Archive for the ‘ethics’ Category
Why HR Management is Always Ethically Relevant
Ethics should be thought of as the heart of your organization’s HR function. Likewise, HR is likely to be the heart of attempts to manage ethics within your organization. Let me explain why.
It’s hard to imagine a function more essential to most businesses than HR.
HR may not get the glory that Finance does, but it’s just as important. Hiring, training, evaluating, and retaining the right people are all undeniably core management challenges. Every manager knows this. The relevant difference between Finance and HR is that Finance gains prestige by bringing to bear the tools of quantitative analysis; HR issues, on the other hand, are typically harder to quantify, harder to mathematize, leading many to think of them as “mushy.” But “mushy” typically just means “I find this stuff difficult.” Managers who find HR difficult would rather hide in the numbers. Ironically, HR gets called “soft” precisely because it is so hard.
At many large companies, the HR Department is in charge of ethics — or at least that part of ethics that isn’t bundled with Compliance. The HR Department is often tasked with making sure every employee gets a copy of the company Code of Ethics, for example. HR is also typically in charge of ethics training, as well as updating the company’s Conflict of Interest policy and other ethically-salient policies.
But the fact that many companies embed their Ethics function within their HR function may actually obscure the extent to which every aspect of HR is ethically significant. The full extent to which HR is an ethical matter may not be obvious.
Ethics is fundamentally concerned with the choices we make — either as individuals or as companies — when those choices have an impact on people’s well-being or their rights. And so ethics is and must be part of all of the policies and activities for which HR is responsible, not just the ones that have the word “ethics” explicitly attached to them.
Hiring, for instance, (or setting the rules for hiring) involves balancing a range of value-laden criteria, such as skill and experience and reliability, and avoiding ethically-inappropriate criteria such as race, gender, and sexual orientation. The same goes for performance evaluation. Likewise, how overtime is handled — who is eligible, under what conditions, with whose permission — is a fundamental question of justice. This is also true of policies related to discipline, which obviously require attention to fairness, another central sub-topic within ethics.
So even if it weren’t in charge of ethics training and ethics policies, the HR function would remain ethically crucial.
Finally, HR also gains ethical significance by embodying most of the few tools available for managers to shape that elusive thing known as corporate culture. Culture — that communal set of understandings, beliefs and traditions that give a shared sense of “how we do things around here” — is widely acknowledged to be a critical element of organizational success. Indeed, there’s a well-worn saying to the effect that culture trumps strategy every time. That is, regardless of what strategic initiatives senior managers put in place, or what policies they put down on paper, those initiatives and policies are liable to fail if the culture of the workplace isn’t suited to them. Enron famously had a rather lengthy code of ethics, but the culture fostered by the company’s compensation model and its performance review process went a long way toward fostering a culture in which unethical behaviour was readily tolerated. Culture, you might say, makes up an organization’s collective ethical character.
So we see, then, that HR is actually ethically significant in two ways. It is the locus of an enormous number of central, ethically-relevant policies, practices, and decisions. And it is the mechanism through which organizational culture is built, the culture that will hopefully support rather than frustrate ethical decision making.
A shorter version of this blog entry appeared at the Cornerstone Blog
The Business Significance of the ‘Trolley Problem’
Filed under: accountability, codes of ethics, critical thinking, decision-making, ethics, excuses, values |
Leave a Comment 
There’s a famous philosophical thought experiment known as “the Trolley Problem.” It goes roughly like this. Imagine one day you see a trolley — the famous San Francisco variety, or something more like a Toronto streetcar — hurtling along its track. The driver is incapacitated, and the trolley is bearing down on 5 people, mysteriously unconscious on the track. You happen to be standing next to a switch, which can divert the trolley onto a different track. But lying on this other track is another unconscious person.
So assuming (as the philosophy professor insists you must) that you don’t have time to haul any of the various unconscious persons off the tracks, your choice is effectively this: should you divert the trolley, thereby killing one person, or do nothing, and allow 5 people to die?
