Chryssides & Kaler - An Introduction to Business Ethics
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Setting thc scene
ground will no doubt relate very readily to issues such as corporate responsibility, the right to work, the position of women in industry, the ethics of advertising and the possible limits to economic growth. We hope that this book will appeal to those in the business world and to philosophers alike. If it cncourages business men and women to be somewhat more reflective, and philosophers to come down a little from their ivory towers, then we will have amply succeeded in our task.
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tsusiness ethics: its scope and purpOse
What is busincss ethics?
How is it done? How is it possible? Why do it? Does it work? Introducing thc readings
Moral issues in business Richard T. De George The ethical side of enterprise Verne E. Henderson The rvealth of nations Adam Smith Why 'good' managers make bad ethical choices Saul W. Gellerman Case study
Ethically active business: the work of business in the community Discussion topics
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WHA'| IS BUSINESS
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What is busincss ethicsi
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ETHICS?
Confrontcd with an unfamiliar subjcct, many pcople insist on st:rrting rvith a definition. Horv, they ask, can rvc knorv rvhat is being talked about unlcss first wc arc told rvhat it is. FIow shall rvc dclinc business cthics? A simple clefinition is casy cnough. Thc terrn is, aftcr all, just a combination of two vcry fanriliur words, narncly 'business' and 'ethics'. Unsurprisingly then, rvhat thc ternt rcfcrs to is sirnply cthics as it applies to business. Just as we can talk of mcdical cthics as conccrned witlt thc morality of mcdical practices and policies, or political ethics as concerncd u,ith thc morality of political affairs, so also can we talk of something called 'business cthics' as being peculiarly conccrned with rnoral issucs in [rusincss. 'I'his is hardly vcry cnlirhtcninq, not only bccausc in this casc thc answcr u,us obvious, but ttcclusc lll rrny tlclinition carr clo is ofler au altcnrativc lbrnr of rvords. It hclps us knorv whal thc tcrm rcfers to of course; but unlcss this is somcthing vcry simplc, wc can hardly be said to 'knorv' that thing rncrcly bccausc wc havc undcrstood a few words of dctinition. With a contplcx subjcct, a dcfinition is only as good as the long and complicatcd account rvhich it cncapsulatcs. With the complex subjcct that is business cthics, we arrivc at such an account by looking at the prolrlcnrs rvhich raise n'roral issucs in business, and by critically cxamining thc various proposals fbr solving thcm. 'lhis entire book is just such an account. At the cnd of it readers should have a broad idea of what busincss ethics is. Accluiring that idea is not the point of the cxercisc though. It is at bcst a by-product. What rcally mattcrs is acquiring an appreciation of thc nature of the issucs and, even rnorc irnportantly, how they rnight bc rcsolvcd. This is bcqausc business ethics, likc ethics in general, is ccntrally conccrned with conduct. Ethical questions are cssentially questions about rvhether wc ought or ought not to perform certain kinds of actions; about rvhcther those actions are good or bad, right or wrong, virtuous or vicious, worthy of praise or biame, rcu,ard or punishment, and so on. Conscqucntlv, with business ethics as rvith any othcr branch of ethical encluiry, the point ol the exercise is to resolve clucstions of conduct. It has, thcn, ln esscntiaily practical purpose. Wc inquirc not simply in order to bc informecl, but to inform our actions; to providc those actions with a bettcr and soundcr basis than they might othcrrvisc have . Docs this mean that business cthics is a mattcr of producing moral
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it a serics of guides to morally good business practices, replcil with iists of dos and don'ts? It can be. But if it wcre only that thcn it would be a branch of what is known as'normativc'or, alternativelr:, 'prescriptive' ethics. (We shall use thc latter term). It would be ethic:; understood as a matter of laying dorvn 'norms' of behaviour, of i:; cscribing' conduct - a matter, that is, of issuing instructions regarcling what should and should not be done; with business ethics concerning itself with those instructions that havc particular reference to thc world of busincss. Laying down the law with regard to what should and should not be done is, as we have acknowledged, very much what ethics is about. But it is not what it is all about, or even primarily about - at least not if 'cthics' is understood in its traditional philosophical sense of a disciplincc.l cnquiry into morality. (Broadly spcaking, 'cthics' is the inquiry, 'moralii;," is what is inquired into). What docs such a conception of cthics rcquirc? Does it mcan a scholarly dctachment from moral commitment, as talk of 'disciplincC enquiry'secms to imply? Is ethics, as a discipline, concerned merely to obscrvc what it is that peoplc say and do regarding moral matters without any attempt to pass judgemcnt? If so, it rvould be subsumed under what can be called 'descriptivc ethics'. Here, in contradistinction to prescriptive ethics, the concern ismcrcly to dcscribc what goes on regarding moral matters. We seek to discovcr, by observation, surveys, interviews, tests, and the like, what it is that people do, say or believe about what is good and bad, right and wrong, and so on. The concern is not to assess the moral corrcctnes:r or incorrectness of what is discovered, nor is it to come up with amcnrjmcnts or altcrnatives. It is merely to give a descriptive account of acluai moral behaviour and attitudes; with the behaviour and attitudes ol business people as the special concern of business ethics. Again,'there is more to ethics than this. It is not that accounts of rvhat people actually do, say and think about morality are set aside. Stiil less is it that no pronouncements on what is right and wrong are to be mldc. But what is missing from both a purely descriptive or purely prescriprivc approach is that vital critical element rvhich is at the heart of ethics as a disciplined inquiry. We have to subject the behaviour and attitudes exhibitcd, and the rules and principles propounded, to a rigorous critical examination to sec if we can determine why they are, morally speaking, right or wrong. It is this which is attempted here and in books on codes? Is
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How is it done?
l-lgliness ethics: its scope and purpose
wages and argue for the importance to them of an enhanced self-esteem that would come from participation in decision
business ethics generally, and is, in terms of a disciplined enquiry, what
is traditionally understood by the word ethics, whether it is applied to business or any other area of life.
HOW IS I1'DONE? This is all very rvell, but horv is it to be done? Horv will we arrive at thesc conclusions about moral rights and rvrongs in business? It is not cntircly facctious to answcr, 'With difliculty!' Busincss cthics is hardll, going to concern itself with issues for which there arc straightforward and obvious solutions. It is not much help, for example, to be told that theft and fraud arc morally wrong. We llready knorv that. It is barely conceivable that anyone rvould rvish to dcfend activities such as stealing thc design of a nerv product and selling it to a competitor, or keeping two sets of accounts, one for oneself and tlte other for the Inland Revenue. It is the morc complex and contentious issues that are going to be of the greatest concern in the study of business ethics: issues like corporatc rcsponsibility, cnvironmental protcction, worker participation, and so on.
