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Trust And Managerial Responsibility

Published online by Cambridge University Press:  23 January 2015

Edward Soule
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Abstract:

This paper explores the moral responsibility a manager has toward a worker. The primary focus is upon those relationships where workers have been led to trust their managers. I argue that in such circumstances, models of the employment relationship based on rational self-interest fail to adequately describe the behavior of the actors. Rather, I show through case studies how trust operates in these environments to supercede pure, self-interested behavior. I then explore the moral implications of this finding relative to those managers who lead their workers to trust them. I make the claim that these managers cannot adequately discharge their moral obligations unless they take on positive moral obligations. I cast this responsibility as one of positive care for some portion of worker welfare and briefly discuss what this might mean in practice.

Type
Articles
Information
Business Ethics Quarterly , Volume 8 , Issue 2 , April 1998 , pp. 249 - 272
Copyright
Copyright © Society for Business Ethics 1998

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References

Notes

I am indebted to Carl Wellman, and two anonymous reviewers at Business Ethics Quarterly for their instructive criticism of an earlier draft of this paper. I also want to thank Larry May and George Brenkert for their enduring patience in reviewing multiple versions of this paper without implying that I have addressed any or all of their concerns. Also, I wish to thank conference participants at De Paul and Appalachian State Universities for their insights and thoughtful criticism of my views. Finally, this paper takes as its model of exemplary managerial responsibility the work of John Bachmann who intuitively puts moral responsibility ahead of other objectives, showing that it is possible.

1 Throughout this paper I refer to the ‘manager’ and not the ‘firm’ or the ‘corporation’ as the locus of moral agency. In many cases the responsibilities I will press into, the manager/ agent could appropriately be assigned to a group of managers or, by implication or ‘vicariously’ to the firm as a whole. I take the manager as the rightful starting point because it is those specific individuals who must ultimately act. For a thorough explanation of this issue, see Larry May, The Morality of Groups (Notre Dame, IN: Notre Dame Press, 1987), particularly pages 41-47 and 83-88.

2 It may be asserted that this conclusion violates Hume’s admonition that we not coax an ‘ought’ from an ‘is’. In this regard it will be suggested that although the present economic landscape and the firms that populate it are organized in a certain fashion, they should not be so configured. I do not intend to weigh in on this debate as I am making a much more modest claim. My starting point is an empirically verifiable employment relationship and an investigation of the moral implications attendant to it. I will try to show that the ‘ought’, in terms of management responsibility, is a function of more standard moral reasoning and my task is to apply such theory to a particular fact pattern in the realm of actual employment relationships. For a thorough analysis of how moral concepts supervene upon social fact patterns, see David O. Brink, Moral Realism and the Foundations of Ethics (Cambridge: Cambridge University Press, 1989).

3 Ronald H. Coase, “The Nature of the Firm,” in Economica, 4 (1937): 386-405.

4 Stephen Marglin, “What Do Bosses Do?”, in Review of Radical Political Economy, 6 (1974): 33-36.

5 Oliver E. Williamson, Markets and Hierarchies: Analysis and Antitrust Implications (New York: Free Press, 1975).

6 Yoram Barzel, “Measurement Costs and the Organization of Markets,” in Journal of Law and Economics, 25 (1982): 27-48.

7 For an analysis of organizational structure that deals more thoroughly with this feature, see Douglas C. North, Institutions, Institutional Change and Economic Performance (Cambridge: Cambridge University Press, 1993), 73-82.

8 In making this distinction I would like to avoid any confusion with the field of transaction cost analysis as developed by Coase and Williamson. Arguing that employment is best characterized as a relationship does not imply that, from an economic standpoint, it may not lend itself to transaction costs analysis. As I understand the field, transaction cost economics does not take a stand one way or the other on the persistence over time of economic encounters. A casual consumer purchase and a prolonged industrial partnership lend themselves equally to the investigative tools of the discipline. Indeed, Williamson’s description of the organization of labor markets and in particular the division he draws between node A and nodes B and C assumes an enduring relationship in the latter two. For instance, see Oliver E. Williamson, Economic Organization (New York: New York University Press, 1986), 186. So, when I conclude that employment should be construed, for purposes of assigning moral responsibility, as a relationship and not a transaction I do not intend to imply anything relative to the merits or inapplicability of transaction cost economics.

9 This observation leaves open the moral question of whether employment should be organized differently. As mentioned above in footnote 2, I am limiting myself to the way things are. I presume that the configuration of employment relationships have and will continue to adapt to work requirements and other utilitarian factors. My present inquiry is limited to understanding the moral implications of the relationship as it is.

10 Gary J. Miller, Managerial Dilemmas (Cambridge: Cambridge University Press, 1993).

11 See for example, Michael C Jensen and W. H. Meckling, “Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure,” in Journal of Financial Economics, 3 (1976): 304-60; Eugene F. Fama, “Agency Problems and the Theory of the Firm,” in Journal of Political Economy, 88 (1980): 288-307; and Armen Alchian and Harold Demsetz, “Production, Information Costs and Economic Organization,” in American Economic Review, 62: 777-95. But beyond the technical discourse of economic theory, agency theory dominates a great deal of actual business practice. An entire industry of compensation specialists has developed around the challenge of designing compensation systems in accordance with agency theory; that is, by aligning the worker’s self-interest with that of the employing firm. This approach is what I am referring to as mechanistic in so far as it is primarily contractual in design, pandering more or less exclusively to the self interest of the worker. For a good example of why agency theory is still so prevalent in management practice we need look no further than a standard business school text in organizational behavior such as that by Paul Milgrom and John Robberts (Economics, Organization, and Management [Englewood Cliffs, NJ: Prentice Hall, 1991]).

