The Irresponsible Enterprise: The Ethics of Corporate Downsizing

Purpose – The purpose of this chapter is to recast downsizing as an act of corporate social irresponsibility by showing it to be contrary to ethical principles available to defend any course of action against the alternatives.

Methodology – Ethics theory is used to analyse the prevalent business practice of downsizing, drawing upon literature that examines downsizing and/or explains and demonstrates the application of ethical principles.

Findings – Downsizing, as defined in this chapter, is an unethical and irresponsible business practice because it reduces utility, ignores rights, creates injustice, breaks social contracts, creates agency relationships where none exist and fails to respond to the legitimate claims that employees, as a stakeholder, make upon corporations.

Practical implications – Change becomes necessary to the business practice of downsizing when it is carried out by profitable companies without proper appeal to ethics principles for justification. Ethical principles may, instead, suggest alternative courses of action or techniques.

Social implications – Downsizing (and other forms of mass layoffs) is not a morally neutral activity, as it engenders significant social implications (i.e. harm) that necessitate ethical consideration. Moreover, when business actions have social consequences, the interests of other stakeholders may become legitimate.

Value of the chapter – This chapter illustrates the formulation and application of principles that help guide business people to take morally right courses of action. It also serves as a template for analysing other aspects of the employment relationship for a more critical approach to corporate responsibility. As shown in this chapter, ethics can have more than a peripheral role in business decision making.