Yet rve are still left with the question of just how these admittedly difficult issucs are to be tackled. By what method do we decide on answers to questions of moral right and tvrong in business? There is no special or uniquc process to do this, nothing more or less than is involved in any disciplined enquiry into complex problems, whethcr in business or anyrvhcrc else. We consider the problcm and come up lvith possible solutions rvhich wc thcn subjcct to thrcc broadly differcnt kinds of tcst.
o Firstly, and most obviously, there is the test of agrcement with the cvidence as rve understand it. Does the evidence support or deny the c-xplanation rve have put forward? If, for example, we are arguing for the benefits of greater rvorker participation in the running of companies, rvhat is the evidence that employees actually want
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involvement? Scconclly, therc is the tcst oi intcrnal cohcrencc. Arc all the parts of the explanation in agreement witir each other or is it self-contradictory in some rvay? Does it say things rvhich are somchow in opposition and so cannot bc, or are unlikely to bc, equally true at thc same time'? Wc cannot, lor example, accept that workcrs arc exclttsively intercsted
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Thirdly, we can subject our conclusions to the test of its compatibility with our more general system of belief. Does it fit in with what we generally take to be true in this area or does it somehow contradict our assumptions, or at least rest uncomfortably with them? How well, for example, does the claim that workers are exclusively interested in maximizing wages fit in with what we generally accept about human motivation?
In rvidening the issue out to consider compatibility with our more general assumptions, we invariably become involved in theoretical issues. The debate about worker participation will, as we have just seen, sooner or later involve theorics of human motivation. What are thcories? Vcry roughly, they are overarching, Iarge scale explanations in terms of which other and smaller explanations are both generated and evaluated. A theory of human motivation which gave pride of place to the dcsire for economic rewards would, for example, both lead to ancl endorse the claim that workers are exclusively interested in maximizing wages. Conversely, a theory giving priority to a need for social relationships would be difficult to reconcile with such a claim. Theories are no less a feature of ethical enquiry than of any other, and have just the same generating and evaluating role. If, for example, we base our argument for worker participation on the claim that workers havc a moral right to have a say in the running of the companies for which they work, then this will certainly raise theoretical questions about the nature of moral rights - questions about what they are and why (or whether) they should include workers having their particular say. Though theories have this overarching role, they are not themselves immune to evaluation of course. They are subject to much the same tests of agreement with evidence, internal coherence, and compatibility'with other beliefs as any other, but more particular, kind of explanation. The .only real difference is that the testing is done at a larger and more abstract scale when theories are at stake. It is one thing, for example, to discuss the question of workers' rights to participation, but quite another to discuss moral rights in general. Summing up then, we can say that we attempt to solve ethical problems in much the same way as we would any other complex and contentious question. Therc is the same range of tests available and the
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l'igure 2,1 llthical cncluiry.
samc kind of critical rclationship to thcory. (This is rvhy this book contains a chaptcr on etltical thcory). Diagrammatically, the situation rvith regard to cthical enquiry can bc
put this way (see Figure 2.1). Herc, whar rvc have labcllcd'critical analysis' is at the ccntrc of a dynamic system where it botit uscs and
asscsses ethical thcory (hence thc two way reiation) to examine existing moral behaviour and beliefs in order to arrivc at critically evaluated moral prcscriptions rvhich uim to rcplacc, cnclorsc, ntodify, or acld to cxistirrg idcas of morality and thcrcby altcr or rcinlbrce cxisting moral practices in some way. Busincss cthics then is sirnply that particular subdivision of this activity which deals with conduct in business affairs as opposed to any othcr particular kind or to conduct in gencral.
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Critical Analysis
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word is 'definitive'. There are plenty of answers, it would have to be admitted, the trouble, the sceptic would have to say, is that none of thcm are definitely correct. They are all uncertain; we can never be surc we have the right answer. That much can be admitted. As well as being complex, ethical problems are, as we noted, contentious. We have not just different, but opposing answcrs, based very often on strongly contrasting theoreticatr
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perspectives.
Much the same is true of many other kinds of enquiry of course. It is not unknown cven in the natural sciences of physics, biology, chemistry, and the like. It is a commonplace, perhaps even the norm, in social scicnces such as psychology, sociology, and economics, and it is as true of the study of business as of any otlrer study of social phenomenon. Thcrc arc many dilfercnt and sometimcs conflicting theorics, for exan:ple, of workcr motivation, marketing, and even the function of managcment itself. In fact, if dcfinitive answers are demanded for difficult qucstions, then it is doubtful if we get anywhere near this in any but the hardcst of hard scienccs - and no one rvould count management sciencc or the study of business in general as bcing in that category. This does not mcan we give up these enquiries into business or any other social phenomenon. What we very sensibiy do is settie for something less than certainty. We recognize the scope for genuine iiiffcrcnccs and so arc prcparcd to cntcrtain a wider rangc of possible solutions than would be normal in more exact forms of enquiry. For an introductory text book dealing with one of these uncertain cnquiries, this means setting out, as fairly as is possible, the various contcnding positions and inviting the reader to choose betwecn thcm. Instead of the comfort of a single definitive answer which can be relaycd to the reader simply, we have the challenging and often confusing situation of a variety of possible answers. This is so in much of the sociai sciences, in many of the more theoretical areas of business studies, ancl is r\ ' very much the situation here. However, though a text book such as this is forced, in fairness to thc reader, to be neutral between various contending answers, this does not mean that therefore there is nothing to choose between them; that tlie choicc is an cntirely arbitrary one, subject only to whim or fancy. if this were so then any old answer would do. we could decide how to act in business by tossing a coin or by looking at our horoscope - or we could simply decide that lbllowing our own personal whims at the time was the right thing to do.
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HOW IS IT POSSIBLE? This is all vcry well, a scepric might say, but are not ethical problenis just too complex, too contentious, for this pretty picture to apply? Is it not the case that rve just do not havc definitive answers to these probiems? Hence, thcre can bc no 'critical anaiysis' of ethical issues in business or
anywhere clse. All wc can have is a vcry uncritical prcscriptivc or dcscriptive ethics. Ethics as an enquiry to provide us with answers to moral problems, it might be said, is just not possiblc. clearly, this objection cannot mean that arriving at answcrs to ethical problems is impossiblc. This book, for one, will bc full of them. Thc key
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--- I ti 18 i I Business cthics: its scopc and purpose Even in the most uncertain of enquiries
How is it possible?
it is obvious that not any old
answer will in fact do. Not any answer could equally well agree with the
evidence, be equally coherent, or be equally compatible with our other beliefs as any other. Some (such as the ones mentioned above) could be wildly implausible. Others, though plausible enough, could run into difficulties of varying degrees of severity. Even though they ncver approach certainty, some answers can still be more evidential, more coherent, more generally compatiblc than others. This has to be so in even the most contentious areas of social science and of the study of business including the study of business ethics. Ali right, it might be retorted, but is there not greater uncertainty in ethical mattcrs? Are rve not much lcss ablc to arrive at a bctter ansrver in ethics than in these other, admittedly uncertain, enquiries? This may be so, but hou, much less certain is it? Just saying cthical enquiry is particularly problematical still leaves it possible for us ro decide between competing answers to moral problems on an objective basis. We can keep on trying, even though success is likely to be particularly hard to achicve.
