By beginning their deliberations about compensation from the perspective of trying to create a non-arbitrary relationship
CASE (20 MARKS)
By beginning their deliberations about compensation from the perspective of trying to create a non-arbitrary relationship between contributions and rewards, not only would directors serve the cause of relative justice, they might even begin to create a more virtuous and productive sense of community among workers, managers, and owners. Here are three examples of contemporary Aristotelian business leadership to illustrate how this can happen: In 2000, Massachusetts businessman Charlie Butcher shared the proceeds of the sale of his company, to the tune of $18 million, with all 325 of his employees. He cut them into the deal proportionate to the length of their employment, giving a $55,000 check, on average, to each worker. (In contrast, and at about the same time, when Chrysler was acquired by Daimler Benz, Chrysler shareholders and executives got fat checks, but hourly workers got nothing, except reduced job security.) Over the length of his long stewardship of the company it appears Butcher had aimed to create a model work environment for employees, offering them high starting salaries, flexible workweeks, and the opportunity to switch jobs to find a personally fulfilling one. Finally, Butcher sold the company to S.C. Johnson & Co., even though he had higher offers from other companies, because the family-owned Johnson organization promised to continue the employee-friendly culture and job security he had created. In late 1996, two Taiwan-born, high-tech entrepreneurs, David Sun and John Tu, sold the Silicon Valley business they founded, Kingston Technology, to a Japanese bank for $1.5 billion. Part of the deal was that Sun and Tu would continue to run the business, and reinvest a half-billion from the sale in the company to fund future growth. That was unusual, but what truly was surprising about the deal was that Sun and Tu divided $100 million of the remaining windfall, ten percent of the sale, among their 523 employees. Significantly, Sun and Tu had been sharing ten percent of the company’s profits with employees all along. They also practiced a highly egalitarian and participative form of management in which all employees had a chance to contribute their full talents to the company. Why did they behave in such an unusually virtuous manner? “The issue is really not money,” Tu told the New York Times, “it’s how you respect people and how you treat them. It’s all about trust, isn’t it?” The story didn’t end there. In 1998, just when the Japanese bank was due to make its last $333 million payment to Sun and Tu, there was more surprising news: The two asked the bank to forgo the payment because Kingston Technology had under-performed during the previous year. The deal was then restructured, and the postponed final payment was linked to performance measures. Why this Aristotelian display of fairness toward all stakeholders? Tu explained that profits follow in the long term when a company behaves ethically towards its partners, vendors, customers, and employees. Besides, he added, “how much money do you need?” Hourly workers spend nearly every cent they earn to pay for food, clothing, to cover their rent or mortgage, and to send their kids to college. Those needs are unremitting and constant. That’s why Aaron Feuerstein, C.E.O. of Malden Mills, kept paying weekly checks to his workers, out of his pocket, when his factory burned down in 1995 and there was no work to do for months while it was being rebuilt. Feuerstein saw the ethical difference between meeting needs and wants, and between the wealth he had in excess of what he needed and the much smaller margin between his employees’ savings and their bankruptcy. So Feuerstein paid ’til it hurt, transferring most of his accumulated wealth to his employees until they could start to earn their own keep again. Sadly, for unrelated reasons, the company ultimately filed for bankruptcy in 2001. As Aristotle said, even virtuous people need good luck. Aristotle doesn’t provide a single, clear principle for the just distribution of enterprise-created wealth, nor would it be possible for anyone to formulate such a monolithic rule. He admits it’s harder to distribute wealth than it is to make it. Nonetheless, here are some Aristotelian guidelines in the form of questions virtuous leaders need to ask themselves: Am I taking more in my share of rewards than my contributions warrant? Does the distribution of goods in the organization preserve the happiness of the community; does it have a negative effect on morale, or the ability of others to achieve the good? Would everyone in the organization enter into the employment contract under the current terms if they truly had other choices? Would we come to a different principle of allocation if all of the parties concerned were represented at the table? Again, the only hard and fast principle of distributive justice is that fairness is most likely to arise out of a process of rational and moral deliberation among participating parties. Prescriptively, all Aristotle says is that virtue and wisdom will certainly elude leaders who fail to engage in rigorous ethical analysis of their actions. The bottom line is that ethics depends on asking tough questions.
Answer the following question.
Q1. Give an overview of the case.
Q2. Give three examples of contemporary Aristotelian business leadership.
By beginning their deliberations
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