Business Ethics: Fairness and Remuneration - Coursework Example

Business Ethics – Fairness and Remuneration Introduction Remuneration is one of the most divisive aspects in organisational management. Different organisations have different ways of remunerating their employees; these are often based on position and performances. In addition, organisations’ pay scales may vary according to their financial capability and objectives, which is why people practicing similar disciplines at similar levels may have very different wages. In some organisations, there are huge disparities between the remunerations of senior management and junior employees, prompting calls for equality in the workplace. In other settings, however, wages are harmonised so that employees feel valued in terms of their contributions. The debate concerning fairness and remuneration revolves around these two scenarios and comprises other undercurrents concerning ethics, humanism, and sustainability. This paper will argue that it is fair and just to salary employees based on positions and performances. Discussion The International Labor Organisation (ILO) explains, in its statutes covering the subject of equal remuneration, which all employers must guarantee that employees receive equal pay for similar responsibilities or work of equal value (Johl, Bruce & Binks 2013:121). This includes basic, minimum, or ordinary wage and any extra benefits enjoyed directly or indirectly, whether monetary or nonmonetary. More importantly, ILO identifies work of equal value as work that demands of staff a comparable amount of professional knowledge evidenced by a qualification, work experience or educational certificate, positions gained from earned experience, duties, and intellectual or physical effort. Most importantly, ILO clarifies that differences in workplace remuneration in the same organisation should not, for work of equal value or similar work, be informed by sexual orientation (Thomas 2013:34). Based on these requirements, it is illogical to classify remuneration based on positions and performance as either unfair or unequal. The concepts of “equal pay for equal work” and “equal pay for work of equal value” are examples of why the use of positions and performances to remunerate employees is justified and sustainable. The concept of equality lies at the core of both concepts; this validates them as viable strategies for managing employees’ remuneration. As much as it may seem opportune to demand smaller disparities in wages of employees working in the same organisations, a number of critical factors are usually spurned by advocates of such an approach. Firstly, performance and position are the two most sustainable strategies of setting employees’ wages. If employers were to start using, for example, market forces and government influence as criteria for determining remuneration, the only beneficiaries would be organisations (Allingham 2014:29). Secondly, all employees know that provided they are hired equally and given equal opportunities to grow, then their performances and responsibilities are the only universally accepted methods by which they can be differentiated, especially when it comes to remuneration. As such, it is ignorant to claim that performance and position should not be used in setting remuneration for employees. Not only are they the most suitable strategies for managing the process, but they are also the most sustainable (Shlomo, Eggert & Nguyen 2013: 259). This is because they have been used for centuries by various organisations and have proven to be effective and acceptable even by employees. Workplace dynamics has undergone a massive shift in the last fifty years. From gender and racial equality to occupational safety and employee development, the workplace has experienced numerous changes as a result of evolving demands from various quarters (Thomas 2013: 51). However, one area that has exhibited strong resistance to change is remuneration. Like gender and racial equality, remuneration is a highly sensitive issue in the workplace. In spite of this, it has become increasingly clear that it cannot be handled the same way as other workplace issues (Chouliarakis & Correa-Lopez 2013: 97). It has also become increasingly obvious that a majority of people have a biased view of fairness and equality, which are often used to justify different logics in the remuneration debate. While some are convinced that fairness and equality in remuneration cannot be achieved without standardising and harmonising wages, others are adamant that people are entitled to enjoy all the benefits afforded by one’s productivity and credentials; I am inclined to agree with the latter. It is not only regressive but also counterproductive to deny people their hard-earned benefits simply because others who are not qualified or powerful enough feel maligned and mistreated. If workplace positions are earned, why should it be unethical for wages pertaining to those rankings to be considered equally deserved? For example, a clerk with limited professional skills and education cannot justify the argument for the wage of a chief executive officer (CEO) of a Fortune 500 company, who has excellent professional and academic qualifications, to be reduced because it is unfair and inequitable (Fikentscher, Hacker & Podszun 2013: 52). Both the CEO and the clerk merit their salaries. In fact, if the clerk somehow manages to grow professionally and become a CEO, the benefits will be commensurate with that position. It is usually convenient to argue that huge wage disparities are created by unequal and unfair setting of salaries and salary caps. However, proponents of such notions feign ignorance by disregarding the fact that professional responsibilities also vary. Junior employees are remunerated according to their responsibilities and contributions to their organisations (Chouliarakis & Correa-Lopez 2013: 103). An office clerk does not face as much risk in decision-making and routine duties like a CEO. In addition, a salesperson does not handle as many critical responsibilities as a regional manager. In this case, the CEO and the regional manager are extremely important to their employers, and they are required to be sober and rational at all times (Holland & Burnett 2014: 31). Their decision-making has greater implications – positive or negative – on the long-term performance and sustainability of their organisations. As such, their employers are often forced to offer them wages that match their positions and performances. Despite many scholars and critics arguing that remuneration should not be based on positions and performance, a large percentage of them fail to acknowledge the fact that this approach meets all the standards of fairness and equality (Jalilvand & Malliaris 2013: 23). Moreover, a majority of their arguments are so biased that they ignore the fact that equality differs from competition. The feminist movement has shown that there is an urgent need to distinguish between equality and direct competition. At the beginning of the feminist movement, focus was usually on the numerous obstacles placed in the paths of women to prevent them from occupying positions favored by men. For example, some were denied the right to vote, the right to go to school, and the freedom to participate in social activities like sports (Jex & Britt 2014: 17). However, with the removal of unjust laws and standards aimed at giving men advantages, and the implementation of laws protecting women against discrimination and unfair requirements, the playing field has been considerably leveled. Currently, women have almost as much access to basic facilities, privileges and programs as men and are now free to manage and lead in any capacities. This is the right way of dealing with