S1E8 – C: Companies and the Greater good

What is the responsibility of a company towards the environment? Is it justified to discriminate against men to improve working conditions for women? Should a company involve itself in social movements such as Black life matters?

All these are important questions that many companies have to answer because if they don’t, either the consumer will stop buying their products, competition will take reputational advantage or the government will come down with possible sanctions. Hence companies, whether they want it or not, have to choose a standpoint on this matter.

This section is very special because this is the first time we will look into “Greater good dilemmas”, which are large-scale problems that affect everyone in one way or another, it’s the kind of problems that require government intervention and even at times international cooperation.  

There are multiple kinds of “Greater good dilemmas” so a small explanation of the concept will be introduced briefly; afterwards, we will aim to solve fairness and equality dilemmas with a view on the CEO vs Employee payment ratio and Gender quotas in the workplace. We will then close up with an observation on Sustainability, a very elusive problem because of the difficulty to quantify injuries and assign expectations.

Background on greater good dilemmas

Let us discuss the umbrella idea of this section, the concept of “Greater Good”. I assign the term “Greater good” to those dilemmas that affect in a direct or indirect way large populations of society and to solve them one requires a vision for the ideal society, a vision that implies a hierarchy of values. In other words, to solve these dilemmas, we rely on political ideologies that propose a vision for how life should be; for example, the issue of inequality has different solutions if one is from the left, as one prioritizes the community, compared to the right, as one prioritizes the individual.

To mention a few “greater good” dilemmas we have: World Poverty, Education for all, Sustainability, Inequality, and Criminality. Pretty much all the key problems addressed in the Sustainable Development goals from the United Nations.

These dilemmas are problematic because multiple actors share the responsibility to solve them, and some of them might not even be conscious of it. In addition because of their scale, it is ambiguous to pinpoint exactly which actions cause it and which ones will fix it, hence making it hard to get everyone to understand the strategy and their contribution.

Nowadays businesses are constantly challenged on many fronts with Greater good dilemmas, “is your product sustainable?”, “what are you doing to make your workplace more inclusive?”, “Are you helping third-world countries in any way?”. This pressure not only comes from governments but from consumers, that are becoming more and more familiar with the consequences of such problems, and from employees, that express the need to work on something “meaningful”

Even if all companies are affected, some do the bare minimum (all the legal regulations) while others take it to the next level, with independent departments that look into compliance and ethical risks, coming forward with strategies on how to mitigate their impact on world problems, all under the umbrella of Corporate Social Responsibility.

DREMSI and Greater Good dilemmas

There are three characteristics of greater good dilemmas that make it difficult for the DREMSI theory to be effective while analysing them:

• First is role expectations. Most of the greater good dilemmas have general expectations of everyone, which in turn means that no one is clearly and specifically accountable. For example on sustainability, everyone is expected to contribute, but not everyone gets punished for lacking action. Right now the second cycle of the ethical dance is missing.
• Second is injury quantification. It is very hard to measure the injuries that an individual will suffer due to certain large-scale problems. For example, how much will one suffer because of the growing inequality? – it is possible to estimate but there is a high level of uncertainty of how much is connected with the problem.
• Third is the spatial reach of injuries. Most of these problems affect so many stakeholders that are not within a single relational space, for example, sustainability affects most third-world countries yet most of the actions are taken in first-world countries.

These three factors will make it difficult to use the DREMSI method in many of the “greater good dilemmas”. But not because is hard to use it means it is impossible, in this episode I’ll highlight how we can still use it in situations that are easy to “localize”. In this regard, equality dilemmas are suitable for the DREMSI method while sustainability dilemmas are a bit more complicated. Let me show you what I mean so that you get a feeling of it.

The payment ratio between CEO to employee

The first dilemma to explore is the very controversial issue of “CEO to employee” payment ratio. This is a problem that is constantly in the news, when every year someone releases the CEO to Employee ratios for the top companies, stressing the large difference in earnings. To give you an example, it has been shared that Amazon’s CEO earns 6,474 times more than the average employee. To put it in perspective, the average CEO-to-employee ratio is 670 to 1, so the ratio in Amazon is really shocking, however, the question at hand is, how ethical is this practice?

Let us formalize this by asking the question, Should a company have a CEO-to-employee payment ratio larger than 1000?

Phase 1  – Evaluation of Injuries

1.1 Introduction of standpoints:

• Standpoint A – Pay the CEO 1000 more than employees, contributing to social inequality and paying unfair wages to the average employee.
• Standpoint B – Cap the salary of the CEO at 60 max, paying unfair wages to the CEO.

1.2 Clarifying stakeholders:

We have The CEO, The clients, The Employees, The shareholders and the Government representing society.

