Answer: The given case study represents the issue of lay off in startups, which is often done eyeing just profits and not the human factors associated with such actions. Such decisions should be taken with some underlying ethics into consideration.
(a) Various stakeholders involved in this case are

• Investors: They want good returns for their investment.
• Company management: They have to balance the interests of both investors as well as the company and its employees.
• Company employees and their family: Their well-being rests upon security of their livelihood.

Ethical issues involved are as follows:

• Employees are being penalized for the management’s past decisions related to bad acquisitions.
• While lower profits (maybe short-term losses) will hurt shareholders, the cost of job-loss will be suffered by employees and their families.
• Current workers and laid off employees may risk suffering from occupational, psychological and other health issues.
• Humans are seen as a mere means rather than an end, thus violating Deontological ethics.
• The profit-oriented share holding in the present world reflects upon the increased consumerism in the society.
• Increased competition for survival reduces the cohesiveness among fellow beings and brings out the worst character of a person. Thus, it alienates an individual not only from his peers but also from himself, as stated by Marx.
• The situation also highlights how ultimate power is being wielded by the wealthy entrepreneurs, while employees who enslave all their lives for the betterment of the company, are left at the mercy of the powerful.

(b) The evaluation of each of the available option is:
(i) identifying key high performers and offering them other positions before implementing a blanket cut based on salaries drawn. Merits

• The talent will be retained in the company.
• It will increase loyalty of high performers.

Demerits

• More employees may need to be fired in order to cut the same expenditure.
• Demoralizing effect on high performers on changing the role and position.
• Feeling of anger, vulnerability and rejection among average performers.

(ii) Putting the terminated employees on retainer to work part-time. Merits

• Balance between organizational needs and individual needs.
• Breathing space to employees while he/she searches for a new job.

Demerits

• Lack of pay, health benefits, and meaningful work has negative implications for financial, physical, and even psychological aspects of employees.
• Wastage of talent sitting idle for most part of the working day.
• It is difficult enough to get a job even without the stigma of being laid off.

(iii) Executing the lay off order in the same spirit as it was asked by the management and letting the management deal with the long-term consequences. Merits

• Following the hierarchical order in letter and spirit, hence respecting procedural protocols.
• Even if it will attract negative repercussions for the company, the management will have a learning experience for the future.

Demerits

• Existing employees might be in a bind when knowledgeable and skilled workers are laid off. Consequently, customer service may suffer.
• Laying off skilled workers may slow down work and damage the quality of output within the company.
• Deteriorate work-culture in the company as employees perceive themselves as commodity that can be easily replaced and just being a number to the company.

(iv) Increasing the perception of fairness among the existing and terminated employees and moving ahead with the layoffs. Merits

• This would ensure the reputation of the company in terms of its personnel policy.
• This follows the order and at the same time makes employees understand the necessity of such a step.

Demerits

• Even if perception is improved, no employee totally relaxes; they are waiting for the next round of downsizing or cost-cutting layoffs, which may include them.
• It still involves high human suffering among a significant percentage of company’s employees.
• The workers that are not let go may suffer from “survivor’s remorse” which can severely damage their work ethic and overall company commitment.

(c) To improve the position of company, following course of action would be taken:

• Find alternatives to improve finances of the company following the steps below in the same order:
  • Getting rid of disengaged workers that cannot “pull their own weight” (“dead wood”) and simply increase workload for other employees.
  • Cutting costs by reducing employee benefits and liability for some time.
  • Across the board cuts of the same percentage barring people with very high salaries who can afford more cuts as well as very low salaries who should be exempted.
• If these steps help improve to significant extent, then firing would not be undertaken else:
  • High performers will be retained in different positions before firing order is executed based on numbers.
  • Firing will be done at higher positions first, as this would cut more costs and a lesser number of employees.
  • A certain number of workers will be given an option to either opt for a part-time or leave completely.
  • Then terminated and existing employees will be given psychological counseling and discussion sessions to make sure the perception about such an order remains positive.
  • Further, supplemental unemployment benefits from the company would be provided to terminated employees for a limited period.

These steps ensure that the company has taken an ethical approach to layoffs but at the same time can pursue hard decisions if needed. It would not also send a negative message to the new talent looking to enter the company in future.