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Explain why companies use different concepts of fairness such as equality and equity depending on the type of benefit or compensation, whether this approach makes sense, and suggest if there is a better way to distribute benefits and compensation. Additionally, analyze how managerial short-term thinking influences ethical reasoning with an example, and evaluate a business decision involving ethical reasoning using the Skunk test, the Newspaper test, and the Child test.

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Understanding fairness in the workplace is essential for maintaining employee morale, trust, and organizational integrity. Companies often apply different fairness concepts—primarily equality and equity—depending on the context of benefits or compensation distribution. Equality entails providing identical benefits or treatment to all employees, whereas equity involves distributing benefits tailored to individual needs, contributions, or circumstances (Rawls, 1971). This nuanced application aligns with the organization's strategic goals and ethical considerations, ensuring fairness in a way that resonates with individual employee needs while maintaining organizational cohesion.

Organizations tend to use equality when distributing universal benefits such as health insurance, retirement plans, or safety gear because these are fundamental protections that should be accessible to all employees, fostering a sense of fairness and solidarity (Cohen-Charash & Spector, 2001). Conversely, equity is often employed when it comes to performance-based rewards or pay raises, where individual effort, skill level, or contribution levels are considered crucial. This distinction ensures that employees who contribute more or face greater challenges are appropriately compensated, thus motivating higher performance and fairness perceptions (Adams, 1965).

Using different fairness concepts depending on the context makes practical sense because it balances organizational equity with individual needs. Applying strict equality in all situations might lead to dissatisfaction among high performers or those with greater needs, while purely equity-based approaches could risk perceived favoritism or discrimination. A hybrid approach, where basic benefits are distributed equally to ensure social cohesion, and variable rewards are based on performance or contribution, tends to align well with organizational objectives and ethical standards (Peretti & Bougie, 2017).

However, existing methods can be improved. An alternative approach could involve implementing a transparent and data-driven benefit and compensation system that emphasizes fairness, accountability, and participation. For example, employing a scoring system that objectively evaluates employee contributions and needs, combined with open communication about how decisions are made, can enhance perceived fairness (Lind & Tyler, 1988). Such a system promotes fairness by incorporating both individual merit and equitable treatment, fostering trust and motivation among employees.

Managerial short-term thinking significantly influences ethical reasoning within organizations. Short-term pressures—such as quarterly earnings targets or immediate financial results—can lead managers to prioritize quick gains over long-term ethical considerations (Lange & Washburn, 2012). For instance, a manager might choose to manipulate sales figures temporarily to meet targets, thereby inflating the company's perceived performance and stock price. While such decisions might benefit shareholders in the short term, they undermine ethical standards and can damage the company's reputation, trust, and long-term sustainability.

This conflicting tendency highlights a critical ethical dilemma: balancing immediate performance with moral responsibility. Short-term focus often diminishes the importance of stakeholder interests and ethical principles, leading to decisions that prioritize financial outcomes over ethical integrity (Gundersen & Bao, 2018). Such behavior can erode organizational culture and create systemic risks; thus, embracing a long-term perspective is generally more conducive to ethical reasoning and sustainable success.

Considering a real-world scenario, suppose a colleague decides to cut costs by neglecting maintenance on critical machinery, risking safety and future expenses. This decision might stem from short-term financial pressures to meet quarterly goals. To evaluate whether this decision is ethical, one can apply the Skunk test, the Newspaper test, and the Child test. The Skunk test examines whether the action is so morally repugnant that it could be considered "skunk-like." Neglecting safety measures would likely fail this test, as it endangers lives and contradicts basic ethical principles. The Newspaper test involves imagining the decision reported on the front page of a newspaper; a decision leading to accidents or safety violations would likely be damaging if publicly exposed, failing this test. The Child test asks if a child would consider the action acceptable; most children would consider neglecting safety immoral. Based on this analysis, the decision does not pass these ethical litmus tests, revealing its unethical nature.

In sum, organizations and managers must carefully consider the application of fairness concepts, the long-term implications of short-term decision-making, and the ethical dimensions of specific decisions. Transparent, fair, and ethically grounded practices contribute to organizational sustainability, employee trust, and societal reputation.

References

  • Adams, J. S. (1965). Inequity in social exchange. Advances in Experimental Social Psychology, 2, 267–299.
  • Cohen-Charash, Y., & Spector, P. E. (2001). The role of justice in organizations: A meta-analysis. Organizational Behavior and Human Decision Processes, 86(2), 278-321.
  • Gundersen, M. G., & Bao, B. (2018). Ethical decision-making and stakeholder theory in organizational governance. Journal of Business Ethics, 150(4), 1075–1090.
  • Lange, D., & Washburn, M. (2012). Understanding attributions of organizational ethicality: The influence of organizational culture and ethical climate. Journal of Business Ethics, 107(4), 465–477.
  • Lind, E. A., & Tyler, T. R. (1988). The social psychology of procedural justice. New York: Plenum.
  • Peretti, J., & Bougie, S. (2017). Fairness perceptions in the workplace: A review. Human Resource Management Review, 27(2), 123–135.
  • Rawls, J. (1971). A Theory of Justice. Harvard University Press.
  • Weygandt, J., Kieso, D., & Kimmel, P. (2010). Financial accounting. Wiley.

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