what is more important ethics or profit essay

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What Are Business Ethics & Why Are They Important?

Business professional pressing a graphic that reads "Business Ethics" and is surrounded by icons

27 Jul 2023

From artificial intelligence to facial recognition technology, organizations face an increasing number of ethical dilemmas. While innovation can aid business growth, it can also create opportunities for potential abuse.

“The long-term impacts of a new technology—both positive and negative—may not become apparent until years after it’s introduced,” says Harvard Business School Professor Nien-hê Hsieh in the online course Leadership, Ethics, and Corporate Accountability . “For example, the impact of social media on children and teenagers didn’t become evident until we watched it play out over time.”

If you’re a current or prospective leader concerned about navigating difficult situations, here's an overview of business ethics, why they're important, and how to ensure ethical behavior in your organization.

Access your free e-book today.

What Are Business Ethics?

Business ethics are principles that guide decision-making . As a leader, you’ll face many challenges in the workplace because of different interpretations of what's ethical. Situations often require navigating the “gray area,” where it’s unclear what’s right and wrong.

When making decisions, your experiences, opinions, and perspectives can influence what you believe to be ethical, making it vital to:

Be transparent.
Invite feedback.
Consider impacts on employees, stakeholders, and society.
Reflect on past experiences to learn what you could have done better.

“The way to think about ethics, in my view, is: What are the externalities that your business creates, both positive and negative?” says Harvard Business School Professor Vikram Gandhi in Leadership, Ethics, and Corporate Accountability . “And, therefore, how do you actually increase the positive element of externalities? And how do you decrease the negative?”

Related: Why Managers Should Involve Their Team in the Decision-Making Process

Ethical Responsibilities to Society

Promoting ethical conduct can benefit both your company and society long term.

“I'm a strong believer that a long-term focus is what creates long-term value,” Gandhi says in Leadership, Ethics, and Corporate Accountability . “So you should get shareholders in your company that have that same perspective.”

Prioritizing the triple bottom line is an effective way for your business to fulfill its environmental responsibilities and create long-term value. It focuses on three factors:

Profit: The financial return your company generates for shareholders
People: How your company affects customers, employees, and stakeholders
Planet: Your company’s impact on the planet and environment

Check out the video below to learn more about the triple bottom line, and subscribe to our YouTube channel for more explainer content!

Ethical and corporate social responsibility (CSR) considerations can go a long way toward creating value, especially since an increasing number of customers, employees, and investors expect organizations to prioritize CSR. According to the Conscious Consumer Spending Index , 67 percent of customers prefer buying from socially responsible companies.

To prevent costly employee turnover and satisfy customers, strive to fulfill your ethical responsibilities to society.

Ethical Responsibilities to Customers

As a leader, you must ensure you don’t mislead your customers. Doing so can backfire, negatively impacting your organization’s credibility and profits.

Actions to avoid include:

Greenwashing : Taking advantage of customers’ CSR preferences by claiming your business practices are sustainable when they aren't.
False advertising : Making unverified or untrue claims in advertisements or promotional material.
Making false promises : Lying to make a sale.

These unethical practices can result in multi-million dollar lawsuits, as well as highly dissatisfied customers.

Ethical Responsibilities to Employees

You also have ethical responsibilities to your employees—from the beginning to the end of their employment.

One area of business ethics that receives a lot of attention is employee termination. According to Leadership, Ethics, and Corporate Accountability , letting an employee go requires an individualized approach that ensures fairness.

Not only can wrongful termination cost your company upwards of $100,000 in legal expenses , it can also negatively impact other employees’ morale and how they perceive your leadership.

Ethical business practices have additional benefits, such as attracting and retaining talented employees willing to take a pay cut to work for a socially responsible company. Approximately 40 percent of millennials say they would switch jobs to work for a company that emphasizes sustainability.

Ultimately, it's critical to do your best to treat employees fairly.

“Fairness is not only an ethical response to power asymmetries in the work environment,” Hsieh says in the course. “Fairness—and having a successful organizational culture–can benefit the organization economically and legally.”

Leadership, Ethics, and Corporate Accountability | Develop a toolkit for making tough leadership decisions| Learn More

Why Are Business Ethics Important?

Failure to understand and apply business ethics can result in moral disengagement .

“Moral disengagement refers to ways in which we convince ourselves that what we’re doing is not wrong,” Hsieh says in Leadership, Ethics, and Corporate Accountability . “It can upset the balance of judgment—causing us to prioritize our personal commitments over shared beliefs, rules, and principles—or it can skew our logic to make unethical behaviors appear less harmful or not wrong.”

Moral disengagement can also lead to questionable decisions, such as insider trading .

“In the U.S., insider trading is defined in common, federal, and state laws regulating the opportunity for insiders to benefit from material, non-public information, or MNPI,” Hsieh explains.

This type of unethical behavior can carry severe legal consequences and negatively impact your company's bottom line.

“If you create a certain amount of harm to a society, your customers, or employees over a period of time, that’s going to have a negative impact on your economic value,” Gandhi says in the course.

This is reflected in over half of the top 10 largest bankruptcies between 1980 and 2013 that resulted from unethical behavior. As a business leader, strive to make ethical decisions and fulfill your responsibilities to stakeholders.

How to Implement Business Ethics

To become a more ethical leader, it's crucial to have a balanced, long-term focus.

“It's very important to balance the fact that, even if you're focused on the long term, you have to perform in the short term as well and have a very clear, articulated strategy around that,” Gandhi says in Leadership, Ethics, and Corporate Accountability .

Making ethical decisions requires reflective leadership.

“Reflecting on complex, gray-area decisions is a key part of what it means to be human, as well as an effective leader,” Hsieh says. “You have agency. You must choose how to act. And with that agency comes responsibility.”

Related: Why Are Ethics Important in Engineering?

Hsieh advises asking the following questions:

Are you using the “greater good” to justify unethical behavior?
Are you downplaying your actions to feel better?

“Asking these and similar questions at regular intervals can help you notice when you or others may be approaching the line between making a tough but ethical call and justifying problematic actions,” Hsieh says.

How to Become a More Effective Leader | Access Your Free E-Book | Download Now

Become a More Ethical Leader

Learning from past successes and mistakes can enable you to improve your ethical decision-making.

“As a leader, when trying to determine what to do, it can be helpful to start by simply asking in any given situation, ‘What can we do?’ and ‘What would be wrong to do?’” Hsieh says.

Many times, the answers come from experience.

Gain insights from others’ ethical decisions, too. One way to do so is by taking an online course, such as Leadership, Ethics, and Corporate Accountability , which includes case studies that immerse you in real-world business situations, as well as a reflective leadership model to inform your decision-making.

Ready to become a better leader? Enroll in Leadership, Ethics, and Corporate Accountability —one of our online leadership and management courses —and download our free e-book on how to be a more effective leader.

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1.3: Ethics and Profitability

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lEARNING oBJECTIVES

By the end of this section, you will be able to:

Differentiate between short-term and long-term perspectives
Differentiate between stockholder and stakeholder
Discuss the relationship among ethical behavior, goodwill, and profit
Explain the concept of corporate social responsibility

Few directives in business can override the core mission of maximizing shareholder wealth, and today that particularly means increasing quarterly profits. Such an intense focus on one variable over a short time (i.e., a short-term perspective ) leads to a short-sighted view of what constitutes business success.

Measuring true profitability, however, requires taking a long-term perspective. We cannot accurately measure success within a quarter of a year; a longer time is often required for a product or service to find its market and gain traction against competitors, or for the effects of a new business policy to be felt. Satisfying consumers’ demands, going green, being socially responsible, and acting above and beyond the basic requirements all take time and money. However, the extra cost and effort will result in profits in the long run. If we measure success from this longer perspective, we are more likely to understand the positive effect ethical behavior has on all who are associated with a business.

Profitability and Success: Thinking Long Term

Decades ago, some management theorists argued that a conscientious manager in a for-profit setting acts ethically by emphasizing solely the maximization of earnings. Today, most commentators contend that ethical business leadership is grounded in doing right by all stakeholders directly affected by a firm’s operations, including, but not limited to, stockholder s, or those who own shares of the company’s stock. That is, business leaders do right when they give thought to what is best for all who have a stake in their companies. Not only that, firms actually reap greater material success when they take such an approach, especially over the long run.

Nobel Prize–winning economist Milton Friedman stated in a now-famous New York Times Magazine article in 1970 that the only “social responsibility of a business is to increase its profits.” 2 This concept took hold in business and even in business school education. However, although it is certainly permissible and even desirable for a company to pursue profitability as a goal, managers must also have an understanding of the context within which their business operates and of how the wealth they create can add positive value to the world. The context within which they act is society, which permits and facilitates a firm’s existence.

Thus, a company enters a social contract with society as whole, an implicit agreement among all members to cooperate for social benefits. Even as a company pursues the maximizing of stockholder profit, it must also acknowledge that all of society will be affected to some extent by its operations. In return for society’s permission to incorporate and engage in business, a company owes a reciprocal obligation to do what is best for as many of society’s members as possible, regardless of whether they are stockholders. Therefore, when applied specifically to a business, the social contract implies that a company gives back to the society that permits it to exist, benefiting the community at the same time it enriches itself.

Link to learning

What happens when a bank decides to break the social contract? This press conference held by the National Whistleblowers Center describes the events surrounding the $104 million whistleblower reward given to former UBS employee Bradley Birkenfeld by the U.S. Internal Revenue Service. While employed at UBS, Switzerland’s largest bank, Birkenfeld assisted in the company’s illegal offshore tax business, and he later served forty months in prison for conspiracy. But he was also the original source of incriminating information that led to a Federal Bureau of Investigation examination of the bank and to the U.S. government’s decision to impose a $780 million fine on UBS in 2009. In addition, Birkenfeld turned over to investigators the account information of more than 4,500 U.S. private clients of UBS. 3

In addition to taking this more nuanced view of profits, managers must also use a different time frame for obtaining them. Wall Street’s focus on periodic (i.e., quarterly and annual) earnings has led many managers to adopt a short-term perspective, which fails to take into account effects that require a longer time to develop. For example, charitable donations in the form of corporate assets or employees’ volunteered time may not show a return on investment until a sustained effort has been maintained for years. A long-term perspective is a more balanced view of profit maximization that recognizes that the impacts of a business decision may not manifest for a longer time.

As an example, consider the business practices of Toyota when it first introduced its vehicles for sale in the United States in 1957. For many years, Toyota was content to sell its cars at a slight loss because it was accomplishing two business purposes: It was establishing a long-term relationship of trust with those who eventually would become its loyal U.S. customers, and it was attempting to disabuse U.S. consumers of their belief that items made in Japan were cheap and unreliable. The company accomplished both goals by patiently playing its long game, a key aspect of its operational philosophy, “The Toyota Way,” which includes a specific emphasis on long-term business goals, even at the expense of short-term profit. 4

What contributes to a corporation’s positive image over the long term? Many factors contribute, including a reputation for treating customers and employees fairly and for engaging in business honestly. Companies that act in this way may emerge from any industry or country. Examples include Fluor, the large U.S. engineering and design firm; illycaffè, the Italian food and beverage purveyor; Marriott, the giant U.S. hotelier; and Nokia, the Finnish telecommunications retailer. The upshot is that when consumers are looking for an industry leader to patronize and would-be employees are seeking a firm to join, companies committed to ethical business practices are often the first to come to mind.

Why should stakeholders care about a company acting above and beyond the ethical and legal standards set by society? Simply put, being ethical is simply good business. A business is profitable for many reasons, including expert management teams, focused and happy employees, and worthwhile products and services that meet consumer demand. One more and very important reason is that they maintain a company philosophy and mission to do good for others.

Year after year, the nation’s most admired companies are also among those that had the highest profit margins. Going green, funding charities, and taking a personal interest in employee happiness levels adds to the bottom line! Consumers want to use companies that care for others and our environment. During the years 2008 and 2009, many unethical companies went bankrupt. However, those companies that avoided the “quick buck,” risky and unethical investments, and other unethical business practices often flourished. If nothing else, consumer feedback on social media sites such as Yelp and Facebook can damage an unethical company’s prospects.

CASES FROM THE REAL WORLD

Competition and the markers of business success.

Perhaps you are still thinking about how you would define success in your career. For our purposes here, let us say that success consists simply of achieving our goals. We each have the ability to choose the goals we hope to accomplish in business, of course, and, if we have chosen them with integrity, our goals and the actions we take to achieve them will be in keeping with our character.

Warren Buffet ( Figure 1.4 ), whom many consider the most successful investor of all time, is an exemplar of business excellence as well as a good potential role model for professionals of integrity and the art of thinking long term. He had the following to say: “Ultimately, there’s one investment that supersedes all others: Invest in yourself. Nobody can take away what you’ve got in yourself, and everybody has potential they haven’t used yet. . . . You’ll have a much more rewarding life not only in terms of how much money you make, but how much fun you have out of life; you’ll make more friends the more interesting person you are, so go to it, invest in yourself.” 5

An image of Warren buffet on the left and Barack Obama on the right. Both are seated and facing each other.

The primary principle under which Buffett instructs managers to operate is: “Do nothing you would not be happy to have an unfriendly but intelligent reporter write about on the front page of a newspaper.” 6 This is a very simple and practical guide to encouraging ethical business behavior on a personal level. Buffett offers another, equally wise, principle: “Lose money for the firm, even a lot of money, and I will be understanding; lose reputation for the firm, even a shred of reputation, and I will be ruthless.” 7 As we saw in the example of Toyota, the importance of establishing and maintaining trust in the long term cannot be underestimated.

For more on Warren Buffett’s thoughts about being both an economic and ethical leader, watch this interview that appeared on the PBS NewsHour on June 6, 2017.

Stockholders, Stakeholders, and Goodwill

Earlier in this chapter, we explained that stakeholders are all the individuals and groups affected by a business’s decisions. Among these stakeholders are stockholders (or shareholder s), individuals and institutions that own stock (or shares) in a corporation. Understanding the impact of a business decision on the stockholder and various other stakeholders is critical to the ethical conduct of business. Indeed, prioritizing the claims of various stakeholders in the company is one of the most challenging tasks business professionals face. Considering only stockholders can often result in unethical decisions; the impact on all stakeholders must be considered and rationally assessed.

Managers do sometimes focus predominantly on stockholders, especially those holding the largest number of shares, because these powerful individuals and groups can influence whether managers keep their jobs or are dismissed (e.g., when they are held accountable for the company’s missing projected profit goals). And many believe the sole purpose of a business is, in fact, to maximize stockholders’ short-term profits. However, considering only stockholders and short-term impacts on them is one of the most common errors business managers make. It is often in the long-term interests of a business not to accommodate stockowners alone but rather to take into account a broad array of stakeholders and the long-term and short-term consequences for a course of action.

Here is a simple strategy for considering all your stakeholders in practice. Divide your screen or page into three columns; in the first column, list all stakeholders in order of perceived priority ( Figure 1.5 ). Some individuals and groups play more than one role. For instance, some employees may be stockholders, some members of the community may be suppliers, and the government may be a customer of the firm. In the second column, list what you think each stakeholder group’s interests and goals are. For those that play more than one role, choose the interests most directly affected by your actions. In the third column, put the likely impact of your business decision on each stakeholder. This basic spreadsheet should help you identify all your stakeholders and evaluate your decision’s impact on their interests. If you would like to add a human dimension to your analysis, try assigning some of your colleagues to the role of stakeholders and reexamine your analysis.

An image of a legal pad with a drawn diagram. The diagram is labeled “Considering Stakeholder Impact” and divided into three columns. The first column is labeled “Stakeholders (in order of perceived priority)”. The second column is labeled “Interests and Goals of Stakeholder”. The third column is labeled “Impact of Action/Decision on Stakeholder”.

The positive feeling stakeholders have for any particular company is called goodwill , which is an important component of almost any business entity, even though it is not directly attributable to the company’s assets and liabilities. Among other intangible assets, goodwill might include the worth of a business’s reputation, the value of its brand name, the intellectual capital and attitude of its workforce, and the loyalty of its established customer base. Even being socially responsible generates goodwill. The ethical behavior of managers will have a positive influence on the value of each of those components. Goodwill cannot be earned or created in a short time, but it can be the key to success and profitability.

