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Utilitarian Analysis and Stakeholder Analysis Term Paper

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Updated: Mar 13th, 2019


Utilitarianism deals with the need to give an answer to what is right that a man has to do. According to utilitarianism, an act ought to the best consequences possible. At the core of utilitarianism is the question of morality especially from a religious point of view.

On that note utilitarianism beliefs argue that morality is not about pleasing God rather it’s about doing what makes one happy so long as the action does not have negative consequences on the rest of the people (elements of philosophy, p. 97). The social reformers and philosophers who were the forces behind utilitarianism believed religion was too rigid and curtailed people’s freedoms effectively denying them happiness.

They alleged that blanket belief in God and the following abstract moral rules set by religion was not right (elements of philosophy, p 98). In effect, they advocated for the prevalence of the free will of human beings in pursuit of happiness. Utilitarianism thinking can be applied on numerous controversial issues that affect human beings on everyday life. The controversy stems from the conservative approach that has informed the beliefs that govern such issues.

The include drug abuse like marijuana smoking, homosexuality and treatment of non-human animals. In business, some business ethics can be analyzed through utilitarianism and stockholder and stakeholder analysis (Cosans, 2009, p. 391). The theories advanced by Freeman and Friedman can be jointly analyzed especially when utilitarianism is concerned in making profits and treating company stakeholders (Moylan, 2005, p. 33).

Case study

Homosexual employee

Homosexuality remains a controversial topic in western societies. Religion, politics, and social life have different looks on the issue. Unfortunately, the attitudes towards homosexuality have trickled through to the corporate world where homosexuals may be treated according to the ideology that governs the particular corporation or industry.

The analysis of the case will be done on two levels, utilitarianism/stockholder analysis, and stakeholder analysis. Human habits greatly determine the success of the endeavors they engage (Covey, 2004, p. 20). Similarly, the habits of employees affect the success of business firms.

Utilitarianism/Stockholder Analysis

Managers are not owners of businesses, stockholders are. Managers act on behalf of the stockholders and sometimes stakeholders to help the business generate revenue (Friedman, 1979, p. 309).

Though employees have individual freedoms, issues like sexual orientation may easily attract unnecessary attention that adversely affect business. John’s case is unique. He is an accomplished middle level manager who also is gay. Before a business decision is made, it is important to consider the utilitarian approach to this issue as well as the interests of stockholders.

According to prevalent culture, homosexuality is not permissible as it’s is unnatural. The conservative environment that the business operates does not make things easier. Furthermore, the law prohibits such practices in the state. According to tradition and religious teaching, what john dopes is unacceptable.

According to utilitarianism, John has not committed any wrongdoing. He is simply pursuing his happiness and his actions have not so far affected anybody including his job. According to Mill (1859) as quoted in (elements of philosophy, p. 101), utilitarianism will approach John’s situation b asking what alternatives are available to him. Being heterosexual cannot make John happy which limits his sources of happiness.

In the contemplation of firing John, one will consider the morality of homosexuality, which is the case in point. According to Bentham as quoted in (elements of philosophy 1967, p. 100), the religious believes that the people around the company’s operation have embodied do not make sense when looked at critically.

It is not fair for their religious beliefs to condemn homosexuality while that is the only way of life that John feels happy to follow. Though John’s actions are not morally upright according g to the prevailing opinions, his way of life makes him happy and that is what matters. Utilitarianism will protect John based on the three most tenets that informs it. John’s actions are to be judged to be right or wrong based on their consequences. On this front, there are no proven negative consequences of John’s actions so far.

However, there may be backlash form some sections of the client base towards the company for retaining a gay employee. Nevertheless, firing John may still fail to persuade some of the clients who may think the company knew all along but hid it from them. Firing therefore will not solve the problem. Utilitarianism also believes that consequences of an action like John’s homosexuality should be judged on the amount of happiness or unhappiness that it’s has created (elements of philosophy p. 109).

John’s actions are likely to make some people unhappy, but personally, he is happy and that is what counts. Besides, firing him may not make colleagues and stockholders happy which gives the manager less reasons to fire him. Finally, utilitarianism believes that each person’s happiness counts the same (elements of philosophy, p. 109). In this case, the happiness of the customers and that of John count the same. For that reason, he should retain his job.