12 Miller, 1993: 3.

13 Miller, 1993: 3.

14 These cases are not intended to be representative of employment relationships in general. Rather, I will draw upon them to illustrate mechanisms of trust that operate between some managers and some workers in specific employment contexts.

15 Alex Bavelas and George Straus, Money and Motivation (New York: Harper & Bros., 1955).

16 Miller, 1993: 116.

17 Miller, 1993: 114.

18 It should be noted that this inadequacy is not lost on some economic theorists. Indeed, Williamson’s transaction cost account speaks directly to the problem. Management’s behavior could be cast in terms of post-contractual opportunism (hazards) and the harm suffered by the workers could be seen in terms of the lack of adequate safeguards. This insight represents a fruitful explanatory tool that I owe to an anonymous reviewer. This particular economic approach represents an alternative characterization and additional evidence of the inadequacy of the neoclassical model. However, pursuing this line of analysis would take me far afield from the task at hand of addressing the moral implications of actual management behavior. That is, if this and the succeeding two examples were recast in terms of transaction cost analysis, we may have a richer economic explanation but the moral implications would remain the same. For purposes of this analysis, I have chosen to stick with the contrast between mechanistic and organic accounts because I find that the mechanistic or neoclassical model (albeit seriously deficient in terms of economic theory) fits fairly closely with the considered behavior of many managers including those at Hovey and Beard.

19 This conclusion is largely confirmed by personal experience gained as an ‘unskilled’ laborer as well as serving in top management roles responsible for ‘reengineering’ such work. While sensitive to the criticism that “the plural of anecdote is not data” I would simply relate that the participative management initiative is often met with employee resistance. And I have confirmed my experience with many others involved in these initiatives that workers have an intuitive understanding that they have knowledge that management needs. Further, these workers sense that their role will be diminished if they divulge such knowledge. This fear is evident in the concerns they voice regarding just how necessary they will be if they give up this information. Such fear is evidence that employees do not naively give up crucial information. Rather, they seem to understand exactly what they are doing and the vulnerability they assume when they ‘open-up’ to management.

20 Miller, 1993: 117.

21 See Norman Fast, The Lincoln Electric Company (Boston: Harvard Business School, 1975), and Bruce G. Posner, “Right From the Start,” in Inc. 10 (1988): 95-6.

22 Miller, 1993: 117.

23 Posner as quoted in Miller, 1993: 117.

24 Miller, 1993: 116.

25 S. C. Currall, “The Role of Interpersonal Trust in Work Relationships.” (Unpublished doctoral dissertation, Cornell University, 1990. Quoted in David Kipnis, “Trust and Technology,” in Trust in Organizations, edited by Roderick M. Kramer and Tom R. Tyler [Thousand Oaks, CA: Sage Publications, 1996].)

26 Mayer, Davis, and Schoorman, “An Integrative Model of Organizational Trust,” in Academy of Management Review, 20(3) (1995): 709-734.

27 Annette Baier, Moral Prejudices (Cambridge, MA: Harvard University Press, 1994), 99.

28 Ibid., 128.

29 Karen Jones, “Trust as an Affective Attitude,” in Ethics, 107(1) (1996): 4-25.

30 LaRue Tone Hosmer, “Trust: The Connecting Link Between Organizational Theory and Philosophical Ethics,” in Academy of Management Review, 20(2) (1995): 379-403.

31 Anthony Giddens, The Consequences of Modernity (Stanford, CA: Stanford University Press, 1990), 34.

32 Baier, 1994: 99.

33 I will refer to the trusted party as the ‘trustee’ and the party doing the trusting as the ‘trustor’.

34 Giddens, 1990: 33.

35 Baier, 1994: 101.

36 For a fully elaborated account of the connection between responsibility for those vulnerable to us see Robert E. Goodin, Protecting the Vulnerable (Chicago: The University of Chicago Press, 1985), 109.

37 Baier, 1994: 101.

38 Baier, 1994: 102.

39 Hosmer, 1995: 392.

40 Throughout this discussion I have only addressed the responsibility of managers to workers. It may be argued that this is a two way street and workers have a reciprocal responsibility if managers trust them. I think this could be the case but not necessarily. Making the case that the company shares the vulnerability of an individual worker is possible but much more difficult to demonstrate. Most companies are not harmed significantly by the departure of any one worker. At least, not in the same sense as the harm suffered by workers through prolonged unemployment. The valued good that companies might place in harms way of the worker is not the same as a key element of a worker’s autonomy. At best, companies entrust financial resources in the form of training and development which will be lost in the event of a worker’s departure. This strikes me as substantively different than the economic prospects that a sole individual trusts to the care of a company. This leaves open the possibility that where management trusts a very key employee or a group of employees some positive responsibility might be called for. This would also be the case where an employee is trusted with key proprietary information that could prove harmful to the company if divulged to a competitor. However, these cases will be harder to show than the reverse.