A company’s name, its corporate logo, and its trademark will necessarily increase in value as stakeholders view that company in a more favorable light. A good reputation is essential for success in the modern business world, and with information about the company and its actions readily available via mass media and the Internet (e.g., on public rating sites such as Yelp), management’s values are always subject to scrutiny and open debate. These values affect the environment outside and inside the company. The corporate culture , for instance, consists of shared beliefs, values, and behaviors that create the internal or organizational context within which managers and employees interact. Practicing ethical behavior at all levels—from CEO to upper and middle management to general employees—helps cultivate an ethical corporate culture and ethical employee relations.

Learning Objectives

Which Corporate Culture Do You Value?

Imagine that upon graduation you have the good fortune to be offered two job opportunities. The first is with a corporation known to cultivate a hard-nosed, no-nonsense business culture in which keeping long hours and working intensely are highly valued. At the end of each year, the company donates to numerous social and environmental causes. The second job opportunity is with a nonprofit recognized for a very different culture based on its compassionate approach to employee work-life balance. It also offers the chance to pursue your own professional interests or volunteerism during a portion of every work day. The first job offer pays 20 percent more per year.

Critical Thinking

Which of these opportunities would you pursue and why?
How important an attribute is salary, and at what point would a higher salary override for you the nonmonetary benefits of the lower-paid position?

Positive goodwill generated by ethical business practices, in turn, generates long-term business success. As recent studies have shown, the most ethical and enlightened companies in the United States consistently outperform their competitors. 8 Thus, viewed from the proper long-term perspective, conducting business ethically is a wise business decision that generates goodwill for the company among stakeholders, contributes to a positive corporate culture, and ultimately supports profitability.

You can test the validity of this claim yourself. When you choose a company with which to do business, what factors influence your choice? Let us say you are looking for a financial advisor for your investments and retirement planning, and you have found several candidates whose credentials, experience, and fees are approximately the same. Yet one of these firms stands above the others because it has a reputation, which you discover is well earned, for telling clients the truth and recommending investments that seemed centered on the clients’ benefit and not on potential profit for the firm. Wouldn’t this be the one you would trust with your investments?

Or suppose one group of financial advisors has a long track record of giving back to the community of which it is part. It donates to charitable organizations in local neighborhoods, and its members volunteer service hours toward worthy projects in town. Would this group not strike you as the one worthy of your investments? That it appears to be committed to building up the local community might be enough to persuade you to give it your business. This is exactly how a long-term investment in community goodwill can produce a long pipeline of potential clients and customers.

The Equifax Data Breach

In 2017, from mid-May to July, hackers gained unauthorized access to servers used by Equifax, a major credit reporting agency, and accessed the personal information of nearly one-half the U.S. population. 9 Equifax executives sold off nearly $2 million of company stock they owned after finding out about the hack in late July, weeks before it was publicly announced on September 7, 2017, in potential violation of insider trading rules. The company’s shares fell nearly 14 percent after the announcement, but few expect Equifax managers to be held liable for their mistakes, face any regulatory discipline, or pay any penalties for profiting from their actions. To make amends to customers and clients in the aftermath of the hack, the company offered free credit monitoring and identity-theft protection. On September 15, 2017, the company’s chief information officer and chief of security retired. On September 26, 2017, the CEO resigned, days before he was to testify before Congress about the breach. To date, numerous government investigations and hundreds of private lawsuits have been filed as a result of the hack.

Which elements of this case might involve issues of legal compliance? Which elements illustrate acting legally but not ethically? What would acting ethically and with personal integrity in this situation look like?
How do you think this breach will affect Equifax’s position relative to those of its competitors? How might it affect the future success of the company?
Was it sufficient for Equifax to offer online privacy protection to those whose personal information was hacked? What else might it have done?

A Brief Introduction to Corporate Social Responsibility

If you truly appreciate the positions of your various stakeholders, you will be well on your way to understanding the concept of corporate social responsibility (CSR) . CSR is the practice by which a business views itself within a broader context, as a member of society with certain implicit social obligations and environmental responsibilities. As previously stated, there is a distinct difference between legal compliance and ethical responsibility, and the law does not fully address all ethical dilemmas that businesses face. CSR ensures that a company is engaging in sound ethical practices and policies in accordance with the company’s culture and mission, above and beyond any mandatory legal standards. A business that practices CSR cannot have maximizing shareholder wealth as its sole purpose, because this goal would necessarily infringe on the rights of other stakeholders in the broader society. For instance, a mining company that disregards its corporate social responsibility may infringe on the right of its local community to clean air and water if it pursues only profit. In contrast, CSR places all stakeholders within a proper contextual framework.

An additional perspective to take concerning CSR is that ethical business leaders opt to do good at the same time that they do well. This is a simplistic summation, but it speaks to how CSR plays out within any corporate setting. The idea is that a corporation is entitled to make money, but it should not only make money. It should also be a good civic neighbor and commit itself to the general prospering of society as a whole. It ought to make the communities of which it is part better at the same time it pursues legitimate profit goals. These ends are not mutually exclusive, and it is possible—indeed, praiseworthy—to strive for both. When a company approaches business in this fashion, it is engaging in a commitment to corporate social responsibility.

Link to Learning

U.S. entrepreneur Blake Mycoskie has created a unique business model combining both for-profit and nonprofit philosophies in an innovative demonstration of corporate social responsibility. The company he founded, TOMS Shoes, donates one pair of shoes to a child in need for every pair sold. As of May 2018, the company has provided more than 75 million pairs of shoes to children in seventy countries. 10

1.2 Ethics and Profitability

Learning objectives.

By the end of this section, you will be able to:

Differentiate between short-term and long-term perspectives
Differentiate between stockholder and stakeholder
Discuss the relationship among ethical behavior, goodwill, and profit
Explain the concept of corporate social responsibility

Profitability and Success: Thinking Long Term

Decades ago, some management theorists argued that a conscientious manager in a for-profit setting acts ethically by emphasizing solely the maximization of earnings. Today, most commentators contend that ethical business leadership is grounded in doing right by all stakeholders directly affected by a firm’s operations, including, but not limited to, stockholder s , or those who own shares of the company’s stock. That is, business leaders do right when they give thought to what is best for all who have a stake in their companies. Not only that, firms actually reap greater material success when they take such an approach, especially over the long run.

Link to Learning

Cases from the Real World

Competition and the markers of business success.

For more on Warren Buffett’s thoughts about being both an economic and ethical leader, watch this interview that appeared on the PBS NewsHour on June 6, 2017.

Stockholders, Stakeholders, and Goodwill

Earlier in this chapter, we explained that stakeholders are all the individuals and groups affected by a business’s decisions. Among these stakeholders are stockholders (or shareholder s ), individuals and institutions that own stock (or shares) in a corporation. Understanding the impact of a business decision on the stockholder and various other stakeholders is critical to the ethical conduct of business. Indeed, prioritizing the claims of various stakeholders in the company is one of the most challenging tasks business professionals face. Considering only stockholders can often result in unethical decisions; the impact on all stakeholders must be considered and rationally assessed.

What Would You Do?

Which corporate culture do you value.

Critical Thinking

Which of these opportunities would you pursue and why?
How important an attribute is salary, and at what point would a higher salary override for you the nonmonetary benefits of the lower-paid position?

The Equifax Data Breach

Which elements of this case might involve issues of legal compliance? Which elements illustrate acting legally but not ethically? What would acting ethically and with personal integrity in this situation look like?
How do you think this breach will affect Equifax’s position relative to those of its competitors? How might it affect the future success of the company?
Was it sufficient for Equifax to offer online privacy protection to those whose personal information was hacked? What else might it have done?

A Brief Introduction to Corporate Social Responsibility

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Access for free at https://openstax.org/books/business-ethics/pages/1-introduction

Authors: Stephen M. Byars, Kurt Stanberry
Publisher/website: OpenStax
Book title: Business Ethics
Publication date: Sep 24, 2018
Location: Houston, Texas
Book URL: https://openstax.org/books/business-ethics/pages/1-introduction
Section URL: https://openstax.org/books/business-ethics/pages/1-2-ethics-and-profitability

© Mar 31, 2023 OpenStax. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution License . The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo are not subject to the Creative Commons license and may not be reproduced without the prior and express written consent of Rice University.

Business Ethics Journal Review

Edited by alexei marcoux & chris macdonald — issn 2326-7526.

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Student’s Guide to Writing Critical Essays in Business Ethics (and beyond)

Here is some advice for writing critical essays, in business ethics but also in other fields. There is of course much more to say on the topic, but this is a start.

Writing your own critical essay:

What kinds of criticisms should you offer in your essay? There are a nearly infinite number of errors or problems that you might spot in an essay or book that you want to critique. Here are a few common ones to look for, to get you started:

Point out one or more logical fallacies. Did the author present a false dilemma , for example? Or an argument from ignorance ? Has the author presented a false analogy or a hasty generalization ?
Critique the scope of the author’s claim. For example, does the author claim that his or her conclusion applies to all cases, rather than just to the small number of cases he or she has actually argued for?
Point out unjustified assumptions. Has the author made questionable assumptions about some matter of fact, without providing evidence? Alternatively, has the author assumed that readers share some questionable ethical starting point, perhaps a belief in a particular debatable principle?
Point out internal contradictions. Does the author say two things that, perhaps subtly, contradict each other?
Point out undesirable implications / consequences. Does the author’s position imply, perhaps accidentally, some further conclusion that the author (or audience) is unlikely to want to accept, upon reflection?

In general, a good critical essay should:

Describe and explain in neutral terms the article or book being critiqued. Before you start offering criticism, you should demonstrate that you understand the point of view you are critiquing.
Be modest. Your goal should be to offer some insight, rather than to win a debate. Rather than to “show that Smith is wrong” or “prove that Sen’s view is incorrect,” you should set your aims on some more reasonable goal, such as “casting doubt” on the view you are critiquing, or “suggesting reason why so-and-so should modify her view.”
Be fair. Sometimes this is referred to as the “principle of charity.” It has nothing to do with donating money. Rather, it is about giving the other side what you owe them, namely a fair reading. Your goal is not to make the author whose work you are criticizing sound dumb. Rather, the goal is to make her sound smart, but then to make yourself sound smart, too, but showing how her view could be improved.
Be well structured . Professors love structure. Remember: a critical essay is not just a bunch of ideas; it is an orderly attempt to convince someone (in most cases, your professor) of a particular point of view. Your ideas will only have real punch if you put them in a suitable structure. That’s not all that hard. For example, make sure your opening paragraph acts as a roadmap for what follows — telling the reader where you’re going and how you propose to get there. Make sure each paragraph in the body of your essay has a main point (a point connected to the goal of your essay!) and that its point is clearly explained.
Stick to two or maybe three main arguments . “The three main problems with Jones’s argument are x, y, and z.”
Be clear. That means not just that your essay should be clearly structured, but also that each sentence should be clear. Proof-reading is important: get someone with good writing skills to proof-read your essay for you. If you can’t do that before your deadline, you can proof-read your essay yourself by reading it out loud. We’re serious. It is much easier to spot errors in your own writing if you read out loud.

A few more tips:

Cite your sources carefully. Use whichever citation method your professor says to use. If in doubt, use one of the established methods (such as APA or Chicago ). But whatever you do, make sure to give credit to the people whose ideas you use, if you want to avoid being charged with plagiarism.
Use what you’ve learned in class. Your professor would love nothing more than to know that you’ve been paying attention. So try to make use of some of the concepts discussed in class, or in your course textbook.
Don’t try to sound like an author. Just say what you want to say. Trying to sound like an author just leads people to use big words they don’t understand and to write complex sentences that overshoot their grammatical skills. Just write it more or less the way you would say it out loud, in short, clear sentences.
Follow instructions. Failing to follow instructions is easily the most common way students screw up when writing critical essays. Read the assignment instructions through carefully — twice! — and then if anything is unclear, ask your professor for clarification.

Looking for essay topics? Check out Business Ethics Highlights .

See also: The Concise Encyclopedia of Business Ethics

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Business Ethics

Exchange is fundamental to business. ‘Business’ can mean an activity of exchange. One entity (e.g., a person, a firm) “does business” with another when it exchanges a good or service for valuable consideration, i.e., a benefit such as money. ‘Business’ can also mean an entity that offers goods and services for exchange, i.e., that sells things. Target is a business. Business ethics can thus be understood as the study of the ethical dimensions of the exchange of goods and services, and of the entities that offer goods and services for exchange. This includes related activities such as the production, distribution, marketing, sale, and consumption of goods and services (cf. Donaldson & Walsh 2015; Marcoux 2006b).

Questions in business ethics are important and relevant to everyone. Almost all of us “do business”, or engage in a commercial transaction, almost every day. Many of us spend a major portion of our lives engaged in, or preparing to engage in, exchange activities, on our own or as part of organizations. Business activity shapes the world we live in, sometimes for good and sometimes for ill.

Business ethics in its current incarnation is a relatively new field, growing out of research by moral philosophers in the 1970’s and 1980’s. But scholars have been thinking about the ethical dimensions of commerce at least since the Code of Hammurabi (c. 1750 BC).

This entry summarizes research on central questions in business ethics, including: What sorts of things can be sold? How can they be sold? In whose interests should firms be managed? Who should manage them? What do firms owe their workers, and what do workers owe their firms? Should firms try to solve social problems? Is it permissible for them to try to influence political outcomes? Given the vastness of the field, of necessity certain questions are not addressed.

1. Varieties of business ethics

2. corporate moral agency, 3.1 ends: shareholder primacy or stakeholder balance, 3.2 means: control by shareholders or others too, 4. important frameworks for business ethics, 5.1 the limits of markets, 5.2 product safety and liability, 5.3 advertising, 5.5 pricing, 6.1 hiring and firing, 6.2 compensation, 6.3 meaningful work, 6.4 whistleblowing, 7.1 corporate social responsibility, 7.2 corporate political activity, 7.3 international business, 8. the status of business ethics, other internet resources, related entries.

Many people engaged in business activity, including accountants and lawyers, are professionals. As such, they are bound by codes of conduct promulgated by professional societies. Many firms also have detailed codes of conduct, developed and enforced by teams of ethics and compliance personnel. Business ethics can thus be understood as the study of professional practices, i.e., as the study of the content, development, enforcement, and effectiveness of the codes of conduct designed to guide the actions of people engaged in business activity. This entry will not consider this form of business ethics. Instead, it considers business ethics as an academic discipline.

The academic field of business ethics is shared by social scientists and normative theorists. But they address different questions. Social scientists try to answer descriptive questions like: Does corporate social performance improve corporate financial performance, i.e., does ethics pay (Vogel 2005; Zhao & Murrell 2021)? Why do people engage in unethical behavior (Bazerman & Tenbrunsel 2011; Werhane et al. 2013). How can we make them stop (Warren, Gaspar, & Laufer 2014)? I will not consider such questions here. This entry focuses on questions in normative business ethics, most of which are variants on the question: What is ethical and unethical in business?

Normative business ethicists (hereafter the qualifier ‘normative’ will be assumed) tend to accept the basic elements of capitalism. That is, they assume that the means of production can be privately owned and that markets—featuring voluntary exchanges between buyers and sellers at mutually agreeable prices—should play an important role in the allocation of resources. Those who reject capitalism will see some debates in business ethics (e.g., about firm ownership and control) as misguided.

Some entities “do business” with the goal of making a profit, and some do not. Pfizer and Target are examples of the former; Rutgers University and the Metropolitan Museum of Art are examples of the latter. An organization identified as a ‘business’ is typically understood to be one that seeks profit, and for-profit organizations are the ones that business ethicists focus on. But many of the ethical issues described below arise also for non-profit organizations and individual economic agents.

One way to think about business ethics is in terms of the moral obligations of agents engaged in business activity. Who can be a moral agent? Individual persons, obviously. What about firms? This is treated as the issue of “corporate moral agency” or “corporate moral responsibility”. Here ‘corporate’ does not refer to the corporation as a legal entity, but to a collective or group of individuals. To be precise, the question is whether firms are moral agents and morally responsible considered as ( qua ) firms, not considered as aggregates of individual members of firms.

