UTILITARIANISM IN BUSINESS

Under guidance of Dr. Kuruvilla Pandikattu SJ -Managerial Ethics

Sandeep Tiwari | H23168

H23168@XLRI.AC.IN
 UTILITARIANISM IN BUSINESS ETHICS AND ITS CRITICISM

Abstract-
This article explores utilitarianism in business ethics, beginning with Jeremy Bentham's foundational
contributions in 1789. Bentham's moral theory, rooted in psychological hedonism and egoism, centers
on the pursuit of pleasure and avoidance of pain as fundamental human motivations. His utility theory
introduces the greatest happiness principle, egoism, and the identification of one's interests with others.
The discussion navigates through various forms of utilitarianism, including act, rule, negative, and
preference utilitarianism. The main focus of the article is to study the application of concepts of
utilitarianism in business ethics as a moral framework for prioritizing collective well-being in decision-
making. It highlights the role of utilitarian considerations in crucial business choices and the practicality
of Bentham's utilitarian system in risk management. Mill's utilitarianism is explored, emphasizing its
motivational role within organizations and the integration of reason and language in ethical decision-
making. Also, the common criticisms of Mill’s utilitarianism, such as the convenience objection,
supererogatory objection, majority-bias objection, motivation objection, and calculation objection, are
detailed. The article concludes by asserting the pragmatic application of utilitarian principles, advocating
for a balance between individual rights and the greater good in business ethics.
(Keywords- Mill’s Utilitarianism, business ethics)

1 Utilitarianism

Utilitarianism, a normative ethical theory and a prevalent form of consequentialism, asserts that the
morality of an action should be determined solely by the results it produces. Throughout history, various
forms of consequentialist theories have emerged. Jeremy Bentham, a key figure in modern utilitarianism,
introduced his moral theory in 1789 against a backdrop of significant economic, political, and social
changes in 18th Century England. Despite studying law, Bentham (Econlib., 2018) chose not to practice,
dedicating himself to the study of legal, social, and moral institutions. His influential work, "Introduction
to the Principles of Morals and Legislation," outlined the core of his moral theory.

1.1 Psychological Hedonism and Psychological Egoism

Bentham's moral theory is rooted in his concept of human nature, viewing human behavior as driven by
the pursuit of pleasure and the avoidance of pain. Hedonism, considering pleasure as the supreme good
and pain as the ultimate evil, is central to his philosophy. Psychological hedonism posits that humans are
naturally motivated by pleasure and aversion to pain. Bentham's view of humans as fundamentally self-
interested individuals led to the concept of psychological egoism, suggesting that individuals always act
in their own best interests, even when seemingly altruistic.

1.2 Theory of Utility

Bentham's theory of utility revolves around three central features: the greatest happiness principle,
egoism, and the artificial identification of one's interests with others. The greatest happiness principle
posits that actions promoting the greatest happiness are morally right. Bentham's psychological
hedonism defines happiness as the most pleasurable, allowing for contemporary utilitarians to identify
intrinsic values beyond pleasure. Egoism implies that individuals, driven by self-interest, will aim to
maximize overall happiness indirectly by identifying their interests with others.

1.3 Types of Utilitarianism

Utilitarianism has evolved into various forms, including act, rule, negative, and preference utilitarianism.
 Act utilitarianism judges each action based on its outcomes alone, potentially permitting
intuitively wrong acts.
 Rule utilitarianism assesses the utility of a rule for action, considering whether everyone
following the rule would maximize general happiness.
 Negative utilitarianism focuses on minimizing harm for the greatest number
 Preference utilitarianism defines the good as the fulfillment of personal preferences, introducing
challenges related to potentially unethical preferences.

2 Utilitarianism in Business Ethics

The utilitarian standard is not the agent’s own greatest

happiness, but the greatest amount of happiness altogether;
and if it might possibly be doubted whether a noble character
is always the happier for its nobleness, there can be no
doubt that it makes other people happier, and that the world
is in general is immensely a gainer by it.
(Mill, 1998)
Utilitarianism provides a moral framework that emphasizes prioritizing the collective well-being of
humanity in ethical decision-making. In the context of business as a driver of societal and cultural
change, utilitarianism becomes a fitting ethical perspective. Businesses wield significant influence in
shaping cities, work environments, values, and more. While contributing positively through goods,
services, employment, and tax revenue, their impact extends to various stakeholders. Utilitarian
considerations often come into play in crucial business decisions, like expansion or layoffs. Business
leaders, implicitly employing utilitarian reasoning, assess gains and losses through cost-benefit analyses,
emphasizing the importance of considering all stakeholders, externalities, worker preferences, and
broader impacts. Bentham's utilitarian system also proves practical in risk management, employing the
utility function for decision-making, risk evaluation, and strategic planning, challenging critiques of
utilitarianism's perceived mechanistic nature, especially regarding customer perspectives (Byars, 2018).

