I.

Problem Statement

What course of action should African Gold Inc. take to balance the interests of its stakeholders, in light of the criticisms against it regarding its human resource policies on HIV/AIDS infected workers, without compromising its profit?

II.

Objective 1. To assess the existing health benefit package of African Gold Inc. employees, and consequently, identify whether there is a need to revise the package in due consideration of the HIV/AIDS infected personnel of the company; 2. To assess the underlying costs and benefits in the current health benefit package offering of African Gold Inc in relation to HIV/AIDS infected personnel of the company; 3. To address rising company costs related to absenteeism, productivity losses, recruitment, and training; 4. To validate the company's limitations in terms of compensation benefits among its miners; 5. To identify courses of action that best balances the interests of employees and the company; and 6. To establish the stand of the company regarding its role in protecting the legal rights of its employees and diminishing the impact of HIV and AIDS within the workplace.

III.

Synthesis

African Gold, Inc. is a mining company in South Africa, where 49 % of its shares had been recently acquired by US-based company, Newton Mining Inc. As part of the acquisition, Newton has designated some of its staff to work in the management and technical division of the South African office to ensure increase in gold production and global acquisition of gold properties. One of the major challenges that the new management team is faced with is the increasing number of employees who are dying of HIV/AIDS-related diseases, cause of which is identified not to be related to mining. Harry Goldstone, head of the Human Resources department, and other colleagues at African Gold, found the company faced with two-pronged challenges: on the one hand, the companys expenses related to medical aid and disability programs had been increasing because of HIV/AIDS related diseases. Implicitly causing these costs to balloon are high absenteeism, productivity losses, and expenses on recruitment and Page 1 of 6

training. On the other hand, the gold mining industry has been experiencing decreasing profits due to the strength of the rand (i.e. South African currency). In this light, Goldstone and his team are working to review and revise human resource policies, where financing medical aid of all HIV/AIDS-related cases will be stopped, while education program to increase awareness on HIV/AIDS will be continued. African Gold, Inc. extensively employs inexpensive migrant workers from neighbouring countries like Lesotho, Botswana, Malawi, Zimbabwe, Swaziland and Mozambique. Some health experts attribute the rise of HIV/AIDS to the fact that many of these workers live in the mine site and away from their respective families. The pulling out of the medical related finance of HIV/AIDS infected workers resulted in negative media coverage, pointing out that most families cannot afford to pay medication and funerals since the average mine worker earns about 2,000 rands per month (USD 250 approximately). Moreover, The National Union of Mine Workers threatened further action if the company would not reinstate the benefits. IV. Areas of Consideration Economic and Social Cost-Benefit Analysis deciding whether to pursue a reinstatement in the policies should give due consideration of potential costs and benefits, i.e. profits, company image/credibility, labor productivity, cost efficiency Legal liability deciding whether to pursue a reinstatement in the policies or not, particularly on HIV/AIDS cases, must make sure that all legal bases are fully covered to avoid more costs and credibility as a company. Employee Morale the new HR policy on Health benefits particularly on HIV/AIDS cases must not only benefit the company, but must also look into their workers and their family. Environmental & Social Obligation aside from making profits, the HR policy on Health benefits particularly on HIV/AIDS cases must ensure that their obligations in the environment and society is also their top priorities Media the new HR policy on Health benefits particularly on HIV/AIDS cases must stop or reverse any negative media coverage they have gotten

Page 2 of 6

V.