We often think and speak as if corporations are morally responsible. We say things like “Costco treats its employees well” or “BP harmed the environment in the Gulf of Mexico”, and in doing so we appear to assign agency and responsibility to firms themselves (Dempsey 2003). We may wish to praise Costco and blame BP for their behavior. But this may be just a metaphorical way of speaking, or a shorthand way of referring to certain individuals who work in these firms (Velasquez 1983, 2003). Corporations are different in many ways from paradigm moral agents, viz., people. They don’t have minds, for one thing, or bodies, for another. The question is whether corporations are similar enough to people to warrant ascriptions of moral agency and responsibility.

In the business ethics literature, French is a seminal thinker on this topic. In early work (1979, 1984), he argued that firms are morally responsible for what they do, and indeed should be seen as “full-fledged” moral persons. He bases this conclusion on his claim that firms have internal decision-making structures, through which they cause events to happen, and act intentionally. Some early responses to French’s work accepted the claim that firms are moral agents, but denied that they are moral persons. Donaldson (1982) claims that firms cannot be persons because they lack important human capacities, such as the ability to pursue their own happiness (see also Werhane 1985). Other responses went further and denied that firms are moral agents. Velasquez (1983, 2003) argues that, while corporations can act, they cannot be held responsible for their actions, because those actions are brought about by the actions of their members. In later work, French (1995) recanted his claim that firms are moral persons, though not his claim that they are moral agents.

Debate about corporate moral agency and moral responsibility rages on in important new work (Orts & Smith 2017; Sepinwall 2016). One issue that has received sustained attention is choice. Appealing to discursive dilemmas, List & Pettit (2011) argue that the decisions of corporations can be independent of the decisions of their members (see also Copp 2006). This makes the corporation an autonomous agent, and since it can choose in the light of values, a morally responsible one. Another issue is intention. A minimal condition of moral agency is the ability to form intentions. Some deny that corporations can form them (S. Miller 2006; Rönnegard 2015). If we regard an intention as a mental state, akin to a belief or desire, or a belief/desire complex, they may be right. But not if we regard an intention in functionalist terms (Copp 2006; Hess 2014), as a plan (Bratman 1993), or in terms of reasons-responsiveness (Silver forthcoming). A third issue is emotion. Sepinwall (2017) argues that being capable of emotion is a necessary condition of moral responsibility, and since corporations aren’t capable of emotion, they aren’t morally responsible. Again, much depends on what it means to be capable of emotion. If this capability can be given a functionalist reading, as Björnsson & Hess (2017) claim, perhaps corporations are capable of emotion (see also Gilbert 2000). Pursuit of these issues lands one in the robust and sophisticated literature on collective responsibility and intentionality, where firms feature as a type of collective. (See the entries on collective responsibility , collective intentionality , and shared agency .)

Another question asked about corporate moral agency is: Does it matter? Perhaps BP itself was morally responsible for polluting the Gulf of Mexico. Perhaps certain individuals at BP were. What hangs on this? Some say: a lot. In some cases there may be no individual who is morally responsible for the firm’s behavior (List & Pettit 2011; Phillips 1995), and we need someone to blame, and perhaps punish. Blame may be the fitting response, and blame (and punishment) incentivizes the firm to change its behavior. Hasnas (2012) says very little hangs on this question. Even if firms are not morally responsible for the harms they cause, we can still require them to pay restitution, condemn their culture, and subject them to regulation. Moreover, Hasnas says, we should not blame and punish firms, for our blame and punishment inevitably lands on the innocent.

3. The ends and means of corporate governance

There is significant debate about the ends and means of corporate governance, i.e., about who firms should be managed for, and who should (ultimately) manage them. Much of this debate is carried on with the large publicly-traded corporation in view.

There are two main views about the proper ends of corporate governance. According to one view, firms should be managed in the best interests of shareholders. It is typically assumed that managing firms in shareholders’ best interests requires maximizing their wealth (cf. Hart & Zingales 2017; Robson 2019). This view is called “shareholder primacy” (Stout 2012) or—in order to contrast it more directly with its main rival (to be discussed below) “shareholder theory”. Shareholder primacy is the dominant view about the ends of corporate governance in business schools and in the business world.

A few writers argue for shareholder primacy on deontological grounds, i.e., by appealing to rights and duties. On this argument, shareholders own the firm, and hire managers to run it for them on the condition that the firm is managed in their interests. Shareholder primacy is thus based on a promise that managers make to shareholders (Friedman 1970; Hasnas 1998). In response, some argue that shareholders do not own the firm. They own stock, a type of corporate security (Bainbridge 2008; Stout 2012); the firm itself may be unowned (Strudler 2017). Others argue that managers do not make, explicitly or implicitly, any promises to shareholders to manage the firm in a certain way (Boatright 1994). More writers argue for shareholder primacy on consequentialist grounds. On this argument, managing firms in the interests of shareholders is more efficient than managing them in any other way (Hansmann & Kraakman 2001; Jensen 2002). In support of this, some argue that, if managers are not given a single objective that is clear and measurable—viz., maximizing shareholder value—then they will have greater opportunity for self-dealing (Stout 2012). The consequentialist argument for shareholder primacy run into problems that afflict many versions of consequentialism: in requiring all firms to aim at a certain objective, it does not allow sufficient scope for personal choice (Hussain 2012). Most think that people should be able to pursue projects, including economic projects, that matter to them, even if those projects do not maximize shareholder value.

The second main view about the proper ends of corporate governance is given by stakeholder theory. This theory was first put forward by Freeman in the 1980s (Freeman 1984; Freeman & Reed 1983), and has been refined by Freeman and collaborators over the years (see, e.g., Freeman 1994; Freeman et al. 2010; Freeman, Harrison, & Zyglidopoulos 2018; Jones, Wicks, & Freeman 2002; Phillips, Freeman, & Wicks 2003). According to stakeholder theory—or at least, early formulations of it—instead of managing the firm in the best interests of shareholders only, managers should seek to “balance” the interests of all stakeholders, where a stakeholder is anyone who has a “stake”, or interest (including a financial interest), in the firm. Blair and Stout’s (1999) “team production” theory of corporate governance offers similar guidance.

To be clear, in a firm in which shareholders’ interests are prioritized, other stakeholders will benefit too. Employees will receive wages, customers will receive goods and services, and so on. The debate between shareholder and stakeholder theorists is about what to do with the residual revenues, i.e., what’s left over after firms meet their contractual obligations to employees, customers, and others. Shareholder theorists think they should be used to maximize shareholder wealth. Stakeholder theorists think they should be used to benefit all stakeholders.

To its critics, stakeholder theory has seemed both incompletely articulated and weakly defended. With respect to articulation, one question that has been pressed is: Who are the stakeholders (Orts & Strudler 2002, 2009)? The groups most commonly identified are shareholders, employees, the community, suppliers, and customers. But other groups have stakes in the firm, including creditors, the government, and competitors. It makes a great deal of difference where the line is drawn, but stakeholder theorists have not provided a clear rationale for drawing it in one place rather than another. Another question is: What does it mean to “balance” the interests of all stakeholders, other than not always giving precedence to shareholders’ interests (Orts & Strudler 2009)? With respect to defense, critics have wondered what the rationale is for managing firms in the interests of all stakeholders. In one place, Freeman (1984) offers an instrumental argument, claiming that balancing stakeholders’ interests is better for the firm strategically than maximizing shareholder wealth (see also Blair & Stout 1999; Freeman, Harrison, & Zyglidopoulos 2018). (Defenders of shareholder primacy say the same thing about their view.) In another, he gives an argument that appeals to Rawls’s justice as fairness (Evan & Freeman 1988; cf. Child & Marcoux 1999).

In recent years, questions have been raised about whether stakeholder theory is appropriately seen as a genuine competitor to shareholder primacy, or is even appropriately called a “theory”. In one article, Freeman and collaborators say that stakeholder theory is simply “the body of research … in which the idea of ‘stakeholders’ plays a crucial role” (Jones et al. 2002). In another, Freeman describes stakeholder theory as “a genre of stories about how we could live” (1994: 413). It may be, as Norman (2013) says, that stakeholder is now best regarded as “mindset”, i.e., a way of looking at the firm that emphasizes its embeddedness in a network of relationships. In this case, there may be no dispute between shareholder and stakeholder theorists.

Resolving the debate between shareholder and stakeholder theorists (assuming they are competitors) will not resolve all or even most of the ethical questions in business. This is because it is a debate about the ends of corporate governance. It cannot answer questions about the moral constraints that must be observed in pursuit of those ends (Goodpaster 1991; Norman 2013), including duties of beneficence (Mejia 2020). Neither shareholder theory nor stakeholder theory is plausibly interpreted as the view that corporate managers should do whatever is possible to maximize shareholder wealth and balance all stakeholders’ interests, respectively. Rather, these views should be interpreted as views that managers should do whatever is consistent with the requirements of morality to achieve these ends. A large part of business ethics is trying to determine what these requirements are.

Answers to questions about the means of corporate governance often mirror answers to question about the ends of corporate governance. Often the best way to ensure that a firm is managed in the interests of a certain party P is to give P control. Conversely, justifications for why the firm should be managed in the interests of P sometimes appeal P’s rights to control it.

Friedman (1970), for example, thinks that shareholders’ ownership of the firm gives them a right to control the firm (which they can use to ensure that the firm is run in their interests). We might see control rights for shareholders as following analytically from the concept of ownership. To own a thing is to have a bundle of rights with respect to that thing. One of the standard “incidents” of ownership is control. (See the entry on property and ownership .)

As noted, in recent years the idea that the firm is something that can be owned has been challenged (Bainbridge 2008; Stout 2012; Strudler 2017). If this is right, then the ownership argument collapses. But similar contractarian arguments for shareholder control of firms have been constructed which do not rely on the assumption of firm ownership. All that is assumed in these arguments is that some people own capital, and others own labor. Capital can “hire” labor (and other inputs of production) or labor can “hire” capital. It just so happens that, in most cases, capital hires labor. We know this because in most cases capital-providers are the ultimate decision-makers in the firm. In a publicly-traded corporation, they elect the board. These points are emphasized especially by those who regard the firm as a “nexus of contracts” among various parties (Easterbrook & Fischel 1996; Jensen & Meckling 1976).

Many writers find this result troubling. Even if the governance structure in most firms is in some sense agreed to, they say that it is unjust in other ways. Anderson (2017) characterizes standard corporate governance regimes as oppressive and unaccountable private dictatorships. To address this injustice, these writers call for various forms of worker participation in managerial decision-making, including the ability by workers to reject arbitrary directives by managers (Hsieh 2005), worker co-determination of firms’ policies and practices (Ferreras 2017; McMahon 1994), and exclusive control of productive enterprises by workers (Dahl 1985).

Arguments for these governance structures take various forms. One appeals to the value of protecting workers’ interests (González-Ricoy 2014; Hsieh 2005). Another appeals to the value of autonomy, or a right to freely determine one’s actions, including one’s actions at work (Malleson 2014; McCall 2001). A third argument for worker control is the “parallel case” argument. According to it, if states should be governed democratically, then so should firms, because firms are like states in the relevant respects (Dahl 1985; Landemore & Ferreras 2016; cf. Mayer 2000). A fourth argument sees worker participation in firm decision-making as valuable training for citizens in a democratic society (Pateman 1970).

Space considerations prevent detailed examinations of these arguments (for critical reviews see Frega, Herzog, & Neuhäuser 2019; Hsieh 2008). But criticisms generally fall into two categories. The first insists on the normative priority of agreements, of the sort described above. There are few legal restrictions on the types of governance structures that firms can have. And some firms are in fact controlled by workers (Dow 2003; Hansmann 1996). To insist that other firms should be governed this way is to say, according to this argument, that people should not be allowed to arrange their economic lives as they see fit. Another criticism of worker participation appeals to efficiency. Allowing workers to participate in managerial decision-making may decrease the pace of decision-making, since it requires giving many workers a chance to make their voices heard (Hansmann 1996). It may also raise the cost of capital for firms, as investors may demand more favorable terms if they are not given control of the enterprise in return (McMahon 1994). Both sources of inefficiency may put the firm at a significant disadvantage in a competitive market. It may not just be a matter of competitive disadvantage. If it were, the problem could be solved by making all firms worker-controlled. The problem may be one of diminished productivity more generally.

Business ethicists seek to understand the ethical contours of business activity. One way of advancing this project is by choosing a normative framework and teasing out its implications for business issues. In principle, it is possible to do this for any normative framework. Below are four that have received significant attention.

One influential approach to business ethics draws on virtue ethics. Moore (2017) develops and applies MacIntyre’s (1984) virtue ethics to business. For MacIntyre, there are goods internal to practices, and certain virtues are necessary to achieve those goods. Building on MacIntyre, Moore develops the idea that business is a practice (or contains practices), and thus has certain goods internal to it (or them), the attainment of which requires the cultivation of business virtues. Aristotelian approaches to virtue in business are found in Alzola (2012) and de Bruin (2015). Scholars have also been inspired by the Aristotelian idea that the good life is achieved in a community (Sison & Fontrodona 2012), and have considered how business communities must be structured to help their members flourish (Hartman 2015; Solomon 1993).

Another important approach to the study of business ethics comes from deontology, especially Kant’s version (Arnold & Bowie 2003; Bowie 2017; Scharding 2015; Hughes 2020). Kant’s claim that humanity should be treated always as an end, and never as a means only, has proved especially fruitful for analyzing the human interactions at the core of commercial transactions. In competitive markets, people may be tempted to deceive, cheat, use, exploit, or manipulate others to gain an edge. Kantian moral theory singles out these actions out as violations of human dignity (Hughes 2019; Smith & Dubbink 2011).

Ethical theory, including virtue theory and deontology, is useful for thinking about how individuals should relate to each other. But business ethics also comprehends the laws and regulations that structure markets and firms. Here political theory seems more relevant. A number of business ethicists have sought to identify the implications of Rawls’s (1971) justice as fairness for business. This is not an easy task, since while Rawls makes some suggestive remarks about markets and firms, he does not articulate specific conclusions or develop detailed arguments for them. But scholars have argued that justice as fairness: (1) is incompatible with significant inequalities of power and authority within firms (S. Arnold 2012); (2) requires people to have an opportunity to perform meaningful work (Moriarty 2009; cf. Hasan 2015); and requires alternative forms of (3) corporate governance (Berkey 2021; Blanc & Al-Amoudi 2013; Norman 2015; cf. Singer 2015) and (4) corporate ownership (M. O’Neill & Williamson 2012).

A fourth approach to business ethics is called the “market failures approach” (MFA). It originates with McMahon (1981), but it has been developed in most detail by Heath (2014) (for discussion see Moriarty 2020 and Singer 2018). According to Heath, the justification of the market is that it produces efficient—in the sense of Pareto-optimal— outcomes. But this only happens when the conditions of perfect competition obtain, such as perfect information, no market power, and no barriers to entry or exit. (When they don’t, markets fail—hence the market failures approach.) On the MFA, these conditions are the source of ethical rules for market actors. The MFA says that market actors, including sellers and buyers, should not create or take advantage of market imperfections. So, for example, firms should not deceive consumers (creating information asymmetries) or lobby governments to levy tariffs on foreign competitors (erecting barriers to entry).

Selecting a normative framework and applying it to a range of issues is an important way of doing business ethics. But it is not the only way. Indeed, the more common approach is to identify a business activity and then analyze it using “mid-level” principles or ideals common to many moral and political theories. Below I consider ethical issues that arise at the nexus of firms’ engagement with three important groups: consumers, employees, and society.

5. Firms and consumers

The main way that firms interact with consumers is by selling, or attempting to sell, products and services to them. Many ethical issues attend this interaction.

Many have argued that some things should not be for sale (Anderson 1993; MacDonald & Gavura 2016; Sandel 2012; Satz 2010). Among the things commonly said to be inappropriate for sale are sexual services, surrogacy services, and human organs. Some writers object to markets in these items for consequentialist reasons. They argue that markets in commodities like sex and kidneys will lead to the exploitation of vulnerable people (Satz 2010). Others object to the attitudes or values expressed in such markets. They claim that markets in surrogacy services express the attitude that women are mere vessels for the incubation of children (Anderson 1993); markets in kidneys suggest that human life can be bought and sold (Sandel 2012); and so on. (For a discussion of what it might mean for a market to “express” a value, see Jonker [2019].)

