Should there be gender quotas in and company? Should a corporation reduce its profits for the sake of the environment? Should a business be responsible for how people use its products? These are the kind of ethical dilemmas companies face on a day-by-day basis, and now it has finally come the time to address them and see how the DREMSI methodology can help us make the best out of them.
There is an important difference between business and individual dilemmas. While the individual as an actor changes environments constantly, shifting from role to role into spaces with different “modus-operandi”, a business operates mostly in one defined relational space, a space that I call the Marketplace. This space will set a very unique context for the expectations we hold on to each actor, influencing greatly what we understand as injuries. Just like a boxing ring allows one to freely exchange punches between fighters, removing the injury label to a punch, in a marketplace there are some behaviours that could be perceived as injuries but are perfectly normal, like firing an employee because is not productive or replacing a company’s service that one is not satisfied with.
Once we go deeper into the relationships and dynamics within a marketplace, we realize that many of the ethical dilemmas in companies arise from applying “family kind” expectations to the marketplace, meaning we expect our boss, our clients and our suppliers to behave like a brother, an expectation that not even one can maintain for long as the dynamics of marketplace eventually push us towards productivity and competition. Visualizing the mechanics of the marketplace will help us dissipate many confusions and properly tackle the real ethical dilemmas businesses face.
This episode will be composed of four sections:
- In section A, we review in more depth how does the market operate as a system, finalizing with a brief view of the dilemmas to handle
- In Section B, we discuss dilemmas concerning the relationship between companies and clients
- In Section C, we increase the complexity and look at dilemmas between companies and society. setting the tone for “greater good” discussions.
- In section D, we close up with a view on the concept of Extended accountability, including a small summary of the key messages in this episode.
A large motivation in my journey to build this theory has been the increasing amount of ethical dilemmas that one faces when one works for a company. After exploring the topic from so many angles, my biggest discovery has been that by understanding how the modus-operandi of the marketplace works, one is able to identify the social expectations that apply and hence behave ethically within the context of a marketplace. With this knowledge, one is able to distinguish which ones are real ethical dilemmas and which ones are just confusing situations. With this said, let us begin explaining how the marketplace works before we get to solve dilemmas.
The Marketplace
To avoid confusion, let us clarify wordings from the very beginning: A company is commonly defined as “a commercial business” while a corporation is “a large company or group of companies authorized to act as a single entity and recognized as such in law.” In this episode, I’ll be referring as a company to any organization that solves clients’ needs in the marketplace, as small as a consultant or a local grocery store, to as big as Mcdonalds, Apple or WallMart..etc
As we want to understand how the marketplace works, we need to understand who are the stakeholders in the marketplace, what is the objective of the space and subsequently what are the characteristics of the modus-operandi. In episode 3, I highlighted the eight conditions that apply to any relational space (below), I’ll be using these concepts to explain the market place so it’s good to have a small overview.
- Relational spaces are formed by stakeholders’ interactions, either individuals, groups or even relational spaces. In the marketplace these are companies, clients, government.
- Relational spaces are multidimensionally connected, as stakeholders are connected with other relational spaces. In the marketplace these are labour market, economic market..etc.
- Relational spaces are functionally influenced, as there is a purpose for the interaction, from something as trivial as a party to a larger goal as the survival of the group. In the marketplace the objective is to satisfy consumer demand.
- Relational spaces are environmentally constrained, hence adaptive, as it responds to its environment in an effort to cope and thrive. In the marketplace competition is ubiquitous, forcing companies to innovate or perish.
- Relational spaces have a modus-operandi, in the shape of rules, institutions, structures and process. Making the best of its resources in order to adapt to its environment. In the marketplace, freedom for the consumer to choose and government intervention will play a critical role to define the rules
- Relational space us the place where individuals fulfil their interests, not only the obvious interest such as resources but deeper ones such as their identity or meaning of life. Companies want not only to achieve profit but to fulfil founders & shareholders personal interest
- For one to play a role, it requires a validation process. The stakeholders’ role is always bound to an internal and external validation process. One cannot be a company if the government nor the consumer recognize them as such
- Due to the “modus operandi”, contextual scarcity and wide variety of stakeholders’ interest, there are always power dynamics within all relational spaces. “the winner takes all” is common within marketplaces, where companies disappear rapidely and new ones appear. Sensitivity towards monopolies will be highly visible across stakeholders.
These 8 points serve as a small guidance, but let us provide a richer view of the important components of the marketplace.
Stakeholders
The system has five key players that interact in different degrees depending on the operation, you have (1) The Clients, who have a need or a problem to solve. (2) The businesses, that solves the need of a client. (3) The employees, who operate the business in the name of (4) the shareholders (who own the business). Lastly, we have (5) the government that represents society and provides the basic rules of interaction within the space.
