International Journal of Social Economics

Emerald Article: Toward an ethics of corporate restructuring Dell Champlin

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To cite this document: Dell Champlin, (1998),"Toward an ethics of corporate restructuring", International Journal of Social Economics, Vol. 25 Iss: 9 pp. 1353 - 1366 Permanent link to this document: http://dx.doi.org/10.1108/03068299810213963 Downloaded on: 23-01-2013 References: This document contains references to 18 other documents To copy this document: permissions@emeraldinsight.com This document has been downloaded 1689 times since 2005. *

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Dell Champlin, (1998),"Toward an ethics of corporate restructuring", International Journal of Social Economics, Vol. 25 Iss: 9 pp. 1353 - 1366 http://dx.doi.org/10.1108/03068299810213963 Dell Champlin, (1998),"Toward an ethics of corporate restructuring", International Journal of Social Economics, Vol. 25 Iss: 9 pp. 1353 - 1366 http://dx.doi.org/10.1108/03068299810213963 Dell Champlin, (1998),"Toward an ethics of corporate restructuring", International Journal of Social Economics, Vol. 25 Iss: 9 pp. 1353 - 1366 http://dx.doi.org/10.1108/03068299810213963

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Toward an ethics of corporate restructuring

Dell Champlin
Department of Economics, Eastern Illinois University, Charleston, Illinois, USA
Corporate restructuring in the 1980s and 1990s has had a profound impact on the US economy. On the positive side, corporate restructuring is said to have revitalized the US manufacturing sector, increased international competitiveness, and created jobs that emphasize teamwork and initiative. However, even the most enthusiastic supporter of corporate restructuring recognizes that the costs have been substantial for many Americans. Corporate restructuring has led to massive layoffs, plant closings, growing numbers of contingent workers, and the decline of secure, well-paid jobs. While the problems of restructuring have been discussed in great detail, the solutions are more elusive. What can or should be done to mitigate the impacts of restructuring on workers, communities, and society at large? The stumbling-block to finding an answer to this question is the lack of a satisfactory framework for evaluating restructuring decisions. Economic theory permits only one yardstick for measuring management decisions: does the decision maximize profits? In practice, this means that any management decision, including the decision to restructure, will be evaluated solely for its impact on corporate performance. However, management decisions are also subject to another standard. All management decisions are expected to comply with the legal and moral norms of the society. Even Milton Friedman, the most famous proponent of laissez-faire economics, does not use profits as the sole measure of corporate decision making.
In a free-enterprise, private-property system, a corporate executive is an employe[e] of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom (Friedman, 1970, p. 33).

Toward an ethics of corporate restructuring 1353

The purpose of this essay is to develop the groundwork for an ethics of restructuring. The first part of the paper examines the ethical guidance provided by the standard economic theory of the firm including a discussion of the corporate responsibility argument. The second half of the paper explores an alternative suggested by Elizabeth Anderson in her book, Value in Ethics and Economics (1993). Anderson develops an expressive theory of rational action that may offer a more promising framework for determining whether corporate decisions conform to the basic rules of society.

International Journal of Social Economics, Vol. 25 No. 9, 1998, pp. 1353-1366, MCB University Press, 0306-8293

