This post contains a formatted MS Word file, written on the application of ethical philosophy in the business decision making process.
Introduction:
This paper provides an introduction to ethical philosophy as it relates to the scenario of a plant closure and relocation. Team Pinnacle has reviewed several ethical theories in an attempt to identify one theory to apply to this scenario. Ethical theories reviewed include deontology, utilitarianism, care ethics, virtue, as well as justice and fairness. Each of the theories reviewed presented both opportunities and challenges when applied to our scenario. A major contributing factor in deciding on our ethical theory revolves around the fact that our fictional company is a for-profit, publicly traded organization. Publicly traded companies are legally bound to increase share-holder profit whenever possible while staying within the confines of the law. As a result, there is a great deal of duty associated with managing a plant within a publicly traded company.
The Deontological Approach:
Deontology is strongly associated with the German scholar Immanuel Kant (1724-1804). According to Kubasek, Brennan, and Browne, “Immanuel Kant attempted to show that there are some things that we ought to do and others that we ought not to do merely by virtue of being rational” (in Hartigan, ed., 2004, p. 282). Kant theorized that ethical decisions are non-consequential. They are “…based on moral worth as defined by duty” (Bowen, 2004, p. 315). When utilizing this theoretical model in decision making, the decision must be based upon the idea that the act itself is appropriate, not necessarily considering the consequences of the act.
Deontology is in strong opposition to the theories of utilitarianism and care ethics. Both utilitarianism and care ethics place considerable value in the net effect of decisions rather than the duty or intention of the decision itself. Kant’s argument for duty-based ethics is summarized by Lahdesmaki (2005) when he says “Kant’s most basic claim is that nothing can be conceived to be good unconditionally and without qualification except a good will” (p. 58). Micewski and Troy (2007) demonstrated that deontological ethics is “a theory based on the concepts of duty and rights that can be demonstrated by reason alone and exist separate of experience” (p.24). In other words, the belief among deontologist is that “there are certain moral rights or moral duties that all human being possess” and should consistently act on as noted by Lahdesmaki (2005, p.58). In practice, as noted by Kubasek, Brennan, and Browne, deontologist adhere to “actions that are right not because of some benefit to ourselves or others but because of the nature of these actions or the rules from which they follow” (in Hartigan, ed., 2004, p. 263).
Sandmeyer Steel Plant Closing Scenario:
The scenario of a plant closing in the United States in order to relocate to another country is a common occurrence in the current economy. Shareholders are asking for sharp increases in profit while consumers are seeking sharp decreases in costs associated with goods. Company leaders must extract savings or profits from every facet of their organization. Our particular scenario involves a large employer in a very small town. The plant employees 400 people in a town of 9,000. The relocation of the plant will potentially have a large effect on the community. The plant manager in our scenario, Larry Melville, has some very tough decisions ahead of him.
In addition to managing the plant, he is also a member of the community, a friend and leader to employees at the plant, and a father and husband to his family. Taking each of these relationships into consideration while determining what course of action to take would be very challenging. Utilizing the deontological ethical approach will help Larry navigate the ethics of some of these actions. When utilizing deontology he can focus on his duty to make decisions based on the goals of the company. Primarily this goal is to increase shareholder value.
In his article regarding managerial ethical leadership, Enderle (1987) discusses three fundamental normative-ethical tasks managers must engage in. First, leaders must perceive, interpret, and create reality. Second, leaders must be responsible for the effects of their decisions on the human beings involved. Third leaders must be responsible for the implementation of the corporate goals. (p. 660). We will discuss how Larry Melville can utilize Enderle’s managerial ethical framework within the bounds of deontology ethics.
Perceive, Interpret, and Create Reality:
As the manager for a plant, Larry Melville is responsible for perceiving, interpreting, and in some cases, creating reality for his employees. In our scenario Larry is the person called in to discuss the future of the plant with the company President. Larry should be the person interpreting the company’s decision for his employees. At the end of our scenario, Larry wonders if he should have argued for control over how the news is communicated to the employees. Taking ownership of communicating the changes will allow Larry to engage in the first task outlined by Enderle(1987). Although the deontological ethical theory does not necessarily consider the affects of ethical decisions, Larry can use his control over communication to soften the blow of the decision to relocate the company.
