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Kevin Shepherd
Professor Wilburn
Global Ethics and Responsibility
14 October 2015
Corporate Ethical Analysis: Budget Cuts
Managerial decision making can be very difficult at times. There are so many paths that
a manager could choose from with so many implications and side effects. This is only part of
what makes a managers job hard. The other major part of managerial consideration is ethics.
In todays extremely connected ecosystem the internet makes a bad corporate decision public and
can ruin a company. While adversely, some companies more recently have really been made a
success by their extremely ethical business models. Ethics are very important to begin with and
now they are gaining a lot of traction in the business world. I am going to analyze a managerial
business decision case in terms of the ethical principle of Utilitarianism, the stakeholders
affected and various pros and cons.
The case I chose to analyze is the third dilemma in which I am a manager at a firm of
four hundred and the economy has started going bad. The central facts of this case are that I am
the manager in charge of this decision in a smaller manufacturing company of about four
hundred. The economy has just started to go bad and I see a reduction in sales. In order to
reduce output to the appropriate levels, I have the option of either laying off about ten percent of
the staff or decreasing hours across the board by about ten percent. Each possible route has extra
benefits and drawbacks. As far as laying off the staff, I am weighed with the option of who
would I lay off because I know that everyone needs their job at my plant. Newer workers are not
as dependent on the job so maybe I could get rid of them? And as far as decreasing hours across

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the board, opponents have said that this will disrupt productivity more than the 10% change in
hours will reflect; however, as a bonus for not laying employees off the local government has
offered to pay five percent of the ten percent loss in earnings for individuals in exchange for not
having to pay unemployment benefits. These are the various main points that I will be weighing
in my analysis through use of Utilitarianism.
There are many assumptions I can make based on the central facts of the case. The first
being that the economy is going to be in a bad state for a few years, but it will bounce back
eventually because that is what markets do naturally. Secondly, an assumption that is kind of
given is that all my employees deserve to work at this firm equally because they all perform well
and none are ready to retire or fire for bad performance as well as that these are basically my
only two options for tackling this problem. Another assumption given in problem is that if
employees are fired then they will go onto unemployment benefits. I am also assuming that
employees want to work at this firm because the economy is bad and jobs are very sparse.
Lastly a major point I can assume is that regardless of what choice I make, some parties will be
negatively affected while other parties are positively affected so the choice I make is very
delicate and must be tackled in a way that brings about the least negative effects.
There are several ethical issues to be weighed in this decision. The way that my mind
logically organized these issues was by which route granted the greatest satisfaction. This is
because as a CEO I evaluate ethical issues based on the principle of Utilitarianism. I chose
Utilitarianism as a basis for evaluating a business decision because in smaller companies (which
I would define as less than five hundred employees) there is a lot of interactivity between
different corporate levels and the satisfaction of employees spreads quickly and seriously affects
output. So in short, Utilitarianism causes the most happiness for the greatest number and I want

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this for my employees because having satisfied employees means there is a greater chance for a
productive work environment as well as it creates loyalty among workers.
Now to tackle some of the ethical issues that I saw in this case. The first that popped into
my head was the overarching issue of people vs profits. This is the ultimate issue at hand
because the two main factors of this problem are how will the people be affected and how will
the profits be affected. Now that I know this issue is the central question of the case, I will break
it down further into each ethical dilemma arises from this issue using the ethical principle of
Utilitarianism. The first issue I came across was the option to lay off ten percent of staff in order
to accommodate the loss in sales. In terms of Utilitarianism, this is problematic because how
will I know who is more positively or negatively affected between company stakeholders and
laid off employees? Further, it is stated that all the employees need their current jobs, so how
would one be able to successfully and accurately weigh satisfaction and dissatisfaction levels
among each individual inside or out of the company?
The next ethical dilemma that I saw arise from this issue came from the possibility to
reduce hours by ten percent for all employees. This is an ethical dilemma because you have the
utility of loyal workers working less hours weighed against the utility of less workers.
Additionally Utilitarianism must weigh the advice given by managers within the company have
stated that shorter hours will exponentially reduce output with previous experience that loyal and
happy workers can actually increase output. Adversely, because there is a depression and in turn
less money circulating through the market which will end up in workers pockets the government
has offered a five percent salary compensation for employees not laid off. This weighs against
the possible loss in productivity caused by shorter hours and Utilitarianism sees this as an issue

