Can fat cats and ethics go to work together?
Updated: Apr 23
Today at work
The following observations, recommendations and commentary are a representation of my first hand experience as a headhunter and executive coach. I enjoy being part of the commercial environment, its dynamic and challenges and I am constantly intrigued by how the ‘actors’, the employees, must change and adjust their behaviours to adapt to these challenges. Corporate processes have been greatly enhanced by new technologies and, when linked to the emergence of globalisation this collectively has created a fast-forward environment which means employees must constantly re-skill and adjust their mentality to cope and synergise with this phenomenon.
From the employer’s perspective it means that real economic predictions are unreliable, volatile and future strategic plans become future strategic guesswork. This reality has also caused a structured dislocation within the commercial arena. The lines indicating executive accountability and responsibility have become blurred and are frequently replaced with inaction and apathy. Who cares? Are work values changing?
I have recently attended an MBA student conference as an invited adjudicator where each of the 80 full-time cohorts made a 10-minute presentation on disparate subjects. It was interesting that 30 per cent of the students chose Corporate Social Responsibility or a derivative of CSR as their subject topic, thus mirror imaging the current concern about excessive pay awards, whistle blowing and unwarranted expense claims by public servants. I interpreted this as an indication that our future leaders will not accept the culture of wealth creation as the only commercial life goal. Capitalism is currently in the dock having caused the largest corporate failures in recent history.
Commercial climate change
Historically western governments abandoned the promotion of nationalisation citing it as the model for inept management, self-serving employees and financial waste. It was proffered that the monopolistic status, the lack of competition and the ‘captive audience’ syndrome did not encourage or promote the drive for greater efficiencies and higher performance. Yet we have also seen governments denying these structured endemic weaknesses and instigating involuntarily, they would say, the re-nationalisation of some of the world’s most important and powerful financial organisations. The strategy is now viewed as our commercial saviour not as our economic demise. In this roller coaster environment of recommendations and contradictions it is difficult to highlight an ethic that could be the role model to lead us out of what appears to be a hedonistic maze.
Are work values relevant?
Candidates whom I interview and coach are seeking a sea change of value. Money rules OK is no longer acceptable. The narrow focus of elevating profit as the exclusive and ultimate achievement is outdated and unrepresentative and voting excessive monetary rewards for excessive incompetence will I believe no longer be tolerated in a more informed and participatory commercial society. Ethics is a topic that is much discussed but not often applied prescriptively. Sceptics might say that we only wheel out ethics and promote the more altruistic theories in bad times only to revert to ‘normal’ when the good times return and we can again concentrate on what comes naturally – earning more money.
Understandably one might say that the title is incongruous, oxymoronic and irrelevant since ethics does not go to work. It would be difficult to imagine a board or senior management team which is wrestling with a strategic decision regarding expansion referring to their Aristotelian Handbook of Management or their Socratic Guide to Profitable Growth. Ethics does not do corporate computations but it may offer a moral framework which if adopted can be applied to real situations. It offers a choice of prescriptive deontic theories or in contrast virtue-centric theory which concentrates on the habitualisation of good moral behaviour to develop a virtuous character.
So we conclude then that we have a patient and a potential cure but finding a connection for collaboration is the real challenge. I believe I can identify a bridge that will create a link whereby ethics can go to work. To do so I will describe in brief the most common theories and then elaborate on the commercial platform to which these could be applied.
Whilst studying philosophy at Heythrop College University of London we delved semantically into heavy debate on the many nuances of the subtle distinction between and within ethical theories and their applications. The following descriptors highlight the most common.
Utilitarianism purports that moral value is determined by what creates the most happiness for most people. Jeremy Bentham and John Stuart Mills are its best-known proponents. This is a consequential theory. Relativism would say that moral judgement is dependent on many variables particular to each situation. This is in contrast to absolutism or universalism which promotes the idea that there are certain issues on which there is common agreement regardless of creed, race or culture. This is similar to Kantian ethics and its application of the categorical imperative to describe goodness of action. Kant supports the concept of obligatoriness that is critical to defining duty, the central component of deontological ethics as distinct from the teleological perspective, which regards the consequences of an act as the determinant for it being good or evil. Virtue theory is a branch of moral philosophy which emphasises the virtuous character development as its ethical goal. We could say that deontic theory is the moral handbook whilst virtue ethics is the guide to good moral character. Deontic tells us what to do and virtue tells us the spirit in which to do it.
I view these theories as highly integrative and their recommendation often replicates the unspoken moral consensus in the business arena. Ethics can be perceived as overly introverted and introspective and the fact that moral philosophy has a strong appeal to the academic community rather than the business environment means that there is a perceived disconnection. ‘Ethics needs to get out more’, is a familiar comment. Sounds great but can it work? Ethics is now frequently used in the aspirational context. We agree we should apply it but are not sure how it fits. Morality and ethics span all religions, creeds, cultures and traditions. We all agree that focusing on the right, the wrong, the good and bad is relevant to all peoples. Applying it is the challenge.
