ETHICS IN BUSINESS TODAY
In light of many recent scandals, the role of ethics in business, in particular that of big corporations, is being questioned and re-evaluated. Our thoughts on what role big business plays in our society and how ethically responsible they should be have changed, or perhaps should change.
Ethics
- A system of moral principals
- The rules of conduct recognized in respect to a particular group, culture, etc. e.g. medical ethics, business ethics.
- A branch of philosophy that addresses questions about morality and values, with respect to the rightness and wrongness of certain actions and to the goodness and badness of the motives and ends of such actions.
So what is the implication of ethics in business? Milton Friedman, professor from the Chicago School of Economics and one of the most prominent advocates of the free market, suggests that corporations cannot be socially responsible, only people can have responsibilities. “A corporation is an artificial person and in this sense may have artificial responsibilities, but ‘business’ as a whole cannot be said to have responsibilities, even in this vague sense.” He continues to suggest that we presume that the individuals who make up the company (individual proprietors or corporate executives) are to be socially responsible, but that this is wrong. Since an executive’s main responsibility is to his employers he must run business as they see fit, which ultimately means to generate as much profit as possible while following “the basic rules of society.”
As an individual the corporate executive has his own set of values and responsibilities. By imposing these on his corporation or pursuing them with company time or money, he is essentially “spending the customers’ money” to pursue his own values, in turn taking away from them the choice of what to do with their money. It is then seen that the corporate executive is acting as a “public employee,” rather than an agent of the corporation. Friedman says that in a free society “there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engage in open and free competition without deception or fraud.” He therefore suggests that by not acting in a way that would increase profits – the interests of his employers and stockholders – he would be acting unethically towards them.
This view has long been the consensus of business. According to business dogma, business is amoral. The claim is that ethics and morals are entirely arbitrary – a matter of subjective personal preference. Ethical assertions rest upon value judgments, which, unlike factual judgments, cannot be true or false. Since there is no way to test ethical and moral assertions, the corporation functions with only one goal in mind and that is to make profit without considering the question of morality because this is not one of its functions or requirements.
Having analyzed both ethics and how they are applied in business, we can make a more informed evaluation of what ethics should mean to business today.
Today we see that the business as usual amoral strategy and the corporate culture that promotes profit over ethical behavior can turn immoral.
With the power of globalization corporations continue to grow and dominate. We are supposed to “trust” them – not that we’ve had much choice in it. What is the place of these corporations in the future? Is there a place for these corporations in the future? These global corporations that may be ‘too big to fail,’ that could have immense influence on society and our lives? Well, their mere power in industry would suggest that they’ll be around, and their grip on the current markets suggest that some of these may be ‘too big.’ On the other hand trends in the market today tell us that a new kind of company is in demand, a company that acts responsibly.
Peter Drucker, who has been called the greatest management thinker of the last century and the inventor of modern management, tells us of the ‘organization of the future.’ He tells us that the new corporation needs to “change or die.” He also says the organization of the future “need[s] to focus on their capabilities: their leadership, their agility, the talent of their employees, their relationship with stakeholders, and the strategic unity regarding their future goals and direction,” with a big focus on social responsibility and the comprehensive application of ethics to the work environment. In his collection of writings he provides intriguing insight into what makes organizations great and successful, and suggests that “there are ‘good profits’ and ‘bad profits,’” it’s not all about the bottom line. The corporation should have a mission statement and “the company has to stand for something greater then itself, that its existence serve the common weal,” but this also has to be something the company truly follows. Most corporations have pledges that declare that they respect their customers and employees, serve society, are transparent, and are here to innovate and serve the greater good; but it is hard to take seriously when so many corporations are found to have such a tight focus on profits above all else.
Also, those new to the work force today, the new generation of talented, innovative forward thinkers – skilled workers that companies want – are more and more concerned with the ethics of a corporation. The business school dogma is being rejected by many students. Now, concepts like profits as well as social good and safeguarding the environment are great concerns for the new talented workforce. Therefore many corporations will not be able to retain or attract those great minds if they continue ‘with business as usual.’ After all, the most fundamental purpose of business is to supply the products and services that the market demands. If these corporations continue to disregard what is demanded and the needs of the public, then there may be no place for them in the future. It is in the interest of businesses today to be ethical.
In conclusion, I disagree with Friedman. I believe that a corporation can and should be socially responsible, but in doing so they should still be able to meet their objectives of making a profit and keeping stakeholders, employers, and customers satisfied. A corporation must be held socially responsible, especially when they purposely position themselves in a place where they are ‘too big to fail’ or to be such a fundamental and indispensable part of society. A corporation cannot wash their hands of any social responsibility when they presume to be such an integral part of society.
