Utilitarian Ethics as Discussed in

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Utilitarian Ethicsas Discussed inThe Ethics
of Corporate Downsizing byJohn Orlando

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Utilitarian ethical theory

• Utilitarian ethics the ethical action is the
  action that maximizes the welfare of the maximum
  number of people.
• Can be applied to individual actions Should I
  cheat on my Business Law exam tomorrow night?
• Can be applied to a general rule Should
  Clarkson prohibit cheating?
• Or to an ethical principle Is cheating
  unethical?
• The focus is on the overall consequences for the
  total group of people.
• The person wanting to take the action does not
  count more than anyone else.

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The decision procedure in Utilitarian ethics

• Identify all possible options for the action
  (rule, or ethical principle).
• Identify the groups and individuals on which
  these possible options will have an impact.
• Evaluate the benefits and negative consequences
  (costs) that each possible option will have on
  ALL of these groups and individuals.
• Choose the possible option with the greatest net
  benefit.

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Utilitarian analysis of a specific white lie

• Should I tell my wife what I think about her new
  hairdo?
• Options 1) Yes, tell the truth that its awful.
  2) Lie through my teeth and say its the
  greatest thing ever. 3) Use a white lie
  Its interesting, or Wow, a new look.
• Parties at interest My wife and me.
• Consequences Option 1) Hurt feelings for her
  and big trouble for me. Entirely negative.
  Option 2) Happy feelings for her but possible
  trouble for me if I cant keep my mouth shut
  while talking with friends. Some positives, but
  some possible negatives. Option 3) Happy
  feelings for her and safety for me. Entirely
  positive.
• Choice Option 3.

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Utilitarian analysis of a general rule about
white lies

• Should I avoid telling white lies?
• Options 1) Yes, never tell a white lie. 2) No,
  tell them when they help ease a difficult
  situation, for example, sparing someones
  feelings, or relieving someones anxiety. 3) No,
  tell them whenever its easiest for me.
• Parties at interest Me and the various
  individuals and groups with which I interact.
• Consequences Option 1) I develop a reputation
  for honesty and integrity, but other people might
  sometimes experience hurt feelings, heightened
  anxiety, etc. Option 2) If my white lying
  becomes known, some relationships might be
  undermined because of diminished trust. Option
  3) .
• Choice Probably Option 1).

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• Now back to Orlandos article about corporate
  downsizing.

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Corporate downsizing is an important issue in
business ethics.

• It has major impact on the laid-off workers.
• 15 lose their homes.
• Suicide rate is 30 Xs higher than national
  average.
• Psychological symptoms increase.
• Entire communities are negatively affected.
• It tends to widen the gap between rich and poor.

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The argument for downsizing based on Utilitarian
ethical theory.

• The argument is that downsizing maximizes welfare
  because the benefit to the majority of the
  population is greater than the costs to a
  minority.
• Orlando shows that this is unknown
• Downsizing does not automatically improve a
  corporations economic health.
• There are many negative consequences that have
  never been quantified, so nobody knows how they
  balance against economic benefit.
• Consequently, that most accurate statement is
  that the Utilitarian case for downsizing has not
  been proven.

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Arguments against the Utilitarian analysis of
downsizing.

• The argument that great harm cannot be justified
  by lesser benefit.
• The argument based on legitimate expectations.
• The argument from fairness.

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The argument that great harm cannot be justified
by lesser benefit.

• Utilitarianism implies that great harm to a few
  is justified if the accumulated small benefits to
  many are greater.
• Orlando says this goes against our moral
  intuitions.
• For example, most people would say it would be
  immoral to randomly arrest and execute suspicious
  people, even if they are not guilty, because this
  practice would scare potential criminals and thus
  slightly increase each of our safety.
• More formally, Kantian theory places a limit on
  Utilitarianism.
• Using someone as means is never right, no matter
  how large the benefit to others.

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The argument based on legitimate expectations.

• Orlando points out that employees frequently base
  important life choices on expectations about
  their jobs, and these expectations are generally
  legitimate.
• Corporate investors rarely base life choices as
  important on their expectations, and these
  expectations are relatively modest compared to
  those of the employees.
• Consequently, employees expectations have to be
  taken into account in calculating costs.

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The argument from fairness.

• Orlandos fundamental point is that downsizing
  often unfairly penalizes employees for
  managements incompetence.
• He mentions Rawls theory about fairness. We will
  examine this theory later, but in general
  Utilitarianism has a difficult time taking
  fairness into account.
• But fairness is one of our earliest and most
  deep-seated moral intuitions.

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Orlando also discusses other arguments for (and
against) downsizing.

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The argument based on the property rights of the
shareholders in the company.

• The argument is that as the legal owners, the
  shareholders of a corporation can do whatever
  they want with it in the pursuit of profit.
• Orlando appeals to our moral intuitions to show
  that legal ownership does not establish an
  absolute moral right to do whatever owners want
  with their property for profit (the apartment
  example).
• Consequently, shareholders property rights have
  to be balanced against the moral rights of other
  groups.

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The argument based on the fiduciary duty of
corporate managers.

• The argument is that the managers of a
  corporation have a fiduciary duty to put the
  interests of the shareholders above the interests
  of all other groups and individuals.
• Orlando shows that the legal purpose of fiduciary
  duty is to protect the shareholders from the
  managers.
• The managers are obliged to put the best
  interests of the shareholders above their own
  interests.
• Consequently, corporate managers can take other
  groups interests into account without violating
  their fiduciary duty to the shareholders.

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The argument based on risk.

• The argument is that shareholders have risked
  money in their investment in the corporation and
  therefore are owed special concern.
• Orlando lists various kinds of real risks that
  are taken on by employees of corporations.
• Consequently, while risk needs to be taken into
  account by corporate managers, this should
  involve an evaluation and balancing of the
  competing relative risks.

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The argument based on contract theory.

• The argument is that there is an implied contract
  among corporate investors, managers, and
  employees that includes the shared understanding
  that the investors profits always take
  precedence over employees well-being.
• Orlando says baloney.
• No such understanding exists certainly for
  employees.
• Such an implied contract would require a balance
  of power that does not exist.
• Consequently, this argument fails.

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What is Orlandos final conclusion about
downsizing?

• There is no universal, automatic conclusion about
  the ethics of downsizing.
• Each case stands on its own, and the ethics
  should be evaluated as such.
• Some cases will be morally permissible.
• Some will not be.
• And even some that are will need to be done in a
  particular way in order to be ethical.