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1.3 Is Business Ethics Necessary?

Learning Objectives

  1. Articulate two extreme views of business ethics.
  2. Describe the sense in which business ethics is inevitable.

Two Extreme Views of the Business World

At the boundaries of the question about whether business ethics is necessary, there are conflicting and extreme perceptions of the business world. In graphic terms, these are the views:

  • Business needs policing because it’s a dirty enterprise featuring people who get ahead by being selfish liars.
  • Successful businesses work well to enrich society, and business ethicists are interfering and annoying scolds threatening to ruin our economic welfare.

A 1987 New York Times article titled “Suddenly, Business Schools Tackle Ethics” begins this way: “Insider-trading scandals in the last year have badly tarnished the reputations of some of the nation’s most prominent financial institutions. Nor has Wall Street been the only area engulfed in scandal; manufacturers of products from contraceptives to military weapons have all come under public scrutiny recently for questionable—if not actionable—behavior.”Sandra Salmans, “Suddenly, Business Schools Tackle Ethics,” New York Times, August 2, 1987, accessed May 11, 2011, http://www.nytimes.com/1987/08/02/education/suddenly-business-schools-tackle-ethics.html.

Slimy dealing verging on the illegal, the message is, stains the economic world from one end to the other. A little further into the article, the author possibly gives away her deepest feelings about business when she cracks that business ethics is “an oxymoron.”

What will business leaders—and anyone else for that matter—do when confronted with the accusation of sliminess? Possibly embrace it—an attitude facilitated by an infamous article originally published in the Harvard Business Review. In “Is Business Bluffing Ethical?,” the author suggests businessmen and women should double down on the strategy of getting ahead through deceit because if you’re in business, then everyone already knows you’re a liar anyway. And since that’s common knowledge, taking liberties with the truth doesn’t even count as lying: there’s no moral problem because that’s just the way the business game is played. In the author’s words, “Falsehood ceases to be falsehood when it is understood on all sides that the truth is not expected to be spoken—an exact description of bluffing in poker, diplomacy, and business.”Albert Carr, “Is Business Bluffing Ethical?,” Harvard Business Review 46 (January–February, 1968), 143–53.

The basic argument is strong. Ethically, dishonesty stops being reproachable—it stops being an attempt to mislead—when everyone knows that you’re not telling the truth. If it weren’t for that loophole, it’d be difficult to enjoy movies. Spiderman swinging through New York City skyscrapers isn’t a lie, it’s just fun because everyone agrees from the beginning that the truth doesn’t matter on the screen.

The problem with applying this logic to the world of commerce, however, is that the original agreement isn’t there. It’s not true that in business everyone knows there’s lying and accepts it. In poker, presumably, the players choosing to sit down at the table have familiarized themselves with the rules and techniques of the game and, yes, do expect others to fake a good hand from time to time. It’s easy to show, however, that the expectation doesn’t generally hold in office buildings, stores, showrooms, and sales pitches. Take, for example, a car advertisement claiming a certain model has a higher resale value, has a lower sticker price, or can go from zero to sixty faster than its competition. People in the market for a new car take those claims seriously. If they’re prudent, they’ll check just to make sure (an economic form of “trust but verify”), but it’s pretty rare that someone sitting in front of the TV at home chuckles and calls the claim absurd. In poker, on the other hand, if another player makes a comparable claim (“I have the highest hand at the table!”), people just laugh and tell the guy to keep drinking. Poker isn’t like business.

The argument that bluffing—lying—in business is acceptable because everyone does it and everyone knows everyone’s doing it doesn’t hold up. However, the fact that someone could seriously make the argument (and get it published in the Harvard Business Review no less) certainly provides heavy ammunition for those who believe that most high-level businesspeople—like those who read the Harvard Business Review—should have a hard time looking at themselves in the mirror in the morning.

Opposing the view that business life is corrupt and needs serious ethical policing, there’s the view that economic enterprises provide wealth for our society while correcting their own excesses and problems internally. How does the correction work? Through the marketplaceUnderstood in ethical terms, it is the enforcement of rules for behavior by economic reality.. The pressures of demanding consumers force companies into reputable behavior. If a car manufacturer lies about its product, there may be a brief uptick in sales, but eventually people will figure out what’s going on, spread the word at the water cooler and on Facebook, and in the end the company’s sales will collapse. Similarly, bosses that abuse and mistreat subordinates will soon find that no one wants to work for them. Workers who cheat on expense reports or pocket money from the till will eventually get caught and fired. Of course it must be admitted that some people sometimes do get away with something, but over the long run, the forces of the economic world inexorably correct abuses.

