When Layoffs Are Immoral

May 26, 2009, 7:04 am from New York Times By Randy Cohen

In mid-May, British Global Services announced 15,000 job cuts, while Japan's Sony continued cutting 16,000 jobs. Here in the U.S., 5.7 million jobs have been lost since the recession began in December 2007. To cite one example, Caterpillar, the heavy equipment manufacturer, is moving to lay off more than 20,000 workers. These days such mass layoffs are sadly unsurprising, but are they ethical?

The Argument

They are not, at least until more benign tactics have been
exhausted. Caterpillar may not simply pile a bunch of unwanted workers
into a van, drive across town, drop them on the doorstep of a
flourishing company, ring the doorbell and run away. (All right: these
days there are no flourishing companies, but wouldn't it be lovely if
there were?)

To deprive thousands of people of their livelihood can have a
catastrophic effect on them, their families and their communities. For
a company to get through a recession, suffering may be unavoidable, but
ethical management means minimizing that hardship, spreading the pain
equitably and bearing some responsibility for its consequences.

Although the law limits the duties employers have to employees,
ethics sets a different standard. Caterpillar's workers have existed
for years - sometimes generations - in profound dependence on the
company. (No work, no food.) In accepting and profiting from this
relationship, Caterpillar (i.e., its stockholders) incurs moral
obligations to those workers. In hard times, it may not simply say:
find another job. There are no other jobs, or surely not enough of
them.

Mass layoffs relegate people to the status of disposable objects. A
company can mothball its welding robots (although I hear the new models
can wake themselves up and contact some kind of killer robots of the
future who will travel back in time and terminate us all). But people
are not machines. Many ethical systems mandate that you do not treat a
person like a thing. You must regard other people as full human beings
with the same moral rights as you. And that must include the right to
make a living.

This is not to assert that Caterpillar can never downsize. Companies
must be able to shrink as well as grow, to adjust to changing
circumstances. (A restaurant with fewer customers needs fewer waiters.)
But prudent staffing must be part of an ongoing strategy, not a panicky
response to an economic downturn.

It's easy to say that some must perish so others can survive, if you
are sure to be among the survivors. (It is worth noting that Jim Owens,
Caterpillar's chief executive officer, the person ultimately
responsible for these layoffs, made $9.77 million last fiscal year. His total compensation over the past five years is $25.89 million. That's some comfy survival.)

Before adopting the ethics of the overcrowded lifeboat, before
tossing thousands of non-millionaires over the side, gentler - and more
equitable - methods must be tried. Everyone's hours might be reduced,
diffusing the pain. Dividends to stockholders can be eliminated. Pay
cuts can be instituted company-wide, with the deepest reserved for the
highest paid (that is, those most able to endure them). To its credit, Caterpillar has done some of this,
trimming some executive pay by up to 50 percent, less for other
management and support staff, and offering buyouts to some employees.

(Caterpillar is also to be commended for posting cool videos of its construction gear in action, like this backhoe loader and these wheel excavators. Even more amazing video can be found here, of another sort of caterpillar, the Hickory Horned Devil. It is a wonder of nature, nearly as wondrous as the expression on the face of Motorola's co-C.E.O. Sanjay Jha. His compensation in 2008? $104 million. In late April, Motorola announced plans to lay off 7,500 people.)

It's no defense of mass layoffs to argue that the worst effects will
be mitigated by the social safety net. Indeed, "safety net" is a
misleading analogy, one that evokes individual failure - a tumbling
tightrope walker - rather than events over which no single worker,
however good her balance (or spangly her costume), has much control.
What's more, that net is badly frayed, particularly when compared to
programs in other advanced industrial democracies, where extended
unemployment pay, for example, means laid-off workers can still shop in
local stores, keeping the store's staff on the job and buffering the
effects of nationwide downturns. Benefits vary, but most European countries
provide 60 percent to 80 percent of a worker's lost salary - the
average is just over 50 percent in the U.S. - and most ensure that
workers and their families preserve their health benefits if they lose
their jobs. Even with more generous benefits, mass layoffs would still
be a slapdash response to a changing economy, jolting to companies and
bruising to workers, their families and their communities. When a
C.E.O. is earning tens of millions a year, we can ask for more
sophisticated - and humane - management.

If Caterpillar is to relegate legions of employees to the care of the public, it may not simply echo Ebenezer Scrooge:
"Are there no prisons? Are there no workhouses? Is there no COBRA?"
Instead, it must use its considerable political clout to ensure that
those programs are robustly funded, hardly a priority either for
Caterpillar or its confreres among the Fortune 500. That is, if
Caterpillar is to deprive thousands of people of a livelihood, it must
either provide for their basic needs or see that the public can do so.
To do neither is to dodge a moral obligation.