I support virtue ethics as the foundational framework to determine right against wrong and I view normative ethics as the moral signposts for right decisions and right action. I am not a supporter of the separative discussions where utilitarianism, relativism and Kantianism are viewed in isolation or where the merits of deontology are pitted against absolutist, consequentialist or teleological theories. I perceive these demarcations as academic and not reflective or representative of the diversity of human behaviours which does accommodate such moral segmentation. The primary concentration of virtue ethics on self-development seems right, and facilitating that development by selectively choosing from a suite of theories also seems right in the determination process for moral discussions and behaviours.
So we can take virtue ethics to work and strategically apply one or a combination of the other theories to arrive at a moral framework for action. Moral frameworks must allow for individualism and diversity in the solution of moral challenges. In the following section I shall endeavour to apply ethics to today’s management structures.
Management theories-stakeholder versus agency
Highly efficient, considerate and competent management must be the ultimate goal for any organisation. This paradigm becomes the role model for staff creating a positive attitude, which inevitably motivates and permeates all the lower management structures. The corollary must be a happy staff, good profits, contented shareholders, strong corporate social responsibility, compliance and funds to spend on social projects and environmental sustainability. This is a good example of an organisation that embraces the Stakeholder Theory incorporating and integrating the social, economic and environmental components. Contrast this with the Agency Theory which concentrates primarily on shareholder value and individual management reward. The narrow self-serving focus and perspective does not bode well for other stakeholders. I believe that the more collaborative stakeholder theory will in future be more actively promoted and implemented throughout the working world. Isolationism, individualism and greed are being superseded.
Environmental ethics and sustainability have burst on to the world stage as very inclusive topics. Inclusive in the sense that they appear to be relevant to all nations and in that the actions of any nation can have a global rather than parochial effect influencing human flourishing positively or negatively. Today we are all called to be stewardships of our environment. Previously we could be passive actors. We could go to work and not care. Now we do not have a choice. We must act to repair. We must act to improve. This is the moral backdrop for my recommendations.
My ideal management structure without fat cats
A management board should comprise a maximum of 20 members or directors. The number will be dependent on the size of the company. An SME might appoint 5 to 10 members and a large multinational might appoint the full complement of 20. The Executive Board The management board will determine strategy and encased policy and will have the ultimate responsibility to ensure that the organisation embraces and achieves its multifaceted goals within its Stakeholder Theory. Report and Accounts will also be their remit and they will elect and rotate the appointment of CEOs annually by secret ballot. If we can determine a moral minimum wage then we can determine a moral maximum salary.
The directors will be paid equal amounts of annual salary to a maximum of £1,000,000 and a 10 % company pension contribution. There will be no other salary benefits. The maximum salary will correlate to a net income of approximately £50,000 per month and that figure will dispel some current myths involving supply and demand. A salary of £1 million will attract the best management talent – talent which promotes the philosophy of co-operation and collaboration where there is no room for egoism or high profile promotion. The structure will attract team-orientated executives whereby there is no self gain for creating short-term share value spikes, but rather a corporate focus of developing long-term sustainable value for the benefit of all stakeholders.
The management board members are the thinkers and planners and their experience will demonstrate this expertise. However as we trade in a fast-forward dynamic environment the board’s real expertise will be its ability to function collectively and produce integrative solutions which are fair, equitable and fit for purpose. Dynamic markets mean that flexibility and adaptability are critical in strategic management. If the management board members are the thinkers and planners, a subsidiary tier of operational executive managers will constitute the operations board. The management Board - these are the doers. Their pay structure will be 30 % less than the management board and, excepting these differentials, the terms will be similar. Again, there will be no performance-related or personal bonus or commission orientated pay schemes. At this executive level it is expected that managers will exert maximum effort at all times in the fulfilment of their roles. If any executive requires further remuneration to inspire extra effort, then culturally this self-serving attitude would not be conducive to our management model of collaborative corporate focus.
Each operational executive will report to an individual board member who will act as their manager and mentor. Operational executives will be invited to make periodic presentations to the board to ensure that they are up to date on all developments. This reciprocal dialogue will help to develop a co-operative team culture and promote real responsibility, thus ensuring that the organisation trades profitably, promotes best management practices, adopts supportive and sympathetic staff policies and courageously implements innovative, ethical projects to develop local community cohesion.
Remuneration and where less can be more
In my model of corporate structure I have deliberately capped salary growth and from my experience specified an amount which to the vast majority of employees is considered very generous. Multimillion pound rewards are untenable and in terms of worth or value cannot be justified nor are they ethically sustainable. ‘To obtain and retain the best you must pay top dollar’. This means that salary is in proportion to candidate calibre. This is a deleterious policy which promotes the aberration of real values and encourages the myth that there is a correlation whereby paying an executive the highest reward will guarantee the highest corporate performance.