2.1 Bentham’s and Mill’s Utilitarianism

Utilitarianism serves as a motivational force within organizations, fostering initiative, responsibility, and
contributions to enhance the organization's reputation. Inspired by Mill's "On Liberty," which
underscores political freedoms and the importance of expression and free speech, utility, according to
Mill, stems from a deliberative process that encourages individual expression and the clash of ideas.
Mill's harm principle is pivotal, prompting an evaluation of whether an action harms others and
necessitating a utilitarian calculation for the greater good. Determining relevant stakeholders and criteria
for harm requires thoughtful consideration, guarding against reliance on public opinion or intuition to
prevent potential tyranny. Mill (1998) contends that deliberation strikes a balance between utility and
freedom, a critical condition for achieving overall utility. In contrast to Bentham's numerical approach,
Mill (1998) advocates for reason and language to uncover truth, emphasizing the need for a fusion of
numerical insights and reasoned principles in the contemporary business landscape. Applying the
Aristotelian and Confucian rule of the mean underscores the importance of balancing responsibility and
profitability in distinguishing sound business practices from poor ones (Gustafson, 2013).

In the realm of business ethics, this discussion draws from John Stuart Mill's utilitarianism, emphasizing
that morally right actions are those maximizing overall well-being. Addressing common criticisms, the
discourse highlights the distinction between Mill's utilitarianism and mere profit maximization,
emphasizing its consequentialist nature, focus on the common good, consideration of long-term
consequences, and the promotion of moral education for a culture of ethical-social concern. Mill's
utilitarianism extends beyond individual or distributive happiness to encompass the happiness of
humanity as a whole, guided by subordinate principles derived from the Greatest Happiness Principle
(GHP). This approach aligns with historical trends, offering lessons on the benefits of ethical business
practices. Mill (1998) underscores the role of moral education in fostering an ethical-social culture within
corporations, promoting a mindset where ethical behavior is ingrained in organizational values,
ultimately contributing to the greater good.

3 Criticism of Mill’s Utilitarianism

Critiquing and refining ethical theories are an integral part of their evolution, and utilitarianism,
particularly in the context of business ethics, has faced its fair share of criticisms. In this exploration, we
will delve into some common objections raised against utilitarianism in business ethics literature and
present responses rooted in John Stuart Mill's utilitarian philosophy. This critique explores the rationality
and practicality of adhering to utilitarian principles, particularly in the workplace, addressing the
motivational dilemma of sacrificing individual good for the greater happiness and the inherent
difficulties in determining and measuring maximal happiness. The goal is not to dismiss critics but to
contribute to the development of a robust utilitarian business ethics framework.

3.1 Convenience Objection

One prevalent critique argues that utilitarianism, by prioritizing the greater happiness for the majority,
compromises principles such as justice and truth-telling, reducing adherence to contracts to a matter of
convenience (Byars, 2018). Critics contend that utilitarian reasoning can justify deceptive actions, as
exemplified by Oliver North's role in the Iran-Contra affair. However, Mill's utilitarianism rejects actions
that lead to the breakdown of societal rules and institutions. Mill acknowledges the misuse of
utilitarianism but emphasizes that adherence to principles is crucial for societal well-being. The
application of "rule utilitarianism" ensures that principles supporting justice and truth-telling are not
abandoned for short-term gains.

3.2 Supererogatory Objection

Another objection posits that utilitarianism can lead to irrational and futile conclusions, particularly in
the business context. The argument suggests that if others do not cooperate, acting solely for the benefit
of the majority becomes futile. Mill's response involves the acknowledgment of extraordinary
circumstances, where staying late to complete a project alone, for instance, may indeed be futile.
However, in normal circumstances, individuals have an obligation to fulfill their responsibilities based on
the principle of utility, contributing to long-term benefits for society (Mill, 1998).
3.3 Majority-Bias Objection
Critics argue that utilitarianism, with its focus on the greatest happiness for the majority, is biased
against minority viewpoints, undermining minority rights. Mill (1998), however, supports individual
liberties and argues that the protection of minority rights contributes to overall societal happiness.
Utilitarianism, as interpreted by Mill, does not sacrifice minority interests for the majority; rather, it
recognizes that certain rights, like security and justice, are essential for societal well-being.