International Journal of Social Economics 25,9 1354

Corporate restructuring and social costs Certain actions are clearly outside the basic rules of society. In the 1980s several notorious cases of unethical behavior by business fueled interest in ethics among academics, the business community and the public. One of the more shocking examples involved the Johns Manville Corporation (Gellerman, 1986). For 40 years managers at this corporation knew that asbestos was harming their workers health but chose to withhold this information from affected employees. Much of the business ethics literature deals with these types of cases: situations where individual managers, with or without upper managements knowledge and approval, engaged in illegal and unethical behavior. These situations occur with sufficient frequency, that they deserve careful consideration. However, there is no ethical uncertainty here. The key issue in these cases is not whether the action is ethical or unethical. The central question is whether it represents misconduct by an individual in violation of company policy, or whether the misconduct was sanctioned by upper management. A second category of actions includes cases where managers believe a course of action is not unethical even though it is against the law. Examples of this type of action include unfair labor practices or discrimination. Such behavior does not expose the company to fines or legal sanctions, but may result in lawsuits or complaints filed with various federal agencies such as the National Labor Relations Board or the Equal Employment Opportunity Commission. That is, enforcement is left entirely up to the victim who must file a complaint or undertake the expense of a lawsuit. In either case, the ultimate resolution may take years. These cases are troublesome, because firms that engage in this behavior face minimal costs. The firm runs a relatively small chance of a lawsuit which it may well win. In many cases, the firm risks only an adverse administrative decision that imposes negligible penalties. However, unless we believe that corporations should engage in civil disobedience, there is also no ambiguity regarding the appropriate decision in these cases. If ethical considerations are not a sufficient guide, individuals and corporations can simply obey the law. What is ultimately more troublesome is a third category of cases where a manager must decide in the absence of an external rule like a law to tell him/her what to do. These are cases that are not illegal, so the law offers no guidance. This is also the category of actions that has figured most prominently in political rhetoric in recent years: actions with significant social costs. To engage intentionally in behavior that causes significant and widespread harm to society is regarded by many as unethical. Until now attention has focussed primarily on actions at the individual level such as teenage pregnancy, the abandonment of children by fathers, and dependence on welfare. However, Senator Bill Bradley (1996) and others argue that we ought to apply the same standard to business. A restructuring decision by a company also carries significant social costs. In fact, a single business decision will often have a far greater impact on society than a decision by one individual. A decision to close

a plant or to convert many workers to temporary or part-time status may affect Toward an ethics an entire community. of corporate However, urging corporations to do the right thing is easier said than done. restructuring The problem is not that managers do not consider the consequences of their actions on the community. The difficulty is that there is no clear and consistent way for them to do this. What is lacking is a satisfactory normative framework 1355 for judging these types of decisions. The next section discusses the role of ethics in the standard economic theory of the firm. Orthodox economic theory does not address ethical questions directly, but the philosophical underpinning is utilitarianism. For purposes of developing an ethics of restructuring, the main drawback of utilitarianism is that it provides either a clear guide to rational action or an ethical guide to socially responsible behavior. It cannot do both. Rationality and ethics in economics Decision making in mainstream economics is based on the notion of rationality, not ethics. Rationality and ethics are on either side of the well-known economic dualism, positive/normative. Economics, as most introductory textbooks are careful to point out, is a positive science. Normative considerations, including ethical ones, are excluded from the actual decision-making process. A proper decision is one that is rational, and a decision is rational if it maximizes wellbeing and is consistent. In the theory of the firm, this view of decision making means that rational managers will maximize profits. Alternative theories have argued that managers do not maximize profits but focus on something else such as market share, sales, or stock price (Baumol, 1983). Berle and Means (1932) suggested that managers may not maximize profits, since their own wellbeing may not be represented by maximum corporate profits. In spite of differences over the variable being maximized, however, these theories of the firm are all based on the view that decision making consists solely of finding the choice that maximizes wellbeing. In contrast to theories that posit a different measure of wellbeing, Friedman, in his often cited 1970 article in the New York Times, goes much further. He steps over the great positive/normative divide and suggests that a decision not to maximize profits is not only irrational but also unethical. Managers who use a criterion other than profit maximization such as social responsibility are failing in their fiduciary duty and thus acting unethically. The money that managers are being socially responsible with is not their own. The presumption here is that stockholders would prefer the profit-maximizing decision to the socially responsible one. A more fundamental assumption is that there is a trade-off involved. A debate over corporate, social responsibility hinges on the view that managers can either maximize profits or behave responsibly. At the very least, there is the presumption that the use of two decision-making criteria, maximization of wellbeing and social responsibility, raises the possibility of conflict between them. Since managers cannot maximize two conflicting goals simultaneously, the use of two criteria may lead to situations where managers do not maximize profits.