If you set up your own business as an entrepreneur incorporating the risk of failure and personal financial loss, then corporate society would wish you well and consider your multimillion profits well deserved. The recent catastrophic corporate failures have highlighted the anomalous practice of rewarding executives multimillion-pound packages for monumental incompetence. Blaming the adverse market for the failure and citing it as a factor beyond the executives’ control is only credible when we allocate the same criteria to successful performance i.e. it is not the individual but the positive trading conditions. Excessive pay awards undermine the ethical practice of fair distribution, particularly when social requests are refused because of ‘lack of funds’ or employees are being made redundant to reduce overheads.
During the economic halcyon times we experienced the deification of CEOs and the contribution of record profits to their personal expertise at the expense of fellow directors, the other 47,500 employees and the corporation’s expertise and reputation which has been established since perhaps 1942. Social justice dictates that entitlement must be fair and balanced. If an excessive performance warrants an exceptional reward, then an excessive failure must dictate an exceptional refund.
The challenge for ethics
I have briefly described the Stakeholder Theory and its wide-ranging structure and its promotion of communalism. Historically, profit making has been the singleminded focus of organisations. Activities that did not have a positive effect on the bottom line have been viewed as irrelevant and disposable. I have definitively specified a limitation on financial reward for any executive as a corporate director. Constantly we read sensational headlines and hear a lot of moral huffing and puffing: fat cats, greedy directors, overpaid, not earned, cap their income; and then we wheel out the cliché: ‘To get the best we must pay the best’. But since that dictum caused so many corporate failures we must stand back and look anew and know that executive skills, however good, are limited and finite and financial reward must therefore synergise with this very obvious fact. Finding the synergy will be one of ethics’ ultimate challenges.
In my role as a recruitment consultant and executive coach I observe a greater call for transparency and accountability. The demise of Enron and Lehman Brothers which were held as the bastions of their industries, has generated much debate on the abuses of capitalism. Yet has their demise taught us any lessons? Has it changed the way we operate and manage large corporations? I haven’t noticed. I do notice lots of reports such as the Cadbury, Greenbury, Turnbull, Higgs and Tyson, recommending guidelines for directors’ remuneration. Recommendations that are vacuous in terms of detail or application; platitudes of good intent that will not curtail an ulteriorly motivated board determined to vote through magnanimous bonuses.
I believe that the real challenge is how to adopt a new approach that incorporates and promotes ethical practices as the moral framework which must be seen as localised and workable. World news and globalisation create this over-magnification whereby the issues are so complex and individually irrelevant that it can encourage moral detachment. For ethics to be at work, it must be at my work.
Can Ethics be at my work?
I want a board that is considerate, fair and competent and one that I can trust and which has an altruistic approach to management. I want management to have the courage to fulfil its deontic, fiduciary obligations and ensure that the organisation is compliant in terms of its statutory and regulatory responsibilities. I want all acts to be encased within good Corporate Social Responsibility recommendations, including the instigation of philanthropic policies and practices such as sponsoring minibuses to transport elderly people within the local community; helping to implement reading programmes at local schools; establishing family-friendly work patterns; allowing sabbaticals for staff without loss of career status; adopting a recycling of waste policy throughout the organisation; setting up review committees comprising all stakeholder bodies, management staff , shareholders, contractors, local schools, care homes, hospitals and local councils. I want all employees to be paid competitive salaries and the board to adopt the recommended ‘My Ideal Management Structure’. I want my employer to adopt the Stakeholder Theory, respect the premise that we are all equal partners with collaborative interests and promote environmental projects that have a sustainable theme to enhance the enjoyment of residents. I want to work for an organisation that values my skills and contributions and conversely one which I value as providing an environment that is atmospherically motivational and professional and which promotes, encourages and acknowledges effort. I want the board and all employees to adopt and practise the Aristotelian cardinal virtues of prudence, tolerance, justice and courage as a decision-making model.
Each employee must take responsibility for their actions, ensure that their judgements are wise and informed, that they respect diverse opinion, promote fairness and have the courage to take unpopular decisions. The adoption of these recommendations, which incorporate the deontic, teleological and virtue theories, clearly creates moral cohesion and means that ethics and I can positively go to work together.
Are Fat Cat and Ethics happy partners?
Ethics is needed for the climate change issues to enable global leaders to reach collaborative conclusions. Ethics is needed for organisations to interpret and integrate those recommendations within their Corporate Social Responsibility Policy and practices which must incorporate sustainability. Ethics is needed so that directors have a true unselfish guide that focuses on the good for all and not the good for a few. Ethics is needed so that we can apply and embrace technological advances as facilitators and promoters of human enhancement. It will guide the technology in the development of moral software to ensure ethical outcomes. Does ethics go to work? As a headhunter and coach I think ethics would be top of my shortlist of candidates.