The”Ethical Corporate Schism” by Marcy George-kokkinaki

The “ethical corporate schism” refers to ethical incoherency between departments or working teams within a company. Certain strategic management procedures include setting company goals for each department or branch or teamwork separately, and not for the company as an entity.

Although theoretically this division of tasks and goals to be achieved seems to define responsibilities in an organised manner, in practice it may provoke inter-departmental competition.

Example:

Top Managers of Shipowning companies allocate monthly or quarterly funds to cover expenditures for each department separately.

Aim of the Crew Manager, is to recruit skilled and experienced Seamen on board the company’s ships. In order to employ high standard Crew, the Crew Manager must reward and motivate them by  providing good employment conditions, pleasant environment and facilities. Good quality of food, quality provisions and spare parts are only but a few of the motivators to attract quality seafarers.

However, this task is disabled as Corporate Managers  from other divisions, have opposing departmental objectives.

One of the objectives of the firm’s Technical Manager is to maintain company’s fleet with minimum expenditures. This is achieved by asking crew to repair ships’ machinery and maintain the entire vessel with existing, second-hand spare parts and tools. This policy is quite onerous as machinery and ship will need more frequent maintenance, and yet the results will not be satisfactory.   

The application of this policy, motivates the Shipowner in the short-term, as operating costs are reduced, but in the long-term, the company’s assets, i.e. its fleet, will deteriorate. 

Aim of the Supply Manager is to minimise cost of supplies. This can be achieved by purchasing goods of lower quality, or smaller quantities. Therefore, Seamen’s food provisions are often minimised, or poor quality food is delivered. According to numerous reports and research carried out, sufficient food quality is among the main reasons for seafarers wishing to terminate employment.  

The following comparison will illustrate the reasons and results of  ethical coherency or incoherency within a firm:

A) Under favourable corporate conditions:  Ethical Corporate Coherency

• Top management will set feasible department goals and will allocate reasonable expenditure funds per department.
• It will be perceived as as gesture of Corporate Good Will, Collaboration and Loyalty, and will enhance  employees’ loyalty. 
• This gesture will enhance corporate reputation and will attract skilled work force.
•  Managers and Department teams will cooperate with coherency and unanimity, seeking for alternative solutions to achieve optimum corporate results. I.e. Instead of reducing costs, emphasis will be placed on benefits from economies of scale etc.

•  It will motivate personnel to boost productivity, creativity and innovation.

Under unfavourable corporate conditions:  Ethical Incoherency

• Top management will set infeasible department goals and will allocate minimal funds to cover departmental expenditures.
• Managers and Department teams will cooperate with incoherency and competitive spirit,  as the more influential, persistent or manipulative Manager or Team, will reach Departmental goals at the expense of the other Departments.
• It will be perceived as a gesture of lack of corporate loyalty. 
•  This will disable production and will seriously affect employees’ motivation and job satisfaction.
• Company standards and Quality will be degraded.

i.e. In a high standard company with unhappy employees, gradually productivity, effectiveness and efficiency are reduced, and eventually the company becomes sub-standard.

Based on the above example, it is evident that by nature, opposing departmental objectives create antagonism between departments leading to firm’s degradation in the following manner.

• Company focuses in cost reduction instead of boosting productivity, creativity and innovation.
• Over time, the  “ethical corporate schism” phenomenon will affect all corporate operations and functions, both internally and externally.
•  Focusing in the short-term profitability, the company degrades and in the long-ran it loses reputation, quality of services and value of assets. 

In both cases, i.e. the “Corporate Ethical Paradox” and the “Ethical Corporate Schism”,

imminent profitability acts as a motivator to further deviate from  the Ethical Conduct.

However, in the long ran, the company deteriorates and becomes self-destructed.