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It’s Nothing Personal, It’s Just Business: Economic Instability and the Distribution of Harm

Published online by Cambridge University Press:  23 January 2015


Managers have the primary role responsibility to protect and promote the economic viability of their organizations. Utilizing a formula that demonstrates the inherently unstable nature of economic systems, I argue that managers are sometimes morally required to make adjustments that result in harming people who work for them in order to reestablish the equilibrium necessary to remain viable. The question of who is going to be harmed and how this harm is morally justified is the focal point of this paper. I argue that utilizing traditional methods associated with our common morality cannot solve the issue of who is going to be harmed, and that the traditional methods for reestablishing equilibrium promote a distribution of harm that cannot be justified from a rationally defensible moral point of view. Utilizing the constraint of impartiality and the concept of the health of the organization, I argue that an equal distribution of harm among everyone affected by the decision is the only one that is rationally defensible.

Copyright © Society for Business Ethics 2000

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Philosophy is best done in a dialogical environment with input from others. I wish to thank Carl Hedman, Julius Sensat, Stephen Rowe, Kelly Parker, Dewey Hoitenga, Barry Castro, and Joshua Alexander for reading and commenting on earlier drafts of this paper.

I also wish to thank the participants at the philosophy colloquium held at Grand Valley State University on October 16, 1998, where this paper was discussed. As I have spent 30 years in foundries, both in hourly and managerial positions, I must give a special thanks to the foundry “rats” I have worked with over these years. These ideas originated on the factory floor in direct response to what was occurring in our lives. Philosophy has afforded me the framework within which to analyze and discuss these issues, but it is on the factory floor where they will ultimately have to be resolved.

1 Robert C. Solomon, “Business Ethics: An Aristotelian Approach,” in Applied Ethics, ed. Winkler and Coombs (Blackwell, 1993). See also Norman Bowie, Business Ethics (Prentice-Hall, 1982), and Patricia H. Werhane, Persons, Rights, and Corporations (Prentice-Hall, 1985).

2 Kelly Parker has pointed out to me that the concept of responsibility as it applies to organizations is problematic. He points out that these responsibilities could refer to relationships the manager has to shareholders, the greater business community, etc. His point is, I believe, that depending on who is included in this relationship will help determine her role responsibilities. This point is well taken. I would argue that anyone who can be affected by the organization is to be included under the label of a stakeholder and included in the organization for decision-making purposes to the extent they are affected by the particular decision. This would include labor, management, owners/shareholders, and the general community.

3 I developed this formula in 1991, while I was Director of Operations at Racine Steel Castings, Racine, WI. I needed a quick way to ascertain what the key variables would have to be given certain “what-if” scenarios that I was facing at the time. I had been brought into Racine Steel as a consultant to do work with the ownership and upper management to improve quality and managerial skills. The company was facing severe pressure from its customers to make significant operational improvements or face losing business. Racine Steel had already gone through one bankruptcy under previous ownership and the present ownership obviously did not want this to reoccur. I was made Director of Operations to implement the programs developed to make the necessary changes to help ensure stability and health to the organization and its continue viability in the marketplace. I have used this formula more than once to decide how many people I could keep given the level of a sales, etc.

I originally formulated it as

but Julius Sensat suggested that it is more mathematically precise to present it as I have above.

I do not know if this formula is one that someone else had already developed so I am reluctant to take too much credit for it. Talking with other business people, they do seem to make use of this formula intuitively when they make adjustments in their organizations responding to marketplace demands. It seems a natural part of a rational thought process even if it has not been spelled it out as I have done.

4 Christopher McMahon, “Morality and the Invisible Hand,” Philosophy and Public Affairs, Summer 1981. Dewey Hoitenga, commenting on an earlier draft of this paper, made the observation that people might include the principle of justice, understood as fairness, in their formulation of the common morality. I am inclined to think that while a good case can be made for this position, it need not be included because any harm resulting from treating someone unfairly could be seen as a violation of other principles, e.g., non-maleficence. I also think that the constraint of impartiality can be used to analyze many of the problems associated with treating people fairly.

5 Rawls, A Theory of Justice (Cambridge: Harvard University Press, 1972).

6 W. V. Quine and J. S. Ullian, The Web of Belief (New York: Random House, 1970). In discussing Rawls and Quine with Joshua Alexander, I have come to recognize the importance that Quine’s ideas had on Rawls’s formulation of his moral epistemology. See also James Rachels, “Moral Philosophy as a Subversive Activity” in Applied Ethics, ed. Winkler and Coombs.

7 Rachels, “Moral Philosophy as a Subversive Activity,” pp. 125, 128.

8 Rachels, “Moral Philosophy as a Subversive Activity,” pp. 125–127.

9 The idea behind the concept of health of the system gets its inspiration from Aldo Leopold’s land ethic, formulated in his Sand County Almanac (Oxford: Oxford University Press, 1949). It is interesting to note that many of the concepts utilized in environmental ethics may have great merit and application in addressing ethical issues in business and economics.