Businesses today must examine its operations, make positive changes to reduce harm, and have a strategic plan in place to function efficiently and make a profit. If a business cannot be socially responsible in society, then it shouldn’t be allowed to operate in society.
As an individual the corporate executive has his own set of values and responsibilities. By imposing these on his corporation or pursuing them with company time or money, he is essentially “spending the customers’ money” to pursue his own values, in turn taking away from them the choice of what to do with their money. It is then seen that the corporate executive is acting as a “public employee,” rather than an agent of the corporation. Friedman says that in a free society “there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engage in open and free competition without deception or fraud.” He therefore suggests that by not acting in a way that would increase profits – the interests of his employers and stockholders – he would be acting unethically towards them.
This view has long been the consensus of business. According to business dogma, business is amoral. The claim is that ethics and morals are entirely arbitrary – a matter of subjective personal preference. Ethical assertions rest upon value judgments, which, unlike factual judgments, cannot be true or false. Since there is no way to test ethical and moral assertions, the corporation functions with only one goal in mind and that is to make profit without considering the question of morality because this is not one of its functions or requirements.
Amoral
- “Ethically indifferent”
- Not involving the question of right and wrong; without moral quality; neither moral nor immoral.
- Having no moral standards, restraints, or principles; unaware of or indifferent to questions of right and wrong.
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Having analyzed both ethics and how they are applied in business, we can make a more informed evaluation of what ethics should mean to business today.
Today we see that the business as usual amoral strategy and the corporate culture that promotes profit over ethical behavior can turn immoral.
Immoral
- Violating moral principles; not conforming to the patterns of conduct usually accepted or established as consistent with principles of personal and social ethics.
- Transgressing accepted moral rules; corrupt.
- Unscrupulous or unethical.
With the power of globalization corporations continue to grow and dominate. We are supposed to “trust” them – not that we’ve had much choice in it. What is the place of these corporations in the future? Is there a place for these corporations in the future? These global corporations that may be ‘too big to fail,’ that could have immense influence on society and our lives? Well, their mere power in industry would suggest that they’ll be around, and their grip on the current markets suggest that some of these may be ‘too big.’ On the other hand trends in the market today tell us that a new kind of company is in demand, a company that acts responsibly.
Peter Drucker, who has been called the greatest management thinker of the last century and the inventor of modern management, tells us of the ‘organization of the future.’ He tells us that the new corporation needs to “change or die.” He also says the organization of the future “need[s] to focus on their capabilities: their leadership, their agility, the talent of their employees, their relationship with stakeholders, and the strategic unity regarding their future goals and direction,” with a big focus on social responsibility and the comprehensive application of ethics to the work environment. In his collection of writings he provides intriguing insight into what makes organizations great and successful, and suggests that “there are ‘good profits’ and ‘bad profits,’” it’s not all about the bottom line. The corporation should have a mission statement and “the company has to stand for something greater then itself, that its existence serve the common weal,” but this also has to be something the company truly follows. Most corporations have pledges that declare that they respect their customers and employees, serve society, are transparent, and are here to innovate and serve the greater good; but it is hard to take seriously when so many corporations are found to have such a tight focus on profits above all else.
Also, those new to the work force today, the new generation of talented, innovative forward thinkers – skilled workers that companies want – are more and more concerned with the ethics of a corporation. The business school dogma is being rejected by many students. Now, concepts like profits as well as social good and safeguarding the environment are great concerns for the new talented workforce. Therefore many corporations will not be able to retain or attract those great minds if they continue ‘with business as usual.’ After all, the most fundamental purpose of business is to supply the products and services that the market demands. If these corporations continue to disregard what is demanded and the needs of the public, then there may be no place for them in the future. It is in the interest of businesses today to be ethical.
In conclusion, I disagree with Friedman. I believe that a corporation can and should be socially responsible, but in doing so they should still be able to meet their objectives of making a profit and keeping stakeholders, employers, and customers satisfied. A corporation must be held socially responsible, especially when they purposely position themselves in a place where they are ‘too big to fail’ or to be such a fundamental and indispensable part of society. A corporation cannot wash their hands of any social responsibility when they presume to be such an integral part of society.
Businesses today must examine its operations, make positive changes to reduce harm, and have a strategic plan in place to function efficiently and make a profit. If a business cannot be socially responsible in society, then it shouldn’t be allowed to operate in society.