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On the other hand, one could argue that there is no conflict between ethics and maximizing profits. This is the flip side of Friedmans argument. Instead of the negative argument that not maximizing profits is unethical, we have the affirmative argument that maximizing profits is ethical. This view can take two forms: (1) maximizing profits is ethical; or (2) acting ethically will maximize profits. The first view is the utilitarian ethic put forth in support of laissez-faire. An action is ethical if it results in the greatest possible benefit for society. If the individual maximization of profit results in the greatest possible output for society, then the individual maximization of profit must be ethical. In laissezfaire economics, the possibility of conflict between maximizing profits and ethical behavior is simply eliminated by definition: maximizing profits is always the ethical choice[1]. The second view found in Skeddle (1990) and others in the business ethics literature is not that maximizing profits and ethical behavior are the same thing, but that they tend to coincide in the long run. For example, Skeddle argues that businesses that behave unethically face legal sanctions involving substantial financial costs. Unethical behavior also leads to damaged reputations and may cause low employee morale. The argument that ethics is good for business would appear to bring ethics into the decision process. Managers can maximize profits and be ethical at the same time. In fact, Solomon argues that the most serious single problem in business ethics is the false antagonism between profits and social responsibility (1992, p. 106). However, despite the expressed intention to include ethics, just the opposite effect occurs. Arguing that ethics is good for business effectively removes any need for ethical choice. Managers can safely return to maximizing profits as the only relevant decision rule. One could just as easily argue that the problem with unethical managers is that they have not been maximizing profits. That is, if they were good managers and always made choices that maximized profits for the company in the long run then they would automatically behave ethically. This last conclusion is true only for unethical behavior that is costly, however. Unethical behavior is costly only for firms that get caught and suffer legal sanctions, are vulnerable to lawsuits, or suffer loss of reputation. But what about firms that do not get caught? In this case unethical behavior is not costly. The good for business approach to ethics is entirely consistent with the recommendation that managers undertake unethical behavior only when there is a relatively low risk of being found out. One could certainly eliminate ethical risk altogether by behaving ethically, but no business decision is riskfree. Managers are routinely asked to weigh risks attached to alternative outcomes. What would be the appropriate decision between a highly profitable venture with relatively little ethical risk and a second alternative with higher financial risk but no ethical risk? Ethics may be good for business but so are

profits. Since this framework would not necessarily lead one to choose the Toward an ethics ethical alternative, it cannot be regarded as a reliable guide for ethical behavior. of corporate An additional difficulty with the ethics is good for business approach is restructuring that the costs associated with unethical actions tend to occur only with illegal actions. This makes ethical equivalent to legal. One could toss out the word unethical and substitute the word illegal and not change the meaning of the 1357 argument. If the only behavior to be avoided is behavior that may result in a financial cost to the company because it is illegal, then, in essence, there is still only one criterion: maximize profits. In conclusion, it appears that the positive/normative distinction in neoclassical economics is intact. Friedman discusses ethics in two ways. He first assumes that decisions based on social responsibility are incompatible with maximizing profits. He then concludes that managers who use this criterion are behaving unethically doing good with someone elses money. In essence, Friedman is arguing against using normative criteria in economic decisionmaking. Second, Friedman supports the superiority of the market in allocation. This belief is equivalent to making the maximization of profits ethically superior by definition. This tautology makes ethics unnecessary as a guide to action. The ethics is good for business literature attempts to make ethics part of the business decision-making process. Indeed, Skeddle argues not only that ethics is part of the business decision but that unethical managers will ultimately lose. However, this approach is not a satisfactory ethical guide. Whether or not individual managers consider ethics and clearly many do it is not necessary to do so within this framework. Thus, despite the attempt to depart from Friedmans stark choice between maximizing profits and the pure unadulterated socialism of social responsibility, the practical result is the same (Friedman, 1970, p. 33). Corporate restructuring and consequentialism From an ethical standpoint, economic theory is consequentialist. That is, a decision is judged ethical or unethical solely on the basis of its outcome. The distinction between a decision and the consequences of that decision is an important one in economics. Amartya Sen (1987) identifies the two aspects of a decision as agency and wellbeing. Agency refers to an individuals ability to form goals, commitments, and values, while wellbeing refers to personal advantage. Economic theory, under the influence of utilitarianism, emphasizes wellbeing and limits agency to rationality or the maximization principle. Thus, the decision to restructure is either rational or irrational, and a rational decision is one that maximizes wellbeing:
Utilitarianism identifies the morally best state of affairs as that in which total or average welfare is maximized, and it defines the right act (rule, motive, and so forth) as that which tends to bring about the morally best state of affairs (Anderson, 1993, p. 27).

