COMMENTARY 986.1: There’s No Such Thing as Business Ethics

Some years ago, a senior executive at a Fortune 100 company objected when I asserted that corporations have an ethical, as well as a legal obligation to keep promises and honor their contracts. He said that the decision to live up to or ignore contractual commitments is a business decision, not an ethical one. The other party has legal remedies, he said, and therefore responsible managers have a duty to evaluate whether it’s in the company’s best interest to honor or breach contracts. The decision should be based on a simple cost/benefit analysis. Ethics has nothing to do with it.

Disturbingly common, this claim of moral immunity is based on the erroneous idea that in business the only thing to consider is self-interest. The theory that expediency, not ethics, should control decision making flourishes because many people compartmentalize their lives into personal and business domains, assuming each is governed by different standards of ethics.

In business, the argument goes, ethical principles are simply factors to be taken into account; they’re not moral obligations. As a result, fundamentally good people who would never lie, cheat or break a promise in their personal lives delude themselves into thinking that they can properly do so in business.

Nonsense! There’s no such thing as “business ethics” — there’s only ethics. Fundamental standards of right and wrong like trustworthiness, respect, responsibility, fairness, caring and good citizenship do not become irrelevant when we enter the workplace. And it doesn’t matter how many people think otherwise.  Remember, ethics is not a description of the way people actually behave. It’s a prescription for how they ought to behave.

This is Michael Josephson reminding you that character counts.

Comments 9

  1. Great points. This needs to be taught. Unethical conduct by a corporation is not a long-run successful or sustainable formula. In my experience, the best companies require ethical behavior and require their employees to have good character. Those are the most important assets for long-term sustainable success.
    But we forget that ethics and honesty are key not only in business but in politics. After all, our Federal government is the nation’s biggest business. Yet, our politicians talk and endlessly campaign, saying one thing and doing either nothing or the opposite. They spend our money irresponsibly. running up huge annual deficits that they know can never be repaid. They purposely pass large complex laws rather than short concise ones so that they can hide the truth from the American people and avoid responsibility. They blame everyone else instead of solving the problem.
    tuation in Washington would never have been tolerated in the 1950s, when budgets were balanced, economic growth much higher and good character and ethics were required in our society. Our country is declining rapidly because of lack of ethics and character in Washington, DC. But we the people are also responsible because we elect and tolerate unethical politicians.

    1. I can only agree totally with your comments. However for citizens that are fed up and want to help change things — HOW? I know voting is something but not nearly enough. Where can folks go or call or email to help start change?

    1. It probably would depend on the circumstances. If a person or company files bankruptcy due to unforeseen circumstances, e.g. loss of income, medical issues, legislation or economy issues beyond their control it may not only not be unethical but may be the ethical thing to do to save jobs and the company in the long run. On the other hand if a person plans failure to deceive or harm others and then intentionally files bankruptcy to accomplish that purpose then of course this would be unethical. We should not be too quick to judge until we have walked a mile in his/her shoes. You can’t judge a book by its cover.

  2. you are completely right. Right is not a matter for usual life but also for business. Moreover, wrong will carry on business to self destruction – we should notr forget that business in the way we see it has an strong ethical basis -.

  3. Just as people have reputations among their peers so do businesses among their peers. People earn the trust of their peers as a result of their ethics and the same applies to businesses except in this case the trust is with their customers and suppliers. I know of companies that will not do business with other businesses because of past unethical behavior. And if a business has as its clients the public – developing a bad reputation for unethical practices such as doing less than quality work, cheating with their billing practices, etc. can ultimately ruin the business as the fewer and fewer people are willing to give them their business. I am not saying that a business should be ethical strictly for business sake however; they should be ethical because it is the right thing to do. I am saying that failure to adopt ethical practices, while possibly profitable in the short-term, has the potential to destroy a business in the long-term.

  4. I agree with Thomas Pritchett. We should do what is right because it is right. But not being ethical also has practical problems as well, which he very wisely pointed out. When a business has behaved unethically, I not only do not want to do business with that company, but the behavior also affects my politics and makes me more likely to want more regulation for such a company, and I vote accordingly. A lack of ethics also affects the stock I will buy and the stock I encourage my religious body to divest itself of in the interest of ethics. Admittedly, I am only one person, and I am not rich, but I can join others to work for change.

  5. Ehics in politics is lacking. It seems every decision made is made with “how will this affect my being re-election”.

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