Table of Contents

Chapter 1: Introduction....................................................................................................1
1.1 Overview of Foxconn Suicide Case.................................................................................1
1.2 Purpose of the report........................................................................................................2
Chapter 2: Theoretical Approaches................................................................................3
2.1 Stakeholder Theory..........................................................................................................3
2.2 Shareholder Theory..........................................................................................................4
Chapter 3: Analysis............................................................................................................5
3.1 Shareholder Theory..........................................................................................................5
3.2 Stakeholder Theory..........................................................................................................6
3.2.1 Primary Stakeholders................................................................................................6
3.2.2 Secondary Stakeholders............................................................................................6
3.2.3 Tertiary Stakeholders................................................................................................6
Chapter 4: Discussion and Conclusion.............................................................................7
4.1 Summary..........................................................................................................................7
4.2 Conclusion........................................................................................................................7
4.3 Discussion........................................................................................................................7
References ..........................................................................................................................8
Chapter 1: Introduction
1.1 Overview of Foxconn Suicide Case
Foxconn is a Taiwanese electronics manufacturer that works with tech giants such as Dell,
HP Inc, Samsung, LG and Apple, Foxconn is responsible for manufacturing and assembling
Apple’s electronic products such as iPhones, iPod, iPads, and Apple Watches (Moorhead,
2019), their factory is designed similar to a campus to create a factory town. In 2010 a series
of employee suicides occurred at Foxconn plants in Shenzhen, China (The Guardian, 2010).
Two people survived their injuries while another eight victims died. All the victims were
aged between 18 and 24 years old, most of them were migrant workers that moved to
southern China to search for jobs (Barboza, 2010). These suicides drew a lot of media
attention around the world and caused multiple companies to investigate worker conditions at
Foxconn (Chang, 2010).

The main players in this case can be speculated to be Foxconn’s management team as they
did not actively check on the employee’s wellbeing, or just forcing employees to work in
harsh conditions to increase their marginal profit. But it cannot be confirmed that it was their
fault as there was no proof that they were the main cause. Foxconn tried to downplay the
issue by blaming suicides on outside factors, such as personal relationships or family disputes
(Stevenson, 2014).

Stakeholders that were affected other than Foxconn themselves was Apple, Apple was
negatively affected, as the event shines them in a negative light and had caused Apple’s to
lose 26% of their earnings causing a loss of 28 million dollars on their sales that in 2011
(Alex, 2011). This event prompted their partnered companies to launch investigations into the
working environment and conditions of the factory, in (Vincent, 2014) It says that the FLA
(Fair Labour Association) found that the employees were not sufficiently compensated for
working overtime and workplace accidents.

Based on Xiang, (2015) the employees are treated badly, receive low pay, and are not even
offered paid leave. The workers are forced to work over 60 hours a week by the enterprise,
not only is it ethical and unreasonable, but it is also illegal in China, the Chinese law states
that an employee’s work hours are limited to 49 per week. (Eisenbrey, 2012). Due to these
illegal and long work time, it could cause employees to have various psychological issues and
is highly likely to cause suicides among them.

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 1.2 Purpose of the report

The purpose of creating this report is to investigate and ponder the case and assess its impact
on the stakeholders. How the Foxconn Suicide scandal has affected its stakeholders
economically and non-economically will analysed later in the report. The report will focus on
the ethical issues that might have caused multiple suicides in the Foxconn factory and the
effects on their relationship with their business partners. The report will also tackle the
factors on what Foxconn did that might have contributed to the suicides of several
employees.

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Chapter 2: Theoretical Approaches
2.1 Stakeholder Theory

The stakeholder theory was proposed by R. Edward Freeman as a management theory that
was published in 1984 in his book Strategic Management: A Stakeholder Approach (Murphy,
2015). A stakeholder is a single or a group of people that can affect or be affected by the
business or an organization. (Bryson, 2004) People such as suppliers, customers and even
employees are considered stakeholders. (Blackburn, 2019) says that stakeholder theory
addresses business ethics, values and morals when managing the stakeholders involved. The
stakeholder theory aims to optimize stakeholder relationships, hence making tasks more
efficient throughout the project or an organization, (Freeman, 2010) notes that stakeholder
theory is about taking into consideration all the stakeholders when making business decisions
and focuses on trying to benefit the stakeholders of the organization. The stakeholder theory
promotes fairness to everyone involved in the organization, and this in turn can create a rich
social environment. Based on Creative Commons, (2012), by using the stakeholder theory
model, it allows an organization to maintain a good balance between its economy and ethics,
this is further reaffirmed as a company cannot survive for a long time without one or the
other.

While it seems that the stakeholder theory is a great model to implement into an organization,
it is not without any shortcomings. The main issue in the stakeholder theory is that it is
impossible to cater to every stakeholder in the organization because not all stakeholders have
the same objectives or purpose (Ambler & Wilson, 2006). The other issue is that the theory
does not mention anything making profits, a company cannot survive if they do not earn
money, and without money a company cannot pay its staff, any fees, and debts. This
ultimately causes bankruptcy of the company.

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 2.2 Shareholder Theory

A shareholder or a stockholder is an individual, a group or an organization that owns a part of

the company’s stock. (Hayes, 2020). Stakeholders are people that have invested in a
company, (Murray, 2020) says that shareholders gain profits by either selling their shares at a
profit or earning dividends from the company’s profits based on their shares owned by the
shareholders. The shareholder theory is interpreted by (Danielson, et al., 2008) as the duty of
an organization’s manager is to maximize the shareholder’s wealth. With this model any
decision-making has the shareholder interest in mind, other members such as staff and
customer’s benefits are not considered. While most people think that the theory is about
minimizing the cost of businesses while maximizing the profits no matter the task both legal
and illegal (Hunsaker, 2018), the shareholder theory is often misunderstood and its original
statement can be found in (Smith, 2003), where the shareholder theory is defined as the task
of gaining profits should be done legally.

