Is the Corporate Strategy of Downsizing Unethical?

Essay by rach8630 May 2006

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Throughout corporate America, downsizing is a common practice. The concept of downsizing as a strategic tool wasn't introduced until the 1980's, and today it is a well known system. This has been caused by the accelerated growth of international and global competition throughout the past two decades. Increasing competition is forcing companies to drive their costs as low as possible, and the quickest, easiest way to cut costs is to cut jobs. Top management within corporations is most worried about the impact downsizing will have on their costs, and they are usually less apprehensive about the influence on the employees affected. Two views on this topic are presented in Marc Street's Taking Sides. The first will argue against downsizing for any reason, saying that business have other responsibilities that extend beyond maximizing shareholder pay outs. The second will take a more in depth look at questioning the morality of downsizing.

Both arguments have valid points and the authors present their arguments in an effective manner.

In "Downsizing: Are Employers Reneging on Their Social Promise?" by Larry Gross, the author refers to a theory discussed earlier this year. The stakeholder theory is Gross' defense against downsizing. According to Gross, "Downsizing is in direct conflict with the Stakeholder Approach to corporate social responsibility" (Gross 26). When companies lay off workers in order to maximize profits, they are ignoring their initial responsibility to their employees, as well as the communities around them. Downsizing does not always result in the desired outcome either. A company could lay off some of its workforce to avoid going bankrupt. However, because they have a smaller amount of people to do the job, the job isn't done as well causing the profits to drop even more. When a company decides to downsize, the employees that are left...