Be Responsible for the Effect of Decisions:
The deontological ethical theory is based on the idea that one must meet ones ethical duty. Being a publicly-traded for-profit organization, the primary objective is to increase shareholder value. It is Larry’s duty to support the decisions of the company, and specifically the decisions that involve the goal of increasing equity for the shareholders. There are many people affected by the decision to move the plant. Larry can utilize the deontological ethical theory while simultaneously meeting his second responsibility as defined by Enderle by focusing on the effect to shareholders. As stated by Lahdesmaki (2005), deontology involves “morality actions stemming from a sense of duty” (p.58), and in the case of Larry it is based on a close relationship with his employees. Like his employees, the shareholders have families and financial responsibilities. Their investment in Larry’s company may be a retirement account for themselves or a college fund for their grandchildren. It is Larry’s duty as an agent for the shareholders to embrace this cost saving measure. He has to remain loyal to the company’s stakeholders. It’s not only a matter of doing the right thing; it’s also doing it smartly (Messick & Bazerman, 1996).
Be Responsible for the Implementation of Corporate Goals
Larry does not have the authority at his company to deviate from the corporate goals that have already been set. Even if he strongly disagreed with the plan, it does not change his place within the company. His job is to execute the plan. The plant will be relocated whether or not Larry facilitates the efforts at the request of the President. Larry should immediately begin to document his recommendations for meeting the concerns discussed in the scenario. Specifically, how will Larry manage relationship with the unions, employees, and community?
Recommendations:
There is no method of moving a plant out of the country that allows employees to keep their positions. Larry’s position at the company is one in which he must execute the strategic plans as stated by the executive leaders. In this position, Larry’s ethics must be centered on his duty to his company. If he cannot embrace duty-focused ethics he will certainly discover himself engaging in acts that he himself finds unethical. Therefore it is our recommendation that Larry embrace deontological ethical theory as a framework with which to approach this very difficult task.
Further, it is critical that Larry argues for, and gain control over how this change is communicated to his employees. To do this he must orchestrate the communication in such a way as to limit the impact to his employee. In addition, he has intimate knowledge of potential financial decision his employee may be considering. With control over communication, he can intervene before employees make decisions they will regret once the plant is relocated.
Since this scenario affects stakeholders and shareholders including the community (including businesses), employees and their families, consumers, suppliers and customers, United States, and Mexico, there are several factors deontologists must consider when facing similar dilemmas. Using the deontological approach, this scenario must accomplish a win-win for everyone where the manager has fulfill his/her moral duty especially with respect for persons (Kubasek, Brennan, and Browne in Hartigan, ed., 2004, p.285). To limit damages, the manager could advise upper management to share its position with its employees, local town and unions before implementing the relocation. Second, the manager could detail certain changes that can occur to prevent the company from moving such as: lower production cost, lower employee wages, and increase efficiency. Finally, the manager could negotiate with the local town in lowering taxes for the company. But most importantly, they have to "guard against irrational and unethical decisions" (Messick & Bazerman, 1996, p.22).
Summary:
Team Pinnacle believes the right approach in this situation must encompass a value for people. Regardless of one’s theory of ethics approach, we believe organizations must uphold to and base ethical business decisions on the company’s code of conduct. The deontological approach in this scenario is the best ethical theory method where a manager acting on his/her moral duty demonstrates a respect for persons. Larry Melville has to maintain the company’s commitment to its stakeholders while complying with the code of ethics. Using him to announce the relocation to the employees will minimize the damages.
References:
Bowen, S.A. (2004, July). Organizational factors encouraging ethical decision making: An exploration into the case of an exemplar. Journal of Business Ethics, 52(4), p. 311-324.
Retrieved on November 6, 2007, from Business Source Premier database. Enderle, G. (1987). Some perspectives of managerial ethical leadership. Journal of Business
Ethics, 6(8), 657 -663. Retrieved November 12, 2007, from ABI/INFORM Global database. Kubasek, N., K., Brennan, B.A., and Browne, M.N. (n.d.). The legal environment of business: A critical thinking approach (3rd Ed). In R. Hartigan (Ed.). Ethics and legal concepts for business. Upper Saddle River, NJ: Peason/Prentice Hall.
Lahdesmaki, M. (2005, September). When ethics matters–Interpreting the ethical discourse small nature - based entrepreneurs. Journal of Business Ethics, 61(1), p. 55-68. Retrieved on November 5, 2007, from Business Source Premier database.
Messick, D.M. & Bazerman, M.H. (1996). Ethical leadership and the psychology of decision making. Sloan Management Review, 37(2), 9-22. Retrieved November 15, 2007, from
ABI/INFORM Global database.