Application of Utilitarianism to Business Ethics

In this video I explore the application of utilitarianism to four aspects of business ethics (employees and employers, business and consumers, business and the environment and business and globalisation). I also look at some of the strengths and weaknesses with the utilitarian approach to business ethics.

Application of utilitarianism to business ethics

Employees and Employers

In act utilitarianism any action is permissible given that it increases pleasure for the greatest number of people and a successful business does exactly this. Therefore, there is no correct way to treat employees. It is completely fine to exploit workers. Rule utilitarianism however differentiates between the material pleasures of the consumers and shareholders and the the higher pleasures of taking care of employees. This implies that there should exist a code of conduct on how to treat employees. Preference utilitarians look at all the preferences and keeping workers happy is one of the company’s preferences because it determines how motivated people are and hence the productivity of the firm. For this reason it is important to treat employees properly. Whistle-blowing is an acceptable activity for utilitarians because it produces pleasure for consumers, employees and the market.

Business and Consumers

According to Bentham all of the pleasures of consumers should  be met as they are the biggest stakeholder and so a business should do everything they want e.g. lower price, provide customer service etc. Mill would say, obviously consumer happiness is important but this should not override the pleasures of employees who work for that business. Preference utilitarianism suggests that a mid-point should be found between this ‘trade-off’ of consumers material preference and employees welfare preferences. The Ford Pinto case is where Ford realised that their batch of cars was faulty but still decided to sell them on the grounds that compensation was a lot cheaper. However, this raises questions about utilitarianism. In principle utilitarianism should agree what Ford did. The consumers were happy because they found compensation and so was the shareholders however this means that the faulty cars could have caused an accident and this makes utilitarianism a lesser consumer friendly ethical theory.

Business and Globalisation

This section is mainly concerned with cheap labour used overseas in places like India and China. Bentham as we can imagine would have no problem with this because the pain of the group of employees is significantly less than the material happiness that consumers find from the products. Mill would be in total disagreement and would forbid child/slave labour as he said before the welfare pleasures of employees are much higher than any financial and material pleasures. Singer’s belief in human intrinsic worth would prevent humans from being utilized to make cheap products overseas. 

Business and the Environment

This is similar to when we look at issues in environmental ethics. The environment for Mill and Bentham has no intrinsic worth only instrumental. Therefore, Bentham would suggest that businesses would have every right to exploit the environment as long as consumer pleasure was being met. Mill again would disagree and say, no, businesses are allowed to use the environment but in moderation and they should not exploit it because caring for the environment is a higher pleasure than destroying it. Singer believed that the environment has intrinsic worth and so he argues that businesses should limit the amount of damage they do and care about the environment.  

Strengths

• Businessmen and women like Bentham’s version of utilitarianism because it provides an easy to use cost-benefit way of working out what is right and what is wrong.
• The purpose of satisfying the greatest good for greatest number seems logical, practical and realistic.
• It is an egalitarian theory - no one person is worth more. (Well consumers are in act utilitarianism.)

Weaknesses 

• The greatest good for greatest number, seems to be focused around greatest good for consumers which makes an unequal distribution of good arise.
• Not always possible to predict consequences or calculate utility particularly when large amount of data are required (particularly if this theory were to be used in reality).
• No common definition of good exists.
• It has some dangerous implications e.g. the subjection of workers
• There are mixed views which means it does not fit exactly in stakeholder or shareholder theory and makes it confusing.