Moral Problems

Moral Problems in Business Management

Moral problems occur frequently in business management. They extend far beyond the commonly discussed issues of bribery, collusion, and theft, reaching into such areas as corporate acquisitions, marketing policies, and capital investments. A large corporation has taken over a smaller one through the common practice of negotiating for the purchase of stock. Then, in merging the two firms, it is found that some of the positions in one are duplicated in the other. Is it “right” to fire or demote executives holding those duplicate positions, many of whom have served their respective firms for years? A manufacturer that has grown rapidly in an expanding market was helped greatly during that growth by wholesale distributors that introduced its products to retail stores. Now the market has become large enough to make direct distribution from the factory to the store in truckload lots much less expensive, and the market has become competitive enough to make the cost savings from direct distribution much more meaningful. Is it “just” to change distribution channels? A paper company in northern Maine can generate power and reduce its energy costs by building a large dam on land that it owns, but the dam will block a river that canoeists and vacationers have used for years. Is it “fair” to ruin recreational opportunities for others?

“Right” and “just” and “fair” are moral terms. They express a judgment about our

behavior toward other people that is felt to be morally correct. We believe that there arere “right” and “wrong” ways to behave toward others, “just” and “unjust” actions, “fair” and “unfair” decisions. These beliefs help to form our moral standards of behavior. They reflect our sense of obligation to other people, our feeling that it is better to help rather than to harm other persons. The problem, however, is that frequently it is difficult to avoid harming other people, and this is particularly true in business management. Why? Various groups are involved in business––managers at different levels and functions, workers of different skills and backgrounds, suppliers of different materials, distributors of different products, creditors of different types, stockholders of different holdings, and citizens of different communities, states, and countries––and benefits for one group frequently result in harms for others.

Moral Problems in Business Management

We can illustrate this problem of mixed benefits and harms with examples from

the introductory paragraph. It would seem “wrong” at first glance to fire executives who happened, through no fault of their own, to hold duplicate positions in the merged firms. Yet, let us assume that the two companies are in a very competitive industry and that the basic reason for the merger was to become more efficient and better able to withstand foreign competitors. What will happen if the staff reductions are not made? Who will be hurt, then, among other managers, workers, suppliers, distributors, creditors, stockholders, and members of the local communities? Who will benefit if the company is unable to survive? Even if survival is not an issue, who will benefit if the company is unable to grow or if it lacks the resources necessary for product research and market development? The basic questions are the same in the other two examples. Who will benefit, and how much? Who will be penalized, and how greatly? These are easy questions to ask, but difficult ones to answer. In many instances,   fortunately, alternatives can be considered. Duplicate managers, instead of being fired, might be retrained and reassigned. Inefficient distributors are a more difficult problem, though a place might be made for them by introducing new products or developing new markets or allowing them to participate in the new distribution processes. The dam across the waterway poses the most difficult problem:

It either exists or it doesn’t, and making it smaller or putting it in a different location does not really resolve the dilemma.

Moral problems truly are managerial dilemmas. They represent a conflict between an organization’s financial performance (measured by revenues, costs, and profits) and its social performance (stated in terms of obligations to persons both within and without the organization). The nature of these obligations is, of course, open to interpretation, but most of us would agree that they include protecting loyal employees, maintaining competitive markets, producing safe products, and preserving environmental features.

Unfortunately, the dilemma of management is that these obligations are costly,

both for organizations evaluated by financial standards and for managers subject to financial controls. The manufacturer that distributes directly from the factory to

stores will be more profitable and better able to withstand competition than the

manufacturer that ships to wholesale warehouses for additional handling and transport.

The salesperson, to use a new and more troublesome illustration, who gives

small bribes to purchasing agents will have a better record and receive higher

commissions than the salesperson who refuses to countenance unethical payments.

The design engineer who finds questionable ways to sharply reduce material costs is more likely to be promoted than the design engineer who places product quality and consumer safety above cost considerations. The plant manager who dumps toxic chemicals out in back of the plant will show greater profits than the one who pays for proper disposal.

Some of these problems doubtless appear very clear to you. Others may seem

much more debatable. Frequently there is a balance between the financial outcome and the social impact of an organizational decision or action, and the dilemma of management comes in attempting to find the point upon that balance that is “right” and “just” and “fair.” The purpose of this book is to examine the factors that enter into that balance and to consider a very specific analytical structure that should help.