We all interact with businesses as customers, as employees, and some of us as owners. And despite the variety—whether we’re talking about complex multi-nationals such as 3M or your friend’s food truck—all businesses have to answer a multitude of ethical questions. How should a company view the safety of products and services; align incentives between employer, employee, business partners and customers; address grievances inside and outside the organization; or ensure fair compensation practices? What are reasonable ways to compete in business, and are there ever any good grounds for a business to lobby politicians?
In STRIVE’s February 26th Q&A session on Objectivism, Don Watkins, an author and Fellow at the Ayn Rand Institute, pointed out, “the less familiarity you have with business, the easier it is to have these kind of cartoonish sorts of conceptions about how [businesses] treat and are incentivized to treat the individual.”
Watkins and Greg Salmieri, an Anthem Foundation Fellow and Lecturer of Philosophy at Rutgers, displayed a nuanced appreciation for the difficulties involved in making ethical business decisions, taking the time to dig into questions and provide useful, practicable answers. For instance, when you’re traveling for business and your meals, travel expenses, and lodging are being paid for by your company or your clients, do you get the most expensive steak on the menu or upgrade your flight or hotel room because someone else is paying?
Watkins prefers to frame the issue, not in terms of conflicts of interest, but rather, conflicts of incentives. He explained that many businesses have set policies for such cases; Wal-Mart employees, all the way up to the top rungs, fly coach and share rooms on business trips. However, “The fundamental thing is that this is something that should be worked out beforehand,” Watkins explained. Salmieri added that, “It’s an issue of acting within your understanding of what the agreement is, and if your understanding of the agreement is too vague, getting clearer on it.”
Watkins regards the broader problem, of knowing how “to align incentives so that everybody can achieve their interests in concert with one another,” as one of the most complex, ubiquitous, and interesting problems businesses must solve. The problem involves employees, employers, and customers alike. He mentioned that BB&T, under the direction of John Allison, refused to grant the types of bad loans that so many of their competitors were doling out left and right at the peak of the housing bubble. These loans were extremely difficult for clients to pay back, and Allison realized that many of BB&T’s clients would get into financial troubles that would break their long-term relationship with his company. Although it lost some clients who went elsewhere to get these types of loans, BB&T was one of the few banks that made it through the financial crisis with a clean bill of health.
Surprise guest, Matt Bateman, weighed in on how the issue relates to employee compensation, saying that he tries to pay employees “as much as possible,” but that figuring that number out takes substantial effort. Bateman holds a PhD in philosophy, but as Director of Content for Higher Ground Education, he also deals with these issues in his daily work. His experience has been that compensation practices send messages that reverberate throughout an organization, shaping companies and their trajectories.
And how compensation packages are hammered out largely depends on how aggressively employees pursue growth. Bateman said, “If an employee came to me and said, ‘I want twenty percent more money,’ I might say, ‘Okay make it worth my while. Here’s the cost of that. . . . That means I now expect you to own this whole domain in the business. So far you’ve been reporting to this person on it; I’m going to take this off their plate and give it to you.’” He added that for various cultural reasons, women are often less encouraged to negotiate like this and that managers should do everything in their power to be objective about the value of their employees, both male and female.
The conversation also turned to expectations around the safety of products and services. “First of all, there is no such thing as safety or non-safety. There’s always an issue of degree and of context,” said Watkins. Salmieri added that part of the context in which we think about safety and acceptable levels of risk is the current state of technological development. But the general principle is the same that applies in all transactions: sellers must not intentionally misrepresent or withhold information about a product. “I think the same thing is true, to a greater extent, if there is information withheld about a way in which the thing is dangerous,” said Salmieri.
They also discussed legitimate uses of lobbying the government and whether or not collusion on pricing to knock competitors out of the market is a reasonable competitive strategy.
Watkins concluded by saying:
We’re taught that profit-seekers are trying to screw other people to line their own pockets. They’re trying to charge their customers as much as possible and sell them garbage products. They want to pay their employees the least they can. They want to indulge in whatever prejudice they have. All of that is wrong. If you have a proper perspective, then there becomes a real question of, ‘How do I encourage my employees, how do I treat them fairly, how do I deal with these very difficult problems that involve aligning incentives?’
Creative Commons licensed image courtesy of Pixabay.