The puzzle is intended to get you to think about what’s more important: promoting good outcomes (fewer deaths instead of more) or sticking to cherished principles (like the principle that you should not cause the death of an innocent person). It makes for a fun and often fruitful classroom discussion.
But as a model of real-life ethical decision-making, the trolley problem is pretty bad. Seldom does life present you with two cut-and-dried options, neatly packaged by your philosophy professor. As Caroline Whitbeck points out, real life isn’t a multiple-choice test. In real life — in business, for example — ethical problem solving is more like a design problem: you need to design the options, before you get to choose among them.
But the trolley problem can still serve as a useful starting point for talking about business ethics. The key is to ask the right questions. Here are a handful of questions designed to make the trolley problem relevant to business ethics. Each, of course, requires a bit of mental translation. We are not, after all, primarily interested in actual trolleys.
1) Does your business need a policy for situations like this? Is your business one in which trolley-problem-like dilemmas come up often? Are employees often faced with situations that require them to trade off outcomes against principles? If so, do existing policies tell them how to deal with such dilemmas appropriately?
2) Is there anything you can do to prevent situations like this from happening in the first place? One of the key characteristics of the trolley problem is that it’s a lose-lose situation: either you kill an innocent person, or you allow several people to die. It’s worth asking (especially if such problems are common; see #1 above) whether there’s something you can do to avoid such situations so that you don’t have to deal with them at all.
3) What kind of corporate culture have you fostered, and how will that culture push people one way or the other in such situations? The trolley problem is a true dilemma, and reasonable people can disagree about it. But what about situations in which you can throw a switch and kill 5 people (metaphorically, at least) in order to save one? And what if that one isn’t a person, but is your company’s bottom line? Will your company’s culture encourage employees to put short-term profit ahead of all other considerations
4) Will people in your organization recognize situations akin to the trolley problem as being ethical problems in the first place? Or will they make the decision on purely technical grounds? Will they see past the fact that flipping switches is, you know, their job? Or past the fact that hey, the trolley has to run on time, and we always flip this switch that way at this time of day?
5) Finally, if the decision were being made by a team, or members of a hierarchy, rather than by an individual, would members feel empowered to speak their mind if they felt the team, or their boss, was making a bad decision?
Philosophical puzzles like the trolley problem become famous for a reason. They get at something deep. And they can provide fruitful fodder for discussion as part of corporate ethics training. The core of a great discussion is there: you’ve just got to know the right questions to ask.
Business Ethics Journal Review: Month 1 Summary
A month ago, we launched the Business Ethics Journal Review (ISSN: 2326-7526), a venture in 21st century academic publishing, which I co-edit along with Alexei Marcoux (Loyola University Chicago).
The goal of BEJR is to publish short, peer-reviewed commentaries on recent business ethics articles published in the standard scholarly journals.
Since our launch, we’ve published the following six peer-reviewed Commentaries:
“Moving Beyond Market Failure: When the Failure is Government’s” by Peter Jaworski Bus Ethics J Rev 1(1) (2013): 1–6
“Corporate Human Rights Obligations: Moral or Political?” by Jeffery Smith Bus Ethics J Rev 1(2) (2013): 7–13
“Toward a Political Theory of the Business Firm? A Comment on ‘Political CSR’” by Pierre-Yves Néron Bus Ethics J Rev 1(3) (2013): 14–21
“Are Usurious? Another New Argument For the Prohibition of High Interest Loans?” by Matt Zwolinski Bus Ethics J Rev 1(4) (2013): 22–27
“The Unification Challenge” by Dominic Martin Bus Ethics J Rev 1(5) (2013): 28–35
“Proposition: Shared Value as an Incomplete Mental Model” by Laura P Hartman and Patricia H Werhane Bus Ethics J Rev 1(6) (2013): 36–43
We’ve also published the following three Responses, from the authors of the works at which some of the above Commentaries were aimed:
“The Cost of Usury” by Robert Mayer (a response to Zwolinski) Bus Ethics J Rev 1(7) (2013): 44–49
“Market Failure or Government Failure? A Response to Jaworski” by Joseph Heath Bus Ethics J Rev 1(8) (2013): 50–56
“Morality Meet Politics, Politics Meet Morality: Exploring the Political in Political Responsibility” by Florian Wettstein (a response to Smith) Bus Ethics J Rev 1(9) (2013): 57–62
You can see abstracts, and get free access to the full PDFs for each piece, by clicking on the links above.