The objective: Transactions and effectiveness.
On a micro level, the Company is an organization that gets created with the objective to provide a service, a product or some kind of result that clients want to pay for. By fulfilling the objective, the business gets revenue that is used to pay all its internal components (suppliers, employees, loaners), including its shareholders. Businesses need to be profitable to keep operations for the long term, hence there is a constant need to generate revenue larger than the cost of operation.
On a macro level, The objective of the marketplace is to provide a space where companies and clients can do transactions. The government tends to get involved to make transactions safer, as the safer the transactions the larger the volume. A side objective of the marketplace is to be efficient in operations, to promote businesses that solve a client need using the lowest resources cost; this is normally achieved by the encouragement of competition that motivates actors to find innovative ways to be “competitive” and solve the problems in better ways than the competition.
The marketplace is heavily connected with multiple relational spaces of society; it relies on an educational system that produces qualified workers, it relies on a legal system that provides protections to do business, it relies on a banking system for loans, credits and transactions and ultimately is overseen by the government that keeps track the marketplace is delivering more positives than negatives to society. The marketplace influences many of the other relational spaces within society and it will always respond to the government of the society.
In a wider perspective, marketplaces are as well connected internationally as nowadays due to the speed of globalization, technologies and the exchange of materials are common at an international level. Hence it is common that situations in other countries will affect the development of practices in other societies’ marketplaces.
Market “modus-operandi”
A good analogy of how marketplace works, is by seeing it as an evolutionary process to fulfil consumer demand, a place where companies survive if they fit the environment, satisfy clients and are operationally sustainable. This is a competitive landscape where multiple companies are aiming for the same clients, hence survival rate is low and is common for companies to appear and disappear rapidly.
There are four key characteristics of a marketplace that makes it unique and bring forward big implications for what we should expect and consider as injuries:
- Customer “freedom” of choice. The most important force within a market is the freedom for the client to choose companies based on their personal preferences. Even if customer loyalty is appreciated, it is totally understandable for clients to change companies based on their preferences. This means that regardless of the negative consequences that the business will suffer, it is not unethical to stop one’s relationships with them (so long is done with the respective process).
- Competition. In most of the cases companies have to compete for the preference of clients. Competition is believed to foster innovation as companies have to find better ways to solve a problem. This means that it is not unethical if one outcompetes another company and this leads the competitor to bankrupt. It is the way the system is design.
- Business Ownership. It is common that businesses are privately owned by a group of shareholders. This private ownership gives the business a large autonomy to choose their actions, an independence that leads to higher rewards, but equally higher accountabilities for their actions. To put it in perspective, if one wants to open a gold mining company, one is expected to get the job done on their own, if one finds gold then they get to keep it, but if they don’t find anything they are not given any support at all. Ownership implies expectations of independence, rewards and accountabilities. As such one shouldn’t feel bad if a private company goes bankrupt for a risky venture they decided to embrace at their own expanse.
- Government regulation. For the market to operate in “safety”, which in turn makes it faster, there is a lot of government intervention throughout the process. From as simple as a company permit, to as complicated as specific contracts and regulations for sales transactions. The government sets the tone of what is permissible or not, and by doing so it (a) formalizes expectations between customer-business and (b) takes ownership of some expectations as its in charge to certify things are “safe”. For example, if one wants to buy food in the grocery store, the food in the grocery store is certified by the government, the store in itself has a selling permit, and the transaction has legal implications attached.
What I just described is an average view of a marketplace, every industry and region operates with variations between the four characteristics. In some marketplaces government intervention is very low and in others there is no competition at all as there is a monopoly on resources. The variations between the four aspects lead to different dynamics and understanding of injuries; for example, we do not expect the same employee protection for a schoolteacher in Germany compared to a construction worker in Arizona, neither is the same to lose access to the national health care in England than losing access to private health care in Mexico.
Even if there are differences among markets, the logic behind their operations remains similar. The interplay between the four characteristics described above will determine many of the expectations and responsibilities in place, and ultimately will give us a perspective of what is unethical or not.
Injuries In The Market Place
Perhaps the easiest way to visualize how the modus-operandi of the marketplace influences our expectations, is if we contrast a marketplace with a family space:
- As a brother, you wouldn’t change a sibling because there is another person that is better
- As a brother, many of your interactions with our siblings won’t require a written agreement.
- As a brother, you would help a sibling that is suffering financial problems, regardless if you would get your money back or not
Even in the “ruthless” marketplace environment there are limits on what one can do. On the legal side, we have limits on how we can break contracts or on what is considered fair competition. And on an ethical side, even if it is not written on a contract it is considered an injury if someone lies or deceives us.
