Strong code of conduct of business and personal ethics is important for all subjects engaged in managerial activities. This is especially true with regard to the CEO’s of the companies. CEO’s decisions affect the success of the company as well as lives and well-being of the employees. Thus, the higher is the position of a person within the company, the more effort he or she should invest into developing balanced ethical decisions and take into account the interests of all stakeholders (Brooks & Dunn, 2009). Personal and business ethics go hand in hand, and even the “intuitive” managers should develop consistent models for solving ethical problems, in order to avoid ineffective decisions (Hartman & DesJardins, 2007). The purpose of this paper is to consider the case of personal crusade of Gino Duncan, CEO of DM Bicycle Company, to analyze whether he has gone too far in his decision to invest into fighting the Batten disease, and to consider whether Carolyn Bridges, HR director of the company, should try to stop him.
Analysis of the case study
The background of the case is the following: during the conference devoted to planning the company’s budget for 2011 year, Gino Duncan announced that the revenue would be split between DMBC’s CSR company against the Batten disease and bonuses of employees. This decision, apart from its positive social consequences, also meant that employees would not have pay raises and would get rather modest bonuses for increased performance and hard work. In addition to this, DMBC already had a CSR program called “The Ride for Life”, aimed at reducing child obesity, and this program has become very successful. The new decision implied that this program would be suspended.
In this case, it is possible to trace three ethical dimensions. Two ethical dilemmas are related to Mr. Duncan. First of all, he has a clear dilemma raised by personal goals (finding a cure from Batten disease for his daughter) and corporate goals (providing higher pay and incentives for employees, supporting existing CSR programs, staffing up as a result of increased production, etc.). Mr. Duncan clearly made a decision in the favor of personal goals, but the ethic and consequences of this decision is highly questionable. The second dilemma is related to governance: is Mr. Duncan empowered to make such significant course changes alone, or should he take into account the opinions of all stakeholders and ask experts in different areas for assistance? Again, Mr. Duncan chose to make a very important financial decision on his own, raising serious ethical concerns. Finally, there is a third ethical dilemma which has emerged for Ms. Bridges. She can try to dispute Mr. Duncan’s decision, risking to hurt his fatherly feelings and here her personal sympathy for Mr. Duncan’s daughter are in conflict with the corporate need to develop a more balanced decision. All these dilemmas will be considered in the case using key ethical approaches and frameworks.
Key ethical approaches
The major approaches in business ethics are virtue ethics, utilitarianism, deontology and libertarianism. Let us consider the above-mentioned ethical dilemmas using these approaches. Utilitarian approach focuses on the consequences of the decisions and their effect on the company (Beer, 2010). From utilitarianist perspective, the decision of Mr. Duncan is clearly wrong since it will lead to lower motivation of the employees and will end a successful CSR program which might be one of the reasons of immense financial success of DMBC. From this point of view, Mrs. Bridges should necessarily try to stop the CEO and provide the necessary reasons. Most likely, the financial results of Mr. Duncan’s decision are going to be destructive for the company.
Deontological approach is based on the set of rules which are “due” (Nash, 2010). From the perspective of this approach, it is not possible to make the decision regarding the dilemmas, because, on one hand, social rules dictate that CSR programs and financing medical research are inherently good; on the other hand, key values in this approach are the freedom and autonomy of a person (Trevino & Nelson, 2010), and Mr. Duncan’s decision clearly overrides these rights of the employees and other managers. Since the latter issue relates to key assumptions of deontology, from this perspective a slight prevalence is given to the situation when Ms. Bridges decides to stop Mr. Duncan. The same can be said with regard to libertarian approach, which suggests that human rights and liberties are the ultimate value (Hartman & DesJardins, 2007). According to this approach, all employees have equal rights with regard to revenue distribution, and Mr. Duncan clearly violates these rights with his decision. This approach does not impose obligations, and thus the first ethical dilemma is also resolved not in favor of Mr. Duncan. From libertarian perspective, Ms. Bridges should oppose the new CSR policy, since it is a rights violation.
However, the approach of virtue ethics clearly justifies the actions of Mr. Duncan. According to virtue ethics, not the actions or consequences of actions define the morality, but the virtue of a person making the decisions (Trevino & Nelson, 2010). Mr. Duncan has chosen the most virtuous way – to help dying children, and from the perspective of virtue ethics, Ms. Bridges should not try to stop him, as it would be non-virtuous.
Thus, different ethical approaches yield different results, and it is quite a complex task to choose which approach should be adopted in this case. The evolution of personal and business ethics has led to the STAR synergy framework, which allows to make ethical decisions in ambiguous cases. Analysis of the current case using the STAR approach is presented in the next section.
Synergy STAR approach
Evolution of approaches to business ethics and classification of these approaches is shown on Fig. 1 (Robinson & Davidsson & van der Mecht & Court, 2007). These different views on ethics combine business and ethics dimensions classified according to the dependency and absolutist divide, and according to the styles of managing and the incorporation and implementation of values (Nash, 2010)
Figure 1. Evolution of personal and business ethics dimensions (Goleby, 2011)
As a result of considering multiple stances of business ethics, business synergy STAR approach has emerged (marked as yellow at the previous scheme). This method allows to break the ethical dilemma into the components, such as the desired outcome, necessary considerations, usually representing the business and ethical sides, and respective pre-requisite actions for both considerations. The STAR logic is illustrated by Fig. 2 (Robinson & Davidsson & van der Mecht & Court, 2007).