For more information about BEJR, please see our instructions for authors.
Update: You can also follow the BEJR’s Facebook page, here: http://www.facebook.com/BusinessEthicsJournalReview
An Innovation in Business Ethics Scholarship
As of a couple of weeks ago, I’m now co-editor and co-publisher of an innovative new publication that aims to shake up the somewhat stodgy world of academic business-ethics publishing. The Business Ethics Journal Review (BEJR) is a cutting-edge online publication: it’s a free, open-access journal that publishes peer-reviewed commentaries on scholarly articles published in mainstream academic journals.
That may not sound all that exciting to those not firmly ensconced in the ivory tower, so let me explain why it’s worthy of note.
The business model of standard academic journals hasn’t changed in decades, perhaps centuries. The process goes like this. Scholars submit their research; editors vet it for basic adequacy, and then anonymize it and send it to other scholars for “blind review.” If the work passes muster (often after a round or two of revisions) it eventually gets published. If another scholar spots errors or confusions, he or she repeats the process, submitting a rebuttal that goes to an editor, then through the process of peer review, revision, and so on. It’s hardly a process that fosters discussion. A single back-and-forth can literally take years.
BEJR aims to change that formula radically, by leveraging the power of the internet and social media. We’re publishing online, and we’ve streamlined the review process so that we promise authors submission to publication in under 30 days. We also provide a “Comments” function on our website, so that literally anyone with an internet connection can participate in the discussion.
(An interesting aside: my co-Editor Alexei Marcoux and I have started BEJR using two laptops, some off-the-shelf software, and a consumer-grade web-hosting service. It’s taken plenty of work, but we’ve hardly broken the bank. A couple of decades ago, starting your own scholarly journal would have required taking out a second mortgage on your house.)
Broadening discussion in the realm of business ethics is no small feat. A lot of different people have an interest in business ethics, including business executives and other corporate employees, as well as consultants, activists, and academics. The problem is that although there is plenty of conversation about the topic, the conversation tends to be fragmented. Executives talk to executives and to their own employees. Activists chat amongst themselves and try to get the public interested. And academics most typically carry on isolated debates about esoteric considerations in scholarly journals that the uninitiated never dare to read. Bringing business ethics scholarship into a much more public forum holds the potential to foster real dialogue.
Of course, like anything really innovative, there’s a chance that the Business Ethics Journal Review will fall flat on its face. We’ve published half a dozen peer-reviewed commentaries so far, and our website has already seen some lively discussion, but it’s entirely possible that our initial momentum will wither, that the novelty will wear off, and that those who have expressed enthusiasm for this new format will go back to old, familiar ways.
And you know what? That’s OK. That’s what entrepreneurship is about: trying something cool, and living with the chance of failure. But for now, it’s great to be part of something that has other people saying, “Wow, what a great idea!” That’s something everyone should get the chance to experience, at least once in their lives.
Opus Dei Sues Game Publisher
Filed under: ethics, freedom, intellectual property, values |
Leave a Comment As you may have heard, Opus Dei, a branch of the Catholic church, is suing a Danish game publisher, Dema Games, for alleged infringement of its trademark. The game is called “Opus Dei: Existence After Religion.”
