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Chapter 3: Theories of Consequence Ethics: Traditional Tools for Making Decisions in Business

when the Ends Justify the Means from The Business Ethics Workshop was adapted by Saylor

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Chapter 3

Theories of Consequence Ethics: Traditional Tools for
Making Decisions in Business when the Ends Justify

the Means

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Chapter Overview

Chapter 3 “Theories of Consequence Ethics: Traditional Tools for Making Decisions in Business when the

Ends Justify the Means” examines some theories guiding ethical decisions in business. It considers ethics

that focuses on the consequences of what is done instead of prohibiting or allowing specific acts.

3.1 What Is Consequentialism?

L E A R N I N G O B J E C T I V E

1. Define consequentialism in ethics.

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Consequentialism Defined

What’s more important in ethics—what you do or what happens afterward because of what you did?

People who believe ethics should be about what happens afterward are labeled consequentialists. They

don’t care so much about your act; they want to know about the consequences.

If someone asks, “Should I lie?,” one answer is, “No, lying’s wrong. We all have a duty not to lie and

therefore you shouldn’t do it, no matter what.” That’s not the consequentialist answer, though.

Consequentialists will want to know about the effects. If the lie is about Bernie Madoff assuring everyone

that he’s investing clients’ money in stocks when really he plans to steal it, that’s wrong. But if a

defrauded, livid, and pistol-waving client tracks Madoff down on a crowded street and demands to know

whether he’s Bernie Madoff, the ethically recommendable response might be, “People say I look like him,

but really I’m Bill Martin.” The question, finally, for a consequentialist isn’t whether or not I should lie,

it’s what happens if I do and if I don’t?

Since consequentialists are more worried about the outcome than the action, the central ethical concern

is what kind of outcome should I want? Traditionally, there are three kinds of answers: the utilitarian,

the altruist, and the egoist. Each one will be considered in this chapter.

K E Y T A K E A W A Y

 Consequentialist ethicists focus on the results of what you do, not what you do.

R E V I E W Q U E S T I O N S

1. Under what scenario could a consequentialist defend the act of stealing?

2. Could a consequentialist recommend that a toy company lie about the age level a toy is designed for?

What would be an example?

3.2 Utilitarianism: The Greater Good

L E A R N I N G O B J E C T I V E S

1. Define utilitarian ethics.

2. Show how utilitarianism works in business.

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3. Distinguish forms of utilitarianism.

4. Consider advantages and drawbacks of utilitarianism.

The College Board and Karen Dillard

“Have you seen,” the blog post reads, “their parking lot on a Saturday?”
[1]

Its packed. The lot belongs to

Karen Dillard College Prep (KDCP), a test-preparation company in Dallas. Like the Princeton Review,

they offer high schoolers courses designed to boost performance on the SAT. Very little real learning goes

on in these classrooms; they’re more about techniques and tricks for maximizing scores. Test takers

should know, for example, whether a test penalizes incorrect answers. If it doesn’t, you should take a few

minutes at each section’s end to go through and just fill in a random bubble for all the questions you

couldn’t reach so you’ll get some cheap points. If there is a penalty, though, then you should use your time

to patiently work forward as far as you can go. Knowing the right strategy here can significantly boost

your score. It’s a waste of brain space, though, for anything else in your life.

Some participants in KDCP—who paid as much as $2,300 for the lessons—definitely got some score

boosting for their money. It was unfair boosting, however; at least that’s the charge of the College Board,

the company that produces and administers the SAT.

Here’s what happened. A KDCP employee’s brother was a high school principal, and he was there when

the SATs were administered. At the end of those tests, everyone knows what test takers are instructed to

do: stack the bubble sheets in one pile and the test booklets in the other and leave. The administrators

then wrap everything up and send both the answer sheets and the booklets back to the College Board for

scoring. The principal, though, was pulling a few test booklets out of the stack and sending them over to

his brother’s company, KDCP. As it turns out, some of these pilfered tests were “live”—that is, sections of

them were going to be used again in future tests. Now, you can see how getting a look at those booklets

would be helpful for someone taking those future tests.

Other stolen booklets had been “retired,” meaning the specific questions inside were on their final

application the day the principal grabbed them. So at least in these cases, students taking the test-prep

course couldn’t count on seeing the very same questions come exam day. Even so, the College Board

didn’t like this theft much better because they sell those retired tests to prep companies for good money.

