June 27, 2010
MGMT440, Summer 2011
Ethical Approach to Reducing Taylor Studio, Inc.’s Payroll Cost
Taylor Studios, Inc., a corporation in which we are the sole shareholder, has been facing some tough economic times. Recently the corporation’s accountant has advised us, the sole shareholders of the company were having a hard time keeping up with their expenses. The accountant has asked that we develop a plan which will assist the corporation in reducing payroll costs by 25%. In trying to figure out a way to reduce payroll costs, we have decided that there are several different ethical ways to approach the reduction: the conventionalist ethic, the end-mean ethic (or consequentialist ethic), and utilitarianism. ‘The difference between these three approaches to [ethical] dilemmas tends to lie in the way [they] are approached than” in the actual outcome, or goal that must be reached (Wikipedia). The first ethical approach we may look at is the conventionalist ethic. This principle implies that business and ethics are to be separate. Any type of business related activity may take place so long as it is legal. By taking the conventionalist approach, people will often only do things that pertain to their self-interest. Although the conventionalist approach may be cruel and unethical it will still be lawful. If Taylor Studios, Inc. were to take the conventionalist approach to decrease the payroll by 25% they would be acting legally. One way The Corporation can reduce the payroll by 25% legally is to take the LIFO (last in, first out) approach. The new employees who have just started working at the corporation do not have as much seniority as those who have been working there for years. Although this approach may be unethical since these employees that are laid off might be the best performers and the hardest workers. Laying off the last in employees makes the processes of deciding who is let go is easy and less time consuming for management. Another approach to achieve a 25% decrease in payroll is to cut all employees compensation by 25%. Although this approach might be legal, in the eyes of many it may not be ethical. Since all the employees would get a pay decrease including the best performers it may cause some violate ethics. The best performers should not get a pay cut since they have been working hard. Ethically those who are the weaker performers should only be the ones affected by the pay cut since they are not working as hard. This approach is legal since they will still be paid at least minimum wage. An alternative approach the corporation can take is to cut the some of the employee benefits. Benefits such as vacation can be cut to achieve the 25% payroll decrease. For example instead of giving employees 2 weeks of paid vacation they will only receive 1 week paid and one week not paid. This is strategy to lower the payroll is legal since corporations legally do not need to give employees paid time off, however it is unethical. This is unethical because employees should be paid for vacation as a reward for their hard work. In order to best demonstrate the conventionalist ethic cutting the number of paid vacation would be the best route to take. This technique best demonstrates the conventionalist ethic because it is the mainly looking out for the best interest of the corporation while still acting legally. By utilizing this technique the corporation will not have to lay off any top performing workers. All the employees will still be working and adding their talent and creativity to the corporation. By cutting down the amount of paid vacation days the corporation will still be acting legally, demonstrates the conventionalist ethic the best. The end-mean, or consequentialism, ethic is another ethical principle. This principle is the idea of ends justifying the means. In other words, consequentialism is the idea that “the consequences of one’s conduct are the true basis for any judgment about the morality of their conduct” (Wikipedia). Another good way to view consequentialism is that actions are “judged right or wrong on the basis of their consequences” (Encyclopedia2). The consequentialist “standpoint, […] is one that will produce a good outcome or consequence” (Wikipedia). A few examples of how this corporation could reach the goal of reducing payroll by 25%, using the consequentialist approach would be reducing the number of employees based upon performance records or based upon the length/extent of their disciplinary files, or by LIFO (last in, first out). The idea of reducing the number of employees based upon their performance records, in order to reduce payroll expenses, would be a consequentialist approach, because the company would then eliminate employees based upon their productivity. Thus, the company would essentially get more for their money, by keeping the best performers. The idea of reducing the number of employees based upon the extent of their disciplinary files (e.g. absenteeism/tardiness, insubordination, ignorance of company policies and procedures) would also be a consequentialist approach, because the company would then maintain the most loyal, dependable, and dedicated employees. This would help the company to also cut the amount of time that they spend working on disciplinary notices, and would thus get the most amount of time, for their money, out of salaries employees, because attendance would likely increase while tardiness simultaneously would decrease. Lastly, the idea of LIFO (last in first out) would be another consequentialist option, because it would be seen as rewarding those who had loyally been with the company for several years. A consequentialist would justify terminating the 25% of employees who were most recently hired, by the idea of rewarding those who have been loyal to the company. The company could have a safe bet that these veteran employees like their job and would be dependable, as they have maintained a great standing with the company and have yet to have their employment terminated. We find that the most useful consequentialistic, end-mean, way to reduce payroll by 25% would be to use a combination of performance and disciplinary records to reduce the number of employees by 25% so that we would maintain the most reliable and best performing associates. This would simultaneously help to increase the corporation’s productivity levels, as well as reduce our turnover ratio and amount of time being spent or documenting disciplinary actions. Utilitarianism, the simplest form of consequentialism, is an ethical principle which holds that the correct course of action in any situation is the one that produces the greatest or maximum balance of benefits and the least harms for everyone (Wikipedia). There are two types of utilitarianism: act utilitarianism and rule utilitarianism. Act utilitarianism states that one should choose to do what he/she believes will generate the most pleasure. On the other hand, the rule utilitarianism advocates general rules that, in some specific circumstances, clearly decrease happiness if followed.
Thus, the common axiom that encapsulates utilitarianism’s “main idea” often leads to misperceptions and the analysis of consequences goes much farther than simply subtracting the harm from the good. Traditional act-utilitarians disagree with these kinds of accommodations to deontological theories, claiming that it goes against utilitarianism at its core—which says that each situation should be evaluated individually, absent of any kind of basic, overriding set of moral guidelines. (http://www.scribd.com/doc/28066735/Utilitarianism-s-Value-Today) The distinction between act and rule utilitarianism is therefore based on a difference about the proper object of consequential calculation — specific to a case or generalized to rules. (http://webs.wofford.edu/kaycd/ethics/util.htm)
There are a few ways to cut payroll by 25% in order to maximize the benefits, or minimize the loss, for all of the employees. First, we can make cuts to the employees’ medical insurance and/or vacation programs, so that only full time employees receive these benefits from the corporation. Part time employees are most likely students who usually do not have a degree and as much experiences as the full time employees. It would be unfair if we cut the benefits from full time employees because they deserve to have better benefits structures. Second method, Taylor Studios, Inc. can keep everyone’s jobs by cutting each employee’s salary by 25%. By doing this, every employees will have an equal setback, percentage-wise. Neither the full time or part time employees would be angered by other employees not having their salaries cut.
Utilitarianism is the best approach in a way to make all employees happy as well as avoid employment lawsuits in the future. It is a good approach as it is subjective to each individual situation because the hedonic calculus allows for us to apply each decision to the different needs of that decision. However, in real world, utilitarianism is a weak theory to base on environmental ethics because it maximize human’s benefits but sometimes forget to treat the animals and nature the same. Therefore, to assess whether we can use it for the environment is difficult as there is no basis for whether all sentient beings are equal or not.
After considering the conventionalist ethic, ends to means ethic and utilitarianism ethic
“Consequentialism”. Encyclopedia2. Farlex, Inc, 2011.
http://encyclopedia2.thefreedictionary.com/Ends+justify+means. “Consequentialism”. Wikipedia. Wikimedia Foundation, Inc., 2011.