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There are a number of difficulties associated with utilitarianism. In the first place, there is the problem of which consequences to take into account. Conventional economic theory states that the task of the manager is to maximize profits. Thus, the consequences to be considered in making a decision to restructure should include only the consequences for corporate performance. In the debates over corporate responsibility, it has been argued that managers should take into account other consequences including the impacts on workers and communities. Friedman (1970) argues strenuously against the idea that managers should engage in corporate altruism. According to Friedman, choosing not to restructure because it would have a deleterious impact on employees and the surrounding community would be altruistic, if it resulted in lower corporate profits. Friedman does state that decisions should follow the social norms of society. What this means exactly is not spelled out. However, since Friedman is a strong proponent of laissez-faire, one might safely conclude that Friedman regards laissez-faire as entirely ethical. Thus, while a manager would not be entitled to break laws or engage in underhand practices in order to make money, he/she is not obligated to rescue those who may lose out as a result of his/her actions. These losers would include laid-off workers and indirect losers such as communities and the society at large. Suppose we overcome Friedmans objections by assuming that the basic moral norms of society include the requirement to consider the consequences for all stakeholders of a corporation. This is not an unreasonable assumption given the moral tone of much of the recent criticism of corporate restructuring. However, the corporate responsibility approach even if implemented is not likely to provide a sound basis for an ethics of corporate restructuring. In welfare economics, a recurring difficulty is the inability to compare two nonPareto optimal states. That is, if one has a choice between two actions and each action will make some people better off and some people worse off, there is no way to decide which action is better if the sum total of the gain is the same[2]. The source of this problem in economic theory is the consequentialism of utilitarianism which focuses only on the total or average gain. For example, suppose State A results in a total gain of $8 and State B also results in a total gain of $8. An impartial observer would rank these two states equally. It is a matter of indifference who the winners and losers are. In the real world a choice between State A and State B usually relies on value judgments about the merits of the winners and losers, something that is not permitted in a consequentialist framework[3]. In most decisions, it does matter who the winners and losers are. For example, if I compare State A in which I gain $10 and you lose $2 with State B in which I lose $3 and you gain $11, I will not rank these two states equally. I will rank them based on how I feel about you. That is, I will most likely prefer State A in which I am the winner, unless there is some reason for me to feel altruistic about you. For example, if you are my child or my mother, I may prefer State B. Most significant management decisions including corporate restructuring require managers to make decisions about whose interests will take priority. If

a manager chooses to focus solely on maximizing the wellbeing of stockholders, Toward an ethics he or she has made the decision that the interests of stockholders take priority of corporate over the interests of all other stakeholders. If managers are to consider the restructuring interests of some or all stakeholders, they must make explicit value judgments about the potential winners and losers. Stakeholders include not only stockholders, employers, and customers, but also competitors, suppliers, 1359 special-interest groups, the surrounding community, and even society at large. A utilitarian ethical approach does not allow the manager to place a greater weight on the interests of one individual over another. What is likely, however, is that the manager will be unable to avoid placing the interests of one group over another. Most managers faced with a gain of X for the stockholders and a loss of X for the firms suppliers would not weigh these two Xs equally. Once the manager makes a decision that the interests of one group of stakeholders are more important than the interests of another, he/she is no longer operating within a utilitarian ethical framework. On the other hand, if the manager decides that the interests of all stakeholders are of equal value, he/she may be adhering to utilitarian ethics but would clearly not be regarded as an effective manager. The expressive theory of rational action The previous section discussed some of the drawbacks of consequentialism. In order to avoid falling prey to the same problems, an alternative approach to an ethics of restructuring must rely on a theory of rational action that is very different from the one used in the conventional theory of the firm. In Value in Ethics and Economics (1993), Anderson sets forth an expressive theory of rational action that offers a more fruitful foundation for an ethics of restructuring than the rational maximization of economic theory. This section focuses on the two characteristics of Andersons theory that have particular relevance for this essay. First, Andersons expressive theory of rational action is not consequentialist. Using Sens terminology, Andersons theory fully recognizes the importance of agency as well as wellbeing. In contrast, economic theory restricts agency to rationality and places primary emphasis on wellbeing. Second, Andersons theory recognizes that it matters whose wellbeing is being enhanced. Orthodox economic theory offers only Pareto optimality as an evaluative criterion and does not provide guidance in comparing non-optimal states. Most important, Pareto optimality is agentneutral. One persons wellbeing is no more important than any others. The dual nature of a decision Andersons expressive theory of rational action recognizes the dual aspect of a decision. This is a key difference between consequentialism and her expressive theory:
Consequentialist and expressive theories of rationality pose sharply contrasting ways of thinking about value and action . Consequentialist theories conceive of rational action as directed toward one end: the production of consequences. Expressive theories conceive of

