“Why did they receive bonuses when their institutions had billions of euros in losses? Why did they get large pensions after they had to be fired?” (International Bar Association, 2010, p108). A lot of questions arose when it became clear that Multi-National companies, especially in the financial sector, were giving out bonuses to employees while they received financial funds from the government or were in desperate need of financial aid.
Many people were angry with the fact that employees and highly placed bankers collected bonuses despite the fact that many believed they did not do a good job at countering the financial crisis or financial uncertainty in their firm. Some even believe these people were the cause of the whole economic instability.
Many different countries are looking for solutions to prevent companies of awarding their employees with bonuses while there is no genuine reasons for. (Watson, 2009). According to Haag and Muller (IBA, 2010), bonuses should not depend on solely the individual performance or contribution of a particular employee, but should be based on the performance of a department or even the whole institution. In this essay, I will address if an international business has the right to grant their employees bonuses, even whilst the corporation is monetarily healthy or is being supported by state funds.
To address this dilemma and view it from an ethical perception, I will use two well known theories in the world of philosophy. These are deontology and consequentialism.
Deontology is a theory that concentrates itself in making choices that are morally required, prohibited or just (Moore and Alexander, 2007).
In this case, this theory questions if multinational companies are in fact morally righteous towards their employees or morally wrong towards the public, as in deceiving the population or hiding the truth of what really happened or what has not occurred yet.
Deontologists believe in acting in the sense of the right thing to do, no so much in the judgment of the good thing to do. In other words, no matter how good an decision might be, if it would not be the right thing to do, that action should not be made.
There are two main deontological theories; Agent-Centered theories and Patient-Centered teories. The Agent-Centered theory explains that the moral choices people make are decided by personal duty and acceptance (Alexander, Moore, 2007). For example, it is a parents’ duty to treat his or her child as more important than other people, but, other adults have no responsibility to treat that parent’s child more different than anyone else. To simplify it even more, it is alright for the parent to save his or her own child even if that could be the cause of harmful or disastrous consequences for other people’s children.
In case of Patient-Centered deontology, this theory centers itself among the rights of individuals, instead of personal duty and obligation. Individuals have the right not to be used for moral good if that would be against their will (Alexander, Moore, 2007). In other words, causing harm to someone in order to do good, that would not be morally possible without permission from that person to harm him or her.
Deontologists are fond of this way of thinking because it gives them permission to keep family and friends safe even when causing danger to others. This brings a pretty big disadvantage to this theory, people can become irrational in making decisions just for the sake of having a duty or permissions to do so.
The exact opposite of deontology would be consequentialism.
A consequentialist consider this theory to be applied to situations about moral rightness of acts that solely depends on the consequences of those acts for them to be morally right (Armstrong, 2006). In other words, it an act does or does not bring out the best consequences, this means an act is morally right or wrong. “Everyone agrees that the consequences of our actions matter morally, but some people think that only the consequences matter” (Mason, 2009).
Consequentialism is one of many different diverse claims under the name of classic utilitarianism. Actually, classic utilitarianism is divided into eleven claims that creates this theory. This many claims makes this theory a difficult one to understand at first. There is one major difference between consequentialism and Deontology; according to consequentialists some we should never do whatever the consequences are. However, deontologists believe some things can be done because it is their duty to do so, even when the consequences are very negative. This because deontologists following Immanuel Kants’ moral philosophy state there are rules to be following no matter what the consequences are according to Johnson (2009).
To determine what theory does or does not apply the most towards the dilemma of this essay, whether companies are to be restricted or not from them granting bonuses to their employees. In an ideal world, the perfect solution would be the satisfaction of each side, whether that side is in favor for bonuses or not. Not granting employees bonuses at all would definitely diminish their motivation and dedication for the company, thus resulting in a less stable company. However, giving the full hundred percent bonus to employees, while not deserving this, because they did a poor job, would negatively affect the public. As Haag (IBA, 2010) said, when the public became aware of the large amounts of bonuses paid, while they were supported by large capital injections by the government, this resulted in a logical reaction of anger.
If we should believe a deontological explanation of this dilemma, a reasonable argument could be that employees that receive excessive bonuses should take responsibility for doing poor job, and eventually should decide not to accept the bonus from their employers. Why should these employees be rewarded with a sum of money they do not deserve?
However, not all employees are the cause of a possible financial instability of a company. Bad leadership, bad decisions or just the lack of ability to communicate and/or delegate could have be the cause of this financial instability in a company. Not all employees ranging in the organizational structure are to blame as some might have done an excellent job, without knowing the company was in dire need of financial funds. These people should not be ‘punished’ for their act of not knowing what was going on in the company.
If we relate this dilemma to the actual theory of deontology, and especially the agent-centered theory behind this philosophy, it seems that the people responsible for causing financial instability in their company have no interest in their company whatsoever. It is supposed to be their duty to act in the best interest for their company. However, it seems they only seem to act selfishly for their own good; make the most money, related to the bonus system, in the smallest amount of time possible for their own gain.
On the other hand, if we would look at consequential reasoning, arguments might be perceived totally different.
For instance, employees that get bonuses are more satisfied and thus are more motivated and dedicated to the company they work for. This would result in a more stable, pleasant and reliable company to be working for. On the other hand, bad publicity for companies that grant unacceptable bonuses could result in even worse financial conditions they were originally in. There is a chance there is no longer faith in a company that has no purpose for society to exist. It only causes the society trouble as they probably have to pay taxes for the debt caused by the company, however, this would only be in extreme cases if the company would be on the verge of insolvency.
To counter and regulate the excessive bonuses being awarded to employees, bonus taxes were introduced by governments. Many employees believe there was no regulation according to Mueller (IBA, 2010). It was an exceptional chance to exploit the financial markets, without knowing what kind of consequences could come from making such actions. Culture, miscommunication and manipulation within an organization or department are also aspects that are needed to be questioned in order to make a decisive statement.
In the end, it is not the system which is good or bad, most likely it are people/employees that can or cannot, on whichever level within an organization, handle these very important responsibilities. I would recommend an consequentialist view on the decision of the introduction of the bonus system in (non-)commercial companies.
IBA: International Bar Association (2010). A survey of current regulatory trends.
Johnson, Robert. (2008) Kant’s Moral Philisophy.
Watson, J. (2009). Bonus Culture.
http://www.ibanet.org/Article/Detail.aspx?ArticleUid=0EACCDBE-287B-473C-BBE6-A550508F7804 [Accessed 25/10/2010]
Armstrong, W, S. (2006) Consequentialism.
http://plato.stanford.edu/entries/consequentialism/ [Accessed 26/10/2010]
Alexander, L. Moore, M. (2007) Deontological Ethics.
http://plato.stanford.edu/entries/ethics-deontological/#AdvDeoThe [Accessed 26/10/2010]
Mason, E. (2009). What is consequentialism?
http://journals.cambridge.org/action/displayFulltext?type=1&fid=3331492&jid=THI&volumeId=8&issueId=21&aid=3331484 [Accessed 04/11/2010]