The case is pretty much entirely without moral merit. Never mind the David-vs-Goliath image raised by the thought of the powerful Catholic prelature focusing its lawyers’ energies on a tiny Danish publisher. Beyond that, there’s no indication that Opus Dei, the organization itself, is portrayed in any way in the game. So this is unlike the dispute that went on back in 2006, when Opus Dei tried to get Sony to remove references to the organization from the movie version of The DaVinci Code. The issue in the present case is simply whether the organization has the right to control how its name is used.
Trademark protection is effectively a limit on free speech. You can say whatever you want, generally, but you can’t help yourself to words or phrases that are specifically used by other people for commercial purposes. Opus Dei isn’t what we would normally think of as a “commercial” organization, but close enough: its name is the “mark” under which it carries out its “trade.” So it has some claim to a trademark. On the other hand, the words “opus Dei” are just a phrase with multiple uses. As those of you who remember your high school Latin will recall, “opus dei” is translated “work of God.”
This case might best be thought of a question of free speech versus respect for religion. The organization can’t rightly expect to exert worldwide control the use of the two words “opus” and “dei,” words that have many uses in conjunction beyond describing the Catholic group. But on the other hand, should the game publishers relent and remove those words from the title of their game? Opus Dei does have an interest at stake, here, even if it’s not clearly an overriding one embodied in a right. A sufficient degree of respect for the organization and its interests might lead a company to adopt a hands-off policy, regardless of whether the trademark claim is legally enforceable.
All indications are that Dema has no intention of manifesting that level of respect, and I suspect many people — including those who are dismissive or even critical of the Catholic church — will applaud the company in this regard. But what is the unbiased observer to think, from an ethical point of view, about cases of this sort? Here, it is important to recognize the crucial ethical difference between a value, on one hand, and a principle, on the other.
Respect — including respect for other people’s religions — is a value. As such, it is something we generally want to promote. It is good, other things being equal, to demonstrate a degree of respect for other people, and arguably for their religions and the organizations that promote them. Even when we do not support or encourage other people’s beliefs, it is generally a good thing, socially, if we respect them.
Free speech, on the other hand, is a right, and respect for it is a moral duty. And rights and duties tend to be moral absolutes, rather than merely things we want to promote. As a right, free speech is something that is to be breached only under very limited and carefully prescribed circumstances. A right is a line drawn in the sand, and across which we step only when absolutely necessary. When a right (like free speech) and a value (like respect) come into conflict, generally the right has got to win.
Hopefully the Danish court will agree.
‘Do Your Best’ in The Tangle of Global Business
Filed under: accountability, competition, corruption, ethics, excuses, international |
Leave a Comment I spoke recently to a corporate audience on the topic of Ethics for Leaders. One of the sub-topics I touched on was the fact that leaders need not only to make good ethical decisions, but also to help others make good ethical decisions. As a practical example, we looked at techniques a leader might use to help someone else understand what is ethically problematic about bribery. Sure, someone in a leadership position might have the authority simply to give orders; but in many cases it will be much more effective to explain the values and principles that underlie a particular prohibition.
One of the attendees at this session pushed back in a useful way. “I get the ethical argument against bribery, and I agree. But I’ve talked to Sales Managers overseas who say it’s just not realistic to avoid everything that could be construed as a bribe. How do I deal with that, beyond simply pointing to the FCPA?”
This is a tough challenge, one that needs to be taken seriously. Whether it’s bribery or nepotistic hiring practices, local practices that violate the rules of business “back home” can seem hard to avoid. Business is a competitive game, and it sometimes really is the case that scrupulously following the written rules puts a company at a significant — maybe even definitive — disadvantage.
It’s far too easy to play Monday Morning Quarterback and to speak in idealistic terms about integrity in business. But ethics isn’t about being a saint; it’s about finding a way to do your best to find suitable limits on profit-seeking behaviours when those behaviours put other people’s legitimate interests and rights at risk. So, if we are to avoid sounding preachy, what can we say about the Sales Manager above?
