Edward Hadas

Make business ethics less boring

By Edward Hadas
April 17, 2013

Business ethics is too bland. That thought crossed my mind during a quite good speech on the topic by Vincent Nichols last week at St Paul’s Cathedral in London.

The Catholic Archbishop of Westminster said many things, but his main idea of how to improve businesses can be summed up in one sentence: “All businesses big or small should be able to demonstrate how they are making the world a better place through providing goods that are truly good, or services that truly serve people, and, by doing so, create employment and fair returns to investors, whilst minimising harm”.
A few moral relativists or free-market ideologues might argue with that, but most business people think they are already behaving as the archbishop thinks they should. They usually see themselves as well-meaning cogs in a basically benign economic machine which provides people with a remarkable array of desired goods and services, and does so efficiently, safely and in a way that is fair to workers and the world.

That self-image is fair. Most businesses in developed economies do work to a quite high ethical standard.

Still, Nichols is hardly alone – and not wrong – in worrying that some businesses have ethical problems. The concern explains why business ethics has become a standard part of the curriculum in MBA programmes, and the existence of numerous initiatives to promote corporate social responsibility and other virtues. The main problem with these worthy efforts is blandness: it’s not clear what business ethics classes are supposed to teach or what, for example, should be the aim of the Westminster archdiocese’s programme “A Blueprint for Better Business”.

One possibility is that ethical instruction should induce qualms. Moral training might have restrained the captains of finance from excessive bets and pay demands before and after the 2009 crisis, but I doubt it. Lloyd Blankfein of Goldman Sachs may have been only half-joking when he said the company he headed was doing “God’s work”. He sees high pay as an appropriate reward for doing a good job in Goldman’s basically good businesses.

If finance is to be made more ethical, Nichols and other crusaders will have to offer something more substantial and detailed than eloquent but vague calls for virtue. They will need to offer fairly sophisticated economic and sociological analyses. It is much the same for most other ethical issues in business. The obvious vices – dishonesty, deception, wilful damage, cruel treatment – are already considered unacceptable. Simple condemnations of greed and calls for solidarity are not enough to deal with problems such as excessive consumerism, irresponsible investing and manipulative advertising.

Still, I see one widespread error: the dangerous belief that people want what is good for them. This belief leads companies to strive for immediate profitability, because that’s what shareholders want. It leads managers to trust that sales and profit, which do indicate what customers want, also show whether customers are being well served. It leads advertisers to decide that any advertising which is effective must be good.

In fact, judgments are so distorted by ignorance, greed, envy and hedonism that people often crave things that are bad for them, their neighbours or their society. Crusaders for ethical business should challenge this false belief – and then provide a coherent objective vision of the relevant economic goods.

Right now, finance belongs at the top of the business ethics agenda. The trade is lost in a frenzy of greedy desires – of savers and investors seeking high returns and absolute safety, of borrowers looking for bargains, of finance professionals lusting after unjustifiably high incomes. The clear and clearly virtuous economic purposes of finance – gathering savings, allocating investments and providing reasonable returns to savers – are often ignored. In a more ethical financial system, customers who ask for things which are objectively unjust would not get their way. Rather, the industry would band together, perhaps guided by the government, to say no. The industry and its regulators would subject all products and activities to severe tests for genuine merit.

A similar determination not to pander to low desires could improve ethics in other economic activities. For example, little advertising qualifies as one of Nichols’s “services that truly serve people”. Rather, advertisers all too frequently raise unrealistic expectations and appeal to greed and gluttony. This is much less “truth well told”, an old slogan of the McCann Erickson agency, than a powerful tool for encouraging bad behaviour.

The moral case against much advertising is strong, but few business school ethics professors will make it, because advertising is too well entrenched in the modern economy. As an outsider, Nichols could take up the cause. He is unlikely to get very far, but at least he would not be bland. He would be calling for something like an ethical – and a cultural – revolution.

Full disclosure: Edward Hadas is on the steering committee of Westminster archdiocese’s programme “A Blueprint for Better Business”.

3 comments so far | RSS Comments RSS

The phrase “business ethics” has been, and always will be, (at best) an oxymoron. Businesses exist (per modern economic theory) to maximize the value of the business owner’s financial interest (not the interests of employees, vendors, customers, municipalities, society, etc.). Just because the value of a business owner’s financial interest is maximized, that does not necessarily mean that the business’s relationship (and the business owner’s relationship) with society results in a net benefit to that society (said benefits to be measured not by theoretical outcomes, but by examples of irrefutable causation). Educators and legislators need to stop trying to force ethical operations on businesses (since such a request runs counter to the business’s basic ideology), as such a reliance on a business to “do the right thing” for the betterment of society is both ineffective and lazy.

The solution to ensuring businesses operate ethically is elegantly simple … we, as educated consumers (note the responsibility I place on consumers to obtain an understanding of the situation), control the demand for business goods and services. If I do not feel that a business is generating a good or service in a manner that, on the whole, benefits society, I can choose not to consume said good or service. It may not make economic sense for me to not patronize the low-cost-provider of a good or service, but my less-than-rational economic actions (based on my desire to patronize businesses whose operations are more closely aligned with my sociological ideals) is, in my opinion, a much more efficient and effective way of encouraging businesses to operate in an ethical manner when compared to academic pleadings or government legislation.

Posted by VirtualThumb | Report as abusive

I actually disagree with Hadas’ point that business ethics courses are boring and that they seem to be unappealing exercises in moral preaching/condemnation. Business ethics is not preaching from the pulpit. As a business ethics professor, I must say that BE courses do not need to be what Hadas’ say they are supposing that they are taught by people who have good knowledge of both – ethics and business. What frequently happens however is that BE courses are taught either by management/business professors who do not have a strong background in ethics or philosophers who do no feel comfortable talking about business. You really need a right type of person to give a business ethics course.

Posted by Maciej81 | Report as abusive

Forgetting finance for a minute, your look for unethical companies clearly didn’t make it as far as the likes of Monsanto who’ve just managed to get a provision passed such that federal courts cannot prevent them planting their genetically modified crops even if they are scientifically shown to be damaging to health. Then there’s the likes of Coca Cola with a really bad ethical record in India. What about slave-labour – used allegedly on plantations (bananas, cocoa etc) in quite a few African countries and sugar plantations in Haiti? There’s Foxconn employing people to produce iPads in appalling conditions. Very few pharmaceutical companies are without significant scandals, often involving drugs that have harmed or killed many people while generating large profits for the company.

You must live in a different World to me.

Posted by TocoToucan | Report as abusive

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