Other writers criticize these arguments, and in general, the attempt to “wall-off” certain goods and services from markets. Brennan and Jaworksi (2016) object to expressive or “semiotic” arguments against markets in contested commodities (cf. Brown & Maguire 2019). Whether selling a particular thing for money expresses disrespect, they note, is culturally contingent. They and others (e.g., Taylor 2005) also argue that the bad effects of markets in contested commodities can be eliminated or at least ameliorated through appropriate regulation, and that anyway, the good effects of such markets (e.g., a decrease in the number of people who die because they are waiting for a kidney) outweigh the bad.

Some things that firms may wish to sell, and that people may wish to buy, pose a significant risk of harm, to the user and others. When is a product too unsafe to be sold? This question is often answered by government agencies. In the U.S., a number of government agencies, including the Consumer Product Safety Commission (CPSC), the National Highway Traffic Safety Administration (NHTSA), and the Food and Drug Administration (FDA), are responsible for assessing the safety of products for the consumer market. In some cases these standards are mandatory (e.g., medicines and medical devices); in other cases they are voluntary (e.g., trampolines and tents). The state identifies minimum standards and individual businesses can choose to adopt more stringent ones.

Questions about product safety are a matter of significant debate among economists, legal scholars, and public policy experts. Business ethicists have paid scant attention to these questions (but see Brenkert 1981). Existing treatments often combine discussions of safety with discussions of liability—the question of who should pay for harms that products cause—and tend to be found in business ethics textbooks. One of the most careful treatments is Velasquez’s (2012). He distinguishes three (compatible) views: (1) the “contract view”, according to which the manufacturer’s duty is only to accurately disclose all risks associated with the product; (2) the “due care view”, according to which the manufacturer should exercise due care to prevent buyers from being injured by the product; and (3) the “social costs view”, according to which the manufacturer should pay for any injuries the product causes, even if the manufacturer has accurately disclosed all risks associated with the product and has exercised due care to prevent injury (see also Boatright & Smith 2017). In the U.S. and elsewhere, the law has moved in the direction of the social costs view, where it is known as “strict liability”.

There is much room for philosophical exploration of these issues. One area that merits attention is the definitions of key terms, such as “safety” and “risk”. Drop side cribs pose risks to consumers; so do trampolines. On what basis should the former be prohibited but the latter not be (Hasnas 2010)? The answer must take into account the value of these products, how obvious the risks they pose are, and the availability of substitutes. With respect to liability, we may wonder whether it is fair to hold manufacturers responsible for harms their products cause, when the manufacturers are not morally at fault for those harms. On the other hand, it may be unfair to force consumers to bear the full costs of their injuries, when they too are not morally at fault. The question may be one for society as a whole: what is the most efficient or just way to distribute these costs?

Most advertising contains both an informational component and a persuasive component. Advertisements tell us something about a product, and try to persuade us to buy it. Both of these components can be subject to ethical evaluation.

Emphasizing its informational component, some writers stress the positive value of advertising. Markets function efficiently only when certain conditions are met. One of these conditions is perfect information. Minimally, consumers have to understand the features of the products for sale. While this condition will never be fully met, advertising can help to ensure that it is met to a greater degree (Heath 2014). Another value that can be promoted through advertising is autonomy. People have certain needs and desires—e.g., to eat healthy food, to drive a safe car—which their choices as consumers help them to satisfy. Their choices are more likely to satisfy their needs and desires if they have information about what is for sale, which advertising can provide (Goldman 1984).

These good effects depend, of course, on advertisements producing true beliefs, or at least not producing false beliefs, in consumers. Writers treat this as the issue of deception in advertising. The issue is not whether deceptive advertising is wrong (most would agree it is), but what counts as deceptive advertising, and what makes it wrong.

In the 1980s, Beech-Nut advertised as “100% apple juice” a drink that contained no juice of any kind. Beech-Nut was fined $2 million and two of its executives went to prison. As of this writing (in 2021), Red Bull is marketing its energy drinks with the slogan “Red Bull Gives You Wings,” but in fact Red Bull doesn’t give you wings. There is no problem with Red Bull’s marketing. What’s the difference? We might say that Red Bull’s slogan is not warranted as true (Carson 2010). It is an example of “puffery,” or over-the-top, exaggerated praise which no reasonable person takes seriously (Attas 1999). By contrast, Beech-Nut’s statement appeared to be a claim meant to be taken at face value, but in fact is false. As these examples illustrate, advertisements are deceptive not because of the truth-value of their claims, but what these claims cause reasonable consumers to believe. Questions can be raised, of course, about what it means to be reasonable (Scalet 2003); the answer may depend on who the consumers are.

Intention is usually taken to be irrelevant to deception in advertising. That is, an advertisement may be deemed deceptive even if the advertiser doesn’t intend to deceive anyone. Some philosophers would say that these advertisements are better described as misleading . (For discussion, see the entry on the definition of lying and deception .) Regulators of advertising blur this distinction, or perhaps they don’t care about it. Their goal is to protect consumers from acting on materially false beliefs, which may be caused either by deception or by blamelessly being misled.

Many reasons have been offered for why deceptive advertising is wrong. One is the Kantian claim that deceiving others is disrespectful to them, a use of them as a mere means. Deceptive advertising may also lead to harm, to consumers (who purchase suboptimal products, given their desires) and competitors (who lose out on sales). A final criticism of deceptive advertising is that it erodes trust in society (Attas 1999). When people do not trust each other, they will either not engage in economic transactions, or engage in them only with costly legal protections.

The persuasive component of advertising is also a fruitful subject of ethical inquiry. Galbraith (1958), an early critic, thinks that advertising, in general, does not inform people how to acquire what they want, but instead gives them new wants. He calls this the “dependence effect”: our desires depend on what is produced, not vice versa . Moreover, since we are inundated with advertising for consumer goods, we want too many of those goods and not enough public goods. Hayek (1961) rejects this claim, arguing that few if any of our desires are independent of our environment, and that anyway, desires produced in us through advertising are no less significant than desires produced in us in other ways.

Galbraith is concerned about the persuasive effects of advertisements. In contrast, recent writers focus on the techniques that advertisers use to persuade. Some of these are alleged to cross the line into manipulation (Aylsworth, 2020; Brenkert 2008; Sher 2011). It is difficult to define manipulation precisely, though attempts have been made (for extensive discussion, see the entry on the ethics of manipulation ). For our purposes, manipulative advertising can be understood as advertising that attempts to persuade consumers, often (but not necessarily) using non-rational means, to make irrational or suboptimal choices, given their own needs and desires.

Associative advertising is often identified as a type of manipulative advertising. In associative advertising, the advertiser tries to associate a product with a positive belief, feeling, attitude, ideal, or activity which usually has little to do with the product itself. Thus many television commercials for trucks in the U.S. associate trucks with manliness. Commercials for body fragrances associate those products with sex between beautiful people. The suggestion is that if you are a certain sort of person (e.g., a manly one), then you will have a certain sort of product (e.g., a truck). In an important article, Crisp (1987) argues that this sort of advertising attempts to create desires in people by circumventing their faculties of conscious choice, and in so doing subverts their autonomy (cf. Arrington 1982; Phillips 1994). Lippke (1989) argues that it makes people desire the wrong things, encouraging us to try to satisfy our non-market desires (e.g., to be more manly) through market means (e.g., buying a truck) (cf. Aylsworth 2020). How seriously we should take these criticisms may depend on how effective associative and other forms of persuasive advertising are. To the extent that advertisers are unsuccessful at “going around” our faculty of conscious choice, we may be less worried and more amused by their attempts to do so (Bishop 2000; Goldman 1984).

Our judgments on this issue should be context-sensitive. While most people may be able to see through advertisers’ attempts to persuade them, some may not be (at least some of the time). Paine (Paine et al. 1984) argues that advertising is justified because it helps consumers make wise decisions in the marketplace. But children, she argues, lack the capacity for making wise consumer choices (see also E.S. Moore 2004). Thus advertising directed at children constitutes a form of objectionable exploitation. Other populations who may be similarly vulnerable are the senile, the ignorant, and the bereaved. Ethics may require not a total ban on marketing to them but special care in how they are marketed to (Brenkert 2008; cf. Palmer & Hedberg 2013).

Sales are central to business. Perhaps surprisingly, business ethicists have said relatively little about sales.

An emerging set of issues concerns refusals to sell. Normally businesses want to sell their goods and services to everyone. But not always. In 2012, Jack Phillips of Masterpiece Cakeshop declined to sell a wedding cake to a same-sex couple because he opposed same-sex marriage on religious grounds. In response, the couple filed a complaint with the Colorado Civil Rights Commission. Should Phillips have sold the wedding cake to the couple? We might say that a commercial transaction is a kind of association, and people—including business owners like Phillips—should be free to associate, or not, with whomever they choose. Or we might say, as Phillips did, that his actions were protected by freedom of religion, since they were an expression of his identity, which includes his religious commitments. Alternatively, we might claim that Phillips was discriminating against the couple, and his actions were wrong for the same reasons discrimination typically is, viz., it denies people opportunities and undermines their dignity (Corvino, Anderson, & Girgis 2017).

Questions can also be raised about the techniques advertisers use to sell. These questions are similar to the ones asked about advertising. Salespeople are, in a sense, the final advertisers of products to consumers. An early contribution to the ethics of sales is found in Holley (1986), who develops a set of obligations for salespeople derived from the point of market activity, which he says is to efficiently meet people’s needs and wants (cf. Heath 2014). In what is probably the most sophisticated treatment of the subject, Carson (2010) says salespeople have at least the following four pro tanto duties: (1) provide customers with safety warnings and precautions; (2) refrain from lying and deception; (3) fully answer customers’ questions about items; and (4) refrain from steering customers toward purchases that are unsuitable for them, given their stated needs and desires. Carson justifies (1)—(4) by appealing to the golden rule: treat others as you want to be treated. He identifies two other duties that salespeople might have (he is agnostic): (5) do not sell customers products that you (the salesperson) think are unsuitable for them, given their needs and desires, without telling customers why you think this; and (6) do not sell customers poor quality or defective products, without telling them why you think this. For the most part, (1)—(4) ask the salesperson not to harm the customer; (5) and (6) ask the salesperson to help the customer, in particular, help her not to make foolish mistakes. The broader issue is one of disclosure (Holley 1998). How much information we think salespeople are required to share with customers may depend on what kind of relationship we think they should have, e.g., to what extent it is adversarial.

For many products bought and sold in markets, sellers offer an item at a certain price, and buyers take or leave that price. But in some cases there is negotiation over price (and other aspects of the transaction). We see this in the sale of “big ticket” items such as cars and houses, and in salaries for jobs. While there are many ethical issues that arise in negotiation, one issue that has received special attention is “bluffing”, or deliberately misstating one’s bargaining position. The locus classicus for this discussion is Carr (1968). According to him, bluffing in negotiations is permissible because business has its own distinctive set of moral rules and bluffing is permissible according to those rules. Carson (2010) agrees that bluffing is permissible in business, though in a more limited range of cases. Carson’s argument appeals to self-defense. If you have good reason to believe that your adversary in a negotiation is misstating her bargaining position, then you are permitted to misstate yours. A requirement to tell the truth in these circumstances would put you at a significant disadvantage relative to your adversary, which you are not required to suffer. An implication of Carson’s view is that you are not permitted to misstate your bargaining position if you do not have good reason to believe that your adversary is misstating hers.

In simplified models of the market, individual buyers and sellers are “price-takers”, not “price-makers”. That is, the prices of goods and services are set by the aggregate forces of supply and demand; no individual buys or sells a good for anything other than the market price. In reality, things are different. Sellers of goods have some flexibility about how to price goods.

Most business ethicists would accept that, in most cases, the prices at which products should be sold is a matter for private individuals to decide. This view has been defended on grounds of property rights. Some claim that if I have a right to a thing, then I am free to transfer that thing to you on whatever terms that I propose and you accept (Boatright 2010). It has also been defended on grounds of welfare. Prices set by voluntary exchanges reveal valuable information about the relative demand for and supply of goods, allowing resources to flow to their most productive uses (Hayek 1945). Despite this, most business ethicists also recognize some limits on prices.

One issue that has received increasing attention is price discrimination. This is discrimination based on willingness to pay, or the practice of charging more to people who are willing to pay more. This might at first seem unfair or even exploitative, but in fact it is commonplace and usually unremarkable (Elegido 2011; Marcoux 2006a). Examples of price discrimination include senior and student discounts, bulk discounts, versioning, and the sort of bargaining one finds in car dealerships and flea markets. We might see price discrimination as an implication of freedom in pricing, and according to a familiar result in economics, price discrimination increases social welfare, provided that it enables producers to increase output (Varian 1985). But some instances of price discrimination have come in for criticism. Online retailers collect and purchase enormous amounts of information about consumers, and there is evidence that they are using this to personalize prices, or tailor prices to what they think are consumers’ reservation prices, i.e., the highest amounts they are willing to pay. Some believe that this practice is unfair (Steinberg 2020), though they problem may simply be that consumers don’t know what retailers are up to.

Another issue of pricing ethics is price gouging. Price gouging can be understood as a sharp increase in the price of a necessary good in the wake of an emergency which renders that good scarce (Hughes 2020; Zwolinski 2008). As the novel coronavirus spread around the world in early 2020, retailers began to charge extremely high prices for cleaning products and medical supplies. Many jurisdictions have laws against price gouging, and it is widely regarded as unethical (Snyder 2009). The reason is that it is a paradigm case of exploitation: A extracts an excessive benefit out of B in circumstances in which B cannot reasonably refuse A ’s offer (Valdman 2009). But some theorists defend price gouging. While granting that sales of items in circumstances like these are exploitative, they note that they are mutually beneficial. Both the seller and buyer prefer to engage in the transaction rather than not engage in it. Moreover, when items are sold at inflated prices, this both limits hoarding and attracts more sellers into the market. Permitting price gouging may thus be the fastest way of eliminating it (Zwolinski 2008). (For further discussion, see the entry on exploitation .)

Most contemporary scholars believe that sellers have wide, though not unlimited, discretion in how much they charge for goods and services. But there is an older tradition in business ethics, found in Aquinas and other medieval scholars, according to which there is one price that sellers should charge: the “just price”. There is debate about what exactly medieval scholars meant by “just price”. According to a historically common interpretation, the just price is determined by the seller’s cost of production, i.e., the price that compensates the seller for the value of her labor and expenses. More recent interpretations understand the medieval just price at something closer to the market price, which may be more or less than the cost of production (Koehn & Wilbratte 2012).

6. Firms and workers

Business ethicists have written much about the relationship between employers and employees. Below we consider four issues at the employer/employee interface: (1) hiring and firing, (2) pay, (3) meaningful work, and (4) whistleblowing. Another important topic at this interface is privacy. For space reasons it will not be discussed, but see the entries on privacy and privacy and information technology .

Ethical issues in hiring and firing tend to focus on the question: What criteria should employers use, or not use, in employment decisions? The question of what criteria employers should not use is addressed in discussions of discrimination.

While there is some debate about whether discrimination in employment should be legally prohibited (see Epstein 1992), almost everyone agrees that it is morally wrong (Hellman 2008; Lippert-Rasmussen 2014). Discussion has focused on two questions. First, when does the use of a certain criterion in an employment decision count as discriminatory? It would seem wrong if Walmart were to exclude white applicants for a job in their marketing department, but not wrong if the Hovey Players (a theater troupe) were to exclude white applicants for the role of Walter Younger in A Raisin in the Sun . We might say that whether a hiring practice is discriminatory depends on whether the criterion used is job-relevant. But the concept of job-relevance is contested, as the case of “reaction qualifications” reveals. Suppose that white diners prefer to be served by white waiters rather than black waiters. In this case race seems job-relevant, but it seems wrong for employers to take race into account (Mason 2017). Another question that has received considerable attention is: What makes discrimination wrong? Some argue that discrimination is wrong because of its effects on those who are discriminated against (Lippert-Rasmussen 2014); others think that it is wrong because of what it expresses to them (Hellman 2008). (For extensive discussion, see the entry on discrimination .)