First, make sure the “when in Rome” argument isn’t just being used as a fig leaf to cover up what is really an appeal to convenience. Sometimes it may be easier to follow local custom, but that’s not quite the same as necessity.
Second, if — if! — it really is necessary, when doing business overseas, to engage in practices that wouldn’t be allowed back home, are you at least doing what you can to a) minimize the frequency of such violations and b) working, in at least some small way, to improve standards in the local business community? Bribery and other forms of corruption are truly corrosive, and economies in which they are common would be much better off without them. Are you part of the problem or part of the solution?
Third, ask whether unscrupulous (or merely ‘grey zone’) behaviour is being used to cover up poor performance. It may be that the Sales Manager who feels the need to offer bribes simply isn’t very good at his job and is looking for ways to succeed without having sufficient talent or making sufficient effort. Sometimes lack of ethics suggests lack of competency.
And finally, ask what your company can do to change incentives such that a Sales Manager isn’t so single-mindedly driven by numbers that he feels compelled to bend or break the rules. No one within an organization should ever think of themselves as having just a single objective. Yes, a Sales Manager is in charge of Sales. But he also has responsibilities that include risk management (including avoiding bringing the company into shame or into court) and managing morale within the sales team. People will behave according to how you reward them, and so reward mechanisms ought to be as balanced as you would like their performance to be.
The challenges posed by doing business in the global marketplace are never easy. Only by avoiding both naïveté and cynicism can you hope to do good while still doing well.
Can Business Schools Teach Ethics?
It’s that time of year again. Fresh young faces are flooding onto campus, and lineups are long at the university bookstores. Once again, there is a rush of new faces past the door of my office at the Ted Rogers School of Management. And once again, editorials are being written about whether business schools can do anything effective in the realm of ethics. Far better than most, in this regard, is a recent piece by Professors Ray Fisman and Adam Galinsky, of the Columbia Business School and Kellogg School of Management, respectively. Is it possible, they ask, for business schools to train students to be ethical?
Fisman and Galinsky’s piece has a lot going for it. The view they put forward is realistic, but not cynical. Nor does it make the all-too-common mistake of assuming that the goal of an ethics course is to “make students ethical.” And it rightly, to my mind, focuses on the psychology of wrongdoing — on looking for ways to counter the psychological forces that result in decent folks doing bad things.
Beyond recommending their article, I’ll only add the following comments:
Echoing a suggestion I made nearly two years ago, Fisman and Galinsky suggest that business students need to be taught to become “Moral Architects” (their term, not mine). That is, business students need to be taught skills relevant to shaping the environment in which they, and others, work in order to push behaviour in the right direction.
This is exactly right, but if anything Fisman and Galinsky underplay the question of design. A great many business school graduates will go on not just to work in business, but to be managers, and managers are tasked with designing and managing work environments. So even if ethics classes aren’t capable of changing students’ behaviour, it is important to ask whether they can give students the skills to help shape other people’s behaviour in the future.
My final point is about the focus on business students. Why focus on them? Fisman, Galinsky and I all teach at business schools, so for us the answer is obvious. But from a broader point of view, it may be a mistake. If we are concerned with ethical conduct in business, we need to look at all of the training grounds for business, and that goes far beyond the business school.
I often ask my own students, do you know what the difference is between a Business major and an Arts major? The answer is that a Business major already knows she’s going to work in the world of business. The Arts major is almost certainly going to end up doing something in the world of business; she just hasn’t realized it yet.
But of course, it’s highly unlikely that anyone is going to make a business ethics course mandatory for arts majors, based on the simple fact that many arts majors will end up in business. So the burden, for all intents and purposes, is likely to stay with those of us who teach at business schools. As I watch the fresh young faces flow past my office door, I can only hope that we are up to the task.