International Journal of Social Economics 25,9 1360

rational action as directed toward two ends: a final end the production of consequences and an end for the sake of which the final end is sought the people, animals, and things the agent cares about. Consequentialist theories evaluate action in terms of its consequences. Expressive theories evaluate action in terms of its expressive meanings and evaluate the relevance of consequences through expressive norms. Consequentialist theories justify action by showing that it maximizes value. Expressive theories justify action by showing that it is normatively appropriate, that it conforms to the expressive norms constitutive of a persons rational valuations. (1993, pp. 32-33)

What matters in a decision is not only the outcome or the effect on well-being, but also whether the decision, itself, reflects expressive norms.
Expressive norms are intentional. They tell people to intend or aim at certain things . Consequentialist norms, by contrast, simply tell people to achieve certain consequences, whether they intend them or not (1993, p. 33).

This second aspect of a decision is found in everyday language and in law in the recognition of the importance of intent. We make a distinction between an accident, carelessness, and premeditation. The Johns Manville case mentioned above was notorious, because it represented a breach of the agency aspect of ethics. The issue was not whether asbestos is harmful to human beings, but whether the managers at Johns Manville knew it was harmful and intentionally withheld this information from employees. According to Anderson, intent is important because of what it says about valuation. Deliberately tripping someone is worse than accidentally doing so, because the former expresses contempt or hatred for someone, whereas the latter does not (Anderson, 1993, p. 34). This same distinction between intent and outcome also applies to corporate restructuring decisions. Digital Electronics Corporation (DEC) and American Telephone and Telegraph (AT&T) are two cases in point. In the early 1960s and 1970s DEC maintained a policy of employment security, but in the 1980s began to downsize dramatically in response to changing market environment[4]. AT&T had a long history of employment security but began a series of restructuring efforts that resulted in a significant reduction in force. In late 1995, the decision to lay off 40,000 employees at the same time that the Chief Executive Officer (CEO) received a large bonus and stock options received a storm of criticism. In both cases, a significant number of employees lost their jobs. However, AT&T is regarded as behaving unethically or, at least, callously, and DEC is regarded as behaving responsibly. That is, even though the consequences in both cases included the loss of job security as well as the actual loss of jobs, the actions of AT&Ts managers received criticism while those of DEC received approval. Andersons expressive theory of rational action offers a framework for evaluating these two cases of corporate restructuring. Understanding that the importance of intent is found in valuation makes sense of the AT&T and DEC cases. It suggests that the reason AT&T faced such an intense public and stockholder reaction was not just the high number of the employees to be laid off, nor the size of the stock options and salary given to Robert Allen, the CEO,

but that the juxtaposition of these two actions expressed an exceptionally low Toward an ethics valuation of its employees. In contrast, DEC made a conscious decision to try to of corporate preserve the corporate employment security policy during the restructuring restructuring process and implemented a number of programs to ease the transition. Valuation is the key to understanding Andersons normative theory. In orthodox economics, the value of a good is its market value, the price at which 1361 one is willing to buy or sell it. On the other hand, outside of the economic sphere we value persons, animals, and things differently. An expressively rational action, then, is one that not only produces the desired consequences but also exhibits appropriate valuation of persons, animals, and things. For example, Anderson cites Immanuel Kants distinction between price and dignity:
Kant expresses the view that there are two kinds of value, relative worth and intrinsic worth. Everything is either a mere means, with a price or relative value, or an end in itself, with an intrinsic worth which Kant calls dignity. Things that differ in the kind of worth they have merit different kinds of valuation. People value mere means by using them, but they value persons with dignity by respecting them (1993, pp. 8-9)[5].

