Business Solutions: Utilitarianism and Business Ethics

Utilitarianism is a normative, consequentialist, empirical philosophy which links the idea of a good action to one which promotes maximum pleasure or happiness, found by adding up costs and benefits (or pains and pleasures). It has two classic formulations – Bentham’s hedonistic (pleasure-based) act utilitarianism and Mill’s eudaimonistic (happiness-based) rule utilitarianism. In this article we make some preliminary comments on Bentham and Mill before analysing a famous case in 1972 where utilitarian ethics seemed to cause a very immoral outcome – the Ford Pinto case.

BENTHAM (1748-1832)

Bentham rejected Christianity and was influenced by David Hume (1711-76) and the French philosophe Helvitius, who argued that true justice was synonomous with the good of the whole. He formulated the greatest happiness principle: “By the principle of utility is meant that principle which approves or disapproves of every action whatsoever, according to the tendency which it appears to have to augment or diminish the happiness of the party whose interest is in question”.

• There is one good, pleasure, and one evil, pain.

  Human nature is naturally motivated by “two sovereign masters, pleasure and pain”. We are pleasure-seekers (hedonists). Other motives such as duty, respect, are irrelevant.

• The empirical calculation could be done with a hedonic calculus which allocates hedons of pleasure to different choices.
• Social goals should be fixed by aggregating personal goals in terms of maximising pleasure and minimising pain.
• The aim of government is to harmonize conflicting interests by passing laws with appropriate penalties for those who cause pain to others – hence modifying their behaviour.
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Bentham became convinced that the British Government was influenced solely by self-interest rather than some idea of the common good. He came to argue for the abolition of the monarchy, universal male suffrage (not just linked to land), and rule by parliament as judge of the common interest.

JOHN STUART MILL (1806-73)

Mill’s version of utilitarianism was so different from Bentham’s that it almost seems that he rejects it. Mill was concerned to move away from what he once called a “swinish” philosophy based on base pleasures, to something subtler. Goodness was based on more than just pleasure, but on the virtue of sympathy for our fellow human beings, a concern for their rights and our duty to promote the common good.

Pleasures were distinguishable between lower bodily pleasures and higher intellectual or spiritual pleasures – and if you wanted to know which was better ask someone who’d experienced both.

• Mill was suspicious of universal male suffrage, and advocated education for all as a key to graduating to the happy life.
• Mill was keen to see fairer distribution of wealth and income and rejected the extreme form of free market economics.
• Mill argues for a weak rule utilitarianism.

We maximise happiness by obeying laws and social conventions which experience has shown promote the common good – such as respect for life, personal freedom and private property, or good manners and politeness. However, when two principles or rules come into conflict, such as the choice to lie to save my friend’s reputation, I revert to being an act utilitarian – making my decision based on a balance of outcomes – choosing that action which maximises happiness.

BUSINESS APPLICATIONS

Utilitarianism can be used in any business decision that seeks to maximize positive effects (especially morally, but also financially) and minimize negative ones. As with Bentham’s formulation, utilitarianism in business ethics is primarily concerned with outcomes rather than processes. If the outcome leads to the greatest good (or the least harm) for the greatest number of people, then it is assumed the end justifies the means. As Lawrence Hinman observes, the aim is to find “the greatest overall positive consequences for everyone” (Ethics, 136).

This can be linked to the idea of cost-benefit analysis, so that “correct moral conduct is determined solely by a cost-benefit analysis of an action’s consequences” (Fieser, p7). Just as John Stuart Mill objected to the coldest, most basic version of the theory, modern business ethicists point to utilitarianism’s limits for practical choices.

For example, Reitz, Wall, and Love argued that utilitarianism isn’t an appropriate tool when outcomes affect a large number of separate parties with different needs or in complex processes whose outcomes and side effects can’t be readily foreseen, e. . , implementing new technology. Utilitarianism suffers from the difficulty that costs and benefits may not be equally distributed. As Hinman comments “utilitarians must answer the question of whom are these consequences for? ” (Ethics, 137). For example, if the UK government fails to regulate carbon emissions, acid rain falls on Sweden. If a tax is then placed on UK business to pay for this, the cost is borne by the UK taxpayer, the benefit is enjoyed by Sweden.

There can be broad social costs, for example, of promoting unhealthy eating that are paid for by UK taxpayers in higher bills for health care, whereas the benefit (McDonalds profits) are enjoyed by employees and shareholders. Such rules as “always pay your taxes” suffer from this problem, that the rich are actually subsidising the poor. Why should they? Mill would argue that we are concerned for others because of a general feeling of sympathy, which as a matter of fact, we all have.

But suppose (as a matter of fact) I don’t share this feeling, then the rational utility maximising thing to do is to avoid paying tax as far as possible – move abroad, set up tax shelters, register my company in the lowest tax economy. 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 (at least in Mill’s weak rule utilitarianism), with no bias towards self, and would use it as an objective, quantitative way to make a moral decision.