The main critique of the shareholder theory is that it only encourages short-term planning,
this would cause reckless decision-making to gain short-term incentives to meet certain
criteria or target set by the shareholders. By focusing on the shareholders profits only, it
limits the organization’s growth and potential (Corporate Finance Institute, 2020) . This is
because instead of using the gained profit for strategic investments, like research and
development, the profit is used to pay out dividends for the shareholders.

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Chapter 3: Analysis
3.1 Shareholder Theory
The shareholder theory mainly focuses on gaining profit, and it is usually used to reach short-
term goals, but can be adapted for long-term goals but is more difficult to achieve. Reaching
short term goals means that the shareholders gets to see results faster, it allows stakeholder to
gain profits as soon as possible without worrying that the company will be unable to pay
later.

Foxconn uses this model in their management strategies, minimizing business costs while
maximizing the profits in sales. This can be proven with environment the workers were
provided with. (Pun, et al., 2019) found that the employee’s living quarters are packed to the
brim and individual privacy is not considered by the company, shopping districts and
cafeterias that were built and developed for the campus like factory town does not even
consider the employees well-being and happiness (Jacobs, 2018), changes in the food menu
are rare, and the restraints focus is for the workers to satisfy their hunger while trying to use
the cheapest ingredients.

Other ways that the company use to cut costs were denying the staff of their welfare terms
(Myslewski, 2010), subsidies and bonuses were not provided to the staff, and interns have no
contract, they do not get any social welfare assistance, if there are any injuries sustained at
work were to be paid by their own because they are not covered by either the government or
Foxconn.

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 3.2 Stakeholder Theory
Based on the case studied, there are a various stakeholder that are affected in the case, they
can be grouped into a few categories. Primary, Secondary and Tertiary.

3.2.1 Primary Stakeholders

Primary stakeholders in the company are the customers, employees and the shareholders. The
stakeholders in this category will be greatly affected when the case happened. Everyone in
this section were greatly affected, Foxconn’s owners and Apple received a huge backlash
since the community characterized the factory as a sweatshop. Hence lowering their
reputation in the eyes of the public and in turn heavily reducing the sales of their well-known
customer Apple. Apple themselves event hired fair labour groups to act as an independent
audit to investigate the situation in the factory. It was later found out that employees were
later given a raise since the incident (Bristow, 2010), while this benefits the employee
financially, it comes at the cost of being mentally and emotionally scarred.

3.2.2 Secondary Stakeholders

Secondary stakeholder of the company is the government. While the government is not
directly affected by the issue, many people looked at how the government responded to it and
how did they confront the labour issues. There are labour laws that address the situation such
as reasonable working hours, discrimination prevention and even employee protection. Even
though there are many articles that say the working environment is horrible, joint
interventions and investigations made and yield no evidence (Huang, 3019). And since no
evidence can be secured there was no public action taken by the government towards the
company.

3.2.3 Tertiary Stakeholders

Foxconn’s tertiary stakeholders are interest groups, more specifically the labour union.
Labour union is an organization that negotiates with companies to improve working
conditions a favourable level in addition to staff perks with collective bargaining. Labour
unions pressure the company and tries to get influential groups involved in the case. They
also have requested for investigations to be done in the factory, to find evidence on
mistreatment of the employees. They also criticised on the current Chinese labour laws and
its implementations in major organizations.

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 Chapter 4: Discussion and Conclusion
4.1 Summary
In conclusion, both theories can be summarised as followed, the shareholder theory is used to
maximize the profits for shareholders with no regard to others well-being, this focuses on
short-term profits as it has the faster pay-out but shorter time period, while the stakeholder
theory focuses on the benefits gained for the stakeholders while minimal regard to profit, this
is used more for long-term profiting, while gaining-monetary value is slower, it can be done
for a longer period of time.

Foxconn used the shareholder theory, they tried to maximize their profits while disregarding
the employee’s wellbeing. Some employees do not even receive compensations when they
are injured at work, they made working environments unbearable and this even led some
employees to take their own lives due to the stress.

Their way of using the shareholder theory is technically wrong, while it offers short-term
profits to shareholders, it also causes legality issues within the company, many reports
mentioned that the company carries out illegal activities, (Mishkin, 2013) some even involve
forcing the workers to do overtime for over the 36 hour limit, even punishing them by
insulting or humiliating them if any mistake were made during work (Merchant, 2017).

4.2 Conclusion
In my opinion, the way that Foxconn manages the employees was less than unsatisfactory,
every human has their rights and should be treated fairly. Human rights should be respected
no matter who it is, so that it is possible to guarantee life, equality and security. As John F.
Kennedy said, “The rights of every man are diminished when the rights of one man are
threatened.”

4.3 Discussion
From my perspective, if Foxconn had to pick either one theory, they should have used a
stakeholder theory strategic model, this allows for the company to plan long-term strategies
and allows shareholders to gain long-term profit. There are not any worries about the
company dying out because Apple is their main customer, and smartphone do not seem to be
losing its popularity anytime soon. This model also improves the employee’s wellbeing and

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in turn creates a good working environment and may improve productivity, for the whole
company.

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