Top 5 Business Ethics Movies
There are lots of ways you can learn about ethical issues in business. You can do some reading. You can take a course. But hey, it’s summer, so let’s talk movies. Here’s a list of my 5 favourite business ethics documentaries. Granted, these aren’t exactly great date movies. Nor are they action-packed blockbusters. But trust me you could do a lot worse.
So grab a bag of popcorn. Here they are, in no particular order:
Let’s start with one you’ve likely heard of, namely The Corporation (2003). This one was popular out of all proportion to either educational or entertainment quality. It’s full of half-truths and bizarre omissions. And its central theme, namely that the corporation is in some sense a psychopath, simply cannot withstand even cursory critical examination. But it’s still useful to watch — if only to understand the source and shape of so much anti-capitalist sentiment. (The Corporation is freely available online here.)
Next on my list is another what we might call ‘anti-business’ documentary, namely Walmart: The High Cost of Low Price (2005). This is one of my favourite videos for classroom use, because it’s a good test of students’ critical thinking skills. Some of the criticisms levelled at Walmart in the movie are entirely on-target: labour code violations, racist HR practices, etc. Other criticisms point to things that are in some sense sad, perhaps — the loss of so many mom-and-pop stores, for example — but far from evil. Others are downright ludicrous, such as blaming Walmart for random murders in their parking lots. Watching this one is a great way to see what is right, and what is wrong, with so many criticisms of business today.
The most recent of my top 5 is already a couple of years old. And while Food, Inc. isn’t about business per se, it is about the production of food, something that is increasingly industrialized and dominated by big business. And as businesses go, none could be more important to us than the food business. The movie does a good job of pointing out problems, but is regrettably short on solutions. A not-unrelated criticism is that the documentary makes too little use of relevant experts. How could a film make concrete recommendations about the future of food without bothering to interview, say, a food economist or two? At any rate, it’s a thought-provoking hour and a half.
Next on my list is a movie you probably haven’t heard of, namely The Take (2004). This one isn’t really a criticism of any particular company, or of any particular industry. At heart, it’s a plea for a different economic model — though the details here are a bit vague. The Take tells the true story of a group of Argentinian factory workers who, when their cruel capitalist boss shut down operations for obscure reasons, seize the factory, start up the machines, and try to make a go of it. The workers’ motto — “Occupy, Resist, Produce” — is in spirit awfully close to “Workers of the world, unite!” It’s a good story. Unfortunately, the movie ends before the story does. As the film closes, the workers have seized the factory and started up the machines and are full of optimism that they can do better without a boss. Can they really do it? Can they beat their little workers’ paradise beat the odds? The film leaves us with lots of idealistic hopes, but few answers.
My next recommendation is admittedly the dullest of the bunch, but still worth considering. A Decent Factory is a story about audits. Not financial audits, but supply-chain audits carried out by Nokia at the factories of one of its Chinese subcontractors. There are two striking aspects of this quiet film. The first is how the auditors seem to struggle with just how much to push their Chinese subcontractors on various issues. The auditors’ job is not an easy one. They are there to evaluate, but also to insist on improvements, or sometimes just to suggest, encourage, and cajole. The path forward is far from clear. This is related to the second striking aspect of the film, which is that the conditions at the Chinese factory are, well, mediocre. They’re not the kind of awful sweatshop that would make for a gripping exposé. Remember what your grade-school English teacher told you about the adjective “nice”? It’s a weak word, one that tells the reader little. That’s the sense in which the makers of this film use the word “decent” in their title. The Chinese factory is a…decent…factory. Not great. But not awful. And just what to think about that is left to the viewer.
Last but certainly not least is Enron: The Smartest Guys in the Room (2005). This one is arguably the best of the bunch. Based on the book by journalists Bethany McLean and Peter Elkind, the movie is a fun, accessible, and best of all plausible telling of the story of what is still the biggest and most complex business-ethics scandal of the century so far. Perhaps the thing that most attracts me to this documentary is its refusal to resort to easy answers. There’s no attempt to say it was “all about greed” or that “capitalism is evil.” The truth about Enron, and about capitalism more generally, is much more complex, and much more interesting, than that.