Alternative Courses of Action Alternative Course of Action 1. The company shall carry on with its current policy, without any change/policy revisions, i.e. there will be no reinstatement of benefits. Advantages Profits will be maximized as a result of reallocating finances that originally covered non-mining related deaths/illness. Employees will continue to work under the same condition. No legal liability, given that companies are traditionally responsible for risks that are internal to them (note that HIV/AIDS are not related to mining) Since Africa Goldstone is a small company, existing negative media does not provide as much coverage as against other large players in the mining industry, thus negative media will not be sustained. Disadvantages Employees continue to be under the health threat of contracting HIV/AIDS. Employees morale may be affected, and result in increased resignation. Costs are projected to rise as an implied result from high work absenteeism, leading to productivity costs. Initial negative media Possible legal issues initiated by the National Union of Mine Workers

Page 3 of 6

Alternative Course of Action 2. The company will reinstate the benefits to include financing of nonmining related deaths/illness. -

Advantages The company will have a positive image as perceived by its external and internal stakeholders (i.e. Union, public, and the employees) No negative media This could lead to increased employee motivation Decreased likelihood of being faced with legal issues -

Disadvantages Employees continue to be under threat of HIV/AIDS Productivity does not improve significantly because employees are still faced with risk of HIV/AIDS Higher spending for the company

3. The company develops an HR policy to manage HIV/AIDS by assigning benefit caps based on tenure, concurrent with the education program on HIV/AIDS Possible caps: 20% benefits for nonregulars; 30% working for 0-5 years; 50% for 6-8 years; 75% for 9-10 years; 100% for 11+ years)

Profit retention becomes more manageable, as costs are also manageable.

Some employees may be against (especially the non-regulars), and the Union may still continue any legal action against African Gold

Employee motivation might increase among regulars, and Union may stop any legal action against African Gold -

The company still incurs unwanted cost

Interests of the stakeholders are balanced, without heavily compromising the profitability of the

Page 4 of 6

Alternative Course of Action

Advantages company. Employees will take more attention to health risks Possible good management-worker relationship

Disadvantages

VI.

Recommendation

Given the cost-benefit table drafted above, it is recommended that the third alternative course of action be taken, as it best balances the interests of the majority of the stakeholders involved, while it also minimizes the negative impacts of policy change on the companys long term profitability. VII. Implementation 1. Re-draft a health package that includes the recommended action on benefit caps, where drafting committee should have sufficient representation of all stakeholders (i.e. management, workers, health experts, and the Union). 2. As soon as the re-drafted health package has undergone exhaustive review and subsequent approval of the committee, this should be cascaded to all employees. This sends a clear message that HIV and AIDS constitute a serious workplace issue and that there is a high level commitment to dealing with it. 3. Involvement of all levels of management should be pre-requisite in the implementation of the new policy. 4. Agree on a set of standards for practice, along with guidelines for all interventions in the workplace. 5. Plan short-term and long-term financial sustainability, including the costs related to this action. 6. Allocates responsibilities within the organization for the management of the epidemic and accountability for decision-making and resource allocation. 7. Align company policies with national policies and related international best practices.

Page 5 of 6

8. Mine workers should commit in attending the educational programs/training related to Preventing HIV/AIDS. 9. There should be Annual medical exam for mine workers to check on their health conditions. 10. African Gold, Inc. may acquire the services of a medical facility for medical tests of miners at the start of their application. Starting right can reduce the problematic situations like deaths, absenteeism etc.

VIII.

Workplace Application

This case could serve as a benchmark for other related cases, where the company is faced with human resource challenges, stemming ultimately from phenomena that are not directly related to the core operations of the company. Likewise, this case validates the direct linkage of the internal working environment and the social environment where the worker operates note that while HIV/AIDS is not directly caused by mining, which is the core operation of African Gold Inc., the social environment of the workers are plagued by the rampant occurrence of HIV/AIDS which then causes a strain on labor productivity, thus resulting in decreased profitability. This case ultimately proves that human resources, more than being a contributor to the long term sustainability of business, cannot be compartmentalized into different persons, i.e. the worker, member of a society, member of a family. While the social environment of the worker is external to any company, the company still finds itself vulnerable to the way in which workers are affected by their external environment. Thus, it is in the best interest of the company to not take the external and internal working environments of the worker in isolation of one another.

Page 6 of 6