The attempt to arrive at conclusions on matters of business ethics rvould be doomed to failure if it were shown that any objective justification in ethics rvas impossible. If this were the case, then anything goes in ethics, and no answer is intrinsically better than any other. This is a very Iarge claim indeed. Can it be defended, and, if so, horv? To uphold such a vierv, it would need to be demonstrated that the whole of morality lay outside the realm of objective justification, This would amount to a full blown theory of the nature of morality itself - albeit that the whole of morality was, in a sense, to be dismissed. , Theories about the naturc of morality are called 'meta-ethical' theories. A meta-ethical theory is a large scale theory which attempts to answer , questions about ethics rather than questions in ethics. The distinction can be explained more readily by considering examples of these respective types of question. 'Is it sometimes right to break confidentiality?' is a question in ethics, whereas, 'Are moral judgments simply expressions of our personal emotion?' is a question about ethics. Meta-ethics, then, attempts to explain the nature of morality as a whole and not just some particular area such as the nature of moral rights or whatever. The theory that ethical statements cannot be objectively justified is a meta-ethical theor,v. We certainly need to look at a neta-ethical thcory which denies the very possibility of ever really knowing moral right from wrong, but rve can do so adequately only in the context of an examination
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of equally grand though opposing meta-ethical theories. A fuller presentation of. this question must therefore wait for the chapter on ethical theories (chaprer 3). the meantime, however, consider the consequences of such a denial _In of ultimate objective justification for the ethicai. would it follow that ethical enquiry must be abandoned? we do not think so. what would have to go is any 'evidential test'for moral conclusions: there could no longer be an aopeal to evidence as an ultimate test of ethical correctneirs. But this would still leave us with the test of internal coherence: some answcrs to ethical problems could still fit together better than others and it is still necessary to avoid having one pait of an answer inconsistent with another. Aldo, and perhaps more importantly, there is still the test of compatibility with our general system o1Uehef. This last-test is particularly important because very prominent among our moral beliefs is adherence to the correctness of some set of rnorui rules. As a matter of fact, a great number of people in all societies, perhaps the great majority, do believe they know-right from wrong. More significantly still, all but a tiny pathological minority accept th;y should adhere to rules of right and wrong. They may not always-adherl to these rules in practice; they may even have juit those intellectual doubts about knowing right from wrong that we have touched upon. Nonetheless, they accept they ought to adhere. And for the most part, they do. Moreover, there is for the most part agreement about what those rules should; at least for the most fundamental and important of them. consequently, and unsurprisingly, society will be structured around those rules. Transgression of them will meel sanctions of various kind: disapproval, ostracism, even legal penalties. The upshot of this is, notwithstanding whether or not these ethical rules can be objectively justified, they will inevitably form a living part of the structure of any and every society. Decision making will -have to accommodate them, and this will be as true of business decision making as of any other. Those responsible for the conduct of business will hal,E i. little option, therefore, but to fit their activities around this inescapable social fact. They will simply have to reconcile our business conduci with ethical expectations or run the risk of social disapproval, ostracism, or worse. Barclays Bank's very reluctant withdrawal from South Africa,,l because of a boycott by uK student unions, illustrates the kind of price they might pay (a bank rvhich does not attract students does not later have high income graduate customers), while the jailings of prominent business men following the Guinness affair demonsiratei anotirer.
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Why do it?
lvloreovcr, moral rules are not simply onc of many kinds of social
within the framework of a generally shared set of moral beliefs. The conipatibility of any particular moral position with that system can by itself provide the basis for rational debate. Indeed, the great majority of moral debatcs are conducted at just this level. We can conclude then that, even without recourse to ultimate justili- i cation, ethical cnquiry rcmains not only possible but, in terms of soci;.il ''
rules. There arc many different kinds of social rules but the moral kind is peculiarly privileged among thcm. Thcy constitutc the basis upon which
the corrcctncss of thc othcrs are cvalulrtccl. Rulcs of ctiquette, for cxample, can be rigidly adhcrccl to; but not at thc cost of immorality. No onc, for cxample, would adhcre to the nicctics of polite conversation when warning of a life or death entcrgency. Even legal rules are subordinated to the moral. The (perccived) imrnorality of a law can-.be such that it is only morally propcr to disobey it. The reccntly repealed aparthcicl larvs in South Africa arc a primc cxamplc ol larvs too nrorally discreditable to be re_spected. As rvith acceptance of any kind of social rule, opcrating within a rnoral framcrvork is not simply a question of blindly follorving instructions. It will aiways involve some kind questioning and cnquiry cven when it puts question ol ultimatc justification^asidc. Thcrc arc at lcast. thrcc rcasons
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The first is that cvcn the best orclered set of moral rules is inevitably going to involve some clashes. Horv, for examplc, are we to reconciie the moral rulc that rvc should obcy tlre law rvith the apparent immorality of certain laws? A second reason is the problem of applying the rules to particular cases. No rule can possibly specify every circumstance it might apply to. It is one thing, for example, to have a moral rule against cheating, quite anothcr to decide in any particular case what constitutes cheating. Why, for instance, is insider dealing taken to be a form of cheating, and what in any instancc constitutcs insider dealing? The third reason rvhy morality is never simple.rule foiiowing is that even though there is a u,ide nteasure of moral agrcement in socicty about rvhat rules are to hold, the agreentent is ncver total. Some rules
are controvcrsial; others will bc revisccl, rcpealcd or replaced. Is there, for example, a right bi, rvorkers to participatc in the running of companies? If so, tvhat of thc supposition that managers have .a right to manage' or priinary duty to sharcholders to maximizc the value of thcir holdings?
All the above cxamplcs illusffatc thc possibility of moral clebatc
without ncccssarily raising the mcta-ethical issue of whcthcr anything ultimatcly justifies competing claims. That issue ccrtainly could arise the questioning to be pushed far enough in a theorctical direction. "vcrc But it need not be. A high level of dcbate can be conducted simply
functioning, absolutely inescapable. We simply cannot function in society without operating within and reasoning about moral rules, and this (as we shall see in chapter 3), is a good reason for regarding them as ultimately j ustifi able.
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WHY DO iT? Granted then that ethical inquiry is all too possible, why engage in it? Why, in particular, engage in inquiring into the ethics of business activity? "i ,
One very good reason has already been given. It is inescapablc. Societies are, we have seen, structured around moral rules in a peculiarly fundamental way. Businesses have to operate in a social structure which in some ways is as much ethical as it is legal, political, economic, or anything else. Business decisions can therefore be as much constrainecl
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by the ethical environment as by the legal, political, economic, or whatever. Some things are better to do than others given the demands of the legal, political, or economic environments; and likewise some things are better than others to do given the demands of the ethical environ1 ment within which a business must also operate. ? Another reason to be concerned with the ethics of business activity is that as an activity business is overwhelmingly important. Most of the working population depend on it for ttrrcir livelihoods. Thc resr are at least dependent on it as consumers. As a force in society it can certainly stand comparison with religion, politics, or anything clse. Some would argue it has long been the dominant force in western societies at least, with governments of various hues only distinguished by the varying degrees of enthusiasm with which they bend to the economic power exertcd by business. Certainly it is a growing power. With world-wide i privatizations of what were state-owned assets, business methods and business attitudes are moving into more and more areas of economic activity in more and more countries. Multi-national corporations grow ever bigger. Their turnovers dwarf the entire gross national produit of ,i' many small and even medium sized countries (Shell's is bigger than
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ethics: its scope and purpose
Why do it?