3.4 Motivation Objection

This critique argues that utilitarianism fails to inspire individuals toward moral engagement with social
issues. Mill responds by acknowledging the risk of utilitarianism being exploited to justify immoral
actions, emphasizing the potential misuse of ethical creeds. He underscores the importance of societal
values like justice, fairness, and civil rights, crucial for fostering lasting societal well-being. The
motivational dimension of utilitarianism raises fundamental questions about why individuals should
prioritize the greater good, especially when beneficiaries are already well-off. Despite concerns, real-
world instances, such as military enlistment patterns and tax breaks for the wealthy, indicate individuals
often sacrifice personal interests for the majority, driven by a blend of external pressures and
internalized values cultivated through education and socialization.

3.5 Calculation Objection

This objection posits a fatal flaw in utilitarianism, asserting its inability to establish a reliable ethical
calculus. Mill responds by acknowledging the challenge of applying ethical standards in conflicting
situations and advocates for prioritizing "first principles" in such cases. Utilitarianism, he argues, serves
as a guiding framework for ethical decisions, emphasizing long-term societal benefits. Inherent
challenges arise in calculating the greatest happiness, particularly in determining the commensurability
of diverse goods. Despite disagreements, utilitarians can find common ground in fundamental values,
like liberty and justice, forming a basis for ethical arguments (Byars, 2018). The inability to predict future
outcomes, Mill contends, doesn't undermine utilitarianism, as generalizations based on cause-and-effect
relationships guide ethical decision-making. To address measurement challenges, utilitarians can adopt a
"satisficing" approach, seeking realistic and achievable outcomes without insisting on maximal
happiness, aligning with Herbert Simon's concept. This pragmatic approach recognizes the limitations of
omniscience, emphasizing the rationality of achieving satisfying results leading to actual happiness.
4 Conclusion
This article delves into utilitarianism in business ethics, tracing its roots from Jeremy Bentham to its
evolution through John Stuart Mill. The central tenet of utilitarianism asserts that the morality of an
action is gauged by the overall happiness it generates. The focus then shifts to Mill's utilitarianism,
underlining its emphasis on collective well-being, consideration of long-term consequences, and the role
of moral education in cultivating ethical conduct. Addressing common criticisms, including concerns
about justice, truth-telling, and motivation, Mill's nuanced responses stress the significance of principles,
individual liberties, and societal well-being. The article contends that despite challenges, utilitarian
principles can be pragmatically applied through a combination of external and internal sanctions. It
concludes by underscoring utilitarianism's potential contribution to business ethics, advocating for a
harmonious balance between individual rights and the greater good.

References

An introduction to the principles of morals and Legislation - Econlib. (2018, July 9). Econlib.
https://www.econlib.org/library/Bentham/bnthPML.html

Byars, S. M. (2018, September 24). 2.4 Utilitarianism: the greatest good for the greatest number -
Business ethics | OpenStax. https://openstax.org/books/business-ethics/pages/2-4-
utilitarianism-the-greatest-good-for-the-greatest-number

Elements and types of utilitarianism. (2023, January 29). https://utilitarianism.net/

Gustafson, A. (2013). In defense of a utilitarian business ethic. Business and Society Review, 118(3), 325–
360. https://doi.org/10.1111/basr.12013

The History of Utilitarianism (Stanford Encyclopedia of Philosophy). (2014, September 22).

https://plato.stanford.edu/entries/utilitarianism-history/

Utilitarianism - Paperback - J. S. Mill, Roger Crisp - Oxford University Press. (n.d.).

https://global.oup.com/ukhe/product/utilitarianism-9780198751632?
cc=in&lang=en&#:~:text=Description,beginning%20and%20more%20advanced%20student .
About the author-

Sandeep Surendra Tiwari (M.Tech)

(https://orcid.org/0000-0003-2130-8816)
Born and brought up in Mumbai, the author is a civil and environmental engineer
by profession. He is the gold medalist of the M.Tech programme at VJTI of batch of
2020 and has 3 years of industry experience in designing water & wastewater
treatment projects. He has worked on some of the largest government project in his stint at L&T. He
is an avid chess player and sports enthusiast.
He is currently pursuing his masters in domain of Human resource management from XLRI
Jamshedpur in his continuous pursuit of knowledge.