An action that displays an inappropriate valuation would be improper. For example, to use another human being is to treat him/her as an object or a commodity. This distinction between mere commodities and persons who are worthy of respect is useful in understanding the criticism that accompanied AT&Ts restructuring. On the one hand, labor is an input to production which means that it is placed on a par with commodities such as raw materials and equipment. In this respect, it is appropriate to use workers. On the other hand, workers are human beings which means that, from an ethical standpoint, it is improper to value them in the same way as commodities. AT&Ts difficulties stemmed from the fact that its actions showed an inappropriate valuation of workers. In essence, AT&Ts decision showed an insufficiency of respect for its employees. Agent-centered restrictions An ethical framework is, by its very nature, evaluative and normative. In economic theory, normative criteria are eschewed, and economic decisions are viewed as value-free. This avoidance of value judgments presents obvious difficulties for the development of an ethics of restructuring. For example, in the corporate responsibility argument discussed above managers are urged to take all stakeholders of a corporation into account[6]. In order to do this, they must confront the necessity of deciding whose interests take priority. The only guidance offered by the utilitarian ethic that underlies economic theory is to maximize total or average value[7]. Welfare economics provides the principle of Pareto optimality. A Pareto move is one that improves the wellbeing of some but does not make anyone worse off. A non-Pareto optimal move is one in which some are better off and some are worse off. The principle of Pareto optimality does not allow us to state whether a non-Pareto optimal move is desirable, since that would require comparing the interests of one group with another[8]. Thus,

stakeholder management appears to be incompatible with orthodox economic International Journal of Social theory. Andersons expressive theory of rational action provides a solution to this Economics dilemma by allowing for agent-centered restrictions: 25,9

1362

Agent-centered restrictions structure relations of special obligation among friends, family members, professionals and their clients, fellow members of communities, and so forth. A person may not betray his friend to prevent two others from betraying their friends. A doctor may not neglect the health of her patient, a corporate executive whose demise will cause his firm to cease neglecting its workers health (1993, p. 73).

An agent-centered restriction contrasts sharply with utilitarianism which focuses on the total or average gain. Anderson cites Parfits (1984) example of the capsizing of a boat that throws a number of children into the sea. We expect that parents will try to save their own children. This may result in fewer children being saved. From a utilitarian standpoint, one should try to save the most children even if that results in not being able to save ones own children. On the other hand, we recognize that parents have special duties and obligations to their own children. The value of the principle of parental love takes precedence over a simple calculation of results:
Out of respect or reverence for each special relation, each person is prepared to accept certain misfortunes rather than demand that others violate their own special duties (Anderson, 1993, p. 78).

The idea that managers need to be more responsive to the needs of stockholders than to employees or to citizens of the community is an agent-centered restriction. Clearly it is not possible for all stakeholders to have an equal status. Managers may wish to take into consideration the interests of workers but will typically place them on a lower rank than the interests of stockholders. It is widely recognized that managers have an obligation to the owners of the firm. That is, we accept the agent-centered restriction toward stockholders. The corporate responsibility argument can be viewed as an argument that there are also agent-centered restrictions that apply to other stakeholders of the corporation, especially employees and the local community. It is the fact that these restrictions are less recognized and less widely agreed on that has led to the debate over corporate responsibility in the first place. The concept of an agent-centered restriction that applies to workers is at the heart of many of the concerns over corporate restructuring. What are the special obligations of a corporation toward its employees? Society has offered partial answers to this question by passing laws governing the treatment of workers on the job including those mandating safe working conditions, payment of compensation for work-related injuries, and payment of overtime for working over 40 hours per week. Unions have offered other answers that over the years have become the norm for unionized and non-unionized workplaces alike. For example, many large employers provide sick leave, paid vacation days, health insurance, retirement plans, and annual cost of living wage increases.