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Morocco's, ICI's is bigger than Jordan's). Business generally is becoming ever more global in character with a world-rvide market in money, services, and products which is beyond the power of even the largest of individual national govemments to control. Never, in short, has there been more need for attention to the ethics of business. A third reason is much more parochial. It is peculiar to the people at whom this and other books on business ethics are chiefly aimed. They are the people who exercise, or will exercise, power in busincsses; that is, managers and those studying to be managers. For them a concern with the ethics of business- is part of a norv well established and seemingly inevitable process of frofessionalization. in this managers are no more than part of a gencral social trcnd. Many groups from librarians to school teachers, engineers to accountants, have attempted in varying rvays and with varying degrees of success to follow lawyers and doctors in professionalizing their occupations. The motivation is almost certainly a desire for that high social esteem rvhich professional status brings. The justification for this is broadly based on two considerations: the first is a claim that the job involves a high degree of intellectual dilficulty; the second is a claim that it involves a high degree of responsibility. This first factor justifies that great distinguishing mark of the professional; a period of formal education and tririning, replete with examination and certification. The second justifies that other great mark of the professional; a concern with ethics, usually rcplete with codes of conduct and enforcemcnt procedures. With managers, the intellectual difficulty factor is rootcd in the complexity, and sometimes scale, of business operations. Managers plan, organize, command, control, lcad, and so on. These erre complex tasks. If the organization is large enough and thc manager senior enough, it is complexity compounded by scale. Increasingly, but by no means universally, this complexity and possible scale is seen to warrant formal educational requirements for managers. i: AS for the responsibility factor, this virtually holds by definition. In planning, organizing, commanding, and so on, managers take on r. responsibilities. This is not just for technical matters: for manufacturing processes, bureaucratic procedures, financial budgets, and the like. There are responsibilities towards pcople. Managers must safeguard investors' money, protect the environment, keep consumers from harm, take care of the health and safety of employees, and the like. When thc organization is very iarge and the manager very senior, these irre responsibilities
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on a vast scale; with financial ruin, ecological disaster, human suffering, and even death, following on from mistakes, misdeeds, or mishaps. Think
of Barlowe Clowes, Polly Peck, the Bank of Credit and
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International, of Bhopal, Exxon Valdez, piper Alpha and so on. Here size has brought notoriety. However, for those involved, the activities of senior managers in small organizations can be no less dire - no less a question of ruin, disaster, suffering or even death. All managers, even the most junior, are all the time making decisions which aifect some people's lives to some degree. And because of the complexity of organizational structures, even the most junior of managers will sombtimes make decisions which have far reaching consequences. They might antagonize an important cuslomer, upset a key group of workers, or fail to follow a vital safety procedure. AII in all then, we can conclude that in terms of J responsibility, managers have as much reason to have a concern with ethics as any lawyer, doctor, or other professional. t t A fourth reason for inquiring into the ethics of business activity may 4 be surprising. It is self-interest. By this we do not mean the self-interest of the groups at theTeGiviE-end of business activities: the employees, customers, trading partners, or society at large. It is easy enough to see their interest in businesses being aware of their ethical responsibilities; )' for these responsibili{eg are or_ved to them. They are the ones who courd /' be chcated, eiploited, or defrauded, if businesses pay no heed to moral matters. The claim we want to make is the altogether more problematic one that it can be in the interest of businesses themselves to inquire into the ethics of business activity. More specifically, because of course 1 'businesses' can't inquire, we want to claim that managers can serve the interests of the businesses if they inquire into the ethics of business activity. Moreover, it is 'self-interest' understood by the normal business criteria of survival, growth, and profitability which is meant and not some notion of virtue as its own reward. There are three ways in which f ethical inquiry can serve that interest: firstly, in terms of relations with I . consumers and the public at large; secondly, in terms of relations with employees; and thirdly, in terms of relations between businesses. .
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Relations with consumers and the public
With regard to the first way, we only have to note that there is, as was pointed out above, a penalty in terms of social disapproval facing any company which transgresses generally accepted moral rules. Such transgressions could threaten the prosperity or even survival of a company
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Why do it?
iust as much as misjudging the political or economic climate, or running a discrete t;;1 ;fit" tu*. Moreover, thc ethical environment is no rnore with eacir interact and ail overlap They others. svstem than are the effects changes political action politics, influence factors o',"n"i, larvs rcstrict and pcrmit particular economic activities,and so on' i;-i;;, ".onomic Because of Ethical factors can vcry obviously figure in such interactions. cvcn be can thcy rulcs, moral of character In" p..uti"rly fundamental of disapproval moral example, For proccss. the in factor .f i'fr" i"iii"ting conpressure {or legal political to lead can activities certain cconomlc iioi., i"r*fting in laws against such rnattcrs as insidcr dcali'g, pollution, , or unsafe working Practices' -'H;;; the role-oi ttte moral environnlent is rcstrictive, as we would ,l it to be. it places limitations on business activity. But tliis need environment, the ethical can be "^p.", ni ot*oyt be so. Like any other social there u-ro.rr."'of business opportunity. For cxample, sittce t|e 1970s at what aimed investment funds' ioiU""n a 'mushrooming' of 'ethical to avoid wants who investor' ,, *"tf"i iesearch. tells us is an 'ethical putting n.roney into armaments manufacture, tobacco, gambling, and ifre tite. Recently, the Co-operative Bank in the UK has launched a icustomer chartei' guaranteeing, amongst other things, not to release
inioi*utlon
about the credit-worthiness of its customers to other financial
of the customer involved. i"riii"ii""t without the expressapermission practice of releasing banking normal become has what iftii Ui""tr of it' The stand aware being even the customer without rr.tt intortation activity dubious morally ifr. Co-op"rative Bank has taken against this praise from the competitors, it says, 'hostility' from its fro, and to existing an inducement be "uot"a, hopcs., ;;;r;, and will, ir presumab.ly is the by now 1 oorential customers to bank rvith them. Finally, there has bccn strlltcgy rnarkctittg a wholc whcrc " ilassi. casc of Body Shop moral rectitude: no pblluting, no testing on of built around an image beauty, feminine of ideal unattainable an of animais, no projecting ', and so on.