10 I developed this in 1990 when I was a consultant for Racine Steel Castings as an education tool to demonstrate what makes an organization viable and successful over the long term operating within an ethical framework. One might argue that it is derived from a virtue ethics approach, although I am inclined to argue for it more from a utilitarian perspective. While I think it is important, and very fruitful, to analyze and determine what dispositions of character a person, or organization, should possess if she, or it, is to be moral, ultimately the justification for any idea comes from it usefulness relative to achieving certain goals and objectives. To my mind, happiness, or well-being, defined in terms of preference satisfaction is the ultimate criterion for deciding what should be the case.

11 I have presented this concept in programs I have given to various professional organizations such as The Association for Quality and Participation, The American Foundrymen’s Society, and The American Association for Quality Control.

12 We need to develop some formalized method for attaining impartiality in practice. Simply voting on issues will not work unless the system itself has been set up to reflect impartiality. I am not sure that a class society, such as ours, can be justified from an impartial perspective, Rawls notwithstanding. As is well known, Rawls argues that the principles of justice chosen in his original position would be in the lexical order he presents them. For our analysis it is the difference principle, the second one in the lexical ordering, that is germane to the argument of this paper. By maintaining that the people in his choice situation would place this principle second he is committing himself to a class-based society. This is a logical result of the Rawlsian person choosing under the conditions of the general knowledge that he allows them. Under the veil of ignorance a Rawlsian person may not know any particulars about herself, but she does have enough general knowledge to know that the society she is choosing will be patterned after the liberal, capitalist society within which the general knowledge of the good life, which includes basic liberties, has been formulated over time. As Lewis Feuer has pointed out in his Spinoza and the Rise of Liberalism (Boston: Beacon Press, 1958), there was a close connection between the development of a liberal theory of politics and the rise of capitalistic economic systems. Without getting into too long a side argument here, Rawls begs the question in the lexical ordering of his principles as a result of giving his people the type of knowledge they do possess in his choice situation. Had the people in his choice situation had a conception of the good life patterned after a society such as Biafra it is arguable that they would reorder these two principles. Starving people do not care about equal liberties, they care about food. As Maslow has shown in his hierachy of needs, needs must be satisfied in a certain order with the lower needs being satisfied before the higher needs can be addressed. The liberties discussed under the “Equal Liberty Principle” are to be found in the higher needs, and the discussion presupposes that the lower needs have been satisfied.

One possible solution may be found in combining Rousseau’s ideas that there must be an economic baseline that is met by all people in order to ensure justice and in his concept of the “general will,” with Marx’s discussion of alienation, and Maslow’s hierarchy of needs. But this needs to be worked out in our contemporary economic and political context, which is part of a larger project of which the argument of this paper is the general outline. See also David Braybrooke, Meeting Needs (Princeton, N.J.: Princeton University Press, 1987), for an interesting discussion of how the concept of needs works, as an alternative to utilitarianism, in establishing social policy.

13 This argument is designed to be applicable only in situations where the negative unstable condition is going to be of short duration and recovery is expected. It will not be applicable in situations where the unstable condition can, and logically will, result in the general upheaval of the system such as was experienced in this country between the first and second World Wars. In this type of situation other considerations will play a role that I have not addressed in this paper.

14 Even if harm is spread out into the managerial/professional class, as has been happening in the past two decades as a result of mergers and/or downsizing, this is simply the result of some people in that class still viewing themselves as non-expendable and therefore not subject to harm for the greater good of the health of the system and its continued competitiveness. The overall argument does not change. There is only one way to avoid harm and that is to ask for volunteers. If there are volunteers, then from a moral point of view there is no harm.

15 Marx distinguishes four forms of alienation that workers face in capitalist societies. His analysis can be found in his “Estranged Labor,” in The Economic and Philosophic Manuscripts of 1844, trans. Martin Mulligan, ed. Dirk Struik (New York: International Publishers, 1964). I have argued in presentations to professional organizations, and classes I have taught in Business Ethics, that Marx’s analysis of alienation provides the historical basis for understanding capitalism’s current problems that managers/owners are trying to address through what is generically known as continuous quality improvement. If one reads the writings of Deming, Crosby, Peters, and other leaders and practitioners of this managerial philosophy, one can see that they are actually addressing issues that arise because of the alienated nature of our organizations. There is hope. The Saturn Company is a good model of an organization that has been instantiated to minimize alienation and promote democracy in the workplace. It still has a management/worker organizational structure, but it is a model of a good first step where workers are allowed a great deal of autonomy in managing the day-to-day production activities.

16 In reality they are both variable costs, as can be seen by the formula. The idea that there are wages and benefits that are fixed costs is simply the result of the class that makes the decisions for the whole protecting itself from harm. If a cost is seen as fixed, it is treated as being unchangeable and therefore not part of the variables that can be adjusted to maintain the balance of the system.

17 I would also argue that it is not treating its members fairly, but that argument is not needed to show how morality is crucial to the health of an organization.

18 I am inclined to think that radical equality—that all economic benefits and harms should be shared equally, or at most within a narrow range of difference, among all the members of a system—is probably the one that is most consistent with the constraint of impartiality.