What is Utilitarianism and How Does It Apply to Business - Case Study Example

Ethics: What is Utilitarianism and How Does It Apply to Business? Utilitarianism, in a simple definition, can be described as a consequentialist, normative theory and, according to Fieser, means that “correct moral conduct is determined solely by a cost-benefit analysis of an action’s consequences” (Ethics, 7). This essay will examine the definitions and elements of the theory, in relation to business ethics and, with specific reference to the Ford Pinto Case, how the use of utilitarian methods and cost-benefit analysis impacted on this. Utilitarianism: The basic ethical principle of this theory is of consequences, weighing them up to determine how every person involved in any event, issue, proposal, project and so forth, would be affected. The aim in doing so would be to decide on a morally right action, one that would result in “the greatest overall positive consequences for everyone” (Hinman, 136). So every aspect must be examined to evaluate potential good and bad outcomes; if the goods outweigh the bads, then morally, the action can be deemed right. If there are more bad consequences predicted, then the opposite applies. As with all ethical and philosophical theories, there are more issues to be considered, nothing is quite so simple. Different forms of utilitarianism have been described over the centuries, like Bentham’s pain – pleasure as bad and good consequences. (Ethics, 8), but all seemed to attempt to measure and define what ‘utility’ actually means. If utilitarians consider morality to be all about consequences, then how are consequences measured, which calls into question how utility can be measured and how much of it is the ideal level to aim for? Hinman states: “utilitarians must answer the question of whom these are consequences for?” (137). This question is highly relevant when applied to using utilitarian ethics in business, and in particular, within the context of the Ford Pinto case, to be discussed later. There are many different versions of the theory, all trying to define what consequences are applied to and how they may be applied. One version, rule-utilitarianism, considers that a rule or code of behaviour is morally right if, by its application, the consequences are more favourable that unfavourable to everyone. The actions driven by the rule would result in benefits, or goods for all of society. One example might be a Council’s Urban Regeneration Programme, funded by Council Tax. The rule is that everyone must pay, and in doing so, produce an outcome that creates a better environment for the majority living in the urban area. The flaw is that those in the suburbs, who contribute the greatest amount, will not receive as much favourable consequences, on the premise that they already have plenty of utilities. So simply following a rule would not always be equally favourable. On the other hand, act-utilitarianism, the most common form used in many circumstances, looks at the consequences of every case individually and works out the benefits before taking a morally right action. Leggett (13) in commenting on Ford’s use of utilitarian ethics, says: “The utilitarian approach evaluates each action separately and the consequences that arise from it. This analysis would include any ‘harms’ or ‘benefits’ incurred by any people involved in the case.” Business Ethics: In applying utilitarian principles to business ethics, the cost-benefit analysis is most often used – it is a good decision making tool. Companies will attempt to work out how much something is going to cost them before taking action that should, ideally, result in consequences favourable to everyone. That would mean the company could make a profit, while the consumer benefited from their product. Hopefully, products are fit for purpose, safe, and give value for money. No business would attempt a project without evaluation of all relevant factors first, as well as taking other issues or risks into account that might jeopardise success. Ethical business practice, using utilitarianism, would thus consider the good and bad consequence for everyone the action would affect, treat everybody as having equal rights, with no bias towards self, and would use it as an objective, quantitative way to make a moral decision. In applied business ethics, within the utilitarian theory, many principles exist which may be used to inform the morality of actions when analysing costs-benefits, or should be, if consequences are to favour more people overall. These include harm, honesty, justice and rights. So no harm should be done to others, people should not be deceived and their rights to life, free expression, and safety should be acknowledged. The contention here is that Ford abandoned these principles, abused the utilitarian theory to suit their needs, stayed within the laws of the time, but behaved unethically. The ‘utilities’ as a consequence, appeared to be money, and they used that to define the value of their needs against the