Whether as opportunities to be exploited or, as. is more usual' as have a very limitations to work within, there is no doubt tltat businesses It is matters. rvith ethical concerned being for ;;;;; prudential reason activities company of disapproval Moral interest. nr_,ite ,imply in their Jun .onu"ri into political pressures' legal controls and even consumel Ltu.ottt, at the very least, it does the company image harm' Morai on the other hand, not only avoids political pressures and legal ^ppio"or can even lead to consumer support; and it does the company f .iiitofs; it
image untold good. For example, and in sharp contrast to other major producers of cosmetics and toiletries, Body Shqp5p_e_!-dl u.o_mo-n,eJ3t ali on advertisilg. tt does not need to. Instead, it has the free publicity provided by frequent media exposure. This tends to centre around the personality of the firm's co-founder, Anita Roddick. But interest in that personality and in the company at large is inextricably bound with that high moral profile which she so successfully promotes and projects. The Body Shop exemplifies the kind of actively benevolent image which probably most companies would like to have. Certainly no company would like to have a malevolent image; public relations departments and public relations consultants exist largely to make sure they do not. A now common form of public relations activity is for companies to engage in the sponsorship of sporting and artistic events, and the funding of conrmunity projects - anything from athletics, to opera, to employment schemes for inner city youth. The beneficiaries are carefully chosen for lending a particular association to the company name. Acknowledgement of the company's 'generous assistance' is made in some suitably discreet fashion. The objective is not so much to make the company known as to make it known as a health conscious, cultured, and above all caring organization. Multi-nationals in particular spend millions on 'corporate.\ advertising'which has nothing to do with selling the company's products and everything to do with making the public feel good about the corr- z pany and its activities. Assurance that the environment is safe in their' hands is a particular favourite here. When, for instance, the beautifuliy modulated voice in a TV commercial asks us, 'Why all the pretty pictures of flamingos?', it is so that we can be told what a good job the British Oxygen Company is doing in cleaning up the environment. Why,
one might ask, does such a largely anonymous industrial concern want to bc known to the public at large except in order to be loved by them? Relations with employees
That the moral approval of consumers and society generally is in the interest of businesses can hardly be disputed. There is room for more contention with the second of the three ways in which ethical concern can serve that interest; when that concern is directed inwards, towards the company's own employees. Here a claim for self-interest is vcrl' much dependent on a particular approach to the management of people. Very roughly, it is an approach which assumes that if an organization
Eg".r ethics: its scopc and purpose shows care and considcration towards its employecs then they rvill rvork
for it. They will respond with a loyalty and a commitment to the organization which rvill translate into increases in productivity and quality that will more than pay for any increascd i'financial cost of bcing caring and considerate. This is the belief which lies behind that tradition of enlightened, if sometimes paternalistic, management rvhich looks to good working conditions and company health and welfare schemes to keep workers happy and productive . It is a tradition rvith a very long pedigree. Examples can bc found in most countries. In Great Britain it can be traced back to .' rcforms instituted by Robert Owen at the New Lanark cotton mills at the start of the ninetecnth century. A iater example is Titus Salt witlr his builcling of the model industrial community of 'saltaire' around the middle of that century. The Quaker founders of the Cadbury and Rorvntree chocolate making firms are also notable examples of this approach. Marks and Spencer would probably be the most cited modern instance. At an international level, one could point to the policy of protecting jobs and attempting to provide lifetimc employment which l, is practiscd by companies such as IBM, Hewlett-Packard, and major J:rpanesc corporations in general, as proof that 'looking after' employecs ,r,. prys productive dividends. so much more effectively
Why do it?
w
Ethics and self-interest
Put all three ways together and it amounts to substantial convergence o between morally correct behaviour and commercial success. To study . business ethics is to try to identify what is morally correct behaviour for business. It is, therefore, to study something which can make a substantial contribution to the commercial self-interest of businesses. As a reason for studying business ethics this is anything but novel. It is the reason given by a former head of the US Securities and Exchange Commission, Mr James Shad, when in 1987 he gave $20 million to a $30 ,Y million ethics programme at the Harvard Business School. What he reputedly said then, and he has certainly repeated similar sentiments since,'was that: 'ethics payl . . . It's smart to be ethical'. More generally,o rve find this same lustification for.'bfusini.ss-eihiCs in the oft-repeated contention that 'good ethics is good business'.o This slogan has obvious attractions for business people. It seems to offer what might be called an 'instrumental' view of business ethics, the idea that it is there simply as an instrument of business efficiency. Like.l. cost accounting, marketing research, or any other tool of modern management, cthical investigation. is, on this view, merely something to furthcr the commercial aims of business. r, For this to be true without qualification, it has to be that there can never be any conflict between the moral and the commercial; that 'good ethics' is always, and unreservedly, 'good business'. This is obviously not so. Take the case of low wages paid to Third World plantation workers by British tea companies. ('Low' in this instance means that at best they only permit a subsistence standard of living). To make the assumption that 'good ethics is always good business' and generously increase the workcrs' wages could well be disastrous in commercial terms. Any company which did this would suffer a cost disadvantage relative to any rival company which did not. Its products would therefore be at a price disadvantage relative to those of these rival firms, and this could lead to falling sales and so falling profits. No unqualified version of the instrumental view is going to be remotely \ plausible. There is obviously a limit to the degree to which morality and' comm.ercial self-interest can converge. This is no more than could be t expected. There are obviously limits to the degree to which morality and any kind of self-interest can converge. In one way self-interest is integral to morality; in another, wholly antithetical. The integral way amounts to no more than the rather obvious but very I
Rclations bctryccn businesses
With the third and final yay which moral concern serves the self-interest of business - that of relations between businesses - there is a very simple yct rather profound and. u,e think, inclisputable point to be made. It is .i,
' i'
businesscs just could not function in an environment dcvoid of ethical constraint. If fraud, theft or deception rvere the norm rather than the exception in business dealings, then those dealings would eventually bccome impossibie to sustain. They would be too uncertain, too fraught rvith danger, to be worth engaging in for most people. As Plato noted many centuries ago, there must be a measure of trust, even amongst thieves.l For business to be carried on successfully there has to a reason-
thlt
able expectation that most people will behave rcasonably honourably most of thc time. So in this third way also, a concern with the ethical on the part of those running businesses will serve the intercst of those brrsinesses.
I
Plato, Tlrc Rtpublic, Book One.
,
?'Business Mauers', BBC2, 11 July 1991.
Why do it?
_l
' profbund fact that rve all have a vested interest in the maintenance of morality. This holds in both a negative and a positive sense. In the l ncgative scnsc it is because it is in our interest not to be the victims of rvrongdoing: to be rvrongcd is to be harrned. In thc positivc sense it is becausc it is in our intercst to have nroral obligations fulfilled towards us, such as obligations to fulfil comnritmcnts, to afford assistance, rcpay debts of various kinds. Morality is all about prohibiting wrongdoing,-on the negative side. and compelling obligarions ro be fulfiiled on the positive side. Therefore, morality serves our intercsts in both respects. That scif-intcresr is also antithetical to morality stcnrs from an cqually robvious but profound fao; it is that the sclf-interest rvhich morality serves is univcrsal in charactcr. It is both rcciprocal and collective. wL are all protected frorn bcing wrongcci by others because we arc all prohibited from rvronging others. we are all entitlcd to have moral obligations towards us fulfillcd by othcrs bccausc we are all compelled to fulfil our obligations to others. The satisfaction of our individual interests does not extcnd to being allorved to do rvrong or set aside obligations ' when it suits us. Morality seryes thc intercsts of inclividuals only up to the point that it is broadly compatiblc witli the interests of evcryone else. The whole point of morality, in fact, is to rcconcile indivictual with collcctivc sclf-intercst; in short, to scrvc thc common good. This is why though it serves self-intercst, morality is also the most threatenecl by it, for nothing is more antithetical to thc common good than the unrestiained sclf-intercst of individuals. In business, as anywherc else, it is this requircment of universality rvhich sets limits on the extent to which morality and selt'-interest can coincide. In the case of the tea companies, for instance, what makes the commercial self-intcrest in low wages wrong is that it at the expense of a reciprocal and collective self-intcrest. It violates iimits set by the common good. It is bccause conlntcrcial sclf-intcrest, like any other kind of selfinterest, can so easily extend beyond the common good that 'good business' does not necessarily follow 'good ethics' and an unqualified version of the instrumental view of business ethics is so untenable. But ,we are still lcft with thc possibility of a qualificd vcrsion. It can be rargued that 'good cthics is good business' in the scnse that while it is not always true, it is true generally, on. balance, or in the long run. There is acceptancc that bcing ethicai imposes limits and cven extra costs on businesscs. Thcy cannot pursuc profit regardlcss of harm to the common good; and things such as cnvironmental protection, lvclfarc provision for
workers, community programmes and the like, cost money. But on balance, it is argued, the benefits and opportunities outweigh the costs land limitations. As a general business strategy 'ethics pays'. Comparies which strive to be ctliical *ill, on balance and all other things being equal, have a competitive advantage over those which do not. So as business ethics is an aid to companies being ethical, it is also, on balance, an aid to companies being commercially successful. Therefore in this qualified, broadly true sense, the instrumental view of business ethics holds good.