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When the College Board discovered the light-fingered principal and the KDCP advantage, they launched a

lawsuit for infringement of copyright. Probably figuring they had nothing to lose, KDCP sued back.
[2]

College Board also threatened—and this is what produced headlines in the local newspaper—to cancel the

scores of the students who they determined had received an unfair advantage from the KDCP course.

As Denton Record-Chronicle reported (and as you can imagine), the students and their families freaked

out.
[3]

The scores and full application packages had already been delivered to colleges across the country,

and score cancellation would have amounted to application cancellation. And since many of the students

applied only to schools requiring the SAT, the threat amounted to at least temporary college cancellation.

“I hope the College Board thinks this through,” said David Miller, a Plano attorney whose son was

apparently on the blacklist. “If they have a problem with Karen Dillard, that’s one thing. But I hope they

don’t punish kids who wanted to work hard.”

Predictably, the episode crescendo with everyone lawyered up and suits threatened in all directions. In the

end, the scores weren’t canceled. KDCP accepted a settlement calling for them to pay $600,000 directly to

the College Board and provide $400,000 in free classes for high schoolers who’d otherwise be unable to

afford the service. As for the principal who’d been lifting the test booklets, he got to keep his job, which

pays about $87,000 a year. The CEO of College Board, by the way, gets around $830,000.
[4]

KDCP is a

private company, so we don’t know how much Karen Dillard or her employees make. We do know they

could absorb a million-dollar lawsuit without going into bankruptcy. Finally, the Plano school district in

Texas—a well-to-do suburb north of Dallas—continues to produce some of the nation’s highest SAT score

averages.

One Thief, Three Verdicts

Utilitarianism is a consequentialist ethics—the outcome matters, not the act. Among those who focus on

outcomes, the utilitarian’s distinguishing belief is that we should pursue the greatest good for the

greatest number. So we can act in whatever way we choose—we can be generous or miserly, honest or

dishonest—but whatever we do, to get the utilitarian’s approval, the result should be more people happier.

If that is the result, then the utilitarian needs to know nothing more to label the act ethically

recommendable. (Note: Utility is a general term for usefulness and benefit, thus the theory’s name. In

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everyday language, however, we don’t talk about creating a greater utility but instead a greater good or

happiness.)

In rudimentary terms, utilitarianism is a happiness calculation. When you’re considering doing

something, you take each person who’ll be affected and ask whether they’ll end up happier, sadder, or it

won’t make any difference. Now, those who won’t change don’t need to be counted. Next, for each person

who’s happier, ask, how much happier? Put that amount on one side. For each who’s sadder, ask, how

much sadder? That amount goes on the other side. Finally, add up each column and the greater sum

indicates the ethically recommendable decision.

Utilitarian ethics function especially well in cases like this: You’re on the way to take the SAT, which will

determine how the college application process goes (and, it feels like, more or less your entire life). Your

car breaks down and you get there very late and the monitor is closing the door and you remember

that…you forgot your required number 2 pencils. On a desk in the hall you notice a pencil. It’s gnawed and

abandoned but not yours. Do you steal it? Someone who believes it’s an ethical duty to not steal will

hesitate. But if you’re a utilitarian you’ll ask: Does taking it serve the greater good? It definitely helps you

a lot, so there’s positive happiness accumulated on that side. What about the victim? Probably whoever

owns it doesn’t care too much. Might not even notice it’s gone. Regardless, if you put your increased

happiness on one side and weigh it against the victim’s hurt on the other, the end result is almost certainly

a net happiness gain. So with a clean conscience you grab it and dash into the testing room. According to

utilitarian reasoning, you’ve done the right thing ethically (assuming the pencil’s true owner isn’t coming

up behind you in the same predicament).

Pushing this theory into the KDCP case, one tense ethical location is the principal lifting test booklets and

sending them over to his brother at the test-prep center. Everything begins with a theft. The booklets do

in fact belong to the College Board; they’re sent around for schools to use during testing and are meant to

be returned afterward. So here there’s already the possibility of stopping and concluding that the

principal’s act is wrong simply because stealing is wrong. Utilitarian’s, however, don’t want to move so

quickly. They want to see the outcome before making an ethical judgment. On that front, there are two

distinct outcomes: one covering the live tests, and the other the retired ones.