Most of these special obligations were initially strongly resisted by business Toward an ethics owners and, in some cases, are still resisted. One reason for this resistance is the of corporate influence of consequentialism. The issue of the proper treatment of workers is restructuring typically phrased in terms of a right to a particular outcome. Owners have the right to private property. Workers have rights to safe working conditions, a fair wage, and so on. This approach tends to place the wellbeing of one group, 1363 the owners, into conflict with the wellbeing of another group, the workers. For example, the workers right to be safe on the job is secured by government regulatory standards and official inspections. Owners have objected both to regulation and to on-site inspections on the basis that they infringe on the right to run their own business. The owners right to private property will necessarily be restricted by the recognition of any rights for workers. Andersons expressive theory avoids this zero sum game approach. The issue of rights is not really the point in many of these cases. For example, the employment-at-will doctrine states that workers are hired at will in the USA. They may leave at any time, and they may be discharged at any time. However, the actual rights of owners and workers have long been less important than expressive norms. Most workers are expected to give notice before quitting a job. There is no way to force them to do this, of course, since they have the right to leave. However, the accepted norm is to provide advance notice. Similarly, norms govern the conditions under which employers may discharge employees. Just what these norms should be is the key issue in controversies such as plant-closing legislation. Closing a plant with a minimum of prior notice to employees provokes criticism not because anyones rights are violated, but because this action is no longer viewed as an acceptable practice. The question is not whether managers have the right to close a plant with no prior notice but how much prior notice is normatively appropriate. Finally, the most important advantage of a theory that allows for agentcentered restrictions is that it is useful. The concept is not necessary as long as one adheres strictly to the self-interested behavior recommended by economic theory and maximizes only ones own wellbeing. However, most businesses are not in a position to ignore the various other stakeholders with interests in the behavior of the firm. In his book on stakeholder management Carroll (1989) develops stakeholder maps for several specific cases including the case of Hooker Chemical Company, a subsidiary of Occidental Petroleum. The stakeholder map for Hooker Chemical at the height of the Love Canal toxic waste controversy between 1971 and 1982 included over 25 separate groups[9]. The notion that management at Hooker Chemical during this period consisted simply of maximizing stockholder profits is nave. Clearly the Love Canal controversy is a special case that attracted the attention of a very large number of groups. However, even before the Love Canal site was sold by Hooker Chemical and used for a housing development and a school, the company had at least 14 separate stakeholder groups (Carroll, 1989, p. 65). The point is that any management decision involves a number of stakeholders, and any decision with significant social costs will attract an even greater number of stakeholders.

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Managers must evaluate the relative importance of each group and the relative importance of each groups specific concern. The advantage of Andersons expressive theory of rational action is that this evaluative process is recognized as a legitimate aspect of any decision. Conclusion This paper has thus far focused only on the advantages of Andersons expressive theory of rational action and the disadvantages of consequentialism as a foundation for an ethics of restructuring. There is, however, one very distinct benefit to consequentialism. Anderson calls this consequentialisms explanatory advantage (1993, p. 44):
Consequentialism promises to provide a single, simple, precise, and determinate procedure of justification that employs objective calculation to overcome disputes about what to do. The pluralist-expressive theory calls for action to be guided by norms described in terms of ideals and evaluative concepts such as respect, friendship, and charity. These norms require interpretation to be applied (Anderson, 1993, p. 44).

This is also the advantage found in the conventional theory of the firm. The profit maximization rule provides a a single, simple, precise, and determinate procedure that does not require interpretation to be used. It is an absolute rule that is not historically or socially relative. A managers decision is always either rational or irrational with no restrictions, caveats, or explanations. In contrast, normative criteria typically rely on a particular context unless they are regarded as moral absolutes. That is, something is regarded as good or bad in a specific set of social and historical circumstances. For example, it is wrong to kill another human being unless it is in self-defense or in war. Moreover, Andersons theory is grounded in social norms. Since social norms change, certain practices that were formerly unacceptable may become acceptable over time. This change in social norms does not mean that the old standard was wrong and the new standard is right. It simply means that priorities shift with changing circumstances. Anderson uses the example of using school figures to judge ice skating competitions. Formerly, this standard was considered important in determining a skaters artistry. Now ice skating places more emphasis on athleticism, and the school figures were dropped. No one claimed that artistry was an unauthentic standard, that past awards informed by this standard were fraudulent. They claimed only that it was no longer important (Anderson, 1993, p. 49). Anderson recognizes that the same decision may be evaluated differently in different contexts. This level of variability means that decision making is more difficult. There is no simple decision rule that will apply to all cases of restructuring. This conclusion will no doubt be unsatisfying to economists who are accustomed to the clarity of the maximization principle. However, this is the nature of ethical questions. As Hausman and McPherson state so clearly:
Very little in ethics is completely uncontroversial, and very little can be said about economics that relies on only uncontroversial moral premises. Economists concerned with evaluation are going to have to get their feet wet in the swamps of moral philosophy (1993, p. 712).

