Utilitarian Principles in Business

Presented To
Md. Russell Iqbal Course Instructor of BUS 315 : Business Ethics

Presented By..
Farzana Alam Tarana 781 Puja Pradip Roy Shakila Rahman Afra Nouare Rumi Waliza Farhana 17th Batch BBA Program 786 787 789 1268

Afrin Nahar Siddiquee 1477

Utilitarianism

Origin

Proposed by the English philosopherreformer Jeremy Bentham (17481832) in his book Principles Of Morals And Legislation'

Bentham definition

Greatest good for the greatest number The greatest happiness or greatest felicity principle

Happiness or Pleasure Satisfaction of Preferences

Principles of Utility

Recognizes the fundamental role of pain and pleasure in human life Approves or disapproves of an action on the basis of the amount of pain or pleasure brought about Equates good with pleasure and evil with pain Asserts that pleasure and pain are capable of quantification (and hence 'measure').

Development

Developed by the English philosophereconomist John Stuart Mill (1806-73) in his 1863 book 'Utilitarianism.'

Mills Modification
Not the quantity of pleasure, but the quality of happiness that is central to utilitarianism The calculus is unreasonable ;qualities cannot be quantified (there is a distinction between 'higher' and 'lower' pleasures) utilitarianism seeks to promote the capability of achieving happiness (higher pleasures) for the most amount of people

Definition
Moral worth of an action is determined solely by its usefulness in maximizing utility and minimizing negative utility as summed among all human beings.

Utilitarian Principles Holds

An action is right from an ethical point of view if and only if the sum total of utilities produced by that act is greater than the sum total of utilities produced by any other act the agent could have performed in its place.

.Dishonesty / theft
Dishonesty / theft is always wrong but if it produces more good consequences than any other act... ..Dishonesty/theft is morally right for that particular situation.....

Utilitarian Organization
A utilitarian organization is a formal organization that is created in order to achieve practical ends.

Examples

Universities Hospitals Business organizations Government

Utilitarianism in Economics

Different Economic Systems

Traditional Economy Command Economy

Market Economy Mixed Economy

Traditional Economy

Family or Community based Economic System that relies on custom and ritual to make its choices. Everyone shares equally in goods and services

Command Economy

Centrally Controlled Economy where the Government makes all decisions. Government decides what is best for the people

Market Economy

Individual or Consumer based Economic System that relies on the consumption choices of consumers. Tends to increase consumer utility

Mixed Economy

Economic System that incorporates some Governmental involvement into a Market Based Economy. Intended to maximize welfare of the societal beings.

So
Utilitarianism principle is the central theme of any of the economic systems.

Business Implications

Utilitarian Principles in Business

Utilitarianism may be employed in any business decision-making process that seeks to maximize positive effects and minimize negative outcomes. The cost-benefit analysis is most often used it is a good decision making tool.

Utilitarian Principles in Business

Using utilitarianism, would consider The good and bad consequence for everyone the action would affect, Treat everybody as having equal rights, No bias towards self, would use it as an objective, quantitative way to make a moral decision.

In Business....

.Income Tax
Progressive taxation system where, those who earn more pay more and vice versa. Represents the extra money to economy by rich.

.Income tax
But in a bigger picture, no extra money brought into the economy by the rich and neither is there a financial deficit owing to the low income of the not-so-rich.

So

Utilitarianism is an idea that becomes the underlying determinant of political as well as economic decisions actions..

.Airlines Industry
In deep inside Utilitarianism exist in Airline Industry

.Airlines Industry

Business class passengers pay a premium price to get all the luxuries of that class that the airline offers.

.Airlines Industry

And in economy class though passengers are traveling for the same amount of time as business class are getting less luxury facility.

Reason Behind
.Business class are actually used to ease out the burden of deficit that the airline would have to bear to allow the economy class passengers the opportunity for air travel at a lower price. This case utilitarianism principle plays discriminatory pricing strategies of companies when pricing products for different customer segments having different income levels.

Consequence..

In a way, the machineries of taxation and discriminatory pricing work upon the principles of utilitarianism ultimate outcome is the high net worth people of the society part with a portion of their extra income . So that the lower income strata of the society also get access to the various civil amenities.

Criticisms of Utilitarianism

Is utility for the same action of different people can be measured or compared?

Two employees working in same position with same responsibilities & same fringe benefit.. But may have different satisfaction about the job

Are all benefits and cost tractable to measure?

Can the value of life or health be measured.

Expensive system installed in workplace that eliminate hazardous gas workers inhale that It may cause earlier death of some workers

Is the measurement adequate?

Many of the benefits and costs of an action cannot be realizably predicted.. ..Information gathered by costly scientific research the future value of the information cant be measured

What is to be counted as cost and benefit?

Oil made from by hunting whale to make medicine. saves human live and destroys ecological balance, whale may extinct

Is social ethical Dilemma is Answered Clearly?

A bank must decide to extend a loan to a manager of local bar or to a old home when the loanable amount is limited.

Are all goods equivalent to each other?

Noneconomic goods economic goods .Freedom, quality, beauty is not equivalent to pizza, CD..

Is Good for maximum Creating Loss To Minimum Always Good?

Death of 1 people can save lives of another 4 people As the 4 people will be donated the organs of the death person.

Case of Ford Pinto

Case of Ford Pinto

In early 1960s Ford marketed a low-cost subcompact Pinto

-cost less than $2000 -weight less than 2000 pounds -brought to the market in 2 years

Case of Ford Pinto

Styling required that gas tank be placed behind the rear axle After crash- test, it was found that when struck from rear at 20 miles/hour or more - The gas tank would rupture - Gas would spray out and into the passenger compartment - Possibly burn any trapped occupants

Case of Ford Pinto

Managers decided to go ahead with production because of Design met all applicable legal and government standards The car was comparable in safety to several other cars Cost of modifying Pinto would not be balanced by benefits

Case of Ford Pinto

Total no. of autos = 12.5 million Cost per unit of auto to modify gas tank = $11 Costs: $11 * 12.5 million autos = $137 million
Modification would prevent 180 burn deaths, 180 serious burn injuries & 2100 burned vehicles Benefits: (180 deaths*$200,000) +(180injuries*$67,000)+ (2100 vehicles* $700) = $49.15 million

Case of Ford Pinto

For the production of unmodified Pinto, in the following decade in fiery incidents involving Pintos At least 60 persons died At least 120 persons suffered burns over large areas of bodies Many requiring years of painful skin grafts Costing Ford millions in compensation

Criticisms of the Case

The Ford Motor Company

weighed the risk of harm and the overall cost of avoiding it. Leggett, (1999) Ignored ethical principles and abused the moral aspects of utilitarian principle Actual costs to correct matters were over-estimated and would have been nearer to $63.5 million. Though these did not equate to the benefits, Ford avoid a moral duty as a huge corporation to bear the cost of $15 million

Should We Absolutely use Utilitarian Principles in Business ???

Utilitarian Principles in Business

Evaluation of good and bad consequences provides one way of ensuring that companies consider the morality of their actions Which suggest that utilitarianism can be a positive influence for ethical business practice

QUERIES.???