Live tests were those with sections that may appear again. When students at KDCP received them for

practice, they were essentially receiving cheat sheets. Now for a utilitarian, the question is, does the

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situation serve the general good? When the testing’s done, the scores are reported, and the college

admissions decisions made, will there be more overall happiness then there would’ve been had the tests

not been stolen? It seems like the answer has to be no. Obviously those with great scores will be smiling,

but many, many others will see their scores drop (since SATs are graded on a curve or as a percentile). So

there’s some major happiness for a few on one side balanced by unhappiness for many on the other. Then

things get worse. When the cheating gets revealed, the vast majority of test takers who didn’t get the edge

are going to be irritated, mad, or furious. Their parents too. Remember, it’s not only admission that’s at

stake here but also financial aid, so the students who didn’t get the KDCP edge worry not only that maybe

they should’ve gotten into a better school but also that they end up paying more too. Finally, the colleges

will register a net loss: all their work in trying to admit students on the basis of fair, equal evaluations gets

thrown into question.

Conclusion. The theft of live tests fails the utilitarian test. While a few students may come out better off

and happier, the vast majority more than balances the effect with disappointment and anger. The greater

good isn’t served.

In the case of the theft of “retired” tests where the principal forwarded to KDCP test questions that won’t

reappear on future exams, it remains true that the tests were lifted from the College Board and it remains

true that students who took the KDCP prep course will receive an advantage because they’re practicing the

SAT. But the advantage doesn’t seem any greater than the one enjoyed by students all around the nation

who purchased prep materials directly from the College Board and practiced for the exam by taking old

tests. More—and this was a point KDCP made in their countersuit against the College Board—stealing the

exams was the ethically right thing to do because it assured that students taking the KDCP prep course

got the same level of practice and expertise as those using official College Board materials. If the tests

hadn’t been stolen, then wouldn’t KDCP kids be at an unfair disadvantage when compared with others

because their test practices hadn’t been as close to the real thing as others got? In the end, the argument

goes, stealing the tests assured that as many people as possible who took prep courses got to practice on

real exams.

Conclusion. The theft of the exams by the high school principal may conceivably be congratulated by a

utilitarian because it increases general happiness. The students who practiced on old exams purchased

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from the College Board can’t complain. And as for those students at KDCP, their happiness increases since

they can be confident that they’ve prepared as well as possible for the SAT.

The fact that a utilitarian argument can be used to justify the theft of test booklets, at least retired ones,

doesn’t end the debate, however. Since the focus is on outcomes, all of them have to be considered. And

one outcome that might occur if the theft is allowed is, obviously, that maybe other people will start

thinking stealing exam books isn’t such a bad idea. If they do—if everyone decides to start stealing—it’s

hard to see how anything could follow but chaos, anger, and definitely not happiness.

This discussion could continue as more people and consequences are factored in, but what won’t change is

the basic utilitarian rule. What ought to be done is determined by looking at the big picture and deciding

which acts increase total happiness at the end of the day when everyone is taken into account.

Should the Scores Be Canceled?

After it was discovered that KDCP students got to practice for the SATs with live exams, the hardest

question facing the College Board was, should their scores be canceled? The utilitarian argument

for not canceling is straightforward. Those with no scores may not go to college at all next year. This is

real suffering, and if your aim is to increase happiness, then counting the exams is one step in that

direction. It’s not the last step, though, because utilitarian’s at the College Board need to ask

about everyone else’s happiness too: what’s the situation for all the others who took the exam but has

never heard of KDCP? Unfortunately, letting the scores be counted is going to subtract from their

happiness because the SAT is graded comparatively: one person doing well means everyone getting fewer

correct answers sees their score drop, along with college choices and financial aid possibilities. Certainly

it’s true that each of these decreases will be small since there were only a handful of suspect tests. Still, a

descent, no matter how tiny, is a descent, and all the little bits add up.

What’s most notable, finally, about this decision is the imbalance. Including the scores of KDCP students

will weigh a tremendous increase in happiness for a very few against a slight decrease for very many.

Conversely, a few will be left very sad, and many slightly happier. So for a utilitarian, which is it? It’s hard

to say. It is clear, however, that this uncertainty represents a serious practical problem with the ethical

theory. In some situations you can imagine yourself in the shoes of the different people involved and,

using your own experience and knowledge, estimate which decision will yield the most total happiness. In

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this situation, though, it seems almost impossible because there are so many people mixed up in the

question.