Whether ethically orientated firms actually are commercially more successful than those that are not is a very vexed question indeed. The evicJence is mixed. Most findings seem posiiive to some degree, a few are netural, a few are negative. This shows a balance in favour of the 'ethics pays' thesis and not much evidence that being ethical wiil actually damage a company's wealth.3 What it is not, though, is conclusive proof
that the thesis 'ethics pays' is true. In the absence of such proof, probably the best that can be done is to point again to thei benefits in terms of consumer and public esteem, employee loyalty, and the trust of other businesses which accrue to ethically concerned companies. Thesc are assets of obvious commercial worth which no business would want to lose and most would strive to acquire. They are assets which would be denied the actively unethical firm, the company which will do anything at all, no matter how unethical, for financial gain. In thq long run, all it will acquire is disdain, disloyalty and idistrust. Provided it could keep out of the courts, it could still no doubt survive and prosper. Other factors, such as a commanding market position, scarcity value, unemployment, and political influence, could all offset the liabilities acquired as a consequence of immorality. But liabilities they would remain and the company is so much the poorer in having them and not the contrasting assets which being actively ethical wouid bring.a
What of the firm which we might describe as the 'ethically passive'? (This could well be your average business). Either from conscience or caution it is not prepared to do just anything in the pursuit of financial 3
K. E. Auppcrlc et al.,'An cmpirical Examination of the Relationship Bctween Corporate
Social Responsibility and Profitiability'; Academy of Management lournal,1985, vol. 28, no. Z, pp. 446-63. Thcir survey of past studies comes up with a majority of positive findings, but thcir own investigations points to a ncutral correlations. a Thc idea that bcing activcly cthical is connccted with risk avoidance is supported by J. B.
McGuire el al.,'Corporatc Social Rcsponsibility and Firm Financial Pcrformancc', Academy \,lvlunagenrcnt Journul,1988, vol. 31, no.
4, pp.854-72.
cJ'
,--
l li l I Business ethics: its scope and purpose
___i
gain. It conforms to whatever minimum standards the larv and public . opinion are prepared to tolerate, but beyond that it does nothing. It does ,not actively seek to promote the common good in any way. It seeks only, up to the maximr.rm limits tolerated, to promote its own financial self. interest. 'Minimum morals, maximum mammon'could sum up its creed. Inevitably, it does some good. For a start, it is avoiding the grosser forms , of corporate immorality, and like any business, even thc most activcly unethical, it will be providing products, services, jobs and (possibly unlike the unethicirl firm) paying taxes. Such public benefaction, if that is what it is, rvill bc incidental to its exclusivcly financial objectives; an , unavoidable by-product of making money in a minimally moral fashion. What then of such a business? Without any trouble and expense, rvill not at least a portion of the commercial advantages which accrue to the 'ethically active' business accrue to it also? We think not. If we look again at those aclvantagcs we see that they follow from being thought deserving of moral credit. Tlre ethically active business has earned the esteem of consumers and public, the loyalty of employees, the trust of other business, as gredit for doing good. But to earn such credit it is not enough just to do good. The intention must be to do good. If, as it is rvith the ethically passive business, the good it does through producing, employing, and paying taxes is incidcntal to an exclusively financial objective, then no credit is deserved. This is mercly serving one's own self-interest, and there is nothing morally credit worthy in that. It is not immoral provided the collective interest is not harmed. But in the fact that it is not directed at serving that common good, it is not moral either. It might be said that at least there is an intcntion on the part of tire ' morally passive business to refrain from the grosser forrns of corporate immorality. But this is no more than can bc expcctcd and so, very properly, earns little or no credit. In contrast, credit is heaped on the ethically active business precisely because it does more than can be expected. For what this demonstrates is a commitmcnt to the common good. It is only if such a commitment can be dcmonstrated that benefiiial deeds earn moral credit for those who perforn-r ihem. . ] All this raises interesting questions about motives of course. Are the people directing the ethically active business doing it just to have the ensuing advantages rvithout a thought for the common good? Or are their motives totally altruistic, wanting nothing but thc common good? Are they perhaps a mixture of altruism and self-interest, mindful of the advantages but also sincerely desiring to benefit society?
FI If the wholly self-interested motive applies, then there is certainly a problcm about how much moral credit, if any, is deserved. Here too, good is being done merely incidentally by people who are .setting out only to serve their own interests. Worse, there is scope for insincerity, even deception; there is the setting of moral objectives without a real moral intent. Fortunately though, moral credit does not demand the other cxtreme of total altruism. Being moral is one thing, being saintly is something extra. Morality is, as we saw, a mixture of self-interest and g!rybtn;-i, is, self-interest within the limits of the common good. So, provided it is desired to advance the- Collective interest along with the personal and that the latter has priority in the event of a clash, then moral credit is perfectly well deserved. In point of fact, the people directing the morally active business are unlikely to be either totally selfinterested or totally altruistic; they are unlikely to be either total villains or saints. Their motives are almost certainly mixed. But provided they are mixed in the way prescribed, with consideration and priority given to \, the collective interest, the business is perfectly entitled to reap those rewlrds of esteem, loyalty and trust. Ethics and the bottom line
In being entitled to these rewards, the ethically active business does enjoy competitive advantages denied even to the ethically passive business, let alone the actively unethical one. But even accepting the qualified instrumental view that on balance such advantages outweigh the costs and limitations of being ethical, the fact that sometimes they will not entails that on occasions being ethical must mean giving ethical objectives priority over commercial ones. The optimistic response to this is to think in terms of small losses and gains within particular firms. Sometimes being ethical will cost more than it brings in, but the business can absorb these costs and in the long run the policy of being ethical pays off. No doubt under normal circumstances this is how it happens; but normal circumstances presuppose extraordinary ones. Sometimes the cost of being ethical rvill be far from minor; it might even threaten the very ) survival of the business. Take the vital foreign order scenario; does/ the company take an order from a tyrannical regime? Many western companies supplied weapons and weapons making plant to Iraq before the Gulf War of 1991, for example. Does the company bribe the corrupt official to win that vital foreign order? The American Lockheed Corporation did this in Japan, for example. Situations can and do arise in r
F' l}:rnesl busincss,, as
f,1191,
