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The following appeared as part of a memorandum from the vice president of
Nostrum, a large pharmaceutical corporation.
“The proposal to increase the health and retirement benefits that our employees
receive should not be implemented at this time. An increase in these benefits is not
only financially unjustified, since our last year’s profits were lower than those of
the preceding year, but also unnecessary, since our chief competitor, Panacea,
offers its employees lower health and retirement benefits than we currently offer.
We can assume that our employees are reasonably satisfied with the health and
retirement benefits that they now have since a recent survey indicated that two-
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thirds of the respondents viewed them favorably.”
Discuss how well reasoned... etc.
The vice president of Nostrum argues that implementing an increase in health and retirement benefits for employees is not a good idea
at this time. His main line of reasoning is that an increase in benefits is both financially unjustified and unnecessary—financially
unjustified because last year’s profits were lower than the preceding year’s, and unnecessary because Nostrum’s chief competitor offers
lower benefits to its employees and because a recent Nostrum employee survey indicates that two-thirds of the respondents viewed the
current benefits package favorably. While the argument has some merit, it is not completely convincing.
Admittedly the vice president’s reasoning linking employee benefits with company profits seems reasonable on its face. Companies that
are not profitable are ill-advised to take on additional costs such as increased employee benefits. However, the fact that Nostrum’s
profits last year were lower than the preceding year does not imply that Nostrum is experiencing financial difficulties that preclude it
from increasing employee benefits at this time. Perhaps the previous year’s profits were extremely large; whereas last year’s profits,
albeit lower, were sufficient to fund an increase in the benefits package without threatening the company’s bottom line.
Also, the fact that Nostrum’s chief competitor provides lower benefits to its employees is not a good reason for Nostrum to deny an
increase to its employees. Employee loyalty is an important asset to any company, and providing good pay and good benefits are among
the best ways to acquire it. Nostrum would be well advised to assure that its employees have little reason to seek employment
elsewhere, and especially from its chief competitor.
Finally, one can infer from the survey’s results that a full one-third of the respondents may have viewed the current benefits package
unfavorably. If so, such widespread satisfaction would weaken the vice president’s argument. Lacking more specific information about
how these other employees responded, it is impossible to assess the reliability of the survey’s results or to make an informed
In conclusion the vice president’s argument against implementing a benefits increase is unconvincing. To strengthen the argument, he
must provide evidence that the increase in benefits would have a negative impact on the company’s overall profitability. Additionally, he
must provide more information about the manner in which the survey was conducted before we can determine the degree of employee
satisfaction of the current benefits