Ethics of Corporate Downsizing

Corporate downsizing decreases the number of workers.
Corporate downsizing decreases the number of workers. (Image: Burning graph decrease image by Tomislav from

Ethics as a subject is about standards of conduct and moral judgment. What these standards are, however, depends in large part on upbringing and education. Ethics might also have to do with the perception of how well adherence to those standards aids survival. Corporate downsizing, for example, involves decreasing the number of workers, which some believe will aid the survival of a corporation by increasing its bottom line, or net income.


The article "History of Downsizing Imparts Lessons" states that an estimated 10 million jobs were eliminated due to downsizing between the 1980s and the year 2000, and the driving force behind this was competition. If a rival finds a way to provide increased value with less cost, i.e. fewer employees on the payroll, following suit by laying off workers might prove to be a wise business decision.


The main function of corporate downsizing is to reduce the number of employees, thereby reducing the cost of operating a business. After selected employees are laid off, restructuring of individual jobs can occur in order to obtain maximum job performance from each individual. This is necessary to avoid a lowering of production, which would not serve the enterprise well. In other words, if fewer employees meant decreased productivity, the bottom line would suffer.


Ethics questions may arise pertaining to the effects of downsizing on workers, particularly if they were long-time employees of the company. Some of the effects might be a sense of betrayal, sadness, cynicism or bitterness. These ethical questions center around the degree of responsibility a business has for the well-being of its workers, beyond working conditions and actual treatment while employed there. Some former employees of a downsized company might feel that a layoff was their reward for years of hard work.

A sense of loss or betrayal may follow a layoff.
A sense of loss or betrayal may follow a layoff. (Image: taking image by Tomasz Wojnarowicz from


The benefits of downsizing to the owners of a business are clear, but there are also benefits to the remaining workers. They may have an increased awareness of their value to the company. After all, there was a reason why management chose to keep them. Part of the restructuring after downsizing might include free training, which will increase the workers' value even more. Much can be said about the connection between responsibility and ethics. In an economic downturn, for example, instead of focusing on the negative, some people who have been laid off seek a new way to make a living with talents or abilities not used prior to the layoff.


In his book "Managing Leadership," Jim Stroup notes that in a downsizing situation, the company is pitting its own welfare against that of its employees. He holds upper-level executives responsible and goes on to say "Ethics cannot survive the retention in the management team of anyone who is responsible for the downsizing dilemma." Resignation of such individuals is his recommendation.

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