Tutorial 9

1. Downsizing of employees to make a firm more competitive is difficult to fault from a

moral viewpoint. Discuss.

Corporate Downsizing
1. Survival
i. Justified if : prudent, cut high paying jobs, cut working hours/days

2. For competition (Better bottom line)

i. Not justified because challenge the privilege of shareholders
-Duty of care towards shareholders is more incumbent

-No acceptable ethically because----- Kanthian ethics, Rawls theory,

Freeman
Kantian response would label them as immoral because, employees
are being used as mere means to enhance shareholder wealth.
However, since there is a employer/employee relationship such as the
contractual agreements, so as long as the relationship was neither
coercive nor deceptive, there would b nothing immoral about layoffs.
- A corporation can be considered moral in the Kantian sense only if
the humanity of
employees is treated as an end and not as a means merely.

Kantsecondmaximtreatpeopleasanendandneverasameansonly,asthemoral
foundationforemployer/employeerelationships.

Kantsayseveryoneshouldberespectedbecauseallhumanbeingshavedignity.

Conclusion:

Moral philosophy of corporate downsizing

Favor principles in favor of corporate downsizing:

Utilitarianism- to max good in the long run

-No choice but to look after the welfare of overall by sacrificing some
jobs
-Downsizing benefits the majority of the population even though it will
harm a few individuals
-The entire economy will benefit and become more efficient as the
stock market rises, benefiting all those who have investments in
mutual funds

Against principles in favor of corporate downsizing:

-Involves causing a great harm for a minor benefit

-Reduce working hours- everyone sacrifice together no need to laid off

anyone
Downsizing refers to a process where a company or a firm simply
reduces its workforce in order to cut the operating costs and improve
efficiency.
-Throughdownsizingthecompanyusuallyaimstoachievebetterfinancialresultsand
profitabilityunderconditionsofincreasedcompetitionordecliningmarket

Causes of downsizing
Nowadays companies are facing numerous challenges and an
incredible level of competition, they must be very creative and
innovative in order to survive and make benefits. In fact most of them
encounter a lot of problems because of the crisis and the high level of
debts characterizing their financial structure. To go through these
difficult times and remain competitive in this global economy, several
firms downsize with the intention of reducing costs, they see no other
alternatives allowing them to survive

Freeman (1994) argues that firms resorting to downsizing expect

positive financial and organizational outcomes while Cascio (1993)
believe that firms aim to improve their effectiveness and productivity.
They become capable to create more value for the investors and
shareholders, moreover if the management predicts the costs easily,
the future outcomes are more difficult to estimate.

Alternatives to downsizing
Firms must always think about the short and long-term costs of layoffs.
Before making a decision to downsize, managers should consider the
variety of effective alternatives.
Cuttemporarystaff.Eliminateovertime.Offervoluntaryretirement.Cutsalaries.Reducework
hours.

Ethical principles in favor of corporate downsizing

1. Utilitarianism
2. Prima facie
3. The narrow/economics view of CSR to maximise profit (Milton
Friedman)

Ethical principles against corporate downsizing

1. Kantian ethics (rights and duties) Deontology

Anactionismorallyrightonlyifyouwouldbewillingtohaveeveryoneactthesame
wayinasimilarsituation.

Peopleshouldneverbetreatedonlyasameanstoanend

2. Rawlss theory of distributive justice ( distributive justice- some will

benefit and some will suffer)
3. Edward Freeman (Broad view)

-There are 3 analytical tools in making moral and ethical judgments---

utilitarianism, rights and duties (Deontology) and justice and fairness
(Rawls theory).
-Utilitarianism is concerned whether downsizing would generate the
greatest good for the greatest number.
-The main idea is that an act or decision is right if it results in
benefits for people and it is wrong if it leads to damages or causes
harm
-Decisionmakershouldevaluateeachdecisionalternative,determinethepositiveand
negativeutilitiesarisingfromthealternative,andthenselecttheonewhichproducesthe
greatestutilityforasociety.
-The second technique, rights and duties is whether individuals have a
right to their jobs and whether organizations have a duty to protect
them.
-This approach considers the individual and views the issue from the
individuals rights to those on whom these rights impose duties
-Human beings have a right to live.
-If human have a right to live then they have a duty not to take each
others lives
-In applying rights and duties approach to the ethical analysis of
downsizing, it appears that the central question is whether an
employee has a moral right to his/her job and whether managers have
a corresponding moral duty not to terminate an employee until he/she
forfeits that right
-It is said that an employee does not have an absolute right to retain a
job.
-An employee that engages in misconduct does not have the right to
retain his/her job
-Managers have duties by virtue because of their positions as
managers.
-Top managers have a duty to act in the best interests of their
organization and stakeholders
-This is in line with that managers role to act as an agent for the
owners and stakeholders of the company to ensure the firms financial
wealth
-Finally, the third technique, justice and fairness deals with the issue of
whether the action such as execution of a downsizing is proportional to
the problem and applied evenly.

