“Business Ethics”? Another Fashion that Needs to Go Away

On November 21, 2011, in Economy, Philosophy, by prosario2000

Fashions in the Academy

In these few months I have become increasingly aware of one fact which is permeating the academic world, certain myths are being propagated around the academy. When I began (unfortunately not concluded) my history graduate courses, I learned how fashions can overrule sound reasoning. Although I feel a great respect towards Marxism, and use it extensively to evaluate injustices inherent to the system, it is very hard to combat some views which should be counted as outdated, such as the predictions made by Marx regarding what a socialist society will be, and its outcome as communism (Marx’s conception of “communism” of course, not the Soviet Union distortion of that ideal), or even the most outdated dialectical materialism.

Worse still is the fact that it is very hard to struggle against postmodern fashions (especially Puerto Rico and some universities in the U.S.) when, practically, in the rest of the world it is out of fashion. At least in one of my history graduate courses, it has been hard to sell the idea that if you use more solid conceptual and philosophical grounds to build a historic framework, then you will be able to interpret historical data with greater accuracy than if you use deeply flawed and refuted-long-ago-arguments regarding human psyche or culture. These either come from the most questionable areas of psychoanalysis or the most disreputed areas of cultural studies. Many of these movements are well intended. I simply admire postfeminists for struggling for women’s rights, and the rights of the GLBTTQ community (… btw.. if there are more letters to refer to this community … sorry, but my political correctness has some limits). Still, I would hardly base any liberating philosophy on the shoulders of Judith Butler or Sandra Harding, whose philosophies have been extensively shown wrong time and again, and whose abuse of philosophical notions is more than evident. However, I would love to build a liberating philosophy on the grounds set by Susan Haack or Judith Jarvis Thompson (who are much better philosophers). I remember Our Lord’s parable on the house built on the rock being firm, while the one built on sandy grounds being subject to fail. This is what I see right now in the academy. For example, certain areas of postfeminism want to understand society and sexuality on purely cultural grounds, paradoxically, deny their own bodies and sexuality by denying human nature.

The Fashion of “Business Ethics”

Yet, some flawed thinking invade the academy again, and again. This does not merely happen in Humanities and Social Sciences, but also occurs in business. In recent years, the myth of “business ethics” is invading the academy, and it is something that really troubles me. It has an imperialistic aspiration to look at ethics from a very specific point of view, one which values the sort of ethics which is purely dedicated to business.

Ethics as a field belongs to philosophy, it has a philosophical foundation. I’m not going to deal with philosophical foundations here, since I do it elsewhere. However, I want to point this: practically every area of applied ethics has recognized basic philosophical investigations, concepts, criticisms, and challenges. From environmental ethics and bioethics, to ethics of law, all applied ethics fields have recognized them. The exception to this apparent rule is “business ethics”.

The fields in applied ethics in generally argue their cases from several philosophical standpoints, such as virtue ethics, deontological or teleological ethics. Yet, in business ethics, I notice that too few of this is discussed, at least in teaching at college level. As a matter of fact, well instructed bioethicists are very aware of deontology, teleology, naturalistic fallacies, idealistic fallacies and the like, discussions on these views are almost absent in the classrooms where “business ethics” is taught, and if taught, they provide very weak rationale to dismiss them as unimportant for the discussion at hand. Even the business ethics textbooks have no reference at all to this (not the Postscript, at the bottom of this post).

This is incomprehensible to a philosopher until you realize something. If business ethics (a genuine philosophical field of business ethics) were about how to look at business from a critical standpoint, especially using virtue, deontological and teleological views, and then suggest to business the best course of action which has the best outcome for society (humanity as an end-in-itself), I would have no problems at all. This is what is being discussed in bioethics in relation to biotechnology, or environmental ethics regarding environmental regulations. Yet “business ethics” is a different thing.

To give you an idea of what I mean, look at this page on “business ethics“. Look at the way it defines “ethics”: moral guidelines which govern good behavior. Nothing further from the truth. If by “ethics” they understand a “code of conduct”, that is one thing, but “business ethics” should be more than this if it claims to be “applied ethics”.

Then it says:

Behaving ethically in business is widely regarded as good business practice. To provide you with a couple of quotes:

“Being good is good business.” ~ Dame Anita Roddick

“A business that makes nothing but money is a poor kind of business” ~ Henry Ford

Unfortunately these are false statements. Both of them show a level confusion. One thing is being fiscally responsible for a corporation, and another is being ethical. Not always being ethically good is a good business decision, nor always doing a good business decision is ethically good. Whoever believes otherwise is either self-deceiving or brainwashed by this “business ethics” propaganda. Of course, the propaganda is made more plausible when it propagates the concept of “corporate social responsibility” (CSR), and the questionable assertion that an ethical firm shoud be “morally or ethically responsible”: that the corporation should be a moral agent.

Some friends of mine actually believe that this is possible. For example, they quote some studies saying that statistically, companies have found that it is more profitable to pay employees higher wages, because they are more productive. Or that it is more profitable to pay employees their health care benefits, because they produce more. But when they tell me this, I point out to them (at the risk of irritation), two things:

First, notice that none of these are ethical arguments, these are cost-benefit analyses. In other words, none of these analyses are made on the basis on whether these “ethical moves” should be adopted because they are ethically good for the employees (who are, ethically speaking, ends-in-themselves). Instead, my friends argue this on the basis of the profit motive, which, in itself, is not an ethical value. In Kant’s own words, even if corporations end up adopting these policies, they would do it in conformity with ethical duty, not for ethical duty, i.e. they will fulfill their duty out of reasons completely foreign to the ethical reasons for duty.
Yes, we agree! All of these studies are true, yet, multinational corporations have not made the move towards that, which means that they have actually made cost-benefit analyses on the issue, and determined that it is not profitable to make such a move towards higher wages or pay health care to their sweatshop employees.