Some writers believe that employers’ obligations are not satisfied simply by avoiding using certain criteria in hiring decisions. According to them, employers have a duty to hire the most qualified applicant. Some justify this duty by appealing to considerations of desert (D. Miller 1999; Mulligan 2018); others justify it by appealing to equal opportunity (Mason 2006). We might object to this view by appealing to property rights. A job offer typically implies a promise to pay the job-taker a sum of your money for performing certain tasks. While we might think that excluding some ways you can dispose of your property (e.g., rules against discrimination in hiring) can be justified, we might think that excluding all ways but one (viz., a requirement to hire the most qualified applicant) is unjustified. In support of this, we might think that a small business owner does nothing wrong when she hires her daughter for a part-time job as opposed to a more qualified stranger.

The question of when employees may be fired is a staple of business ethics texts and was the subject of considerable debate in the business ethics literature in the 1980’s and 1990’s. There are two main views: those who think that employment should be “at will”, so that an employer can terminate an employee for any reason (Epstein 1984; Maitland 1989), and those who think that employers should be able to terminate employees only for “just cause” (e.g., poor performance or excessive absenteeism) (McCall & Werhane 2010). In fact, few writers hold the “pure” version of the “at will” view. Most would say, and the law agrees, that it is wrong for an employer to terminate an employee for certain reasons, e.g., a discovery that he is Muslim or his refusal to commit a crime for the employer. Thus the debate is between those who think that employers should be able to terminate employees for any reason with some exceptions , and those who think that employers should be able to terminate employees only for certain reasons. In the U.S., most employees are at will, while in Europe, most employees are covered, after a probationary period, by something analogous to just cause. Arguments for just cause appeal to the effects that termination has on individual employees, especially those who have worked for an employer for many years (McCall & Werhane 2010). Arguments for at will employment appeal to freedom or macroeconomic effects. It is claimed, in the former case, that just cause is an unwarranted restriction on employers’ and employees’ freedom of contract (Epstein 1984), and in the latter case, that it raises the unemployment rate (Maitland 1989). The more difficult it is for an employer to fire an employee, the more reluctant she will be to hire one in the first place.

Businesses generate revenue, and some of this revenue is distributed to employees in the form of compensation, or pay. Since the demand for pay typically exceeds the supply, the question of how pay should be distributed is naturally analyzed as a problem of justice.

Two theories of justice in pay have attracted attention. One may be called the “agreement view”. According to it, a just wage is whatever wage the employer and the employee agree to without force or fraud (Boatright 2010). This view is sometimes justified in terms of property rights. Employees own their labor, and employers own their capital, and they are free, within broad limits, to dispose of it as they please. In addition, we might think that wages should be should determined by voluntary agreement for the same reason prices generally should be, viz., it allocates resources to their most productive uses, as determined by people’s wants (Heath 2018; Hayek 1945). A “wage”, after all, is just a special name for the price of labor.

A second view of wages may be called the “contribution view”. According to it, the just wage for a worker is the wage that reflects her contribution to the firm. This view comes in two versions. On the absolute version, workers should receive an amount of pay that equals the value of their contributions to the firm (D. Miller 1999). On the comparative version, workers should receive an amount of pay that reflects the relative value of their contributions to the firm, given what others in the firm contribute and are paid (Sternberg 2000). The contribution view strikes some as normatively basic, a view for which no further argument can be given (D. Miller 1999). An analogy may be drawn with punishment. Just as it seems intuitively right for the severity of a criminal’s punishment to reflect the seriousness of her crime, so it may seem intuitively right for the value of a persons’s pay to reflect the value of her work (Moriarty 2016). In this way, pay might be understood as a reward for work.

Some argue that compensation should be evaluated not only as a problem of justice but as an incentive. The question here is what pay encourages employees to do, and how it encourages them to do it. Poorly structured compensation packages for traders in the financial services industry are thought to have contributed to the financial crisis of 2007-2009 (Kolb 2012). Traders were incentivized to take excessively risky bets, and when those bets went bad, their firms could not cover the losses, putting the firms and ultimately the whole financial system in peril. Bad incentives may also help to explain the recent account fraud scandal at Wells Fargo.

The pay of any employee can be evaluated from a moral point of view. But business ethicists have paid particular attention to the pay of certain employees, viz., CEOs and workers in factories in developing countries, often called “sweatshops.”

There has been significant debate about whether CEOs are paid too much (Boatright, 2010; Moriarty 2005), with scholars falling into two camps. Those in the “managerial power” camp believe that CEOs wield power over boards of directors, and use this power to extract above-market rents from their firms (Bebchuk & Fried 2004). Those in the “efficient contracting” camp believe that pay negotiations between CEOs and boards are usually carried out at arm’s-length, and that CEOs’ large compensation packages reflect their rare and valuable skills. (For a recent survey of relevant empirical issues, see Edmans, Gabaix, & Jenter 2017).

There has also been a robust debate about whether workers in sweatshops are paid too little. Some say ‘no’ (Powell & Zwolinski 2012; Zwolinski 2007). They say that sweatshops wages, while low by standards in developed countries, are not low by the standards of the countries in which the sweatshops are located. This explains why people choose to work in a sweatshop; it is the best offer they have. Efforts to increase artificially the wages of sweatshop workers, according to these writers, is misguided on two counts. First, it is an interference with the autonomous choices of employers and workers. Second, it is likely to make workers worse off, since employers will respond by either moving operations to a new location or employing fewer workers in that location (cf. Kates 2015). These writers sometimes appeal to a principle of “nonworseness,” according to which a consensual, mutually beneficial interaction (of the sort sweatshop owners and workers engage in) cannot be worse than its absence. Other writers challenge these claims. While granting that workers choose to work in sweatshops, they deny that their choices are truly voluntary (Arnold & Bowie 2003; Kates 2015). Given their low wages, this suggests that sweatshop workers are wrongfully exploited (Faraci 2019). Moreover, some argue, firms can and should do more for sweatshop workers, on grounds on fairness or beneficence (Snyder 2010). These writers invoke a principle of “interaction,” according to which people involved in a certain relationship (of the sort sweatshop owners and workers are engaged in) must live up to certain standards of conduct (which exploitation is alleged to fall below). In response to the claim that firms put themselves at a competitive disadvantage if they do, writers have pointed to actual cases where firms have been able to secure better treatment for sweatshop workers without suffering serious financial penalties (Hartman, Arnold, & Wokutch 2003). (For further discussion, see the entry on exploitation .)

Smith (1776 [1976]) famously observed that a detailed division of labor greatly increases the productivity of manufacturing processes. To use his example: if one worker performs all of the tasks required to make a pin himself—18, we are told—he can make just a few pins per day. However, if the worker specializes in one or two of these tasks, and combines his efforts with other workers who specialize in one or two of the other tasks, then together they can make thousands of pins per day. But according to Smith, there is human cost to the detailed division of labor. Performing one or two simple tasks all day makes a worker “as stupid and ignorant as it is possible for a human creature to become” (Smith 1776 [1976]: V.1.178).

To avoid this result, some call for work to be made more “meaningful”. In this sense, a call for meaningful work is not a call for work to be more “important”, i.e., to contribute to the production of a good or service that is objectively valuable, or that workers believe is valuable (cf. Michaelson 2021; Veltman 2016). Instead, it is a call for labor processes to be arranged so that work is interesting, requires skill, and gives workers substantial decision-making power (Arneson 1987; Roessler 2012; Schwartz 1982).

Smith’s insight that labor processes are more efficient when they are divided into meaningless segments leads some writers to believe that, in a competitive economy, firms will not provide as much meaningful work as workers want (Werhane 1985). In response, it has been argued that there is a market for labor, and if workers want meaningful work, then employers have an incentive to provide it (Maitland 1989; Nozick 1974). According to this argument, insofar as we see “too little” meaningful work on offer, this is because workers prefer not to have it—or more precisely, because workers are willing to trade meaningfulness for other benefits, such as higher wages.

The above argument treats meaningful work as a matter of preference, as a job amenity that employers can decline to offer or that workers can trade away (cf. Yeoman 2014). Others resist this understanding. According to Schwartz (1982), employers are required to offer employees meaningful work, and employees are required to perform it, out of respect for autonomy (see also Bowie 2017). The idea is that the autonomous person makes choices for herself; she does not mindlessly follow others’ directions. A difficulty for this argument is that respect for autonomy does not seem to require that we make all choices for ourselves. A person might, it seems, autonomously choose to allow important decisions to be made for her in certain spheres of her life, e.g., by a coach, a family member, a medical professional, or a military commander.

A potential problem for this response brings us back to Smith, and to “formative” arguments for meaningful work. The problem, according to some writers, is that if most of a person’s day is given over to meaningless tasks, then her capacity for autonomous choice, and perhaps her other intellectual faculties, may deteriorate. A call for meaningful work may be understood as a call for workplaces to be arranged so that this deterioration does not occur (Arneson 2009; Arnold 2012; Yeoman 2014). In addition to Smith, Marx (1844 [2000]) was concerned about the effects of work on human flourishing.

Formative arguments face at least two difficulties, one empirical and one normative. The empirical difficulty is establishing the connection between meaningless work and autonomous choice (or another intellectual faculty). More evidence is needed. The normative difficulty is that formative arguments make certain assumptions about the nature of the good and the state’s role in promoting it. They assume that it is better for people to have fully developed faculties of autonomous choice (etc.) and that the state should help to develop them. These assumptions might be challenged, e.g., by liberal neutralists (Roessler 2012; Veltman 2016). Yeoman (2014) seeks to surmount this challenge—and make meaningful work safe for liberal political theory—by conceptualizing meaningful work as a fundamental human need, not a mere preference.

Suppose you discover, as Tyler Shultz did at Theranos in 2015, that your firm is deceiving regulators and investors about the efficacy of its products. To stop this, one thing you might do is “blow the whistle” by disclosing this information to a third party. While scholars give different definitions of whistleblowing (see, e.g., Brenkert 2010; Davis 2003; DeGeorge 2009; Delmas 2015), the following elements are usually present: (1) insider status, (2) non-public information, (3) illegal or immoral activity, (4) avoidance of the usual chain of command in the firm, (5) intention to solve the problem. In the above example, Shultz was a whistleblower because he was (1) a Theranos employee (2) who disclosed non-public information (3) about illegal activity in the firm (4) to a state regulator (5) in an effort to stop that activity.

Debate about whistleblowing tends to focus on the question of when whistleblowing is justified—in the sense of when it is permissible, or when it is required. This debate assumes that whistleblowing requires justification, or is wrong, other things equal. Many business ethicists make this assumption on the grounds that employees have a pro tanto duty of loyalty to their firms (Elegido 2013). Against this, some argue that the relationship between the firm and the employee is purely transactional—an exchange of money for labor (Duska 2000)—and so is not normatively robust enough to ground a duty of loyalty. (For a discussion of this issue, see the entry on loyalty .)

One prominent justification of whistleblowing is due to DeGeorge (2009). According to him, it is permissible for an employee to blow the whistle when his doing so will prevent harm to society. (In a similar account, Brenkert [2010] says that the duty to blow the whistle derives from a duty to prevent wrongdoing.) The duty to prevent harm can have more weight, if the harm is great enough, than the duty of loyalty. To determine whether whistleblowing is not simply permissible but required, DeGeorge says, we must take into account the likely success of the whistleblowing and its effects on the whistleblower himself. Humans are tribal creatures, and whistleblowers are often treated badly by their colleagues. (Shultz and his family were hounded by Theranos’s powerful and well-connected lawyers, at a cost to them of hundreds of thousands of dollars.) So if whistleblowing is unlikely to succeed, then it need not be attempted. The lack of a moral requirement to blow the whistle in these cases can be seen as a specific instance of the rule that individuals need not make huge personal sacrifices to promote others’ interests, even when those interests are important.

Another account of whistleblowing is given by Davis (2003). Like Brenkert (and unlike DeGeorge), Davis focuses on the wrongdoing that the firm engages in (not the harm it causes). According to Davis, however, the point of whistleblowing is not so much to prevent the wrongdoing but to avoid one’s own complicity in it. He says that an employee is required to blow the whistle on her firm when she believes that it is engaged in seriously wrongful behavior, and her work for the firm “will contribute … to the wrong if … [she] [does] not publicly reveal what [she knows]” (2003: 550). Davis’s account limits whistleblowers to people who are currently firm insiders. Many find this counterintuitive, since it implies that people often described as whistleblowers, like Jeffrey Wigand (Brown & Williamson) and Edward Snowden (NSA), are not actually whistleblowers.

7. The firm in society

Business activity and business entities have an enormous impact on society. One way that businesses impact society, of course, is by producing goods and services and by providing jobs. But businesses can also impact society by trying to solve social problems and by using their resources to influence governments’ laws and regulations.

“Corporate social responsibility”, or CSR, is typically understood as actions by businesses that are (i) not legally required, and (ii) intended to benefit parties other than the corporation (where benefits to the corporation are understood in terms of return on equity, return on assets, or some other measure of financial performance). The parties who benefit may be more or less closely associated with the firm itself; they may be the firm’s own employees or people in distant lands.

A famous example of CSR involves the pharmaceutical company Merck. In the late 1970s, Merck was developing a drug to treat parasites in livestock, and it was discovered that a version of the drug might be used treat Onchocerciasis, or river blindness, a disease that causes debilitating itching, pain, and eventually blindness in people. The problem was that the drug would cost hundreds of millions of dollars to develop, and would generate little or no revenue for Merck, since the people usually afflicted with river blindness were too poor to afford it. Ultimately Merck decided to develop the drug. As expected, it was effective in treating river blindness, but Merck made no money from it. As of this writing in 2021, Merck, now in concert with several nongovernmental organizations, continues to manufacture and distribute the drug throughout the developing world for free.

The scholarly literature on CSR is dominated by social scientists. Their question is typically whether, when, and how socially responsible actions benefit firms financially. The conventional wisdom is that there is a slight positive correlation between corporate social performance and corporate financial performance, but it is unclear which way the causality goes (Vogel 2005; Zhao & Murrell 2021). That is, it is not clear whether prosocial behavior by firms causes them to be rewarded financially (e.g., by consumers who value their behavior), or whether financial success allows firms to engage in more prosocial behaviors (e.g., by freeing up resources that would otherwise be spent on core business functions).

Many writers connect the debate about CSR with the debate about the ends of corporate governance. Thus Friedman (1970) objects to CSR, saying that managers should be maximizing shareholder wealth instead. (Friedman also thinks that CSR is a usurpation of the democratic process and often wasteful, since managers aren’t experts in solving social problems.) Stakeholder theory (Freeman et al. 2010) is thought to be more accommodating of prosocial activity by firms, since it permits firms to do things other than increase shareholder wealth.

We do not need, however, to see the debate about CSR a debate about the proper ends of corporate governance. We can see it as a debate about the nature and scope of firms’ moral duties, i.e., what obligations (e.g., of rescue or beneficence) they must discharge, whatever their goals are (Hsieh 2004; Mejia 2020).

Many writers give broadly consequentialist reasons for CSR. The arguments tend to go as follows: (1) there are serious problems in the world, such as poverty, conflict, environmental degradation, and so on; (2) any agent with the resources and knowledge necessary to ameliorate these problems has a moral responsibility to do so, assuming the costs they incur on themselves are not excessively high; (3) firms have the resources and knowledge necessary to ameliorate these problems without incurring excessively high costs; therefore, (4) firms should ameliorate these problems (Dunfee 2006a).

The view that someone should do something about the world’s problems seems true to many people. Not only is there an opportunity to increase social welfare by alleviating suffering, suffering people may also have a right to assistance. The controversial issue is who should do something to help, and how much they should do. Thus defenders of the above argument focus most of their attention on establishing that firms have these duties, against those who say that these duties are properly assigned to states or individuals. O. O’Neill (2001) and Wettstein (2009) argue that firms are “agents of justice”, much like states and individuals, and have duties to aid the needy (see also Young 2011). Strudler (2017) legitimates altruistic behavior by firms by undermining the claim that shareholders own them, and so are owed their surplus wealth. Hsieh (2004) says that, even if we concede that firms do not have social obligations, individuals have them, and the best way for many individuals to discharge them is through the activities of firms (see also McMahon 2013; Mejia 2020).

Debates about CSR are not just debates about whether specific social ills should be addressed by specific corporations. They are also debates about what sort of society we want to live in. While acknowledging that firms benefit society through CSR, Brenkert (1992) thinks it is a mistake for people to encourage firms to engage in CSR as a practice. When we do so, he says, we cede a portion of the public sphere to private actors. Instead of deciding together how we want to ameliorate social ills affecting our fellow community members, we leave it up to private organizations to decide what to do. Instead of sharpening our skills of democracy through deliberation and collective decision-making, and reaffirming social bonds through mutual aid, we allow our skills and bonds to atrophy through disuse.