-Fairness and justice (John Rawls)

-Fairness and justice approach considers both the individual and the
social system within which he/she operates
-The major focus of the fairness and justice approach is limited to a
company, agency or community
-Some employees who have performed well have lost their jobs while
others who have performed equally satisfactorily have remained with
the system
-A downsizing approach that is sometimes taken in the name of
fairness is to downsize certain percentage of employees, or a so-called
across-the-board approach to downsizing.
-In practice, this means that each division, department or region would
downsize a certain percentage of its employees.

-If one were to adopt Rawls veil of ignorance, would the larger
community approve of a system of downsizing based on seniority or
merit?
-Which would be the fair and just system?
-Rawl argues that of the 2 approaches, merit would appear to be more
defensible since it ties the goal of downsizing (example, improved
company performance) to the judgment of which individuals would
suffer from retrenchment (example, those who contribute least to the
companys performance)
-Seniority might be defensible if there is not sufficient evidence to use
merit
-In general, employees with more experience will contribute more to
the companys performance than those with less experience

In conclusion, in an extreme case where downsizing is the only way to

save the organization from bankruptcy, the utilitarian approach finds
the decision to engage in downsizing to be moral. This is due to the
fact that downsizing would generate the greatest good for the greatest
number.

The rights and duties approach sees the action of downsizing in the
same situation to be moral since employees do not have absolute
rights to their jobs.
However, the view also requires the downsizing to be conducted in a
fair and just manner. It has been established that individuals do have a
right to be treated fairly.

The justice and fairness approach does not find downsizing to be

moral. This is due to the lack of proportionality between the
individuals behavior (good performance) and the resulting action
(termination of employment). However, when the focus is changed
from fairness to each individual to fairness in the total system, then
downsizing activities are justifiedat least when the alternatives is
that all employees lose their jobs. Since all individuals involved are
part of the system, a reasonable argument can be made that the
system view is more appropriate one to be used here. Given that
retrenchments are to be conducted, the approach finds seniority or
merit to be moral bases for determining who will lose and retain their
jobs.

In the opposite, extreme case where downsizing is proposed in attempt

to change the company that is already performing well and does not
appear to face financial problems, none of these 3 approaches
supports the view that downsizing activities are ethical. In this
situation, the greatest good for the greatest number is not achieved.
While employees do not have rights to their jobs, executives do not
have a duty to conduct downsizing. Finally, justice and fairness are also
not served.
*changing the company (mergers, acquisitions and outsourcing)

2. A medical doctor of a large corporation did not want to reveal to his

workers that they are suffering from asbestosis, an irreversible
disease. He feels that doing so would cause them to become mentally
and physically ill, simply through the knowledge that they have the
disease. He argues that they are not disabled and as long as
they feel well, are happy at home and at work, and their
physical condition remain good, they should not be told of
their condition so that they can live and work in peace and the
corporation can benefit by their many years of experience. He
adds that eventually compensation will be paid to each of these men.
Assess the doctors decision to conceal from workers the nature of
their health problems.

- Medical doctor of a large corporation protecting interest of the

company

-Employers should inform workers of any life-threatening hazards

-Did the workers voluntary assumption of risk?
-Did the workers give informed consent?
-Employees have a moral and legal right to refuse dangerous work
(page 439)
-OSHA 1970, to ensure so far as possible every working man and
woman in the nation safe and healthful working conditions

-A quantitative approach to make decision denies ethical consideration

reflects only a bottom lone priority

-Prima facie duty (beneficence, non-maleficence)

Duty of non-maleficence is more incumbent duty of not creating a
workplace that is not clean----causing more harm for workers- floor
dirty, dusty

Duty of Non-maleficence- working conditions got asbestos- your duty is

to make sure the place is safe for workers.

Conclusion: Company must go beyond safety measures

-Culture where safety is priority (Provide training, safety equipment
and safe place)

* Similar tutorial 10-question 2.

Health and safety