Number 2 needs an explanation, which goes at the root of this problem. Corporations themselves are made to make money to their shareholders at the end of any given quarter, which means that, structurally speaking, they can only be responsible to their shareholders. There is no such thing as “corporate social responsibility“, it is a fiction. It creates the idea that corporations can actually be socially responsible and make money because they are socially responsible. Again, nothing further from the truth. As many scholars have pointed out, corporations have a responsibility only to their shareholders, and to place their interests above everything else, even the public good. And even supposing that their shareholders and CEOs all want to act ethically, the environment of competition for profit, which is essential to capitalism, would drive them out of business. There are too many factors at hand for any enterprise: production costs, tax payments, salaries, degree in which consumers buy products … (i.e. supply and effective demand). If you adopt an ethical policy that translates into higher costs, but your competition has chosen not to recognize such policies for itself and is making more money because of that, then you will have no choice but to reduce all the so-called “code of ethics” to keep the corporation working. This is the reason why the corporate market cannot self-regulate in order to benefit society. External intervention is needed, especially using jurisprudence to regulate these corporations.

But … But … Corporations Do Serve People!

Yeah, yeah … I hear you screaming at me saying that corporations serve the people. Actually, they don’t. They serve themselves! Let me clarify this for you.

For example, one person will tell me: ”Pedro, these corporations have charities and help people around the world.” This is true, and there is no denying that. But there are two points I want to clarify. First, regardless of whether the CEO actually feels something for the poor or not, at the end of the day, he or she will have to be accountable to the shareholder or he/she is removed. Therefore, these charities, in some way should, in the long run, be profitable. For example, in Microsoft’s case, it has helped schools by providing them with free computers. However, these computers will have Windows installed on them. Of course, initially there will be a loss, but it will have a captive market for a great while with the use of the operative system. Other charities given by other companies have similar traps, or it can be a simple way of showing positive publicity, which, in the end, incline people to buy their services. However, how good are these charities in contrast with their externalities? Do the externalities neutralize the charity work? For instance, it is still fresh in my memory how Walmart offered a children’s charity using Kathy Lee Gifford as spokeswoman, while at the same time mercilesly exploiting children in El Salvador. Well … they stopped exploiting children there …. so they can exploit them in China.

We could ask whether corporations serve well when they are paid. This is not always true, but … hey! … for the sake of the argument, let’s say that this is the case (at least in most cases). Yet, the problem arises again: if they serve the public, it is only for one reason and one reason alone: to make their shareholders rich! In other words, it is for the shareholders that they serve us, it is not for us that they serve the shareholders.

What some people, especially in the business world, do not understand is that corporations do not exist to teach anyone about responsibility, nor to value jobs, nor to value our love for our neighbor, nor family values, nor ethical values of any kind. They are there for one reason: to make money — the bottom line.

We should recognize that ethics and the economy are two very different spheres. Even when the law recognizes corporations as “legal persons”, they are not moral beings, that is, beings who can make decisions on the basis of right or wrong, or decide on the basis of ethical values, virtues or vices, but rather on the basis on what makes more money. If fulfilling an ethical duty makes money, then a corporation will do so, but only for the money. They act in conformity with duty, but not for duty.

So, are You Suggesting that There Should Not Be Business Ethics?

I would never remotely suggest that. My point is this: corporations, like buildings, houses, cars, sharks, or flowers, are neither good nor evil, they are amoral. To claim that a business can be moral is to commit level confusion. The dynamics of the economy and the dynamics of ethical duty are remarkably different. You and I are moral beings, we make choices on the basis of what is ethically good, and the values society should hold. This is not the case of corporations. Yes, they are made of people who are like you and me, yet to make it work these same people make decisions which are directed at making the machine work. There can be a genuine field of business ethics when two things are accepted:

That ethics and economy are essentially different: being ethical does not guarantee success (if by “success” you mean rich and you’ll enterprise will survive overall competition), and that being successful does not imply that you are successful because you are ethical. Therefore, corporations are not moral agents. You and I are moral agents, but corporations are amoral entities.
That corporations are just a means, not ends-in-themselves: This is conceptually understood in current conversations regarding business ethics, unfortunately it does not translate into actions. Some people actually believe that by placing people in business ethics courses will make people decide ethically. The problem is that the corporate machine is built in such a way that internally making money and the corporation itself are not considered as a means to an end, but ends-in-themselves.

This last point is one that many business people have not fully digested, and one of the reasons why people who call for privatization of everything, and turning all the commons to private property, do not get about corporations. Corporations are only accountable to shareholders, not to you or me as persons. Therefore, giving a public institution to a private enterprise is giving it to an unaccountable tyranny (in the words of Noam Chomsky). This is not an axaggeration, it is the truth. If you give an institution to serve a corporation, the corporation will use it for its own ends, not ours.

Whether a public or private corporation should be in charge of x or y is not an issue of whether there are “too many restrictions” to the economy, or if there is too little. These matters only make sense if the economy and public institutions together serve the public good with efficiency. Contrary to some dogmas, sometimes public institutions can be more efficient than private, and sometimes private can be grossly inefficient. Sometimes public institutions can be messy, and it throws a lot of money to the garbage, sometimes private institutions do the same. How the two relate in order to serve us better is an interesting debate to talk about in applied ethics, which is not going to occur as long as we keep believing in fictional “CSR”s.

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P.S. – I will have to say, though, that the book Business Ethics: a Textbook with Cases written by William H. Shaw seems to be a glaring exception to the rule. It discusses all subjects regarding theoretical ethics. If you look at most other textbooks, they fit the profile I described above.