1.3 Role Expectations in jeopardy:

The problem for this dilemma arises from the wrong understanding of “fair” remuneration. People use a fairness perspective within a group, when they should be using a fairness perspective within the marketplace. In this context, fairness of salary is not calculated by comparing employees within the company but across the industry, hence the CEO should be compared against other CEOs, and the same comparison should be done for the average employee, comparing on a profession within the industry. With this as background:

• The clients expect the company to offer them a reliable solution to their problems.
• The government expects the company to “play by the rules” and to not cause any social discomfort.
• The CEO expects to get paid according to their agreement, and a sense of market fairness is expected.
• The shareholders expect the company to make a profit so that they can get a return on their investment.
• The employees expect to be paid fairly according to market values.

1.4 – Estimating Injuries.

• Standpoint A (market value CEO salary), no injuries to neither CEO nor employee as the remuneration follows market based guidance. It may injure society if this contributes to higher inequality, I would say an uncomfortable injury due to the size of the CEO population. This option is ethical within the company, with a small risk to be unethical towards society as it may contribute to the growth of inequality

• Standpoint B (controlled). Very likely an injury to the current CEO, or alternatively an increase in everyone’s salaries which is likely to make the company unprofitable, laying off employees. Either way, this option is at least seriously unethical towards the CEO, and potentially to shareholders if the company becomes less competitive.

Phase 2  – Decision Taking

2.1 Ranking of injuries and legal

Standpoint A, keeping the CEO

2.2 Legal aspect

Both options seem to be legal.

2.3 Beyond expectations

Companies could aim to go beyond expectations and either pay more to the average employee or pay less to CEOs as a policy. This kind of action would be supported if it prevents critical injuries without causing other injuries of the same or larger intensity, this however is not the case as marketplace remuneration is not an injury at all.

2.4 Conclusion and Observations

The best decision here would be Standpoint A, keeping the 1000 to 1 CEO-to-employee payment ratio.

This is perhaps not the result you were looking for, but it is the way this gets solved if we take into consideration the Modus-operandi of the marketplace to determine fairness. Two observations are worth discussing:

• The difficulty to estimate the inequality damages. As we saw, it is problematic to claim that one company is causing serious or critical injuries to society by having their CEO earning so much money. Not only is hard to make the connection but is insensitive to claim that they cause such large damage. For this reason, we could only make it a probability of an uncomfortable damage.

• Employees and CEO as assets. Given that the employees and CEO are independent “contractors” or “employees” of the company, with the freedom to choose and change companies as they wish, their value to the company is dictated by other comparable assets. In this regard, one gets paid to play the engineer role in comparable terms as all engineers get paid within an industry. In most cases, one doesn’t get paid in proportion to what the company makes.

I want to emphasise that in the marketplace there are several perspectives of “fairness“, in this case, we use the employee & CEO as an asset, hence using industry valuation. But this is not the case if one opens a company with their own money, taking all the risk and accountability; in this case, if one is a co-founder one is expected to earn proportionally to what they invested in.

Gender quotas

Let us look into a different kind of “fairness” dilemma with the famous case of gender inequality. It has been shared in the media that there is a big payment difference between males and females, women’s gross hourly earnings were on average 13.0 % below those of men in the European Union and in the US women earn 83 cents to every dollar earned by men.

To make this dilemma different from the previous one, we won’t be asking if it’s fair if a man earns more than a woman for the same job or outcome, this is clearly unethical. The question at hand will be focused on the practice of “gender quotas” to minimize the salary gap. The practice of “gender quotas” has become popular as a way to manage unconscious bias in the recruitment process and have more female leaders within high positions of an organization, hence reducing the “payment gap” ratio. Nowadays it is common that companies to advertise their “gender quotas” where they guarantee there will be a certain amount of women in C-level positions.

Let’s formalize the dilemma as this, should a company implement gender quotas to equalize the number of women compared to men at c-level?

Phase 1  – Evaluation of Injuries

1.1 Introduction of standpoints:

• Standpoint A – Leave things as they are, causing injuries to women with soft-discrimination
• Standpoint B – Install quotas, effectively discriminating against men

I guess we can take the bull by the horns already. The reason why this dilemma is complicated is not because is wrong to avoid bias towards women, is because gender quotas are effectively a clear discrimination against men

1.2 Clarifying stakeholders:

We have the male employees, the female employees, the clients, the shareholders and the Government representing society.

1.3 Role Expectations in jeopardy:

• Nothing relevant for the clients.
• The government expects the company to “play by the rules” and to not cause any social discomfort.
• The shareholders expect the company to make a profit so that they can get a return on their investment.
• The women employees who expect to have fair opportunities in the workplace
• The men employees who expect to have fair opportunities in the workplace

1.4 – Estimating Injuries.

• Standpoint A (No gender quotas), this option has the risk to be critically unethical towards the female employees in the company, and an uncomfortable issue to society as it damages the opportunities for the female population. The risk comes in the sense of unconscious bias that limits the opportunities of the female employees

• Standpoint B (controlled). A critically unethical action injury towards the male population, and a potential challenge to the productivity of a company, uncomfortable to shareholders.

