BUS FPX 4801 Assessment 2 Company Ethical Issue Identification

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Capella University

BUS-FPX4801 Ethics and Enterprise

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The Ethical Cost of Unequal Wealth Distribution in Corporate Culture

Introduction

Economic growth is often celebrated for enhancing quality of life, but this progress comes with a darker side—inequitable wealth distribution within corporations. Many companies focus on concentrating wealth among executives, neglecting broader societal impacts. This article explores the ethical implications of disproportionate wealth allocation and proposes actionable solutions to foster fairness in corporate compensation.

Understanding the Ethical Dilemma

Revenue Efficiency vs. Capital Investment

Revenue per employee (RPE) is commonly used to evaluate companies’ revenue efficiency. However, this metric overlooks critical factors like capital investment, creating an incomplete picture of corporate success. Despite its limitations, RPE underscores the integral connection between employees and revenue generation (Urosevic, 2021).

The Executive Compensation Gap

Unfortunately, corporate leadership often fails to reflect this connection. Instead, disproportionate rewards are lavished on C-suite executives, widening the wealth gap. In 1965, CEO-to-worker pay ratios stood at 21-to-1, but by 2020, this figure skyrocketed to 351-to-1 (Kandra & Mishel, 2021). Companies like Apple epitomize this disparity, with CEO compensation far exceeding both median employee wages and profit per employee (Carpenter, 2021; Vanian, 2020).

Such practices raise profound ethical questions. Why are executive contributions valued so highly, while the efforts of rank-and-file employees are consistently undervalued? This imbalance undermines morale and fosters a sense of exploitation within the workforce.

The Societal Consequences of Corporate Greed

Rising Economic Inequality

A culture fixated on profit maximization has deepened socioeconomic divides. Outsourcing, pension cuts, and other profit-driven policies have left many workers financially vulnerable. As a result, a significant portion of the population faces precarious living conditions and uncertain retirement prospects (Ballard, 2021; Wallach, 2020).

Impact on Consumer Demand

Beyond individual hardship, economic inequality threatens long-term corporate sustainability. As wealth becomes increasingly concentrated at the top, consumer purchasing power diminishes. This creates a paradox where the very system fueling executive wealth undermines future profitability.

The perception of corporate greed also damages public trust. Employees and consumers alike are disillusioned by companies that prioritize shareholder wealth over fair compensation. This erosion of trust can lead to reputational damage and reduced employee loyalty, further affecting profitability.

A Simple Yet Transformative Solution

Prioritizing Equitable Compensation

Tackling this issue requires a radical shift in corporate priorities. Fair employee compensation is not just a moral imperative but also a practical strategy for fostering long-term sustainability. By narrowing the pay gap between executives and employees, companies can promote economic equality and enhance workplace satisfaction.

Corporate Responsibility and Ethical Leadership

Leadership must take active steps to align compensation structures with societal values. While immediate uniform benefits may be unrealistic, adopting more equitable policies represents progress. Companies must move away from the notion that profit maximization is the sole goal, instead embracing a model where employee welfare is integral to success (Wikipedia Contributors, 2021).

Benefits of Reform

Enhanced Productivity: Fair wages boost employee morale, leading to increased productivity and innovation.
Stronger Brand Reputation: Ethical compensation practices improve public perception, attracting both customers and talent.
Long-Term Growth: Addressing inequality helps sustain consumer demand, creating a stable economic foundation for growth.

Conclusion: Choosing Fairness Over Excess

The disproportionate allocation of corporate wealth represents an ethical crisis with far-reaching societal consequences. By prioritizing fair employee compensation, companies can help bridge economic divides and create a more equitable future. Ultimately, corporate success should be measured not just by profit margins but by its contributions to societal welfare and human dignity.

Adopting ethical compensation practices isn’t just an option—it’s an essential step towards a more sustainable and just economic landscape.

References

Ballard, J. (2021). About a quarter of Americans don’t think they will ever be able to retire comfortably. YouGov. Retrieved from https://today.yougov.com/topics/economy/articles-reports/2021/09/13/retire-comfortablygeneration-industry-poll-data

Carpenter, S. (2021, August 26). Apple CEO Poised to Get $750 Million Final Payout From Award. Bloomberg. Retrieved from https://www.bloomberg.com/news/articles/2021-08-26/apple-ceo-poised-to-get-750-million-final-payout-from-big-award

Kandra, J., & Mishel, L. (2021, August 10). CEO pay has skyrocketed 1,322% since 1978 Economic Policy Institute. Retrieved from https://www.epi.org/publication/ceo-pay-in-2020

Romburgh, M. von. (2019, January 15). This is how much Apple pays a typical employee — and how that compares to Google, Facebook, Netflix, Microsoft, Box and more. Silicon Valley Business Journals. Retrieved from https://www.bizjournals.com/sanjose/news/2019/10/01/median-salaries-tech-goog-nflxsplunk-netapp-intc.html

Urosevic, M. (2021, June 15). Revenue per employee [the added value of labor]. SpendMeNot. Retrieved from https://spendmenot.com/blog/revenue-per-employee

BUS FPX 4801 Assessment 2 Company Ethical Issue Identification

Vanian, J. (2020, August 25). Here’s how much these tech giants are making in profit per employee. Fortune. Retrieved from https://fortune.com/2020/08/24/apple-microsoft-facebook-amazon-alphabet-profit-per-employee

Wallach, O. (2020, December 2). Charting The Growing Generational Wealth Gap. Visual Capitalist. Retrieved from https://www.visualcapitalist.com/charting-the-growing-generational-wealth-gap/

Wikipedia Contributors. (2021, September 2). Chance for Peace speech. Wikipedia; Wikimedia Foundation. Retrieved from https://en.wikipedia.org/wiki/Chance_for_Peace_speech

Wikipedia Contributors. (2021, November 9). List of countries by total wealth. Wikipedia; Wikimedia Foundation. Retrieved from https://en.wikipedia.org/wiki/List_of_countries_by_total_wealth

Williams, C. (2020, September 28). Millennials Were Already Putting Off Having Children. Then the Pandemic Hit. Morning Consult; Morning Consult. Retrieved from https://morningconsult.com/2020/09/28/millennials-economy-children-poll/