Business Ethics - Profit Distribution Problem
surferdude
Posts: 2,057
Imagine this scenario. You are the owner of a company that has been losing money for the past few years. You've drawn on both a personal and a company line of credit to keep the company solvent and meet payroll. Your staff are all paid at or above market average.
You've spent considerable time coming up with a new business plan. You've come up with a plan you are sure will work that will involve investing in technology and additional staff. You invest a considerable amount of your money, have had a few private investors commit some money and have given allyour employees a chance to invest but no employees do invest.
Three years later your plan has been a fantastic success. Not a single employee has been asked to do more than they previously were as the plan included hiring new staff.
Do you feel obligated in sharing the new huge profits with your staff? Do you feel the government should obligate you to share the profits with the staff?
You've spent considerable time coming up with a new business plan. You've come up with a plan you are sure will work that will involve investing in technology and additional staff. You invest a considerable amount of your money, have had a few private investors commit some money and have given allyour employees a chance to invest but no employees do invest.
Three years later your plan has been a fantastic success. Not a single employee has been asked to do more than they previously were as the plan included hiring new staff.
Do you feel obligated in sharing the new huge profits with your staff? Do you feel the government should obligate you to share the profits with the staff?
“One good thing about music,
when it hits you, you feel to pain.
So brutalize me with music.”
~ Bob Marley
when it hits you, you feel to pain.
So brutalize me with music.”
~ Bob Marley
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Comments
R.i.p. My Dad - May 28, 2007
R.i.p. Black Tail (cat) - Sept. 20, 2008
Absolutely not. It was my investment and after giving the employees the ability to invest, if they opted not too than its not my problem.
Also if not a single employee is asked to do more than before than definetly no, they should not reap any of the rewards.
bonuses= doing more work. IF they do more than expected than of course they should receive a bonus.
Your bonus idea is a nice idea. Where I work bonuses are not so much tied to company performance as personal performance. They want to reward a person for excelling at their job during lean years as well as bumper years.
when it hits you, you feel to pain.
So brutalize me with music.”
~ Bob Marley
Like Jane said, loyalty is gold... while they didn't invest financially in the company, they invested their hard work, loyalty and effort in a company that was heading in the wrong direction.
A bonus or a raise would be a nice "thank you" for sticking it out, and maybe some more motivation.
was like a picture
of a sunny day
“We can complain because rose bushes have thorns, or rejoice because thorn bushes have roses.”
― Abraham Lincoln
Just trying to understand why an employer should pay a premium to an employee for sticking with them during lean times when during the whole lean period the employee was still being paid at or above market average? What sacrifice or risk was the employee making to merit this bonus? The employees could have had no idea of the financial situation if the company was privately held. They certainly wouldn't know that the employee was drawing on his/her own personal line of credit to keep the company going.
It almost makes more sense for the employees to give the employer a bonus for the risks and sacrifices made by the employer by not cutting jobs, paying at or above market and ensuring payroll was always met during the lean years.
when it hits you, you feel to pain.
So brutalize me with music.”
~ Bob Marley
So they all leave before buddy gets the act together and they can snub their noses as they toss quarters to him on the street. Everything is relevent.
You didn't say that the employees had no idea of the financial situation, which I find is almost impossible. I've never worked for a company where rumors and gossip didn't go around, so unless no one else saw the books, they would know that something wasn't going well (especially if you asked them to invest).
Like I said before, I've been with a struggling company, and moral isn't good. Not knowing if your job will exist next week is a pretty stressful situation.
Employees aren't robots, if they are working for years (even at a good wage), and all of a sudden the company strikes it rich, and they don't see any of it, then they will quickly resent the management/owners.
I'm not sure what the point of this thread is... you ask people what they would do in that situation, then you try to change their minds.
was like a picture
of a sunny day
“We can complain because rose bushes have thorns, or rejoice because thorn bushes have roses.”
― Abraham Lincoln
Im working on a sinking ship right now ( mortgage industry). But i wouldnt expect a raise or a bonus if i dont put more time in and effort.
No. Why should I?
No. Why should they?
Yet, you will surely agree the cost of living raise for no good reason though, well your pay is stagnent? Makes super sense.
I feel obligated in growing a vegetable garden and drinking clean water from a well.
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Certainly! But, at least in my interpretation, the operative word was obligation. An obligation implies only one appropriate path. A singular path, arrived at by choice, implies a singular purpose. The purposes of Mr Business Owner in the example may have nothing to do with a "happier workforce which in turn is more creative, productive, and safe".
when it hits you, you feel to pain.
So brutalize me with music.”
~ Bob Marley
In the end it comes down to how important keeping good, happy employees are to you as an owner or a manager. A lot of people think that it's important, but you don't seem to. It's all in your business/management philosophy I guess... There is no right answer, just different views/approaches on what makes a company run better.
was like a picture
of a sunny day
“We can complain because rose bushes have thorns, or rejoice because thorn bushes have roses.”
― Abraham Lincoln
wouldn't that be a better case study then one where you skew everything towards the responses you want?
when it hits you, you feel to pain.
So brutalize me with music.”
~ Bob Marley
^^^ That's food for thought too. I own a small business. While I don't technically have employees, I have contract workers, who cover some of my work as subcontractors. I treat them as well as possible, and I do give bonuses. I work my own ass off, and they do just enough to help me keep the business running. Without them, I couldn't afford to be the size I am (I'm not huge, but I can pay my basic life expenses and can cover my pearl jam and other band/music habit). If my subcontractors feel dissatisfied, they can take on other work instead of the work I have for them. So I treat them well. I guess as a business owner, I feel that I *should* be more invested and put in more effort than I expect of others, because while I think I'm generous, it is not a collective - I pay them set fees (and I limit the amount of work I give them, to only what I can't cover), and I keep the rest. It serves me to pay them bonuses. While I am generous, I do it to help my business.
R.i.p. My Dad - May 28, 2007
R.i.p. Black Tail (cat) - Sept. 20, 2008
i've never heard of a bank losing money where the ceo puts in his or her own money ... u gotta be kidding me?? ... exxon?? ... since when are these industries on lean times where only one person makes a sacrifice?
Umm...I think you're simplifying some very complex companies and actions. None of the above really mirrors the story you laid out in the beginning of this thread.
I agree with your ethical conclusions here. However, I'm now wondering how you arrived at them.
Working for one of the majors here in Cda. I will attest that not all employees get treated very well.
when it hits you, you feel to pain.
So brutalize me with music.”
~ Bob Marley
Right and very well have a large margin between them. And with the amount of employees they do employ I would imagine that not all are treated very well.
I do enjoy my job and the perks.
What are you even talking about?
If nobody gets raises. Why would or should the cost of living have to go up. Get it now? You say nobody warrants a raise. Well then the rest is elementary.
The answer seems quite obvious to me, surferdude, and I think that is what you are getting at:
I would not feel obligated to share the new profits. The simple fact is this: risk and reward are proportional. If I take all of the risk in investing my own hard-earned capital, I should receive all of the reward.
Conversely, if the project had been a flaming failure and I lost all of my money, I would not expect the employees to share the debt burden.
This seems to be a simple shareholder equity issue: if the employees decide to buy stock in your company, they deserve the rights of a stockholder. If they don't buy, they don't get rights as a stockholder.
I would find any other arrangement to be a perverse understanding of economics.
-Enoch Powell