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because it is unclear what levels of happiness or unhappiness can achieved through each course
of action.
Now to analyze who all would be affected by my decision. First and foremost I would
say that all immediate employees would be affected managers and workers alike because it is
their salary and livelihood that I will be changing for the better or worse due to the changing
market climate. The second most impacted stakeholder group I can think of is the shareholders
of the company if it is publicly owned which I am assuming it is. The decision I make will affect
company profits which will affect stockholder earnings for the good or bad. Third, I definitely
would not try to tackle this issue by myself because of the serious implications that it has so I
would consult with either my board of directors if I have one or with a business mentor in a
similar situation which would make my consultant a stakeholder in the success or failure of my
decision. These are the main stakeholder groups, but there are still a few more that will just not
be affected quite as severely. These groups are; the state government, because they will benefit
or suffer from a business due to taxes as well as they are the ones who offered to pay the five
percent salary compensation, producers who buy our goods are stakeholders(assuming that we
produce goods that arent yet finished products) because they will see the change in our
productivity one way or another, and finally consumers are stakeholders because they will see a
change in output pricing or quantity. Identifying all of the correct stakeholders is a very
important part of my decision because so much is affected by my choice.
Finally for what I think is the correct choice of action to deal with this problem. I think
that the correct choice of action is to go ahead and reduce employee hours by ten percent and
accept the state governments offer to subsidize five percent of the loss of income to employees. I
chose this course of action for many reasons, but the main ethical principle which led me to this

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decision was Utilitarianism because as a CEO in an increasingly socially responsible corporate
world I feel that maximizing the happiness of each employee by letting them not deal with the
stress of finding a new job is the socially responsible thing to do instead of throwing them to the
curb. I also find that the utility of a five percent government subsidy is set in stone and more
useful than the alternative which is to risk having inefficiencies in production. Another factor in
my decision making was the fact that my economics knowledge lets me know that markets suffer
swells and depressions and when the market turns around, I will be one step ahead of
competitors who decided to lay off employees who now need to rehire. So in turn due to being a
utilitarian thinker, I choose to invest in my workers which I believe will yield a greater return in
the long run than any alternatives.
Speaking of alternatives, I want to weigh the other possible decision routes I could have
taken and explain why they were flawed or just did not yield as good of results. The exact
opposite of my decision was most likely the strongest decision alternative which would be to lay
off ten percent of employees to adjust to the market. This decision was actually my first choice
at the beginning till I began to see flaws pile up. Some good aspect of this route would be that
you would not affect remaining employees after the cuts and very little would need to be
changed. Adversely, cutting staff would cause those cut to suffer by being unemployed and the
companys goodwill may suffer for incorrect treatment of workers as well as the fact that we will
now be understaffed when the market bounces back. This alternative did have many positive
aspects such as simplicity, directness and accuracy; however it appears that possible liabilities of
this plan are greater than what could be achieved through simply cutting hours. So I chose to
steer away from this plan.

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Another alternative decision making route I considered was simply to not do anything.
With my knowledge as a CEO as well as that of my advisors, I know that a suffering market
tends to bounce back at some point. With this knowledge, I could simply keep things the same
and put extra inventory into storage. This route has a few positive aspects such as respect for
employees needing their jobs, simplicity and possible long term payout for being ahead of the
market in production. Though these aspects seem promising, this is actually probably the riskiest
route I could have gone because it has the worst potential downfall. This is because if the market
does not bounce back relatively soon then we will exponentially hemorrhage money and possibly
go out of business. Also the benefit of having extra inventory when the economy does bounce
back is not that great compared to the complete loss of the company, so this plan was out of my
consideration as well.
So now that the facts have been laid out and examined closely, I can honestly say that I
believe my plan to cut hours and accept the governmental subsidy is the correct choice of action.
I chose to evaluate each ethical issue raised by this problem in terms of Utilitarianism because of
its potential to expand the goodwill of the company in our very socially conscious environment.
Through analyzing each possible course of action through the scope of Utilitarianism, I was able
to see that the most benefits and the least liabilities were capable for various stakeholders
through reducing hours rather than people. I hope that you can see my logic in making this
decision. I have a great respect for people and corporate social responsibility and I think that this
decision will pay off in the long run because I weighed people above immediate profits and
recognize that being a socially responsible entity is what really counts in todays day and age.

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Works Cited

Carroll, Archie B., and Ann K. Buchholtz. Business & Society: Ethics, Sustainability and
Stakeholder Management. 9th ed. Mason: Cenage Learning, 2012. Print.

-I also used information from in class lectures as well from our class as well as
economics knowledge from previous classes