and patchy in order to temporarily deal with troubles caused by enterprises. The case study is clearly stated that the most worrying is the record number of pension plans which are at risk of failure. According to the Pension Benefit Guaranty Corp, until September 2003, there have been at least $86 billion used for pension payment plans which were committed to implement by enterprises with signs of financial weaknesses. The amount of money has been twice times as high as the last year amount worth $35 billion. The number of enterprises attempting to eliminate burdensome pension plans within the framework of the PBGC reached the record number 152. It led to the fact that the number of employees who were entitled to receive pensions has been on the rise: In 2003, there were 206.000 employee receiving pensions from the PBGC a record number including 95.000 employees from the largest takeover in the history of Bethlehem Steel Corp.. Moreover, there were over 30.000 enterprises owing their employees the amount of money worth over $1,000 billion. Almost all these enterprises pledged to pay their retired employees dozens of billion US dollar for insurance and health care expenses. Therefore, these rising number have been causing huge pressure to the government. The trouble will grow to be worse when the policy on medicine subsidy comes into effect in 2006. It is estimated to consume an
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California Miramar University U.S.

amount of money equivalent to 1% of the Americas GDP in 2011 . In fact, it is an enormous figure. The figure and the rising number of employees entitled to receive pension have made the government fail to extend the payment plan for employees any longer. In this situation, retired employees who can only live on their saving money, personal pension and overtime pay will suffer the worst damage. The second reason also holds no less importance. When the government decides to pay pensions for all employees, it may create favorable conditions and pave the way for enterprises to increase their desires to eliminate pension plans. Indeed, although the government has not decided yet to pay pensions for all employees, there appears a very popular phenomenon in the US. That is nearly all industries and enterprises are in an attempt to reduce or even eliminate the so-called redundant expenses. Consequently, by accident, the government supports enterprises in abandoning their responsibility with their commitment and employees who devote their best effort and enthusiasm for enterprises development. Third, despite of the fact that the government pays pensions for all employees, the amount of money is much smaller than that paid by enterprises as promised. Furthermore, the bailout package of the government is mainly based on profit making enterprises to compensate for failed plans. Nevertheless, in the situation that there have been more and more pension plan failures, these profit-making enterprises with sustainable pension plan within PBGC system must make more payment. This is not fair for profit-making enterprises because they must suffer consequences caused by enterprises which lack responsibility with their commitment and employees. In brief, it is visible that the plan of the government to pay pensions for all employees of is unwise and unfeasible

Question 3: Why is the plan of insurance and health care for retired people more easily eliminated than the plan of pension subsidy?

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Center for Systems Development Hanoi National University

California Miramar University U.S.

The plan of insurance and health care for retired employees is more easily eliminated than the plan of pension subsidy due to several reasons: First of all, pension subsidy is one of three mandatory social welfares in the U.S Law (the two others are workers compensation and unemployment insurance). Meanwhile, health care insurance is one of optional social welfares that the U.S Law encourages enterprises to provide. Hence, under the U.S Law, eliminating the plan of insurance and health care is much more easily than eradicating a plan of mandatory welfare. Second of all, the reality reveals that there is a race among enterprises to reduce or eliminate medical subsidies for retired people with a view of quickly improving performance result of these enterprises. Insurance and health care subsidies for retire people which are inherently easy to be eliminated have been vanished at fast pace. In reality, there is a difference between pension plans and medical subsidy plans. Pension plans are accumulated and funded over time while medical subsidy plans are paid from current cash accounts; any reductions can immediately impact on the final outcome. Thus, if there is any problem happening, these subsidies will be cut down at once. In short, medical welfare plans are much more easily eliminated than the pension plans. Lastly, in response to the situation that medical and health care expenses are growing quickly and that a huge amount of money which can be saved thanks to the elimination of medical subsidies of retired people, enterprises have no reasons to retain a costly plan like that. The case study provides an example to prove this point of view: Suppose that the U.S Congress asks Medicare to pay expenses of listed drug, it will cut down the responsibility with health care of retired employees worth billion U.S dollar. Deere & Co., a manufacturing company estimates that the movement will help the company save from $300 to $400 million of debts which must be paid for future health care expenses starting from this year. Meanwhile, pensions are monthly paid and accumulated and funded over time. Accordingly, insurance and health care plans are more easily eliminated.

PART III: CONCLUSION

L mt trong nhng cuc khng hong gy hu qu nng n i vi nn kinh t M, cuc khng hong hu tr khin cho hng chc triu ngi n tui v hu ca M phi cht vt lo
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Center for Systems Development Hanoi National University

California Miramar University U.S.

lng cho cuc sng tui gi ca mnh. y s l mt bi hc t gi cho nc M ni ring v tt c cc quc gia khc ni chung nu mun m bo cng bng, quyn li v mt cuc sng an hng tui gi cho nhng ngi lao ng dnh trn c i lao ng v s pht trin ca doanh nghip, ca t nc. Regarded as one of cries causing the most serious consequences to the U.S economy, the pension crisis has caused hundred millions of retired people struggle to take care of their old age lives. This will be a valuable lesson for the U.S in particular and other countries in general if they want to maintain fairness, benefits and comfortable retired lives for retired employee who have devoted their lives for the development of enterprises and the countries.

REFERENCE

- http://tailieu.vn/xem-tai-lieu/tong-quan-ve-dao-duc-kinh-doanh.591187.html

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