Ethics on Wall Street: Hate the Player, Not the Game!
Filed under: accountability, adversarial ethics, capitalism, CEOs, character, compliance, corporations, corruption, employees, ethics, insider trading, white collar crime |
Comments (8) A recent survey of Wall Street executives paints a bleak picture of the moral tone of a central part of our economic system.
According to the survey (conducted for Labaton Sucharow LLP), 24 percent of respondents believe that financial professionals need to engage in unethical behaviour in order to get ahead. 26 percent report having observed some form of wrongdoing, and 16 percent suggested that they would engage in insider trading if they thought they could get away with it.
Two points are worth making, here.
First, some perspective. Far from alarming, I think the number produced by this survey are relatively encouraging. Indeed, the numbers are so encouraging that I can’t help but suspect unethical attitudes and behaviours were seriously underreported by respondents. Only 26 percent had seen something unethical? Seriously? That seems unlikely. And the fact that only 16 percent said they would engage in insider trading is also relatively benign. There are, after all, people who believe that insider trading isn’t unethical at all, and shouldn’t be illegal. They argue that insider trading just helps make public information that shouldn’t be private in the first place. I don’t think that point of view hold water, but the fact that it’s put forward with a straight face makes it pretty unsurprising that a small handful of Wall Street types are going to cling to the notion.
Second, a survey like this highlights the difference between our ethical evaluation of capitalists, on one hand, and our ethical evaluation of capitalism, on the other. One of the major virtues of the capitalist system is that it is supposed to be able to produce good outcomes even if participants aren’t always squeaky clean. In no way does it assume that all the players will be of the highest virtue. Adam Smith himself took a pretty dim view of businessmen. In The Wealth of Nations, Smith wrote:
“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public.”
And yet despite his dim view of capitalists, Smith remained a great fan of capitalism — or rather (since the term “capitalism” hadn’t been coined yet) a fan of what he referred to as “a system of natural liberty.” The lesson here is that evidence (such as it is) of low moral standards on Wall Street shouldn’t make us panic. Perhaps it should make us shrug, and say, “Such is human nature.” The challenge is to devise systems that take the crooked timber of humanity and mould it in constructive ways. Governments need to take corporate motives as they are and devise regulations that encourage appropriate behaviour. And executives need to take the motives of their employees as they are and devise corporate structures — hierarchies, teams, incentive plans — that motivate those employees in constructive ways. In both cases, while the players should of course look inward at what motivates them, the rest of us should focus not on the players, but on the game.
5 Business Ethics Must-Reads
Business Ethics is an academic discipline, as well as a field of practical expertise and increasingly a central business function.
There are many ways to educate yourself about Business Ethics as a field of study and understanding. But if your interest in the topic is sufficiently deep, you could do worse than to read a handful of papers by some of the leading scholars in the field.
So here are five of what I regard as essential readings in business ethics, along with an explanation of their significance.
The List
In order to say anything useful about ethical issues in the marketplace, you first need to understand something about how markets work, how they fail, and what the ethical argument for their existence is. And simply being in business doesn’t guarantee that you understand markets, any more than being an athlete guarantees that you understand physiology. You need to go to someone who has a deep understanding just of one particular market — the market for mobile phones, say, or for cars — but of markets in general.
So the first bit of essential reading is a decent chunk of…
1. Adam Smith’s The Wealth of Nations. (It’s freely available online, and I recommend reading at least the first three chapters of Book 1, Volume 1.) Smith, one of the great philosophers of the Scottish Enlightenment, wasn’t the first to speculate about how economies work, but he’s generally thought of as the guy who more or less got it right. Smith is to economics what Darwin is to biology. In The Wealth of Nations, Smith outlines the basic way in which trade produces mutual advantages, the way those advantages encourage specialization, and — importantly — the way self-interest is sufficient to get the whole process started. (But a word of caution: Smith is often wrongly thought to have encouraged greed. Nothing could be further from the truth. For useful correctives, read Nobel-prizewinning economists Ronald Coase and Amartya Sen.)
