Essay: The Positive Side of Business Ethics

Business ethics, as taught in business schools and discussed in the business community and media, is most frequently conceived of in terms of limits—what one must not do. For example, one must not engage in deceptive advertising practices or fire an employee without cause.

Moreover, it doesn’t change the fundamental character of the discussion to restate these prescriptions in positive terms—one must act with integrity in advertising and respect the dignity of the employee. Whether stated positively or negatively, these ethical prescriptions are still understood as limits on activity that might otherwise be pursued.

In this sense, business ethics is often considered from the same perspective as legal constraints. Minimum wage laws and the Clean Water Act, for example, are legislatively imposed restrictions. This is law as a straitjacket. In the same sense, business ethics is yet another straitjacket, albeit a tighter one—a set of prescriptions that preclude illegal practices and some business practices that would be legal.

But ethics, properly conceived, is a study of what ought to be done. To focus exclusively on what ought not be done presumes that the underlying direction or purpose of business is either (1) beyond control and therefore not fruitfully discussed in ethical terms, or (2) fundamentally amoral and thus not susceptible to being analyzed in terms of right or wrong.

From this perspective, business is like a river that always flows downhill. No purpose would be served in talking about the “rightness”or “wrongness”of the direction of the water. Its purpose is given. In this analogy, ethics are simply designed to ensure that the river stays in its channel and that in a few areas the channel is narrowed or widened to minimize harm that might otherwise be caused by the inexorable currents.

But this is a faulty analogy. While market forces do exert something like the pull of gravity on water, they are neither as immutable nor as powerful as gravity. The purpose and direction of business activity is neither beyond control nor inherently amoral.

Another analogy might be more helpful. To teach someone to play football, would it be sensible to describe only what the rules preclude—e.g. no blocking in the back, no late hits? If that were the sum total of instruction, a confused game would emerge. None of these limitations make sense until the underlying purpose of the game is explained. Unlike the flow of the river, the purpose of the game is not a given. Similarly, the purpose of business is not a given.

Most often the appropriate ends of business activity are assumed, not expressed. When forced to answer the question, “Why business?”many would respond with some variant of “to make money.” Stated more precisely, the traditional business school direction to corporate managers is to “maximize shareholder return.” That direction, when not simply assumed as a given, is often justified ethically in terms of an agent’s fiduciary duty to a principal—an obligation to deal faithfully with the private property of another. This begs the underlying question of what the principal (the shareholder) should be seeking through deployment of his or her capital. Is it ethical to use one’s wealth for the ultimate purpose of making more wealth for oneself? Does a belief in the efficacy of Adam Smith’s “invisible hand”convert a self-interested pursuit of personal gain into an ethical desire for the good of the community?

It is not my purpose here to answer these questions, but to suggest that they need to be answered and are quite properly the subject of business ethics. The purpose of business activity is not predetermined, as there are other conceivable goals. For example, instead of accepting the pursuit of personal gain as the appropriate purpose, businesses could see their purpose to provide products and services to those who need them, or to provide jobs to those who seek outlets for their creative and productive instincts.

Moreover, the choice of ends is not amoral. What one chooses to pursue has moral consequences. If profit is the purpose of business, satisfying customers and retaining a loyal workforce become means to that end. Alternatively, if service is the purpose of business, the customers are the ends themselves. Profit becomes a mere means to this end by allowing businesses to attract sufficient capital to pursue their ultimate goals of service. These differences are not inconsequential nor are they without moral content.

We need a positive, purpose-oriented ethic to serve as a foundation for the more traditional limit-oriented approach to the subject. A full-orbed discussion of business ethics must include not only what should not be done, but also what should be done.

Jeff Van Duzer
Dean, School of Business and Economics
Seattle Pacific University

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