Then things get still more difficult. For the utilitarian, it’s not enough to just decide what brings the most

happiness to the most individuals right now; the future needs to be accounted for too. Utilitarianism is a

true global ethics; you’re required to weigh everyone’s happiness and weigh it as best as you can as far into

the future as possible. So if the deciders at the College Board follow a utilitarian route in opting to include

(or cancel) the scores, they need to ask themselves—if we do, how will things be in ten years? In fifty?

Again, these are hard questions but they don’t change anything fundamental. For the utilitarian, making

the right decision continues to be about attempting to predict which choice will maximize happiness.

Utilitarianism and the Ethics of Salaries

When he wasn’t stealing test booklets and passing them on to KDCP, the principal in the elite Plano

school district was dedicated to his main job: making sure students in his building receive an education

qualifying them to do college-level work. Over at the College Board, the company’s CEO leads a

complementary effort: producing tests to measure the quality of that preparation and consequently

determine students’ scholastic aptitude. The principal, in other words, is paid to make sure high schoolers

get an excellent education, and the CEO is paid to measure how excellent (or not) the education is.

Just from the job descriptions, who should get the higher salary? It’s tempting to say the principal.

Doesn’t educating children have to be more important than measuring how well they’re educated?

Wouldn’t we all rather be well educated and not know it than poorly educated and painfully aware of the

fact?

Regardless, what’s striking about the salary that each of these two actually receives isn’t who gets more;

it’s how much. The difference is almost ten times: $87,000 for the principal versus the CEO’s $830,000.

Within the doctrine of utilitarianism, can such a divergence be justified?

Yes, but only if we can show that this particular salary structure brings about the greatest good, the

highest level of happiness for everyone considered as a collective. It may be, for example, that objectively

measuring student ability, even though it’s less important than instilling ability, is also much harder. In

that case, a dramatically higher salary may be necessary in to lure high-quality measuring talent.

From there, it’s not difficult to fill out a utilitarian justification for the pay divergence. It could be that

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inaccurate testing would cause large amounts of unhappiness: students who worked hard for years would

be frustrated when they were bettered by slackers who really didn’t know much but managed to score well

on a test.

To broaden the point, if tremendous disparities in salary end up making people happier, then the

disparities are ethical. Period. If they don’t, however, then they can no longer be defended. This differs

from what a libertarian rights theorist might say here. For a libertarian—someone who believes

individuals have an undeniable right to make and keep whatever they can in the world, regardless of how

rich or poor anyone else may be—the response to the CEO’s mammoth salary is that he found a way to

earn it fair and square, and everyone should quit complaining about it. Generalized happiness doesn’t

matter, only the individual’s right to try to earn and keep as much as he or she can.

Can Money Utilitarian Happiness? The Ford Pinto Case

Basic questions in business tend to be quantitative, and money is frequently the bottom line: How many

dollars is it worth? What’s my salary? What’s the company’s profit? The basic question of utilitarianism

is qualitative: how much happiness and sadness is there? Inevitably, it’s going to be difficult when

businesses accustomed to bottom-line number decisions are forced to cross over and decide about general

happiness. One of the most famous attempts to make the transition easier occurred back in the 1970s.

With gas prices on the rise, American car ers were looking for smaller, more efficient models than

Detroit was manufacturing. Japanese automakers were experts in just those kinds of vehicles and they

were seizing market share at an alarming rate. Lee Iacocca, Ford’s president, wanted to rush a car into

production to compete. His model was the Pinto.
[5]

A gas sipper slated to cost $2,000 (about $12,000 today); Ford rushed the machine through early

production and testing. Along the way, unfortunately, they noticed a design problem: the gas tank’s

positioning in the car’s rump left it vulnerable to rear-end collisions. In fact, when the rear-end hit came

faster than twenty miles per hour, not only might the tank break, but gasoline could be splattered all the

way up to the driver’s compartment. Fire, that meant, ignited by sparks or anything else could engulf

those inside.

No car is perfectly safe, but this very scary vulnerability raised eyebrows. At Ford, a debate erupted about

going ahead with the vehicle. On the legal end, the company stood on solid ground: government

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regulation at the time only required gas tanks to remain intact at collisions under twenty miles per hour.

What about the ethics, though? The question about whether it was right to charge forward was

unavoidable because rear-end accidents at speeds greater than twenty miles per hour happen—every day.