If this vision of business reality is correct, then adding another layer of academic ethics onto what’s already going on in the real world isn’t necessary. More, those who insist on standing outside corporate offices and factory buildings preaching the need for oversight and remedial classes in morality become annoying nags. That’s especially true if the critics aren’t directly doing business themselves. If they’re ensconced in university towers and gloomy libraries, there may even be a suspicion that what really drives the call to ethics is a burning resentment of all the money Wall Street stars and captains of industry seem to make, along with their flashy cars, palatial homes, and luxurious vacations.

An issue of the Cato Institute’s Policy Report from 2000 carries an article titled “Business Ethics Gone Wrong.” It asserts that some proponents of business ethics aren’t only bothersomely envious—their resentment-fueled scolding actually threatens our collective economic welfare. Business ethics, according to the author, “is fundamentally antagonistic to capitalist enterprise, viewing both firm and manager as social parasites in need of a strong reformative hand.”Alexei M. Marcoux, “Business Ethics Gone Wrong,” Cato Policy Report 22, no. 3 (May/June 2000), accessed May 11, 2011, http://www.cato.org/pubs/policy_report/v22n3/cpr-22n3.html.

These reforms—burdensome regulations, prying investigations, and similar ethical interventions—threaten to gum up the capitalist engine: “If the market economy and its cornerstone, the shareholder-oriented firm, are in no danger of being dealt a decisive blow, they at least risk death by a thousand cuts.”Alexei M. Marcoux, “Business Ethics Gone Wrong,” Cato Policy Report 22, no. 3 (May/June 2000), accessed May 11, 2011, http://www.cato.org/pubs/policy_report/v22n3/cpr-22n3.html.

There’s a problem with this perspective on the business world. Even if, for the sake of argument, it’s acknowledged that economic forces effectively police commerce, that doesn’t mean business ethics is unnecessary or a threat to the market economy. The opposite is the case: the view that the marketplace solves most problems is an ethics. It’s a form of egoism, a theory to be developed in later chapters but with values and rules that can be rapidly sketched here. What’s most valued from this perspective is our individual welfare and the freedom to pursue it without guilt or remorse. With that freedom, however, comes a responsibility to acknowledge that others may be guided by the same rules and therefore we’re all bound by the responsibility to look out for ourselves and actively protect our own interests since no one will be doing it for us. This isn’t to confirm that all businesspeople are despicable liars, but it does mean asserting that the collective force of self-interest produces an ethically respectable reality. Right and wrong comes to be defined by the combined force of cautious, self-interested producers and consumers.

In the face of this argument defending a free-for-all economic reality where everyone is doing the best they can for themselves while protecting against others doing the same, objections may be constructed. It could be argued, for example, that the modern world is too complex for consumers to adequately protect their own interests all the time. No matter how that issue gets resolved, however, the larger fact remains that trusting in the marketplace is a reasonable and defensible ethical posture; it’s a commitment to a set of values and facts and their combination in an argument affirming that the free market works to effectively resolve its own problems.

Conclusion. It’s not true that doing business equals being deceitful, so it’s false to assert that business ethics is necessary to cure the ills of commerce. It is true that the business world may be left to control its own excesses through marketplace pressure, but that doesn’t mean business escapes ethics.

Business Ethics Is Inevitable

Business ethics is not about scolding, moralizing, or telling people to be nice. Ethics doesn’t have to be annoying or intrusive. On the other hand, it can’t just be dismissed altogether because ethics in business is unavoidable. The values guiding our desires and aspirations are there whether they’re revealed or not. They must be because no one can do anything without first wanting something. If you don’t have a goal, something you’re trying to achieve or get, then you won’t have anything to do when you get out of bed in the morning. Getting up in the morning and going, consequently, mean that you’ve already selected something as desirable, valuable, and worth pursuing. And that’s doing ethics; it’s establishing values. The only real and durable difference, therefore, between those who understand ethics and those who don’t is that the former achieve a level of self-understanding about what they want: they’ve compared their values with other possibilities and molded their actions to their decisions. The latter are doing the same thing, just without fully realizing it. The question about whether ethics is necessary, finally, becomes a false one. You can choose to not understand the ethics you’re doing (you can always drop this class), but you can’t choose to not do ethics.

Key Takeaways

  • Views about the ethical nature of the business vary widely.
  • Because ethics is the arrangement of values guiding our aspirations and actions, some form of ethics is unavoidable for anyone acting in the economic world.

Review Questions

  1. Why might someone believe the business world needs exterior ethical monitoring and correction?
  2. What is the argument that the business world can regulate itself, and why is that an ethics?
  3. In your own words, why is business ethics unavoidable?