Many businesses are active participants in the political arena. They support candidates for election, defend positions in public debate, lobby government officials, and more. What should be said about these activities?

Social scientists have produced a substantial literature on corporate political activity (CPA) (for a review, see Lawton, McGuire, & Rajwani 2013). This research focuses on such questions as: What forms does CPA take? What are the antecedents of CPA? What are its consequences? CPA raises many normative questions as well.

We might begin by asking why corporations should be allowed to engage in political activity at all. In a democratic society, freedom of expression is both a right and a value (Stark 2010). People have a right to participate in the political process by supporting candidates for public office, defending positions in public debate, and so on. It is generally a good thing when they exercise this right, since they can introduce new facts and arguments into public discourse. People can engage in political activity individually, but in a large society, they may find it useful to do so in groups. The firm might be seen as one of these groups. Indeed, we might think it is especially important that firms engage in (at least some forms of) political activity. Society has an interest in knowing how proposed economic policies will affect firms; firms themselves are a good source of information.

But political activity by corporations has come in for criticism. One concern focuses on what corporations’ goals are. Some worry that firms engage in CPA in order to advance their own interests at the expense of their competitors’ or the public’s. This activity is sometimes described, and condemned, as “rent-seeking” (Jaworski 2014; Tullock 1989). Questions have been raised about the nature and value of rent-seeking. According to a common definition, rent-seeking is socially wasteful economic activity intended to secure benefits from the state rather than the market. But there is disagreement about what counts as waste. Lobbying for subsidies, or tariffs on foreign competitors, are classic cases of rent-seeking. But subsidies for (e.g.) corn might help to secure a nation’s food supply, and tariffs on (e.g.) foreign steel manufacturers might help a nation to protect itself in a time of war (Boatright 2009; Hindmoor 1999). One person’s private rent-seeking is another’s public benefit.

A second concern about CPA is that it can undermine the ideal of equality at the heart of democracy (Christiano 2010). Some corporations have a lot of money, and this can be translated into a lot of power. In 2010, the state of Indiana passed a law—the Religious Freedom Restoration Act (RFRA)—that appeared to give employers the freedom to discriminate against LGBTQ people on religious grounds. In response, Salesforce and Angie’s List cancelled plans to expand in the state, and threatened to leave it altogether. Indiana quickly convened a special session of its legislature and announced that the new law did not in fact give employers this freedom. By contrast, if the average Indianan told the legislature that they might leave the state because of the RFRA, the legislature would not have cared. This objection to CPA is also an objection to political activity by powerful groups like the National Rifle Association (NRA) or the American Civil Liberties Union (ACLU) and individuals like Charles Koch or Tom Steyer.

A third objection to CPA is more narrowly targeted. According to it, corporations are not the right type of entities to engage in political activity (Hussain & Moriarty 2018). The key issue is representation. Organizations like the NRA and ACLU are legitimate participants in the political arena because they represent their members in political debate, and people join or leave them based on political considerations. By contrast, business organizations have no recognized role to play in the political system, and people join or leave them for economic reasons, not political ones. On this criticism, corporate political activity should be conceptualized not as a collective effort by all of the corporation’s members to speak their minds about a shared concern, but as an effort by a small group of powerful owners or executives to use the corporation’s resources to advance their own personal ends.

Traditionally CPA goes “through” the formal political process, e.g., contributing to political campaigns or lobbying government officials. But increasingly firms are engaging in what appears to be political activity that goes “around” or “outside” of this process, especially in circumstances in which the state is weak, corrupt, or incompetent. They do this through the provision of public goods and infrastructure (Ruggie 2004) and the creation of systems of private regulation or “soft law” (Vogel 2010). For example, when the Rana Plaza collapsed in Bangladesh in 2013, killing more than 1100 garment industry workers, new building codes and systems of enforcement were put into place. But they were put into place by the multinational corporations that are supplied by factories in Bangladesh, not by the government of Bangladesh. This kind of activity is sometimes called “political CSR,” since it is a kind of CSR that produces a political outcome (Scherer & Palazzo 2011). We might call it CPA “on steroids”. Instead of influencing political outcomes, corporations bring them about almost single-handedly. This is a threat to democratic self-rule. Some writers have explored whether it can be ameliorated through multi-stakeholder initiatives (MSIs), or governance systems that bring together firms, non-governmental organizations, and members of local communities to deliberate and decide on policy matters. Prominent examples include the Forest Stewardship Council (FSC), the Roundtable on Sustainable Palm Oil (RSPO), and the Extractive Industries Transparency Initiative (EITI) (Scherer & Palazzo 2011). Critics have charged that MSIs, while effective in producing dialog among stakeholders, are ineffective at holding firms to account (Hussain & Moriarty 2018; Moog, Spicer, & Böhm 2015).

There is another kind of corporate political activity. This is political activity whose target is corporations, known as “ethical consumerism” (for a review see Schwartz 2017). Consumers typically make choices based on quality and price. Ethical consumers (also) appeal to moral considerations. They may purchase, or choose not to purchase, goods from retailers who make their products in certain countries or who support certain political causes. These can be described as political activities because consumers are using their economic power to achieve political ends. It is difficult for consumer actions against, or in support of, firms to succeed, since they require coordinating the actions of many individuals. But consuming ethically may be important for personal integrity. You might say that you cannot in good conscience shop at a retailer who is working, in another arena, against your deeply-held values. One concern about ethical consumerism is that it may be a form of vigilantism (Hussain 2012; cf. Barry & MacDonald 2018), or mob justice. Another is that it is yet another way that people can self-segregate by moral and political orientation as opposed to finding common ground.

Many businesses operate across national boundaries. These are typically called “multinational” or “transnational” firms (MNCs or TNCs). Operating internationally heightens the salience of a number of the ethical issues discussed above, such as CSR, but it also raises new issues, such as relativism and divestment. Two issues often discussed in connection with international business are not treated in this section. One is wages and working conditions in sweatshops. This literature is briefly discussed in section 6.2 . The second issue is corruption, which is not discussed in this entry, for space reasons. But see the entry on corruption .

A number of business ethicists have developed ethical codes for MNCs, including DeGeorge (1993) and Donaldson (1989). International agencies have also created codes of ethics for business. Perhaps the most famous of these is the United Nations Global Compact, membership in which requires organizations to adhere to a variety of rules in the areas of human rights, labor, environment, and anti-corruption. In his important work for that body, Ruggie (2004, 2013) developed a “protect, respect, and remedy” framework for MNCs and human rights, which assigns the state the primary duty to protect human rights and remedy abuses of them, and firms the duty to respect human rights (cf. Wettstein 2009). A striking fact about much of this research is that, while it is focused on international business, and sometimes promulgated by international agencies, the conclusions reached do not apply specifically to firms doing business across national boundaries. The duty to, e.g., respect human rights applies to firms doing business within national boundaries too. It is simply that the international context is the one in which this duty seems most important to discharge, and in which firms are some of the few agents who can do so.

There are issues, however, that arise specifically for firms doing business internationally. Every introductory ethics student learns that different cultures have different moral codes. This is typically an invitation to think about whether or not morality is relative to culture. For the businessperson, it presents a more immediate challenge: How should cultural differences in moral codes be managed? In particular, when operating in a “host” country, should the businessperson adopt host country standards, or should she apply her “home” country standards?

Donaldson is a leading voice on this question, in work done independently (1989, 1996) and with Dunfee (1999). Donaldson and Dunfee argue that there are certain “moral minima” that must be met in all contexts. These are given to us by “hypernorms”, or universal moral values and rules, which are themselves justified by a “convergence of religious, philosophical, and cultural” belief systems (1999: 57). Within the boundaries set by hypernorms, Donaldson and Dunfee say, firms have “free space” to select moral standards. They do not have the liberty to select any standards they want; rather, their choices must be guided by the host country’s traditions and its current level of economic development. Donaldson and Dunfee call their approach “integrative social contracts theory” (ISCT), since they seek to merge norms derived from hypothetical contracts with norms that people have actually agreed to in particular societies.

ISCT has attracted a great deal of attention and many critics. Much of this criticism has focused on hypernorms, the criteria for which are alleged to be ad hoc (Scherer 2015), ambiguous (Brenkert 2009), and incomplete (Mayer & Cava 1995). Dunfee (2006b) collects and analyzes a decade worth of critical commentary on ISCT. For a more recent elaboration and defense of the approach, see Scholz, de los Reyes, and Smith (2019).

A complication for the debate about whether to apply home country standards in host countries is that multinational corporations engage in business across national boundaries in different ways. Some MNCs directly employ workers in multiple countries, while others contract with suppliers. Nike, for example, does not directly employ workers to make shoes. Rather, Nike designs shoes, and hires firms in other countries to make them. Our views about whether an MNC should apply home country standards in a host country may depend on whether the MNC is applying them to its own workers or to those of other firms.

The same goes for responsibility. MNCs, especially in consumer-facing industries, are often held responsible for poor working conditions in their suppliers’ factories. Nike was subject to sharp criticism for the labor practices of its suppliers in the 1990s (Hartman et al. 2003). Initially Nike pushed back, saying that those weren’t their factories, and so wasn’t their problem. Under mounting pressure, it changed course and promulgated a set of labor standards that it required all of its suppliers to meet, and now spends significant resources ensuring that they meet them (Hsieh, Toffel, & Hull 2019; Wokutch 2001). This is increasingly the approach Western multinationals take. Here again the response to the Rana Plaza tragedy is illustrative. What lengths companies should go to ensure the safety of workers in their supply chains is a question meriting further study (see Young 2011).

A businessperson may find that a host country’s standards are not just different than her home country’s standards, but morally intolerable. She may decide that the right course of action is not to do business in the country at all, and if she is invested in the country, to divest from it. The issue of divestment received substantial attention in the 1980s as MNCs were deciding whether or not to divest from South Africa under its Apartheid regime. It may attract renewed attention in the coming years as firms and other organizations contemplate divesting from the fossil fuel industry. Common reasons to divest from a morally problematic society or industry are to avoid complicity in immoral practices, and to put pressure on the society or industry to change its practices. Critics of divestment worry about the effects of divestment on innocent third parties (Donaldson 1989) and about the efficacy of divestment in forcing social change (Hudson 2005). Some believe that it is better for firms to stay engaged with the society or industry and try to bring about change from within—a policy of “constructive engagement”.

It is not hard to see why philosophers might be interested in business. Business activity raises a host of interesting philosophical issues: of agency, responsibility, truth, manipulation, exploitation, justice, beneficence, and more. After a surge of activity 40 years ago, however, philosophers seem to be gradually retreating from the field.

One explanation appeals to demand. Many of the philosophers who developed the field were hired into business schools, but after they retired, they were not replaced with other philosophers. Business schools have hired psychologists to understand why people engage in unethical behavior and strategists to explore whether ethics pays. These scholars fit better into the business school environment, which is dominated by social scientists. What social scientists do to advance our understanding of descriptive ethics is important, to be sure, but it is no substitute for normative reflection on what is ethical or unethical in business.

Another explanation for the retreat of philosophers from business ethics appeals to supply. There are hardly any philosophy Ph.D. programs that have faculty specializing in business ethics and, as a result, few new Ph.D.’s are produced in this area. Those who work in the area are typically “converts” from mainstream ethical theory and political philosophy. Some good news on this front is the recent increase in the number of normative theorists working on issues at the intersection of philosophy, politics, and economics (PPE). Many of the topics these scholars address—the value and limits of markets, the nature of the employment relationship, and the role of government in regulating commerce—are issues business ethicists care about. But PPE-style philosophers hardly cover the whole field of business ethics. There remain many urgent issues to address.

I hope this entry helps to inform philosophers and others about the richness and value of business ethics, and in doing so, generate greater interest in the field.

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How to cite this entry . Preview the PDF version of this entry at the Friends of the SEP Society . Look up topics and thinkers related to this entry at the Internet Philosophy Ontology Project (InPhO). Enhanced bibliography for this entry at PhilPapers , with links to its database.

Marcoux, Alexei, “Business Ethics”, The Stanford Encyclopedia of Philosophy (Fall 2016 Edition), Edward N. Zalta (ed.), URL = < https://plato.stanford.edu/archives/fall2016/entries/ethics-business/ >. [This was the previous entry on business ethics in the Stanford Encyclopedia of Philosophy — see the version history .]
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Acknowledgments

For helpful suggestions on this entry (and the previous version), I thank Dorothea Baur, George Brenkert, Jason Brennan, Matt Caulfield, David Dick, Anca Gheaus, Keith Hankins, Edwin Hartman, Laura Hartman, Lisa Herzog, David Jacobs, Woon Hyuk Jay Jang, Peter Jaworski, Xavier Landes, Chris MacDonald, Emilio Marti, Dominic Martin, Pierre-Yves Néron, Eric Orts, Katinka Quintelier, Sareh Pouryousefi, Amy Sepinwall, Kenneth Silver, Abraham Singer, Alejo José G. Sison, Cindy Stark, Chris Surprenant, Kevin Vallier, and Hasko von Kriegstein.

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11.3 Ethics and Profitability

Few directives in business can override the core mission of maximizing shareholder wealth, and today that particularly means increasing quarterly profits. Such an intense focus on one variable over a short time (i.e., a short-term perspective) leads to a short-sighted view of what constitutes business success.

Profitability and Success: Thinking Long Term

Decades ago, some management theorists argued that a conscientious manager in a for-profit setting acts ethically by emphasizing solely the maximization of earnings. Today, most commentators contend that ethical business leadership is grounded in doing right by all stakeholders directly affected by a firm’s operations, including, but not limited to, stockholder s , or those who own shares of the company’s stock. That is, business leaders do right when they give thought to what is best for all who have a stake in their companies. Not only that, firms actually reap greater material success when they take such an approach, especially over the long run.

Nobel Prize-winning economist Milton Friedman stated in a now-famous New York Times Magazine article in 1970 that the only “social responsibility of a business is to increase its profits.”

This concept took hold in business and even in business school education. However, although it is certainly permissible and even desirable for a company to pursue profitability as a goal, managers must also have an understanding of the context within which their business operates and of how the wealth they create can add positive value to the world. The context within which they act is society, which permits and facilitates a firm’s existence.

Competition and the Markers of Business Success

Warren Buffet (Figure 11.3), whom many consider the most successful investor of all time, is an exemplar of business excellence as well as a good potential role model for professionals of integrity and the art of thinking long term. He had the following to say: “Ultimately, there’s one investment that supersedes all others: Invest in yourself. Nobody can take away what you’ve got in yourself, and everybody has potential they haven’t used yet. . . . You’ll have a much more rewarding life not only in terms of how much money you make, but how much fun you have out of life; you’ll make more friends the more interesting person you are, so go to it, invest in yourself.”

This is a very simple and practical guide to encouraging ethical business behaviour on a personal level. Buffett offers another, equally wise, principle: “Lose money for the firm, even a lot of money, and I will be understanding; lose reputation for the firm, even a shred of reputation, and I will be ruthless.”

As we saw in the example of Toyota, the importance of establishing and maintaining trust in the long term cannot be underestimated.

For more on Warren Buffett’s thoughts about being both an economic and ethical leader, watch this interview that appeared on the PBS NewsHour on June 6, 2017.

Stockholders, Stakeholders, and Goodwill

Earlier in this chapter, we explained that stakeholders are all the individuals and groups affected by a business’s decisions. Among these stakeholders are stockholders (or shareholders), individuals and institutions that own stock (or shares) in a corporation. Understanding the impact of a business decision on the stockholder and various other stakeholders is critical to the ethical conduct of business. Indeed, prioritizing the claims of various stakeholders in the company is one of the most challenging tasks business professionals face. Considering only stockholders can often result in unethical decisions; the impact on all stakeholders must be considered and rationally assessed.