its scope ancl purposc
in lifc gcncrally, whcrc to take thc moral line is to pay a
heavy price. Talk of an 'on balancc' gain from be ing ethical can overlook the fact that thc balance is also across thc. rvhole sprcad of businesscs and not just rvithin a particular business. overall most busincsses might gain, but this still leavcs the possibiliry, that parricurar busincsses might iosc, ancl losc heavily. civcn this sobcring thought, it coulcl sccm to rnany business pcoplc that bcing cthicatl can be takcn too far. 'lhc irttraction of thc instrumcntal theory, evcn in its morc plausiblc qualiliecl form, is rhat it seems 10 offcr an apparcntly painlcss absorption of business cthics into business practicc. If 'good ethics' is ahvays 'good busincss' then thcre is no question of any conflict bctwecn ethical ancl commercial aims. on thc contrary, the ethical is always an aid to achieving the commercial. Even if 'good ethics' is only, generally speaking, ,good business', this still might sccm to promise only harmony anci bcnefit in the long run. Now it stands rcvcaled that evcn thougir there might bc gains overall, there could be losses - and crucial losses at that. At this point many business people could indeed decidc that maybe business ethics is not such a good idea after all, for what it now secms to bc cloing is threatcning another idca to rvhich (for good and not so good rcasons) nrany busincis peoplc are very attachcd; the idea that in business profit maximization must bc the ultimate guiding objective, thc 'bottom line'. Thg not-so-good reason for being attached to this iclea is, to put it bluntly. machismo. It has connotations of toughness, hard-headedness, cvcn ruthlessness, which are vcry attractive to somc pcople - particularly males. A vivid illustration of this was rvhen the Abbey Nitional wai convertcd from a not-for-profit building society to a for-profit bank. This meant that what rvere 'surpluses on income' would now count as 'profit'. Asked about this, the then chairnran, campbell Adamson, said in support of the change that as far as he was concerned 'surpluses were for choirboys'. (He rvas making a pun between 'surpluses' ancl ;surprices'). on this particular score we think wc can, as far as it is wirrantecl, offer some comfort. Etirical objectives in business are a far from soft option. The fact tirey must interconncct with commercial ones makes thcm compiex; the fact they can collide with the commercial makes thern uncomfortable; and they are, as we have scen, no lcss vital to the prosperity and even survival of thc companv than any other kind of objective which business people arc called upon to determine and realize. All this is dramatically dernonstratcd in thc phenomenon of 'crisis managemcnt'. why there is a crisis is invariably because management is
Why do '
it:lL_l l ::
i
faced with a combination of moral and commercial demands. In 1990, for example, the Frcnch company perlier rvas faced with just such a dilemma with the discovery of a relatively minor degree of iontamination of its bottled water. The perrier management had ihen to make delicate and difficult decisions involving financial, marketing, medical, and moral considerations. (Perricr eventually removed milli-ons of bottles from circulation and so rcstored public ionfidence in the product). Thc good reason why business people are attached'to thc idea of profit as the bottom line is the obviously ciucial role which profit does piay in business. Pr-ofit is gcnerally why businesses are s"t up in the firsi piace and they will not normally survive without it. Added to this, the drive for profit is an undeniable inducement to efficiency in busincss. All this is true; but if (as we presume it does) 'bottom line' means rhe ultimate guiding principle which takes precedence over everything eise then it is- simply false. None but a small minority of businesses, and then not all the time, do or possibly could operate on this principle. what they generally do, and generally must do, is to contain theii drive for profit within broad legal and moral limits.s If all businesses attempted to take. the drive for profit beyond legal limits then mosr business people wouid be in jail - onq there is only limited scope for entrepreneuiial activity there. If they all attempted grossly to exceed moral limits for the sake of profit then nor only would public and political opinion stop them, but the conduct of business itself would become imposiibte. As we have seen, there has to be an expectation that most businesses will behave reasonably morally most of the time for commercial relations between businesses_to be possible, otherwise these relations are just too unccrtain to be worth the risk. Does this mean the legal is the bottom line in business? After all, no one goes to jail for breaking rules that are merely moral. Despite this notable fact, it is moral rules which have precedence as social rules. As 7 we have also'seen, the legitimacy teg3l_,s judged in terms oiJh; t 91j,e U9IAL. If a law is deemed-im-mora1-ffien there?re groinds ff;Grid;r rcpealing it, or even disobeying it. Basic though legal rules are io society, it is the moral which are the most fundirn.niul kind of social rules. Nor is it the case that the moral are totally without the sanctions of state-administered punishment: they are to some extent replicated in law; particularly the more basic kind- rures against murder, fraud, theft, 5 It can trc disputed whethcr cvcn within broad lcgal and moral limits prolit maximization is thc
ovcrriding aim of businesscs. scc pcrer Druckcrirftc practice,r 1968).
ui"iii^i,rilionaon, rrn,
t4i
Business ethics: its scope and purpose
----t
and the like. But even rvhen they are 'merely moral', rvithout legal enforcement and with perhaps only the (consiclerable) sanction of public op,inion as support, in virtue of being moral they still have that lrcgical priority over all social rules. Just as a profitable activity can be ruled out on grounds of illegality, so an activity which is both profitable and legal can be ruled out on the grounds that it is immoral.
The moral is therefore the 'bottom line' in business just as
it
Does it
I
is
anywhere else in social Iife. This means that there has to bi a fifth, last and.overriding reason for studying business ethics. It is to help businesses gct it right morally; to discovcr thc moral limits within which businesses have to.operate, and how they might better further the common good along with their morally legitimate business aims. In adding this reason we recognize that ethically active business is attempting to operate according to the most fundamental of social rules. It is attempting to align itself with the common good; the collective sclfinterest of society. without that organizing principle, not just business activity, but social life in general, would be irnpossibre. Theie would just be competing seif-interest without hope of reconciliation. So rvhat the ethically active business is doing is organizing itself and its relations with thc rvider society in harmony rvith the guiding principle of social life, the vcry basis of social cooperation. That is rvhy it is iikely to be rewarcled with estecm, loyalty, trust, and so on. Conclusion
Finally, rvhere does the addition of this fifth reason leave the (qualifiecl) instrumental vierv of ethics? Not totally abancJoneci; there are stili goocl grounds for thinking that being ethically activc,is generally sound business sense. what must be abandoned is the notion that this can alone stand as a reason for studying the ethics of business. Rather, seif-intercst must take its piace alongside inescapability, importance, professionalism and above all, thc objective of moral correctness, as a reason for cngaging in this study'.