fairness and equality at any level (Johl, Bruce & Binks 2013: 121). It differs from a myopic outlook that is driven by unrealistic and short-term perspectives that deliberately ignore common rules and requirements. For example, neither genders can justify enjoying some privileges strictly on account of their gender if conditions are similar for all entities. An unemployed man is just as deserving of a job as an unemployed woman if they are in the same position academically and professionally. The same logic should apply in the remuneration debate since the rationales used to criticise the use of positions and performance in awarding monetary benefits is flawed (Macky & Wilson 2013: 47). While it would be unfair for employees with similar qualifications and experience who work for the same company in similar positions, and whose performances are comparable, to have hugely contrasting salaries, the same cannot be said for employees with different qualifications, different levels of experience, and different levels of productivity, who have different salaries. It is worth noting that using performance and position in remunerating employees does not violate the principles of normative and descriptive ethics. For example, utilitarianism, which is the foundation of numerous moral and ethical concepts, holds that an act is only right if it results in the most happiness for the highest number of people. All organisations in the world use performance and position to salary their employees, and evidence shows that this is the most acceptable method for a majority of employees because it is as standardised and fair as it could be (McKendrick 2014: 61). In this regard, it is safe to say that using performance and position as guides for remuneration practices results in the most happiness for the greatest number of employees. As such, it satisfies the fundamental principles of utilitarianism (Phillips & Gully 2013: 105). Although using performance and position to pay employees does not meet all the requirements of egalitarianism, it nevertheless shares a common denominator with the concept: fairness, equal opportunity, and sustainability. It is also important to note that performance and position represent the bare minimum of employee management. In fact, the two aspects’ application is not just limited to remuneration; they are also used in promotions, financial and nonfinancial reward schemes, employee appraisal and development, and recruitment. It is, therefore, difficult to understand why some only consider them unsuitable and impractical when they are used in setting salaries (Kumar & Thiaw 2013: 16). The ethical aspects of fairness in relation to remuneration indicate that it is just to pay employees for the value of their work. If this is true, then it follows that performances and positions are directly proportional to wage (Taylor, Michl & Rezai 2013: 24). Finally, if this is also true, then variations in seniority and productivity will automatically lead to variations in remuneration. The result is neither unethical nor unfair; it is simply a manifestation of the fundamentals of organisational management. In reality, no organisation can achieve total fairness in compensation. This is because employees’ wages will always be influenced by a myriad of factors, most of which are beyond a normal organisation’s control. Consequently, the best approach involves creating what is known as perceived fairness (Ferran 2012: 28). This entails making employees feel satisfied with their wages as they can be. Using this concept, employers adopt measures which give workers confidence and belief that they enjoy the best monetary and nonmonetary compensation schemes regardless of their responsibilities or performances, despite the fact that these two factors (performance and responsibilities) are still employed in determining pay packages and salary scales. Employees should be remunerated for actual performance at any time an organisation is financially capable of doing so. Performance depends on the organisational environment and employees. For example, when an organisation’s internal and external environments have been supportive of its operations, it should pay bonuses to employees who have had the biggest influence on success (Idowu & Caliyurt 2014: 46). This activity can be shared among all employees in the context of a merit money formula. In this formula, all workers receive a specific percentage of credits and they are required to share them with their colleagues in their preferred way, depending on how they think their colleagues influenced the organisation’s failures and successes (Weil 2014: 68). The only caveat is that they cannot award themselves. The credits that workers receive from their peers can then be translated into cash. Merit money formulas ensure that commendable actions and notable contributions are rewarded, irrespective of how inestimable or spontaneous they are, since employees see much more than the average spreadsheet-oriented performance appraisal system (Zalewska 2014: 53). Fairness is realised by separating remuneration into two groups: participation (complemented with a salary formula) and performance (supported by a merit money formula) (Gomez-Mejia, Berrone & Franco-Santos 2014: 37). This approach eliminates negotiations, ensures that the salary system is free of partiality, helps to prevent unreliable self-appraisals, and reduces the need for a preliminary assessment of any employee’s performance. The only concerns are consistent variables in an acceptable procedure for a base salary, and an accurate estimation of peer performance to be referred to in regular bonus payouts. Paying employees for being active in the organisation is also important in creating a fair remuneration system. Employees manage processes, learn practices, dispense services, and interact. A large percentage of these duties are inestimable in terms of results. More significantly, organisations should not focus only on paying for employees’ performances (Chen, Kraemer & Gathii 2011: 3593). The explanation is that pay-for-performance schemes inspire employees to be cautious in order to avoid missing out on their performance-based benefits. In some cases, employees will limit themselves to using routine practices (limited development, lucrative compensation) and will be averse to managing projects (high learning, unpredictable compensation). A fair remuneration formula is completely clear for all stakeholders and may comprise the name of the position, cost of living, professional experience, academic qualifications, seniority, and numerous other factors (Collings, Wood & Caligiuri 2014: 19). The formula is leveraged to compensate all employees with relatively modest base salaries and indicates what all employees receive for contributing to the organisation. In workplace settings in which collaboration and honesty are encouraged, employees who are adept at negotiating for their colleagues will fit in just as well as their colleagues. In addition, performance is not overly individualised or gendered. Conclusion Remuneration fairness is impossible to achieve. The ethical and moral dimensions of remuneration show that organisations must first understand their environments – internal and external – before they can implement effective compensation systems. Perceived fairness, on the other hand, is a realistic and sustainable practice that can be used to enhance retention by improving employee satisfaction. Once organisations have accepted that wages cannot be completely fair, they should work towards making salary disparities less of an issue than they already are. The money merit system, performance, and position are important measures and facilitators of fair compensation. 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