Figure 2. Business ethics synergy STAR
(Robinson & Davidsson & van der Mecht & Court, 2007)
Let us analyze the case of personal crusade of Gino Duncan according to this framework. His objective clearly is to invest into saving the lives of children with Batten disease. The business condition X is the economic perspective of DMBC and keeping the workers motivated. The ethical Y condition is to help the community by taking a CSR initiative to help the dying children. Both conditions are necessary to reach the desired outcome; this is clear for condition Y, and for condition X simple economic reasoning shows that if Mr. Duncan does not pay attention to motivation of the employees and creating a sustainable strategy, the company will be unable to finance the initiative in the long-term perspective.
Action Z relates to the distribution of the budget performed by the company (employees and other major stakeholders). Action –Z implies the transfer of half of the company’s annual revenue to CSR initiative. It is clear that lines X-Z and YZ contain contradictory actions and consequences.
Possible solutions lie on these diagonals and involve alternative solutions which might mitigate the controversies, and result in a balanced decision (Flynn, 2008). The line X-Z is focused around the problem of revenue distribution, and, in my opinion, the employees and managers cannot stay equally motivated and show the same high performance if they cannot participate in the decision-making. Thus, the first thing Mr. Duncan has to do is to develop a certain decision-making procedure which would allow other stakeholders to make an influence on the final decisions. Furthermore, the line YZ contains a controversy between the wish of most employees to take control of their part of revenues, and the need to invest into financing the new CSR initiative. Again, it is possible to introduce a compromising approach here: Mr. Duncan could arrange a charitable procedure where the employees could make their possible contribution to fighting the Batten disease, either by actions or financially. This will keep the image of the company as of the best employer, and allow people to feel generous. Taking into account the great sympathy of the employees for Mr. Duncan and his daughter, this way might result in comparable investments into CSR campaign, and would even raise the motivation of the employees. Moreover, this decision is consistent in the long-term perspective, compared to the original idea of Mr. Duncan
Analysis of similar cases
It is possible to determine several cases similar to the analyzed one, where the final outcomes differ basing on the ethical character of the decision. The first case is related to Aaron Feuerstein, the CEO of Malden Mills, who put the well-being of his employees above his own economic well-being (Flynn, 2008). After the fire happened at Malden Mills, Aaron Feuerstein announced that he would pay his employees full wages during 90 days, and benefits during 180 days, which cost $25 million total for the company (Bloom, 2004). This decision, which seems inherently ethical, has significantly damaged financial effectiveness of the company. It was three times called to bankruptcy court, and haven’t yet managed to recover to the final level (since 1995). Instead of 3,000 employees only 1,000 worked at the Polartec, former Malden Mills in 2007. Here the choice of purely ethical decision led to loss of 2,000 working places in the long-term perspective, which can be considered as a bigger loss than 90 days of low wages or absence of payment. This case illustrates that purely ethical decisions might lead to negative long-term consequences, and that such decisions should be only done after a serious consideration and economic analysis.
The second case is about Citicorp Building. This company is situated in a skyscraper designed by a know n innovator LeMessurier (Fewings, 2008). For this building, he created a new bracing system, which was very cost-effective. Already after the building was opened, a student has found a flaw in the design which could result in collapse of the building in case of a hurricane. The architect approached Citicorp and reported about the additional work on strengthening the building. The cost of extra work was $4 million, and the architect had to pay a heavy insurance claim (Fewings, 2008). Although LeMessurier was afraid that these actions would damage his reputation, this did not happen, and the public trust for him has even increased, and his reputation was enhanced.
Both of these cases demonstrate the domination of personal values and decisions on the economic considerations. However, in the first case the decision based on ethical premises led to a failure of the whole company, and in the other case ethical actions led to positive consequences. This difference shows the importance of the balance and consideration of long-term consequences of the actions. LeMessurier managed to foresee key long-term implications of his actions, while Aaron Feuerstein put his ethical code above reasoning.
Analysis of the case of personal crusade of DMBC CEO that there are three ethical dilemmas, related to the decision of Mr. Duncan. The majority of approaches to business ethics show that his decision is not consistent with ethical frameworks, although his reasoning is apparently based on virtue ethics. Thus, Ms. Bridges should interfere and explain the scope of consequences of this decision.
STAR analysis of the situation has shown that there might be alternative ways of reaching the organizational outcomes. It might be useful for Ms. Bridges to present this framework and alternative solutions to Mr. Duncan, since this would make her position more constructive. It is possible to recommend to Mr. Duncan to let the employees and stakeholders participate in the distribution of revenue, and ask them for help regarding the new CSR imitative. Most likely, the employees will agree to help their CEO, especially if they could do this on anonymous basis (to eliminate the effect of the “big Brother”). These actions are likely to result in slightly less impressive achievements in the short-term perspective, and to significantly better results in the long-term perspective, which is preferred in this situation.
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