If
[tsl
what is being demanded is some necessary connection between and practice, then the answer is no. Alr the knowledge in the world car.not guarantee to make a person more ethical. The ancient pr.eek philosopher Socrates thought it did.6 He uerieved ,t r, *rongdoing was a kind of ignorance; if ie knew what was righiwe-couto onty do.what was right. Aras, this is not so; peopre can very iu.rr mo* what is right and still, through weakness or *itrut disregard, do *rrui-i, wrong. Business ethics cannot alter this fact of life. wtra"t it .un p..rrop, do is to help people become more ethical, and it may do this in i*o *!yr. _ Firstly, it can make it more difficult for plopre to behave immoraily. Ignor.ance may.not be the sore cause of wrongdoing uut-ii-.an be a contributory facior. Lf is given exposure to ethicarissu.r unjiuii-oi 9n: resolving them, then it is that much mbre difficult not to be aware of what is at stake or retreat behind the excuse it is beyond on.;r.o.np"tence. This is the.thinking behind the increasingry popular practice'of issuing company codes of ethical practice; no oneiin claim they did not know. It,is also, incidentaily, thelhinking of an American ludgJ who sentenced unrcago exchange dealers to take an ethics course at a law school after they were found guilty of illegal trading practices. Their comment was that it was a bit ironic being taught etitiis by lawyers. But that was a comment on lawyers, not ethics courses. The s.econd way in which-studying business ethics might herp business people become more. ethical is nothlng more than the a'ssump?ion made in any academic study of any area of business. It is that tnf auitity to tackle problems of business can be enhanced by formar, rigoic,us _the study. In the case of business ethics, this means that t'he abilitf to tacl(le the ethical problems of business is enhanced. That study can lead to excellence in practice is not guaranteed; but neither is it in accounting, pTk91ing, personnel, or anything else. With any study, ir is up to individuals how well, or even whether, they translate'iearning'into stud-y-
practice.
DOES IT WORK? Given that moral correcrness is the overriding reason for studying business ethics, the inevitable quesrion is; will it'work? will studyin! uusiness ethics make business people - and hence businesses as insiituiions more ethical?
*orrl-1
6 Plato, /oc cit.
tral L:g:f:tr
:thics: its scopc and purposc
Moral issues in business
I
INTRODUCING THE READINCS
Moral issues in business
The first reading is a lrroad survey of the rvhole fielcl of business ethics by Ilichard f. De George. Ir starts by considering thc issuc of objectivity in morals, moves on to the 'macro-moral' problcm of morally evaluating entire societies and economic systems (principally capitalism) and concludcs rvith a six-fold ciassification of the kinds of 'micro-moral' problems that arise within a given social and economic framework. (A similar division fcatures in this book with chapter 3 dcaling with objectivity, chapter 4 with the macro-moral, and subsequent chapters with specific micro-moral issues). The second reading, by Vcrnc E. Henderson, is explicitly ,micromoral'. It seeks to shorv how ethical considerations fit into business decision nraking in gcneral. It makes the point that businesscs must operate within an environmcnt that is as much moral as legal. Stress is placed on tackling the particular 'situation' rather than operating with a fixed set of principles, and thc assumption is made that ethics is essentially about promoting 'human welfare'. (As we shall see in chapter 3, both claims arc qucstionable). This sanre identification of the moral with the common good is made in the third rcading. It is the classic defcnce of self-interestcd individualism by the Scottish philosopher and economist, Adam Smith (17231790). In it hc propounds his famous'invisibls hand'argument. This says that providcd there is compctition to satisfy customcr wants, then thc common good is best scrvcd by thc pursuit of individual self intercst. That way, human rvelfare will bc m;rximizcd even though it is no part of the intcntion of thc self-interestecl individuals that it should be. Smith adds, howcver, a warning that busincss people will do anything to avoicl thc compctition ncrcessary to cnsurc this happy harnony betwecn individual inte rest and the common good - a point'we shall return to in
I{ICHARD T. DE GEORGE
chapter 4.
The final reading by Saul W. Gellerman is very much an example of 'applied business cthics'. In it hc analyscs thrcc notablc cascs of business misconduct in ordcr to isolate the factors which lead competent managers to go morally rvrong. Having isolatcd them, he concludcs with recommendations on how to avoid their occurrencc.
The position that ethics has nothing to do with business has a long history. But it is a position that takes too narrow a view of both ethics and business. Ethics is concernccl with the goods worth seeking in life and with the rules that ought to govern human behavioi and social intcraction. Business is not just a matter of economic exchangc,
of nroney, commodities, and profits; it involves human interactions, is basic to
human society, and is intertwined with the political, social, legal, and cultural life of
society.
There is an obvious connection between business and ethics. A businessman whose employecs rob him blind could no more survive than a businessman who through lying and fraud sold only products that did not work. such examples, howevel, co not settle any real issue between business and ethics. For iflying, fraud, or theft iead to the failure of a busincss, then a businessman might condemn and eschcw them not because thcy are inrmoral but because they are bad business practices. Actions that arc contrary to morai norms may in some, perhaps even in many, instanccs be bacl for busincss. But we can distinguish acting in.a certain way because it is moral frcir: so acting because it is economically profitable. The distinction is between an acrion donc from duty (i.e., because the action is morally correct) and an action.which happcns to coincidc with one's rnoral duty, done from some other motive. Thc claim that morality is inapplicable in business aflirms that one's calculation should be based on business, not on moral, considerations. wherc both coincidc, so much thc better; rvhcrc thcy divcrgc, so rnuch thc worsc for morality. It would bc nice to bc ablc to show that moral action is always bcst for busincss. Ilut this secnrs not to bc truc, cspccially in the short run. Lying, fraud, deception,
and theft sometimcs lcad to greater profits than their opposites. Hcnce, moJSl udgme nls . so n-r-e!iq 9r qillgf lgT_lglirys,l!ggg._!-ts_. B usinesses needl ot bc ru n fronr moral motivcs. But the actions of-dusftesseJ affect indiviciuals, society, and the colnmon good. If moral actions are ultimately in the common good, then runnrng businesses in accord with moral norms is in the common good. To the extent that profit maximization conflicts with moral norms, it leads to actions which are not in thc common good. In such cases, if the common good is to be protected, and if businessmen do not on thcir own act in accordance with moral norms, they should be forced to do so. Either public pressure or legal mcasures should be urougtrt to bear to nrake the immoral practices unprofitable. If the penalties for not acting morally arc sufficiently scvere and if thc enforcement of norms is sufficiently diligent, then j
Rcading takcn from Ethics, Free. Enterprise and public policy, editcd by Richard r. Dc George and Joscph R. Pilchcr. Copyright O 1978 by oxford Univcrsiry picss, Inc. Reprinted 6y
pcrnrission.
I Business ethics :jlTg9f conforming
"dl1ryI
to moral norms will in the long run be in the
Moral
l business interests of
business as well as in the general interests of society, Discussions of morality and business, if the above points arc conceded, often lcad to three different kinds of qucstions. First, whose morality is to be imposecl on business? Secondly, can economic systems be morally evaluated, and how is morality to serve as a guide between different economic systems and diflbrent societies rvith varying moral norms? Thirdly, rvhich specific practices within a given system are in the public's good?
I The first question is in several ways a specious one, though seriously and lrequently raised. It assumes that there are many different moralities, perhaps that each person has his orvn, that each is equally valid, and that there is no rvay to choose among them. When fleshed out as a theory, the position has come to be known as motal relativism. As a philosophical position, it has been refuted at some length,r and I think cogently. For present purposes, however, we need look only at the argument based on the fact of cultural diversity and on the fact of moral pluralism witbin our own contemporary American society. Do either of these facts provide adequate grounds for arguing that there is no morality we can collectively and appropriatcly apply in thc moral cvaluation of busincss practiccs? I think not, for threc rcilsons. First, despite the differences in many customs and moral practices_fro_m society to society and age to age, there is and hii 6een basic- agr-egment.o-n a kl{ge.number of central issues. The most basic agreem6ht,'thoggh-iompletely formal, is that good should-6e done ancl evil avoided. Substantivcly, 