On the other hand, the stockholders who own the company are in pursuit of profits and anything that acts contrary to that is a derailment. Freeman (1984, p. 409) says that stockholders must be granted certain rights and privileges and rights by the management since they are the owners of the firm. Freeman further argues that management should always aim at reinforcing the primacy of stockholders.

Since the main objective of stockholders is to make profits, any action therefore that will adversely affect the operations of the company will be in contravention of stockholder interests. John is a priced asset of the company. He has experience, has helped close lucrative deals for the company besides blending well with everybody in the work environment. The company stands to lose all the above plus possible negative effects on the rest of the workforce.

Stakeholder Analysis

Freeman defines stakeholders as those groups that can lay a stake in the firm or business. They include employees, customers, suppliers, and the local community that surrounds them (Freeman, 1984, p. 410).

According to Freeman, each of the above groups has a right to be treated importantly because they in one way or the other help the in achieving success of the company. According to Beth (2005), the actions that a company takes in regards to stakeholders is somehow influenced by the company’s corporate social responsibility policy (p. 56).

In this case, the employees of the company, John being one of them, the local community that is overly conservative, the suppliers and the stockholders are important in their own ways. its important to note that the main point of this stakeholder analysis will be examine to whose ultimate interest the management of the firm will be carried out.

Though the role of stockholders in determining the direction of the firm has been constrained lately, the interests and roles of customers, employees, and local community are still subordinate to those of the stockholders (Freeman, 1984, p. 410). The local community may be disgruntled over the company’s decision to retain a gay employee but stockholder interest superseded their views and that may help John retain his job.

According to Bowie & Hogue (2005, p. 90), the survival of the company is determined the stakeholders. They can be divided into two groups. Those that determine the survival of the company, and, those that whose actions and those of the corporation affect each other (Freeman, 1984, p. 415).

The owners who own the company through stocks and bonds are the main financial backers of the firm. Their interest must therefore be catered for since the operations of the firm can easily ground to a halt. Employees on their part are the owners of skills and the stockholders compensate them for their skills.

According to Freeman the stockholders are supposed to cater for the welfare of the employees by taking them through the most difficult times (1984, p. 411). In this case, the stockholders are expected to stand firm with John especially considering his productivity.

Suppliers help the firm in supplying with raw materials in whatever sense that help it producing products. The most important of all stakeholders according to Freeman, are the customers. These same people comprise of the local community that in this case is very conservative. Freeman further says that the customers are the lifeblood f the firm (1984, p. 412). Before John is fired, its important for the manager to consider who the most important of these groups is. Stockholders and customers come first.

Employees with the same skills and suppliers with same quality materials can easily be replaced (Bowie & Hogue, 2005, p. 86). Retaining John is likely to drive away a significant portion of the clientele away. The stakeholders may not risk such a move. Though the employees like John are important, the cost of losing one experienced employee is less compared to losing a significant portion of the client base.


As a manager, its will be a painful decision to fire John but when looked at from the stakeholders’ point of views, it will be necessary to safeguard the interests of the company. Additionally, the manager would not have committed any gross violation of the laws of the state.


Beth, K. J. G. (2005). Corporate Social Responsibility as Risk Management: A Model for Multinationals. Cambridge: Harvard University: John F. Kennedy School of Government.

Bowie, E, N. & Hogue, P. (2005). Management ethics, Volume 5 of Foundations of business ethics. New York: Blackwell Pub.

Cosans, C. (2009). Does Milton Friedman Support a Vigorous Business Ethics? Journal of Business Ethics, 391-399.

Covey, R. S. (2004). Seven habits of highly effective people personal workbook. New York: Fireside. Elements of Philosophy: ( N.D)

Freeman, R. E. (1984). Strategic Management: A Stakeholder Approach. New York: Pitman Publishing.

Friedman, M. (1979). Greed. New York: Pitman Publishers.

Moylan, W. (2005). Ethics in Construction Bidding: Considering the “Friedman” vs. the “Freeman” view. Nait Selected Papers, 32-36.

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