While we may desire a simple decision rule or a law to make our decisions for Toward an ethics us, in certain cases a moral judgment is unavoidable. The purpose of an ethical of corporate framework is to provide guidance in making this judgment. restructuring
Notes 1. Strictly speaking, in economic theory only perfectly competitive markets always result in maximum efficiency and output. Thus, one can claim that maximizing profits is the best choice from a utilitarian ethical standpoint only in a perfectly competitive economy. The extent to which imperfectly competitive markets bring about the maximum output for society, is, of course, subject to debate. 2. See the discussion on the limited applicability of Pareto optimality in Hausman and McPherson (1993, pp. 702-03). 3. A theoretical solution that avoids value judgments is the compensation of the losers by the winners. In essence, eliminate the existence of losers. This is the classic solution in welfare economics. See Hausman and McPherson (1993). 4. Kochan et al. (1988). 5. Anderson later asserts that Kantian ethics is too limited, since it only offers two modes of valuation. For example, there is no way to value animals and nature. See Chapter 1 of Andersons book, Value in Ethics and Economics (1993). 6. See Carroll (1989), for example. 7. Economics also has the concept of the impartial spectator found in Adam Smiths, The Theory of Moral Sentiments (1976). However, this concept urges us to consider the common good it does not provide much guidance in valuing the interests of one group versus another. 8. The problem here, of course, is the concept of utility which is the foundation of Pareto optimality and welfare economics. Utility is not considered cardinally measurable. Thus, we cannot compare the magnitude of one persons utility gain with another persons utility loss. 9. A stakeholder map is simply a diagram depicting the company in the middle with lines to the various stakeholders. In the case of Occidental Petroleum and Love Canal, the stakeholders included: stockholders, customers, suppliers, competitors, the financial community, employees, unions, the US Justice Department, the US Internal Revenue Service, the National Labor Relations Board, The Environmental Protection Agency, the federal courts, the state courts, the New York State Board of Education, the New York Legislature, the New York State Department of Health, the local town council, the PTA, individual residents, suppliers, insurance companies, The Chemical Manufacturers Association, environmental groups, lobby groups, tourists, and the media. See Chapter of Carroll (1989). References and further reading Anderson, C.J. (1993), Corporate social responsibility and worker skills: an examination of corporate responses to work place illiteracy, Journal of Business Ethics, Vol. 12, pp. 281-92. Anderson, E. (1993), Value in Ethics and Economics, Harvard University Press, Cambridge, MA. Bane, M.J. and Ellwood, D.T. (1991), Is American business working for the poor?, Harvard Business Review, September, Vol. 69 No. 5, pp. 58-66. Baumol, W.J. (1983), Business Behavior, Value and Growth, Macmillan, New York, NY. Berle, A.A. and Means, G.C. (1932), The Modern Corporation and Private Property, Macmillan, New York, NY. Bradley, W. (1996), Time Present, Time Past: A Memoir, Knopf, New York, NY. Brody, D. (1992), The breakdown of labors social contract, Dissent, Vol. 39 No. 1, Winter.

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Carroll, A.B. (1989), Business and Society: Ethics and Stakeholder Management, Southwestern Publishing Co., Cincinnati, OH. Friedman, M. (1970), The social responsibility of business is to increase its profits, New York Times Magazine, September 13. Gellerman, S. (1986), Why good managers make bad ethical choices, Harvard Business Review, July-August 1986, pp. 85-90. Hausman, D.M. and McPherson, M.S. (1993), Taking ethics seriously: economics and contemporary moral philosophy, Journal of Economic Literature, Vol. 31, pp. 671-731. Kochan, T.A., MacDuffie, J.P. and Osterman, P. (1988), Employment security at DEC: sustaining values amid environmental change, Human Resource Management, Vol. 27 No. 2, pp. 121-43. Parfit, D. (1984), Reasons and Persons, Oxford University Press, Oxford. Sen, A. (1987), On Ethics and Economics, Basil Blackwell, Oxford. Skeddle, R.W. (1990), Business ethics: dealing in the gray areas, Financial Executive, May-June, pp. 9-13. Smith, A. (1976), The Theory of Moral Sentiments, Raphael, D.D., Raphael, A. L. and Macfie, A.S. (Eds), Clarendon Press, Oxford. Solomon, R.C. (1992), Ethics and Excellence: Cooperation and Integrity in Business, Oxford University Press, New York, NY. Tiemstra, J.P. (1992), Varieties of institutional economics: the theory of the firm, Forum for Social Economics, Vol. 21 Nos 1-2, Fall 1991/Spring, pp. 43-50.