value of human life. Ford Pinto Case and Cost Benefit Analysis: Lacey (580-581) stated that: “Ford pushed the federal regulators to put some price on auto safety…It was an agency of the U.S. government [National Highway Traffic Safety Adminis- tration (NHTSA)] which arrived at this blood-chilling calculation, not the Ford Motor Company. But the way in which Ford took this government figure [$250,725] and used it for its own purposes carried a chill…” What occurred is that the Ford Pinto went on sale with dangerous design faults in the position of the fuel tank and nearby bolts, and the tendency for the fuel valve to leak in rollover accidents. Design and production was rushed and cost of the vehicle kept down to sell it at $2000. It sold well, until 1972 when four people died and one young boy was horrendously burned and disfigured; these are only a few of the incidents that resulted from the Pinto’s flaws, many more followed, costing Ford millions in compensation. The cost-benefit analysis demonstrated an abuse of utilitarian principles, and the engineers were fully aware of the flaws, yet the company continued to sell the car as it was, without safety modifications. They “weighed the risk of harm and the overall cost of avoiding it.” Leggett, (1999). The government figure, mentioned earlier, was made up of 12 ‘societal components’ that included $10,000 for ‘victim’s pain and suffering’ and was meant to determine the cost to society for each estimated death. Ford decided to predict or estimate 180 deaths, 180 serious burn injuries, 2100 vehicles lost, and calculated $49.5 million overall, a figure that would be a benefit to the company, if they put things right with the car. The estimated cost of doing so came to $137 million, for 11 million vehicles at $11 dollars per tank and $11 per unit for other modifications. So costs outweighed benefits and the value of human life was quantified as an economic commodity. It also came to light that some evidence suggested the actual costs to correct matters were over-estimated and would have been nearer to $63.5 million.While these did not equate to the benefits, there would seem to be a moral duty somewhere for a huge corporation like Ford, to bear the cost of $15 million. That way, utilitarian ethics, normative principles and the most good and positive consequences for most people overall would have resulted. There seems to be some form of justice or divine retribution in the way the benefits dwindled and the costs grew over the years, as lawsuits and penalties took millions of dollars from Ford. The company did noting illegal in terms of design at that time; they took advantage of the cost-benefit analysis, ignored ethical principles and abused the moral aspects in utilitarianism. As Lacey (577) put it: “The question is whether Ford and Iacocca [Executive vice president] exhibited all due care for their customers’ safety when balanced in the complex car making equation that involves cost, time, marketability and profit.” Conclusion: Utilitarianism, business ethics and the Ford Pinto case present a dilemma, as the theory appears to be one of moral strength and a good guideline for ethical practice. In relating its consequential content to the Ford Pinto case, it would seem that the application of ethics had been dismissed in favour of profits, reputation and immoral actions. The theory cannot be used to put a value on a human life, as Ford attempted to do. The dangers in utilitarianism lie with the potential for abuse, and in abandoning the inherent principles, Ford demonstrated those dangers in action. The decision not to rectify faults represented a denial of doing no harm, not deceiving others, justice and the rights to life and safety. Nor can the theory measure human suffering or loss, as Ford found, to its cost; it cannot predict consequences accurately or quantify benefits and harms, simply by applying a cost-benefit analytical tool. In considering that the ends justify the means, another aspect of utilitarianism, and determining the pain of actions, volume and not ‘who’ suffers, has significance. In principle, evaluating of good and bad consequences provides one way of ensuring that companies consider the morality of their actions, which may suggest that utilitarianism can be a positive influence for ethical business practice. Works Cited Fieser, J. Ethics: Consequentialist Theories Internet Encyclopaedia of Philosophy 2006. University of Tennessee at Martin. 24 April 2007 http://www.iep.utm.edu/e/ethics.htm Hinman, L. M. Ethics: A Pluralistic Approach to Moral Theory: Chapter 5: The Ethics of Consequences: Utilitarianism. 3rd Edition. Belmont, CA: Wadsworth: 2003 Lacey, R. Ford. London: Book Club Associates by Arrangement with William Heinemann Ltd. 1988 Leggett, C. The Ford Pinto Case: The Valuation of Life as it Applies to the Negligence Efficiency Argument. Law and Valuation Papers, Spring 1999 at Wake Forest University. 24 April 2007 http://www.wfu.edu/~palmitar/Law&Valuation/Papers/1999/Leggett-pinto.html Read More