Ethics in an Economic Recession

by Dr. John Throop, The Summit Group

Our nation is facing tough economic times that require difficult decisions for policy makers, employers and families. Frequently, the focus is on money and its availability and use. In the last decade, we enjoyed great prosperity in the global marketplace, but at the same time, we also gave into greed and excess, speculating on market conditions and spending money beyond our means. In the credit crunch, small businesses and large companies alike have been strapped to keep the flow of goods moving, which, in turn, has a chain of effects on people in many walks of life. Even for those who have managed pretty well in the downturn, there is a reluctance to shop, travel or invest until signs appear that the recession is easing.

Many ethical challenges have presented themselves in a variety of ways in this recession. Economic decisions have always had ethical implications, but so many lives are now more directly impacted that the ethical challenges have become even clearer.

For example, how does a company deal ethically with layoffs? The decisions that executives and managers reach about “reductions in workforce” reflect their views of workers. Are they people, primarily, or are they commodities or units of production”? Do we decide to lay off workers for short-term economic gain, to align production with demand on a temporary basis, or to restructure the business entirely—which, alas, has human casualties?

To Caterpillar’s credit, for example, plant closings in January were brief in scope and affected only certain lines of production. The size of the permanent workforce—especially of skilled workers—has been kept in place for the most part. Contracted workers are laid off before permanent workers, since permanent workers are of greater value to the company, and union contracts are honored. Even when more permanent layoffs occur, it is for production adjustment, not for the export of jobs to lower-paying economies overseas.

Contrast that with Republic Glass in Chicago, which laid off workers and closed down the plant without ensuring back pay, vacation pay or any healthcare coverage until the national media highlighted the worker sit-in at the plant. Banks that supplied the company’s credit determined that the workers needed their compensation in all fairness.

Another ethical issue was underlined by the insurance giant AIG in its use of the $700 billion taxpayer bailout of the financial services and insurance underwriting industries. Formally or not, elected officials and policymakers were clear that excessive executive compensation or bonuses should not happen with these tax dollars. So AIG officials chose to reword the extra money paid to executives as “retention fees.” How likely were they to find other work so that they would have to receive a “retention fee”? How logical is that decision?

What happens when a smaller company sells out to a larger competitor? A family-owned company in suburban Chicago recently sold its operations to a larger national firm, generating a huge profit for the family. Yet instead of pocketing all of the proceeds, the owners made sure that every employee received a share. In some cases, line workers received over $100,000, based on length of service. They were also guaranteed a continuation of health insurance for a certain number of months. It would have been much easier—and much more natural—for the owners to take all they could get. In this case, the owners said that the workers helped the company to be so successful, so they deserved a share of the sale. How often does this happen? Yet it is one of the most ethical choices that exceeded even our wildest imagination.

Hard times can bring out the best and the worst in people, both in daily life and in the workplace. In recessions, we are forced to examine our most fundamental assumptions about our own lives and our own economic choices. At work, we have to reexamine the decision-making and strategic approaches that we took in better times to evaluate whether they were based on small thinking rather than strategic, long-range planning, and whether we acted out of greed rather than grace.

As we enter a new presidency and a bold new chapter in American history, perhaps we will actually have an economic policy that will help us to make better choices for ourselves and for our workplaces. Time will tell. iBi 


Source URL: https://www.peoriamagazines.com/ibi/2009/feb/ethics-economic-recession