Ethical Dilemmas Affect Employee Morale and Business Bottomline

By Ashwini Mokashi, Ph.D.

Business dilemmas, especially those involving ethical issues, have a far deeper impact on the employee morale, the business bottomline and sometimes even on the economy of the country, if the problem is seriously widespread. The dilemmas may seem trivial to begin with, but they have a potential to put the organization in a downward spiral. Below is an illustration:

Philosophical Consulting is meant to address ethical issues, so as to streamline the operations of a business and clear the air of any doubts in the minds of the employees, re-establish the trust between the employers and employees, which eventually helps improve the productivity of any organization. No matter how small or how big an organization is, ethical dilemmas need to be addressed to make the organizations more supple and competitive.

Following is a case study of an ethical dilemma, that played out in a big way in the US markets in 2008 economic downturn:

The recession was upon us in 2008. At the compensation department, the compensation committee was trying to figure out how to keep the company profitable and stop the executives from jumping ship and what kind of golden handshake can be offered to executives. While preparing these reports, one employee had a suggestion about how to retain most of the employees in the company instead of letting large numbers of employees go, when they would be jobless, as no other jobs were in sight. This member proposed to do a salary cut for all, phased by their earnings, such as greater percentage for high earners and small percentage for low earners, in short doing salary cuts and not job cuts.

It seems as if there were two categories of people in the company at that time: one category was those who were sure their jobs were safe and they were not prepared for any salary cuts, and the second category was those who were afraid that their jobs were at risk and they were willing to do salary cuts, so that they don’t lose the jobs altogether. They would still have the hope that the salaries would become whole, when the recession was over. The first category were not willing to make much changes to their lifestyle and financial goals, but they were also not 100% sure that their jobs were safe either.

There were multiple moral dilemmas in this situation. Should the company care for all its employees and for the general welfare of the society, so that the damage to the livelihood of the large numbers of people was not as bad as it could have been? Once the people lost jobs, there were no jobs to go to, unless they were willing to change their lifestyle to a great extent, either by moving to another location, or by taking up another line of work, or by giving up their current lifestyle. So altogether it was a difficult situation.

Another moral dilemma was whether the company should protect its low-income workers by leveling some compensation given to high-income workers. This would be an assurance to those low-income employees who have been with the company for a long time, but needed to be let go.

Another dilemma was how to safeguard the interests of the executives. Some executives did not have another offer from a rival company, but some executives did. In those cases, this company needed to match or exceed the offer to keep them on the job, for retaining the executives, for maintaining the company secrets and then to be fair, the company also needed to increase the salaries of the remaining executives, so they didn’t court offers from the rival companies.

The compensation committee consulted various other consultants who worked in the same field. But alas, it took the decisions that were in favor of the high-income workers. It gave a job-cut to a large number of low-income workers by either automating those jobs, or temporarily suspending those jobs, and saved a small percentage of the company profits. The large percentage of company profits lied in the salaries of high-earners. Some of them were let go and the others were kept either at the same salaries or given increases. This worked well for the benefit of the company at that time, but the economy suffered, people suffered, job losses mounted, a lot of people never went back to the same kind of job they were doing in 2008, some left the country, and some managed to find meaning in life in doing different kind of work.

Was the society better off, by focusing on a small number of people and their financial wellbeing? Or was it better off because it coveted the meritorious people and their earnings? Or was the society better off, because the elite knew how to look after themselves? It would have been better to address these questions head-on.

In this case study, we see how the financial decisions were ambiguous and unethical, how they first hurt the morale of the employees, created large unemployment and also ultimately hurt the economy.


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