I serve as treasurer of a small nonprofit organization for writers in Maryland, and because of the Covid-19 stay-at-home order, we had to cancel our annual conference. That cost us about $2,000. At a recent board meeting, someone suggested we apply for money being made available by the local government to assist nonprofits in sudden need. We talked about it and decided not to apply. We have a big enough rainy day fund to cover the loss, we have no employees to worry about, and we’re in no danger of slowing, let alone ceasing, operations. Other organizations clearly need it more.
None of us had to think hard about this; it was clearly the ethical thing to do.
A similar quandary faces commercial companies in the U.S. with regard to the $349 billion federal Paycheck Protection Program designed to help small businesses keep workers on their payrolls even while they are closed and bringing in no revenue.
Companies with fewer than 500 employees are eligible, and the loans do not have to be paid back if the money is used to keep workers on the payroll.
Because the idea was to distribute the money as quickly as possible, rules and oversight are minimal, and we are already hearing that some larger companies got the money, including some that are public and have enough cash on hand to see themselves through for a while without help. They are technically eligible because of the way they are structured and the way regulations have been written, but they don’t need the cash now.
Some are acting responsibly and not applying or not accepting the cash, while others are grabbing whatever they can. Shake Shack became the ethical poster boy when it acknowledged that it didn’t need the money and returned $10 million. Not so with scores of other companies. The Washington Post reports that a coal company with almost 800 employees—and close ties to the administration—got $10 million. While no one is accusing these and other companies of breaking the law, the ethical implications are another matter.
The same principle applies to large, cash-rich companies even if they aren’t getting government help. An astounding number are laying off workers even while moving to appease top executives and shareholders who aren’t suffering from the economic crash.
One of the worst scofflaws is Marriott, which furloughed most of its American workers, jeopardizing their access to health care, even as it paid shareholders $160 million in dividends and gave their CEO a raise, according to the New York Times. Macy’s also furloughed most of its workers while distributing $116 million in dividends April 1, but at least it is continuing to pay health insurance for furloughed workers. Better than nothing, but not nearly enough.
This is not to say that all companies are behaving this way. Bloomberg reported April 2 that 21 companies in the S&P 500 were planning to reduce or eliminate dividends, including Starbucks, Kohl’s and the Gap.
Most people would argue that in normal times, there is nothing wrong with taking what the government gives you regardless of need, whether it’s Social Security benefits or tax breaks. But these aren’t normal times. The government is spending trillions to help those in desperate need, and while the bureaucracy may be in no position to do means-testing, companies have an obligation to let those most in need go first.
We as individuals also have that need. Ethical theories of all types generally share a common goal—to work toward the greater good, which means doing what is right for others and not just yourself. This is why all of us who are not in economic distress need to think especially hard during this crisis about helping others—whether it’s those who’ve lost jobs and need help with basic needs or whether it’s leaving enough toilet paper on the shelf for a neighbor.
We’ll take a closer look at our individual obligations in next week’s blog.