Thursday, May 25, 2006

Column on Business Ethics

Business Ethics Distortions

Tibor R. Machan

Ethics is an ancient discipline, mostly tackled by philosophers. It
addresses the issue of how human beings should choose to live, what
standards should guide them in deciding what conduct is right, what is
wrong. And it concentrates mainly on broad principles or virtues?honesty,
generosity, temperance, courage, moderation, prudence, and so forth.
Philosophers tend to argue about the exactly ranking of these principles
or virtues, as well as about whether ethics is possible at all.

There has always been some interest on the part of certain philosophers
in the application of ethics to specific areas of human life?parenting,
farming, medicine, business, engineering, and so forth. For some years,
however, the study of business affairs was completely taken over by
economics, which is deemed a social science. Thus ethics had been set
aside where business was being investigated?it was assumed, largely, that
what happens in commerce and business goes on as a kind of natural
process, driven by the innate human impulse to prosper?in other words, the
profit motive.

In time, however, it became evident that business, like other special
areas of human concern like medicine or law, also needed to be studied
with an eye to its special ethical dimensions. That gave rise to the
currently widespread and even fashionable academic field of business

Apart from cynics, who say ?business ethics? is an oxymoron, those who
study the field tend to bring to it the most prominent ethical theories
within the philosophical community. Those mainly include
utilitarianism?strive to promote the general welfare?and altruism?serve
your fellow human beings first and foremost. Yet, oddly, this is not what
those who study the special ethical dimensions of, say, art or science or
even medicine focus on.

In these other professions it is widely understood that the ethical
guidelines arise from the purpose that?s to be served by the profession.
So that education, for example, should generally be guided by the goal it
serves?imparting knowledge and understanding to students. That purpose, of
course, must be pursued without doing violence to ordinary ethical
principles or virtues. So educators may not ignore honesty and generosity
and prudence as they do their work. But their basic purpose is to teach.

For the profession of business, however, this idea has been undermined.
Instead of acknowledging that those in the profession ought to strive to
produce wealth?heed the bottom line, for which they are hired by the
owners of firms, investors, shareholders, and so forth?many teachers of
business ethics have embraced the doctrine of Corporate Social
Responsibility. This basically holds that the primary goal of those in
business must be to advance the social or common good, never mind their
professional obligations to those who have hired them, their clients.

Now business is unabashedly committed to promoting prosperity, to seeking
a profit, and this goal has irked a great many people, specially many
philosophers. Too many of them have embraced, instead, the ethical view
that our actions should serve humanity or other people, not our own well
being or success in life. So unlike what seem more like service
professions?thus appear mainly be helpful?business is more directly aimed
to advancing the benefits of the owners.

Of course, in medicine this holds as well?doctors and health
professionals are hired to serve the well being of their patients or
clients, not of society or someone down the street. So there?s nothing off
about an ethical perspective in which the emphasis is on benefiting
clients. But with health this seems less objectionable than with wealth,
for a variety of reasons. The pursuit of prosperity has always been
problematic among philosophers and theologians, starting with Socrates and
Christ all the way to today?s teachers in the field.

Nonetheless, the idea that business must be aimed to benefit society is
highly dubious. It comes from the historical accident that it was the
monarch who initially set up business corporations. But that?s because it
used to be the monarch who set up everything?religion, science, the arts,
you name it.

Since monarchies have been discredited as fraudulent?no one is really
appointed by God to run other people?s lives, to own and care for the
realm?businesses, too, are primarily private enterprises, not state
projects. And this is where the myth of CSR breaks down. Corporate
managers have as their goal to serve their owners, not society, humanity,
the nation, or anything of that sort. This doesn?t mean those in business
have no other responsibilities than to enrich the folks who hired them.
But while on the job, that?s mainly what they ought to be doing.

Machan is RC Hoiles Professor of business ethics & free enterprise at the
Argyros School of Business & Economics, Chapman University, and a research
fellow at the Hoover Institution, Stanford University. He also advises
Freedom Communications, Inc., on public policy issues.

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