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Imagine that you are the CEO of Yamakawa Corporation’s U.S. subsidiary, but the US government bailouts are only good for US-own firms and are thus irrelevant for your unit, which is 100% owned by the Japanese parent company. You are faced with the dilemma of either cutting salaries or jobs. Analyze the role that institutions, cultures, and ethics play and determine whether you will cut salaries or jobs. Please provide the rationale for your decision.
Expert Answer
I will recommend a cut in salaries.
Traditionally, the logic was that throughout-the-board salary cuts create issues related to determination, lead to distraction & affect productivity.
But in the last few months an increasing amount of major corporations, like FedEx and The New York Times, have all cut their employees’ base pay. Majority have made bigger cuts for senior managers and lesser ones for the lower hierarchies. In a period of increasing unemployment levels and hit business models, some appreciate such actions as a good substitute to job cuts. Uniform salary cuts can be thought of as a united sacrifice in the benefit of the collective good.
An additional factor is a demographic one. Most corporations are highly mindful of the requirement to retain persons with global familiarity and a specific set of technical abilities. While such personnel may be dear or even underutilized in the present scenario, management may be concerned about a wider talent deficiency when the economy recovers. As of now, employees may be willing to experience their salaries drop so long as they can retain their employment. The main idea is to ensure star performers still take home more than their coworkers who perform lesser, even post a salary cut