Phase 2  – Decision Taking

2.1 Ranking of injuries

An important observation here is that discriminating towards women is worst than towards men. This idea comes from the fact that women are discriminated against culturally, hence everywhere they go they suffer from it, while men would only suffer a setback and have plenty of opportunities.

I understand the argument and haven’t made up my mind about how true this is, in any case, this time it is not relevant as the two standpoints we are comparing are different in risk, with standpoint B being a clear discrimination and Standpoint A being probable. This makes Standpoint A (no-gender quotas) the one that causes the least injuries.

2.2 Legal aspect

We will not include any legal aspect at the moment.

2.3 Beyond expectations

To go beyond expectations will only be valid if there are no critical injuries towards men in the solution. For example giving extra training, changing the hiring practices or assigning career development plans. The idea is that it shouldn’t cause critical injuries to an individual for being a man.

2.4 Conclusion and Observations

We conclude that the best option to take is to not implement gender quotas. Even if this is the best option it doesn’t mean is ethical, it comes with the risk of being critically unethical hence companies should take action to reduce this risk.

I would like to bring forth a bit more details on the concept of Discrimination. To discriminate is a practice that varies based on relational space. For example, it is expected that we should prioritize our family against strangers when in a communal setting, but if one is in the marketplace this would be considered nepotism and would be an issue. The reason is that in the marketplace, economic value prevails, meaning that the “fair” decision should be taken in the sense of economic value and productivity. This is not the case in other spaces, like the family, where closedness is the important metric and we can easily discriminate based on blood relation.

Sustainability Dilemmas

Moving away from inequality dilemmas, I wanted to close this episode with an observation on regards of sustainability dilemmas.  Sustainability dilemmas are associated with changes in climate caused by human excessive usage of resources. Sustainability is part of the Ethics agenda because climate change poses a massive risk of injuries for thousands of people due to the raise of natural disasters.

Given the characteristics of the problem, I believe we can make three kinds of categories for Sustainability dilemmas:

Easy dilemmas “easy”, clear accountability and damages.

We have easy dilemmas where the direct damage is easy to estimate, for example, should a company avoid the environmental damage it might cause to a community? – an obvious unethical behaviour where is easy to visualize the damages and identify the culprit. To place it in a different perspective, If a painter comes to your house and leaves a mess on your floor, they would be accountable to clean it, in the same way, any company that does a job and leaves a mess in the environment has to clean it

Complicated dilemmas, vague accountability and damages.

Complicated dilemmas are ones where we know the situation causes a problem but is hard to fully determine the scope of accountability and damages. For example, how responsible are petrol companies for the environmental damages within a community?

These kinds of dilemmas get even more difficult when we contrast the possible injuries of solving the problem, for example, should a petrol company stop their operations for the sake of the environment? – although beneficial for sustainability, this would cause larger problems in the supply chain, transport..etc, leading to larger issues that we are certain to suffer compared to the apparent issues we might get from climate change.

Complex dilemmas, too ambiguous to pinpoint accountability, damages and probability.

Complex dilemmas are grand in scale and tend to have a time perspective, making it very hard to pinpoint the injuries, accountabilities and probabilities for it to happen.  To make it tangible, a complex dilemma would be the question for an airline company to reduce their Carbon footprint by half in the next 10 years. In this context, how do you quantify the damage of 2000 KG of CO2?  who in particular is affected?, how certain are we that this is causing the injury?

The value of DREMSI

Given the different layers of difficulty of Sustainability dilemmas, the DREMSI method will work well for the easy dilemmas and will be limited in value as we increase the complexity, mostly because ethics is a tool for social interaction where the accountable parties and affected individuals have to be visible. Although it sounds unprofessional to say, given the ambiguity of some sustainability dilemmas, if one wants to solve them at one point one has to make a “leap of faith”, making an educated assumption on what will happen at a granular level; then ethics can bring value to the table, even if it’s mere speculation. I’m confident that just by doing the speculative work, the perspective will be valuable for the taking of the decision.

Concluding remarks

Solving “greater good” dilemmas is certainly not an easy task for anyone, a lot of information is required and there is much ambiguity involved. Companies face the challenge of taking the best decision under the pressure of delivering profit based on industry standards. In other words, it is hard for companies to be ethical and still be competitive if the competition or the industry doesn’t support such actions.

The greatest danger for any company is to avoid all ethical considerations, running the risk to cause injuries to either employees, shareholders, clients or society; all of them critical for the survival of the company. Because of this companies have to engage in ethical discussions, and the more proactive they do it, the higher their chances to come on top and make significant decisions.

I believe most of us have faith in a capitalist system that keeps ethics as a priority, but much work is needed to understand precisely how expectations are assigned and how can we use them to improve the system. I’ll like to bring forth a fresh perspective on this in the next episode.

NEXT: S1E8 – D Extended accountabilities