The decision was finally made in utilitarian terms. On one side, the company totaled up the dollar cost of

redesigning the car’s gas tank. They calculated

 12.5 million automobiles would eventually be sold,

 eleven dollars would be the final cost per car to implement the redesign.

Added up, that’s $137 million total, with the money coming out of Pinto ers’ pockets since the added

production costs would get tacked onto the price tag. It’s a big number but it’s not that much per person:

$11 is about $70 today. In this way, the Pinto situation faced by Ford executives is similar to the test

cancellation question for the College Board: one option means only a little bit of suffering for specific

individuals, but there are a lot of them.

On the other side of the Pinto question—and, again, this resembles the College Board predicament—if the

decision is made to go ahead without the fix, there’s going to be a lot of suffering but only for a very few

people. Ford predicted the damage done to those few people in the following ways:

 Death by burning for 180 ers

 Serious burn injuries for another 180 ers

 Twenty-one hundred vehicles burned beyond all repair

That’s a lot of damage, but how do you measure it? How do you compare it with the hike in the price tag?

More generally, from a utilitarian perspective, is it better for a lot of people to suffer a little or for a few

people to suffer a lot?

Ford answered both questions by directly attaching monetary values to each of the injuries and damages

suffered:

 At the time, 1970, US Government regulatory agencies officially valued a human life at $200,000. (That

would be about $1.2 million today if the government still kept this problematic measure.)

 Insurance companies valued a serious burn at $67,000.

 The average resale value on subcompacts like the Pinto was $700, which set that as the amount lost after a

complete burnout.

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The math coming out from this is (180 deaths × $200,000) + (180 injuries × $67,000) + (2,100 burned-

out cars × $700) = $49 million. The result here is $137 million worth of suffering for Pinto drivers if the

car is redesigned and only $49 million if it goes to the streets as is.

Ford sent the Pinto out. Over the next decade, according to Ford estimates, at least 60 people died in fiery

accidents and at least 120 got seriously burned (skin-graft-level burns). No attempt was made to calculate

the total number of burned vehicles. Shortly thereafter, the Pinto was phased out. No one has final

numbers, but if the first decade is any indication, then the total cost came in under the original $49

million estimate. According to a utilitarian argument, and assuming the premises concerning dollar

values are accepted, Ford made the right decision back in 1970.

If every Pinto purchaser had been approached the day after ing the car, told the whole Ford story, and

been offered to change their car along with eleven dollars for another one without the gas tank problem,

how many would’ve handed the money over to avoid the long-shot risk? The number might’ve been very

high, but that doesn’t sway a utilitarian conclusion. The theory demands that decision makers stubbornly

keep their eye on overall happiness no matter how much pain a decision might cause certain individuals.

Versions of Utilitarian Happiness

Monetized utilitarianism attempts to measure happiness, to the extent possible, in terms of money. As the

Ford Pinto case demonstrated, the advantage here is that it allows decisions about the greater good to be

made in clear, objective terms. You add up the money on one side and the money on the other and the

decision follows automatically. This is a very attractive benefit, especially when you’re dealing with large

numbers of individuals or complex situations. Monetized utilitarianism allows you to keep your happiness

calculations straight.

Two further varieties of utilitarianism are hedonistic and idealistic. Both seek to maximize human

happiness, but their definitions of happiness differ. Hedonistic utilitarian’s trace back to Jeremy Bentham

(England, around 1800). Bentham was a wealthy and odd man who left his fortune to the University

College of London along with the stipulation that his mummified body be dressed and present at the

institution. It remains there today. He sits in a wooden cabinet in the main building, though his head has

been replaced by a wax model after pranking students repeatedly stole the real one. Bentham believed

that pleasure and happiness are ultimately synonymous. Ethics, this means, seeks to maximize the

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pleasures—just about any sensation of pleasure—felt by individuals. But before dropping everything and

heading out to the bars, it should be remembered that even the most hedonistic of the utilitarian’s believe

that getting pleasure right now is good but not as good as maximizing the feeling over the long term.

(Going out for drinks, in others words, instead of going to the library isn’t recommendable on the evening

before midterms.)

A contemporary of Bentham, John Stuart Mill, basically agreed that ethics is about maximizing pleasure,

but his more idealistic utilitarianism distinguished low and highbrow sensations. The kinds of raw, good

feelings that both we and animals can find, according to Mill, are second-rate pleasures. Pleasures with

higher and more real value include learning and …