Is important to recognize that the marketplace is a place where innovation happens at all times, and it is precisely the speed of innovation that requires us to put extra attention from an ethical side. Innovation is commonly accompanied by new behaviours and in turn new social expectations.
Let’s take for example the rise of data privacy, which was not a well-understood concept until Facebook began monetizing on the data of its 1 billion users. In the beginning it was a sort of wild west, with no clear social expectations in place and companies experimenting and trying new things, consumers not knowing what was happening or how they could be affected and no intervention or awareness from the government, all this making difficult to understand what was ethical or not. Eventually, this led to large injuries (such as the Cambridge Analytical scandal) and subsequently the rise of governmental regulation, formalizing many of the expectations between companies, clients and government with regard to data.
The message I aim to convey is that innovation changes behaviours and rise new expectations, and in this process many injuries can happen due to a lack of formal social expectations. In this regard I believe Emmanuel Lulin, Senior Vice President & Chief Ethics Officer of L’Oréal express it nicely:
“When the speed of technological and scientific discovery is faster than the speed of legal production, it has two consequences: the relative importance of law decreases and the relative importance of ethics increases… because we have to make a decision. And how do we make decisions? According to our ethical values,”
Which dilemmas will not be handled by DREMSI.
With the details of the marketplace clear, let us enter into discussions of ethical dilemmas. I believe there is much confusion on which dilemmas in the marketplace are of ethical nature and which ones are not. To help us in the exploration of ethical dilemmas I would like to remove common “topics” from the table. In specific, I would like to remove four large areas of situations that are either too easy to discuss or not relevant at all to the field of ethics.
First, we remove dilemmas handled by the legal domain.
Although these kinds of situations are clearly unethical, they are already heavily regulated and managed by the legal system, so it makes little sense to discuss them. For example, we all know that child labour is not allowed, we all know that companies have to take environmental measurements, we know that one should embezzle money from the company and the list goes on. In the end, even if we can analyse them it would make little sense to explore them as this territory is highly regulated and already known to be unethical.
Second, we remove dilemmas with Business vs Family expectations.
One of the biggest issues in the marketplace is to consider the business a family, this makes things complicated as one wants to be a “father” towards his/her employees. I guess the perfect example is when we should discuss if a person must be fired because of poor performance; in the marketplace firing a person is not an injury if it’s properly justified, hence this is not an ethical problem to begin with. In a similar light, anytime we try to put “family” expectations towards clients, suppliers or even the government, we are not really having an ethical dilemma but a role dilemma, placing expectations of a family into something that is not a family.
Third, we remove money-related injuries.
Discussions about money are not relevant for ethics as money is a token for exchange and not a good in itself. On one side, losing money out of marketplace transactions is no injuries in the marketplace as this is how it operates, hence losing money and becoming bankrupt is part of the game. On another side, money as an injury is hard to conceptualize, for example, what is the damage a person suffers by losing 100,000 dollars? Injuries have to be put in individual context and in most cases, the company “injuries” in money aspects are hard to conceptualise.
Of course, I am generalizing as we can always make the case that without money one gets closer to poverty with big implications on the quality of life, however, most of the dilemmas in business regarding profitability or loss in revenue are not about poverty, but just about lower returns. With this said, although some profit losses could be considered an injury, we will not dwell on them due to their low importance to the field of ethics.
Fourth, we remove Shareholders dilemmas on money-related affairs.
Connected to the previous point, given that money and profit are not so relevant for our evaluation, then shareholder problems where they lose money for an investment will not be handled in this work. Not because they are not unethical but because the injuries are too small to bother.
What ethical dilemmas are handled here?
After removing so many obvious business dilemmas the question arises, then which dilemmas will it be handled here?
The most common dilemma for business will be the business and clients dilemmas. Where we will explore the limits in the relationship between both of them. In this regard we will explore:
- the unfair pricing of a medical product,
- the seemingly unethical practice of staggering product launch that makes the consumer spend more money,
- and the apparent authoritarian behaviour from a social platform that bans users from their platforms.
In a larger perspective, we will analyse the companies and social dilemmas, where companies cause damage to the “greater good” of a society. Here we will look into inequality dilemmas such as
- the CEO vs Employee payment ratio,
- gender equality prevention actions
- and participation in social causes.
By the end of the episode, we will look into the concept of Extended accountability, tackling the question of what level of accountability can be assigned to companies for how their clients use their products.
I believe the dilemmas handled in this episode provide a solid overview of the DREMSI method in the context of a company. Many might believe that is all about money, but in reality, most of the dilemmas are about deception, unfairness, treachery and lack of responsibility, in other words, breaking expectations. It will become easy to visualize once we solve dilemmas, so let us move on to the next section and finally begin solving them.