#2. My next suggestion is to read something by Edward Freeman on what’s known in academic circles as “Stakeholder Theory.” His co-authored piece called “Stakeholder Capitalism” would do, as would any of a number of papers he’s authored or co-authored over the last 3 decades. The basic idea that Freeman defends is that corporate managers shouldn’t see themselves as beholden primarily to shareholders, but rather as ethically obligated to balance the interests of a wide range of stakeholders. The idea is attractive, but also deeply flawed, for reasons that the next two readings explain. One way or the other, the stakeholder idea forms an important part of the debate over how we should think about the central obligations of managers. (For my review of one of Freeman’s recent books on the notion, see here: Review of Managing for Stakeholders.)
#3. The best antidote to Stakeholder Theory is to read Joseph Heath’s “Business Ethics Without Stakeholders”. Heath argues that the stakeholder idea, however evocative, only muddies the water without providing managers with any useful direction. Heath’s paper basically outlines the fundamental debate over shareholders-vs-stakeholders in business ethics. In that regard, it’s a useful summary of the field. Heath argues that shareholder-driven and stakeholder-driven theories of business ethics both have virtues, but that both are also subject to fatal flaws. Heath argues for an alternative, which he calls the Market Failures theory. According to the Market Failures theory, the guiding ethical notions for businesses ought to be to honour the preconditions for market efficiency. In other words, they shouldn’t engage in the kinds of behaviours that make markets fail: they shouldn’t seek to profit from information asymmetries, or from externalities, or from exercising monopoly power.
#4. A bit of middle ground can be found in the work of John Boatright, including especially his article “What’s Wrong—and What’s Right—with Stakeholder Management”. In previous writings, Boatright has generally not been a fan of stakeholder theory. But in this paper, he says that the stakeholder idea can play a legitimate role in the corporation, if used properly. In particular, Boatright says that the stakeholder idea should only be held up as an ideal, a source of a sense of mission, a motivator reminding corporate insiders that all participants need to find long-term benefit. He says that the stakeholder idea is much less likely to serve the role that Freeman and his fans think it ought to play, namely that of a principle for corporate governance.
#5. All of the above is aimed at helping frame the question of how businesses (or people in business) ought to behave. But sometimes the problem isn’t with knowing the answer, but with putting it into action. And that seems to be a problem. After all, there’s a good deal of wrongdoing in the world of business. And yet look around you: most of the people you know (starting with yourself!) are pretty decent, honest folks. How do so many good people end up doing bad things.
In this regard, I have to recommend another paper by Joseph Heath, namely his “Business Ethics and Moral Motivation”. Heath points out that, when asked about what motivates wrongdoing, most people say it has a lot to do with greed, or with other deep character flaws. The trouble with this, he says, is that the scholars who study wrongdoing in the most depth — namely, criminologists — long ago considered and rejected those as key factors in wrongdoing. The real source of trouble, says Heath, lies in the ability people have to offer themselves excuses, and in particular to redescribe their behaviour their behaviour in ways that lets them rationalize it. “Sure, I took the money. But I wasn’t stealing — I was just taking what I was owed.” To get people to behave better, you need to help them see that such rationalizations are unsupportable, and we need to work to avoid institutional cultures that actually encourage thinking in those ways.
So that’s my list. It’s admittedly a particular take on the field — all of the authors cited above are philosophers. But hey, I’m a philosopher by training, and so I’m committed to the idea that an understanding of fundamental principles always helps. As someone once said, there’s nothing so practical as a good theory. Reading these won’t guarantee excellence in ethical decision-making, but they will help you understand what is fundamentally at stake in our ongoing exploration of what behaviour is right, and what behaviour is wrong, in the world of business.
