Ethics Theory and Business Practice 2.3 Utilitarianism – Part Three Utilitarianism and Management

aims to explain how the principle of corporate maximization offers a rule-utilitarian guide to management decision making to outline some limitations of the principle of corporate maximization

a utilitarian justification for taking ethically troubling actions ‘It sounds callous, but … you sacrifice a hundred to save the thousand. Sometimes you’ve got to make those decisions.’ (MD working for a global agribusiness, cited in Fryer, 2011: 172)

dependent stakeholders those people who are dependent on a company in some way and whose ‘good’ therefore depends on the survival and prosperity of the company

identifying some dependent stakeholders (1) ‘The health of the organization supports currently one-hundred-and-twenty-eight families. You've only got to see the Christmas party, where suddenly your responsibilities are clear: when you see four hundred people who depend on you getting it right. And, at the end of the day, the health of the many support the decisions you make about the few.’ (CEO of business support organization, cited in Fryer, 2011: 159)

identifying some dependent stakeholders (2) ‘All our employees, all our local farmers – their main crop now is cider apples. We’re not only looking after us as shareholders, as directors, but we’ve got the employees, we’ve got our suppliers. There's a huge knock-on effect … so I need to keep the company sound and that [ends up] looking after everybody that's involved with the business, whether it’s a shareholder, whether it’s an employee, whether it’s a supplier or whether it’s a customer.’ (MD of cider company, cited in Fryer, 2011: 162)

the principle of corporate maximization business managers have a responsibility to do all they can to maximize the commercial performance of their corporation, because this, if applied as a consistent rule, will maximize the good for their dependent stakeholders

a rule-utilitarian justification if managers follow the general rule of maximizing corporate performance, this will maximize the good because following this rule will promote the good of most of the company’s dependent stakeholders even if it involves bad things for some and even if, in a particular instance, act utilitarianism would suggest an alternative course of action

applying the principle of corporate maximization ‘If you compromise on [tough] decisions, the company doesn’t perform so well … If you make the right decision, you are being more responsible to everybody else in the business because you are doing the best for the business, which is then doing the best for them. So you are doing the best for the majority in effect, but at the cost of some individual.’ (CEO of a travel company, cited in Fryer, 2011: 158)

challenging the principle of corporate maximization it may maximize the good for dependent stakeholders … but what about non-dependent stakeholders?

influential stakeholders company normative relationship instrumental relationship and normative relationship dependent (affected) stakeholders non-dependent (affected) stakeholders

theory in practice oil spillages in the Niger Delta: is Shell neglecting its non-dependent stakeholders?

key points the principle of corporate maximization offers a practical rule-utilitarian guide to ethical business management, which coincides with the ethical intuition of many managers however, the principle of corporate maximization should be used with care, because it may otherwise privilege the good of dependent stakeholders while overlooking the good of non-dependent stakeholders

references Fryer, M. (2011) Ethics and Organizational Leadership: Developing a Normative Model. Oxford: Oxford University Press.