Managers do sometimes focus predominantly on stockholders, especially those holding the largest number of shares because these powerful individuals and groups can influence whether managers keep their jobs or are dismissed (e.g., when they are held accountable for the company’s missing projected profit goals). And many believe the sole purpose of a business is, in fact, to maximize stockholders’ short-term profits. However, considering only stockholders and short-term impacts on them is one of the most common errors business managers make. It is often in the long-term interests of a business not to accommodate stockowners alone but rather to take into account a broad array of stakeholders and the long-term and short-term consequences for a course of action.

Here is a simple strategy for considering all your stakeholders in practice. Divide your screen or page into three columns; in the first column, list all stakeholders in order of perceived priority (Figure 11.4: Considering Stakeholder Impact). Some individuals and groups play more than one role. For instance, some employees may be stockholders, some members of the community may be suppliers, and the government may be a customer of the firm. In the second column, list what you think each stakeholder group’s interests and goals are. For those that play more than one role, choose the interests most directly affected by your actions. In the third column, put the likely impact of your business decision on each stakeholder. This basic spreadsheet should help you identify all your stakeholders and evaluate your decision’s impact on their interests. If you would like to add a human dimension to your analysis, try assigning some of your colleagues to the role of stakeholders and reexamine your analysis.

The positive feeling stakeholders have for any particular company is called goodwill, which is an important component of almost any business entity, even though it is not directly attributable to the company’s assets and liabilities. Among other intangible assets, goodwill might include the worth of a business’s reputation, the value of its brand name, the intellectual capital and attitude of its workforce, and the loyalty of its established customer base. Even being socially responsible generates goodwill. The ethical behaviour of managers will have a positive influence on the value of each of those components. Goodwill cannot be earned or created in a short time, but it can be the key to success and profitability.

A company’s name, its corporate logo, and its trademark will necessarily increase in value as stakeholders view that company in a more favourable light. A good reputation is essential for success in the modern business world, and with information about the company and its actions readily available via mass media and the Internet (e.g., on public rating sites such as Yelp), management’s values are always subject to scrutiny and open debate. These values affect the environment outside and inside the company. The corporate culture, for instance, consists of shared beliefs, values, and behaviours that create the internal or organizational context within which managers and employees interact. Practicing ethical behaviour at all levels—from CEO to upper and middle management to general employees—helps cultivate an ethical corporate culture and ethical employee relations.

Which Corporate Culture Do You Value?

Imagine that upon graduation you have the good fortune to be offered two job opportunities. The first is with a corporation known to cultivate a hard-nosed, no-nonsense business culture in which keeping long hours and working intensely are highly valued. At the end of each year, the company donates to numerous social and environmental causes. The second job opportunity is with a nonprofit recognized for a very different culture based on its compassionate approach to employee work-life balance. It also offers the chance to pursue your own professional interests or volunteerism during a portion of every workday. The first job offer pays 20 percent more per year.

Thus, viewed from the proper long-term perspective, conducting business ethically is a wise business decision that generates goodwill for the company among stakeholders, contributes to a positive corporate culture, and ultimately supports profitability.

Or suppose one group of financial advisors has a long track record of giving back to the community of which it is part. It donates to charitable organizations in local neighbourhoods, and its members volunteer service hours toward worthy projects in town. Would this group not strike you as the one worthy of your investments? That it appears to be committed to building up the local community might be enough to persuade you to give it your business. This is exactly how a long-term investment in community goodwill can produce a long pipeline of potential clients and customers.

The Equifax Data Breach

Equifax executives sold off nearly $2 million of company stock they owned after finding out about the hack in late July, weeks before it was publicly announced on September 7, 2017, in potential violation of insider trading rules. The company’s shares fell nearly 14 percent after the announcement, but few expect Equifax managers to be held liable for their mistakes, face any regulatory discipline, or pay any penalties for profiting from their actions. To make amends to customers and clients in the aftermath of the hack, the company offered free credit monitoring and identity theft protection. On September 15, 2017, the company’s chief information officer and chief of security retired. On September 26, 2017, the CEO resigned, days before he was to testify before Congress about the breach. To date, numerous government investigations and hundreds of private lawsuits have been filed as a result of the hack.

A Brief Introduction to Corporate Social Responsibility

If you truly appreciate the positions of your various stakeholders, you will be well on your way to understanding the concept of corporate social responsibility (CSR). CSR is the practice by which a business views itself within a broader context, as a member of society with certain implicit social obligations and environmental responsibilities. As previously stated, there is a distinct difference between legal compliance and ethical responsibility, and the law does not fully address all ethical dilemmas that businesses face. CSR ensures that a company is engaging in sound ethical practices and policies in accordance with the company’s culture and mission, above and beyond any mandatory legal standards. A business that practices CSR cannot have maximizing shareholder wealth as its sole purpose, because this goal would necessarily infringe on the rights of other stakeholders in the broader society. For instance, a mining company that disregards its corporate social responsibility may infringe on the right of its local community to clean air and water if it pursues only profit. In contrast, CSR places all stakeholders within a proper contextual framework.

An additional perspective to take concerning CSR is that ethical business leaders opt to do good at the same time that they do well. This is a simplistic summation, but it speaks to how CSR plays out within any corporate setting. The idea is that a corporation is entitled to make money, but it should not only make money. It should also be a good civic neighbour and commit itself to the general prospering of society as a whole. It ought to make the communities of which it is part better at the same time it pursues legitimate profit goals. These ends are not mutually exclusive, and it is possible—indeed, praiseworthy—to strive for both. When a company approaches business in this fashion, it is engaging in a commitment to corporate social responsibility.

A long-term view of business success is critical for accurately measuring profitability. All the company’s stakeholders benefit from managers’ ethical conduct, which also increases a business’s goodwill and, in turn, supports profitability. Customers and clients tend to trust a business that gives evidence of its commitment to a positive long-term impact. By exercising corporate social responsibility, or CSR, a business views itself within a broader context, as a member of society with certain implicit social obligations and responsibility for its own effects on environmental and social well-being.

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The Ethics of Profit

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One could also title this chapter “Profit and the Market Economy.” I will get less into general questions of ethics, morals, or philosophy, and concentrate instead on economic aspects related to profit.

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Simon, H. (2021). The Ethics of Profit. In: True Profit!. Copernicus, Cham. https://doi.org/10.1007/978-3-030-76702-0_4

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The Balancing Act: Profit, Ethics, and Social Responsibility in Business

Strategic Advisor Board

In the complex realm of modern business, there exists a perpetual balancing act a delicate equilibrium between profit, ethics, and social responsibility. It is a realm where financial success meets moral compass, and where the pursuit of self-interest converges with the greater good of society. This article embarks on a journey to unravel this intricate interplay and explore how businesses navigate the sometimes-turbulent waters where profit motives, ethical considerations, and social responsibility converge.

At its core, the balancing act we explore here is about harmonizing two seemingly contradictory forces: the relentless drive to maximize profits, often seen as the lifeblood of any enterprise, and the ethical and social responsibilities that guide businesses toward a more sustainable and compassionate path. It is about understanding that success in the modern business world is no longer solely defined by financial gains but also by the positive impact a company has on its stakeholders and the broader community.

In a world where consumers, investors, and employees increasingly demand more than just profits from corporations, understanding and mastering this balancing act has never been more critical. So, join us on this enlightening journey as we dissect the intricate dance between profit, ethics, and social responsibility, and uncover the blueprint for creating a business world that thrives while making a meaningful difference.

Profit vs. Ethics

At the heart of the balancing act in business lies the tension between the pursuit of profit and the imperative of ethical considerations. This tension has been a hallmark of the business world for centuries, and it continues to shape the decisions and actions of organizations large and small.

The Pursuit of Profit

Profit is often viewed as the primary goal of business. It's the financial engine that drives growth, innovation, and sustainability. Businesses exist to generate revenue and provide returns to shareholders, and this drive for profit can sometimes lead to a singular focus on the bottom line.

Ethical Dilemmas in Business

Yet, the pursuit of profit is not without its ethical challenges. Businesses frequently face dilemmas that force them to consider the moral implications of their actions. These dilemmas may include issues such as:

Labor Practices: Decisions related to fair wages, working conditions, and employee rights can test a company's commitment to ethics when they intersect with profit considerations.

Environmental Impact: Balancing profit with environmental responsibility is a common challenge. Companies must decide how to manage their ecological footprint while remaining economically viable.

Consumer Welfare: Ethical questions arise when it comes to product safety, marketing practices, and fair pricing. Companies must weigh these considerations against profit margins.

Balancing Profit and Ethical Considerations

The key to success in navigating the profit vs. ethics conundrum lies in finding a balance. Businesses that excel in this area recognize that profitability and ethics are not mutually exclusive. Instead, they understand that ethical behavior can lead to long-term profitability by fostering trust, enhancing reputation, and attracting socially conscious customers and investors.

Social responsibility in business

In today's interconnected world, businesses are increasingly expected to operate with a sense of social responsibility. This concept, often referred to as Corporate Social Responsibility (CSR), transcends the traditional profit motive and emphasizes a company's obligations to the broader society in which it operates.

Understanding Corporate Social Responsibility (CSR)

Corporate Social Responsibility (CSR) is a voluntary commitment by businesses to act ethically and contribute positively to society beyond their primary profit-making objectives. It encompasses a wide range of activities and initiatives aimed at addressing social, environmental, and ethical issues. Key aspects of CSR include:

Environmental Stewardship: Implementing sustainable practices to reduce carbon footprints, conserve resources, and minimize environmental impact.

Community Engagement: Engaging with local communities and supporting social initiatives, such as education, healthcare, and infrastructure development.

Ethical Governance: Ensuring transparency, accountability, and ethical behavior within the organization, including fair treatment of employees and ethical supply chain practices.

Philanthropy: Donating a portion of profits to charitable causes or organizations, either through financial contributions or in-kind support.

Impactful CSR Initiatives

Businesses engaging in CSR initiatives can create a positive impact in various ways:

Enhanced Reputation: Demonstrating a commitment to social responsibility can enhance a company's reputation, fostering trust among consumers, investors, and stakeholders.

Attracting Talent: Companies known for their social responsibility tend to attract top talent who are passionate about working for organizations aligned with their values.

Competitive Advantage: CSR initiatives can be a source of competitive advantage, as socially conscious consumers increasingly prefer brands that align with their values.

Risk Mitigation: Ethical behavior and responsible practices can help mitigate legal, regulatory, and reputational risks.

Integrating Social Responsibility into Business Models

Successful CSR initiatives are not mere add-ons; they are integrated into the core business strategy. Companies that excel in social responsibility go beyond one-off philanthropic gestures. They embed ethical and sustainable practices into their operations, products, and services.

Challenges and Ethical Considerations

As businesses strive to balance profit, ethics, and social responsibility, they encounter a spectrum of challenges and ethical dilemmas that demand thoughtful navigation. These challenges underscore the complexity of the balancing act and the need for conscious decision-making.

Ethical Challenges in Pursuit of Profit

Short-Term vs. Long-Term Gains: One of the fundamental ethical dilemmas is the trade-off between short-term financial gains and long-term sustainability. Businesses may be tempted to prioritize immediate profits, potentially at the expense of long-term environmental, social, or ethical consequences.

Cost-Cutting vs. Fair Labor Practices: Striking a balance between cost-cutting measures and maintaining fair labor practices can be challenging. Ethical concerns arise when businesses seek to reduce labor costs through practices that compromise worker rights and well-being.

Transparency and Accountability: Ensuring transparency in financial reporting, supply chain practices, and corporate governance is an ethical imperative. Businesses must grapple with the ethical dilemma of balancing the need for transparency with protecting proprietary information.

Balancing Short-Term Gains with Long-Term Sustainability

The tension between short-term gains and long-term sustainability is a recurring challenge. Ethical businesses recognize that prioritizing sustainability, even if it involves initial costs, can yield long-term benefits. However, the pressure to deliver immediate financial results can create ethical conflicts.

Reputation Management and Ethical Crises

Maintaining a strong ethical reputation is vital, but businesses can face ethical crises that tarnish their image. Ethical considerations must guide crisis management strategies to regain trust and credibility.

Complexity of Supply Chains

Global supply chains often involve multiple stakeholders and regions with varying ethical standards. Businesses must grapple with the challenge of ensuring ethical practices throughout their supply chains, addressing issues like child labor and environmental degradation.

Ethical Decision-Making

At the core of these challenges is the need for ethical decision-making. Businesses must establish clear ethical guidelines, codes of conduct, and decision frameworks to navigate complex situations where profit and social responsibility intersect.

Striking the right balance between profit, ethics, and social responsibility requires vigilance, commitment, and a long-term perspective. It demands that businesses prioritize ethical considerations not as an afterthought but as a core element of their business strategies. The following sections will delve into successful case studies and emerging trends that showcase how businesses can overcome these challenges while upholding their ethical responsibilities.

Future trends

The landscape of business ethics and social responsibility is continually evolving, shaped by changing societal values, technological advancements, and global challenges. To stay ahead in this dynamic environment, businesses must anticipate and adapt to emerging trends. Here are some future trends that will influence the way companies balance profit, ethics, and social responsibility:

Evolving Business Paradigms

Purpose-Driven Business: The trend toward purpose-driven businesses is expected to intensify. Companies that prioritize a clear sense of purpose beyond profit will resonate more with socially conscious consumers and investors.

Stakeholder Capitalism: Businesses will increasingly adopt a stakeholder-centric approach, recognizing that they have responsibilities not only to shareholders but also to employees, customers, communities, and the environment.

The Role of Technology and Globalization

Ethical Tech: The technology sector will face increased scrutiny regarding ethical considerations, data privacy, and the responsible use of artificial intelligence. Ethical tech practices will become a competitive advantage.

Supply Chain Transparency: Advancements in blockchain technology will enhance supply chain transparency, enabling consumers to trace the origin and ethical practices associated with products.

Emerging Trends in Social Responsibility

Environmental Sustainability: Climate change mitigation and environmental sustainability will remain at the forefront of social responsibility. Companies will be expected to set ambitious sustainability goals and reduce their carbon footprint.

Diversity, Equity, and Inclusion: Companies will continue to prioritize diversity, equity, and inclusion in the workplace, with a focus on closing gender and racial gaps in leadership positions.

Social Impact Investment: Social impact investing, where investors seek both financial returns and positive social or environmental impacts, will gain momentum, influencing corporate decision-making.

Ethical Supply Chains

Circular Economy: The transition to a circular economy, where resources are reused and recycled, will become a standard practice for businesses seeking to reduce waste and environmental impact.

Ethical Marketing and Transparency

Authentic Branding: Authenticity in marketing will be crucial. Consumers will demand transparency and honesty in advertising and branding efforts.

Sustainable Packaging: Ethical packaging choices, including recyclable and biodegradable materials, will become more prevalent as consumers prioritize environmentally friendly options.

Regulatory Changes

Tightening Regulations: Governments and regulatory bodies are expected to introduce more stringent regulations related to ethical business practices, requiring greater compliance and transparency.

Employee Well-Being

Work-Life Balance: Companies will prioritize employee well-being, offering flexible work arrangements and mental health support to address work-related stress and burnout.

Adapting to these trends will be essential for businesses aiming to thrive in an increasingly conscious and interconnected world. By embracing these shifts and integrating ethics and social responsibility into their core strategies, companies can not only navigate the evolving landscape successfully but also contribute to a more sustainable and responsible global business ecosystem.

In the intricate dance between profit, ethics, and social responsibility, businesses find themselves at a pivotal crossroads. The challenges are abundant, the dilemmas are complex, but the imperatives are clear. This exploration has illuminated the fact that the pursuit of profit does not have to come at the cost of ethics or social responsibility. In fact, businesses that strike a harmonious balance between these elements can thrive in a rapidly changing world where consumers, investors, and stakeholders demand more than mere financial returns.

The future of business lies in embracing emerging trends that underscore the significance of ethical behavior, social impact, and sustainability. Purpose-driven businesses, stakeholder-centric models, and the responsible use of technology are set to redefine success. Ethical considerations, from diversity and inclusion to supply chain transparency and environmental sustainability, will shape corporate strategies and decisions. As the world becomes more interconnected and information flows more freely, authenticity, transparency, and accountability will be non-negotiable.

Are you ready to navigate the complex interplay of profit, ethics, and social responsibility in your business? Contact Strategic Advisor Board today to align your business strategies with ethical practices and social responsibility, ensuring a sustainable and successful future in the modern business landscape. Let's make a meaningful impact together!

This article was brought to you by: Jason Miller, AKA Jason "The Bull" Miller, Founder/CEO and Senior Global Managing Partner of the Strategic Advisor Board - What has your business done for YOU today?

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'Business knowledge is money, wealth and power'

The Never-ending Conflict Between Ethics and Profit

BUSINESS MANAGEMENT , BUSINESS ORGANIZATION and INTERNAL AND EXTERNAL ENVIRONMENT

Businesses face conflict between profits and ethics because following the ethical behavior to achieve ethical objectives increases expenses, and greater costs mean lower profits for the business.

For example, paying higher wages to production workers, providing better working environment, reducing pollution levels by purchasing the newest technology, etc.

For some businesses, not following ethical policies may bring unwelcome publicity. Even though businesses can increase short-term profits by behaving unethically, the unethical behaviors are not good for the reputation in the long-term. And without decent reputation, profitability is most likely to decrease threatening the survival of the business.

How businesses respond to ethical issues vs. profit maximization?

Decision-making is not easy when managers face an ethical issue because they need to consider the interests of the various stakeholders who have conflicting interests . Both the advantages and disadvantages of ethical behavior need to be considered. Advantages of ethical behavior include:

Good reputation. Improved corporate image can help with attracting new investors and encouraging the current ones to invest more money into the business propelling business growth . Businesses can use this to improve their brand awareness and recognition.
Easier to attract and retain workers. Working for an ethical business can be a source of motivation helping to attract and retain good quality staff. Companies such as Google and Bloomberg have very loyal and dedicated workforce due to lots of on-site benefits such as comfortable working environment with free food at full service pantries in all offices, gym access and comprehensive healthcare coverage, parental leaves, consumer discounts, free laundry and childcare services.
Source of motivation . Can be a motivating factor for existing employees which will help with retaining them.
Easier to attract and retain customers. Customers these days are increasingly concerned about environmental protection and ethical business behavior therefore to attract new customers and retain existing ones, businesses need to consider the impact of their business operations on the society and natural environment.
Increased customer satisfaction. Increasingly aware customers will be pleased when offered eco-friendly products that have been made fairly.
Good Public Relations (PR). Socially responsible businesses will use their ethical stance to generate good publicity and Public Relations (PR).

Choosing to be ethical and socially responsible can bring benefits, but there are also compliance costs involved with such decisions. Disadvantages of following ethical behaviors include:

Higher costs. Using recycled materials may mean higher production costs, comparing with using raw materials with the lowest price.
Lower profits. Improving working conditions and not hiring cheap child labor will lead to lower profits.
Compliance costs. The costs of being ethical may involve not choosing the cheapest supplier who is perceived by customers and other stakeholders to be an unethical business, therefore time and money need to be spent on sourcing socially responsible suppliers.

How to solve the conflict between ethics and profit?

Overall, it is important to find the right balance between ethics and profit because the business has long-term interests of acting ethically.

One idea is that mangers can increase profits by locating the business in countries where environmental protection laws are less strict, or reduce labor costs by paying only the minimum wages for a period of time.

Another idea is to outsources some of the business functions such as accounting, promotion or manufacturing operations to less-developed countries such as India or Bangladesh where minimum wages are lower than in the U.S or the UK.

Although there is a cost involved initially in acting ethically, it pays off over time, and the society as a whole is likely to benefit too.

business ethics
compliance costs
customer satisfaction
ethical behavior
ethical policies
Profit maximization
Public Relations (PR)
stakeholder conflict

CATEGORIES: BUSINESS MANAGEMENT , BUSINESS ORGANIZATION AND INTERNAL AND EXTERNAL ENVIRONMENT

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Profit, Prudence and Virtue: Essays in Ethics, Business and Management

Samuel Gregg and James Stoner (eds.), Profit, Prudence and Virtue: Essays in Ethics, Business and Management , Academic Imprint, 2009, 265 pp., $34.90 (pbk), ISBN 9781845401597.

Reviewed by John R. Boatright, Loyola University Chicago

After a useful introduction by the editors, the essays are divided into four sections on Foundations, Practical Challenges for Ethical Management, Teaching Ethics in Business School, and After the Credit Collapse. The four essays on the foundations of business and the business system touch on similar themes: that business activity contributes powerfully to the moral development of humans as individuals and social beings, and that the resulting moral development — which includes the cultivation of virtues and the conceptions of well-being, justice, and the common good — are critical for the success of business. Drawing heavily on Aristotle and natural law theory, these authors (Harold James, Roger Scruton, David Novak, and Robert P. George) do not question the technocratic and bureaucratic nature of modern business nor the profit motive, but they stress that businesses are still composed of people whose decisions matter, and that business is conducted within and has profound impacts on a community of individuals and a political and legal order. In a world in which the business system takes on an impersonal character, they affirm that individuals still matter as decision makers and that ultimately success should be defined in terms of the extent to which business contributes to human flourishing.

The three essays in the second section on practical challenges, written by a physician, (Anthony Daniels) a historian (Wilfred M. McClay), and a management consultant collaborating with a philosopher (Thomas R. Krause and Sean Kelsey), explore some of the subtle dynamics of managing institutions, both public and private. The essay by Daniels, the physician, notes that incentives, which are the chief instrument for motivating desirable conduct in economic systems, often have perverse consequences and that some use must be made of a sense of professionalism and other non-incentive-based sources of motivation. Krause and Kelsey, the management consultant and philosopher, emphasize the necessity of leadership that can articulate a vision for an institution that is noble but still true to its core mission. For a business this means accepting the economic nature of its activity but finding a broader vision in a humanistic understanding of business as a cooperative venture that should benefit everyone.

The third section on business schools contributes to an ongoing dialogue about the state of business education and the need for reform. There is no lack of critical ideas in this dialogue but little agreement on either the problems or the solutions. There are as many conceptions of the ideal business school as there are business school professors. This volume explores two different, though not wholly incompatible, sources of inspiration: stakeholder theory and — yes, again — Aristotle. R. Edward Freeman, a noted developer of stakeholder theory, and his colleague, David Newkirk, usefully outline the history of business schools and survey the recent critics, such as Sumantra Ghoshal and Henry Minzberg, who argue that business education has been led astray by its focus on (bad) theories and its attempt to be “scientific.” Two of the essays argue that business leaders must have a broadly humanistic education and be able to address business problems within a broader set of concerns in which business is a human enterprise. The other two essays are by writers — Edwin Hartman and James O’Toole — who have written extensively on what business and business education would be in an Aristotelian framework. Their essays, while valuable, do not go beyond their previous writings.

The final four essays, written for this volume, appear under the heading “After the Credit Collapse.” Readers looking for a close analysis of the technical causes of the current financial crisis will be disappointed. The writers of these essays take the view that the particular faults that may have led to this crisis are of less interest than the more general moral failings that lie behind most economic troubles. This leads Christopher Megone, the author of the section’s first essay, to explore the ways in which the effort to maximize shareholder value threatens integrity and virtue. The essay by Samuel Gregg, one of the editors of this volume, focuses more specifically on how, after the crisis, business schools could better prepare their students for the ethical challenges of the contemporary business world. His recommendations would not add significantly to the range of topics considered in business education but would entail placing them in a broader, more humanistic context, so that students would understand both the ethical and economic assumptions involved in the concept of credit, for example. Of the four essays in this section, only the one by Philip Booth attempts to analyze the underlying causes of the current financial crisis, and his recommendations call, interestingly, for more rigorous education in economics, although he argues that the subject should be expanded to include economic thought that seeks to understand market failures and sources of disequilibrium, such as the Austrian school and public choice theory.

Where Morals and Profits Meet: The Corporate Value Shift

Harvard Business School professor Lynn S. Paine's new book, Value Shift , argues that companies can't consider themselves amoral or apart from society anymore—that the relationship between companies and society at large necessitates bringing a moral dimension to decision making. In this interview with HBS Working Knowledge's Carla Tishler, Paine explains why this shift has occurred, and why now.

Tishler: Your research on corporate values and ethics dates back to the 1980s, including much work done for Harvard Business School cases. Clearly, business ethics issues have been around a long time. Do you see a marked difference in the types and degrees of ethical breaches occurring in the past, compared to more recently?

Paine: Business ethics, of course, is as old as business itself, but formal academic study of the subject is, as your question suggests, comparatively new. When I began working in this area, the field was just beginning to emerge. At the time, corporations were being taken to task for a host of moral failings—neglecting consumer and employee safety, ignoring civil rights, polluting the environment, violating election laws, misleading investors.

The 1970s, much like the period we are in today, had witnessed a dramatic loss of confidence in business and American institutions more generally. In 1968, 70 percent of the public thought business tried to strike a fair balance between profits and the public interest. By 1977, the proportion was something like 15 percent. The overseas payments scandal was another contributor to the malaise. More than 400 major U.S. companies had admitted to making illegal campaign contributions and bribing public officials to win business overseas.

Given the field's origins in these events, people sometimes forget that business ethics at its core is about excellence and high attainment rather than misdeeds and malfeasance. But we do pay attention to misconduct, and I have seen many types over the years—from the garden-variety deceptions and betrayals that sap morale and waste human energy to the serious forms of wrongdoing that destroy health, wealth, and life itself.

The issues span the ethical spectrum: falsified books and records, misleading communications, defective and dangerous products shipped without warnings or information, abusive behavior and unsafe conditions in the workplace, unwarranted favoritism and conflicts of interest, myriad examples of bribery and extortion, unfair and predatory competition, theft and misappropriation of information, civic and environmental irresponsibility.

Unfortunately, we have no reliable gauge of how the levels and types of misconduct have changed over time. One reason for this, as I note in the book, is that expectations for corporate behavior are constantly evolving. Conduct that would have been ethically acceptable in one era becomes unacceptable as expectations rise.

People sometimes forget that business ethics at its core is about excellence and high attainment rather than misdeeds and malfeasance. — Lynn S. Paine

Moreover, new issues are constantly coming to the fore as a result of changes in technology, society, and politics. For instance, data privacy was not a major issue until the late 1980s and 1990s when companies began to exploit newly available information technologies. Recent advances in biotechnology have raised ethical issues that have never before presented themselves. And globalization has given rise to cross-cultural dilemmas that just weren't a major part of the scene in the 1970s.

Q: You note in your book that many companies are making a "turn to values,"—focusing on ethics, values, and examining company culture—but for varied reasons including risk management, organizational functioning, market positioning, and civic positioning. In your view, do you expect to see more companies follow one of these four routes more than the others? Does there always have to be a corporate justification? Will we see any trends?

A: As I describe in the book, the paths to values are many and varied. Some managers arrive by way of a crisis or scandal, and others by way of personal conviction or a logical process of reasoning and analysis. And a few are motivated simply by the vision of a better and more humane way of conducting business.

Overall, though, my experience has been that probably half, and maybe even two-thirds, categorize ethics mainly as a risk management issue. These managers tend to see corporate values as a tool for preventing misconduct with its incident legal, financial, and reputational risks. Ethics gets their attention because they want to avoid the high-profile missteps and billion-dollar losses experienced by a Salomon Brothers, Bridgestone/Firestone, or Enron.

In the future, I think more managers will recognize that risk management is only part of the story and that the benefits of positive values go well beyond problem avoidance. — Lynn S. Paine

In recent years, however, I have seen more attention being paid to the positive side of ethics. More managers are waking up to the ways in which positive values contribute to a company's effective day-to-day functioning, as well as its reputation and long-term sustainability. In the book, I trace these connections in some detail and show how they play out in practice—sometimes in surprising ways.

In the future, I think more managers will recognize that risk management is only part of the story and that the benefits of positive values go well beyond problem avoidance. I have seen this progression in some companies that initially turn to values as a damage control measure when confronted with a scandal in their organization or industry. Then, over time, they come to take a broader view as they see the positive effects on work life, product quality, relationships with their constituencies, or their standing in the community.

Q: Having a positive value system in place can help contain costs by heading off trouble. But can improved values also add to the bottom line?

A: I've alluded to some of the ways positive values can add to the bottom line. And research points to others that I discuss in the book—better access to talent, enhanced employee commitment, better information sharing, greater creativity, enhanced reputation, and so on.

But I caution managers against focusing only on the financial case for values. No matter how much evidence we amass for this case, the fact remains that moral indifference and even blatantly unethical behavior can also be financially rewarding in many circumstances. We should not forget that slavery had its financial benefits for slave owners. And, in virtually every case of misconduct that I've studied, the perpetrators justified their actions by reference to the anticipated financial gains.

What's important to recognize, as I argue in the book, is that today's companies are being held to a higher standard. Financial results are a must, but in addition, leading companies are expected to achieve those results by acting in an ethically acceptable manner. This represents a dramatic departure from centuries of tradition holding that corporations are by nature amoral and thus incapable of assuming responsibility, adhering to ethical standards, or exercising moral judgment. But abundant evidence shows that companies today are expected to do all these things.

In every region I've studied, I've found business leaders who are trying to develop companies that meld high ethical standards with outstanding financial results. — Lynn S. Paine

This shift in our understanding of the corporate personality has profound implications for management. Among other things, it means that managers must develop more robust ethical reasoning skills and increasingly subject their decisions to ethical as well as financial analysis. In a world in which companies are expected to behave as moral actors that conform their activities to certain ethical requirements, financial tests of acceptability alone are insufficient.

In the book, I spell out the implications of this shift in some detail and show how companies can become what I term "center-driven"—oriented toward strategies that make both ethical and financial sense. In the schema I lay out, companies can choose to be "dues payers" that practice an ethic of compliance, "sustaining members" that practice an ethic of mutuality, or "sponsoring members" that practice an ethic of contribution. But, as a practical matter, they can no longer choose ethical indifference as orthodox corporate theory has long maintained.

Q: What about the global picture? Are there other countries setting good examples for American firms to follow? Are there some places where the turn to values will be particularly difficult?

A: One of the most rewarding aspects of my research in recent years has been learning about well-regarded companies in all parts of the world. In every region I've studied, I've found business leaders who are trying to develop companies that meld high ethical standards with outstanding financial results. Generally, these are companies that seek to do an excellent job serving their core constituencies, including investors, customers, employees, and the public.

This is an inherently challenging task in any country, but it is more difficult in some environments than others, particularly those plagued by high levels of corruption. The effects of corruption are insidious and they go well beyond requests for bribes and favors. Obviously, the economic implications can be significant when your competitors can get away with paying off officials—either public or corporate—to win major contracts or secure exemptions from health, safety, or other requirements.

On the other hand, a background of corruption can sometimes make it easier for a good company to stand out. The story of Nigeria's Guaranty Trust Bank, which I recount in the book, provides a nice example. Given that studies have consistently found Nigeria to be among the world's most corrupt countries, it would not appear, at least initially, to be a very promising venue for a values-based company. But, for this very reason, GTB's founders felt it was imperative to try. They set out to build a bank that would be known for its workplace innovations, outstanding customer service, superior financial results, and exemplary corporate citizenship.

In general, though, it is easier to meld ethical commitment and economic success in environments where information is free-flowing and people have real choices about where to work, invest, and consume. Of course, people can only make sound choices if they are educated and have ongoing access to relevant information. So an educated populace and a free press are also important. In addition, a well-understood ethical framework and an effective legal system are crucial. In other words, it is very hard to talk about corporate ethics without paying attention to the broader social and institutional context in which a company is operating.

Q: What other projects are you working on?

A: As I note in the preface, Value Shift raises many more questions than it answers. So there are several directions I am considering for my next project. But, for now, the general idea is to go more deeply into the cross-cultural issues you just asked about.

For the past few years I have been developing a course on cross-cultural management for the second-year MBA program. While this project has persuaded me that leading companies around the world are gravitating toward a set of what might be termed "generally accepted ethical principles," it has also persuaded me that cultural differences present some formidable challenges for companies and their managers.

In my next project, I hope to shed some light on this murky area and also to help fill a gap in our curriculum. Historically, cultural issues have not had a central place in management education, but given the world today—and the role of business in it—familiarity with these issues has become essential preparation for business leadership.

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Profit vs. Ethics

By Ian Angus , originally published by Great Transition Initiative

March 2, 2020

Ed. note: This piece is part of the Towards a Great Ethics Transition Forum on the Great Transition Initiative website .

As historical experience reveals, voluntaristic wishful thinking — often wedded to a direct appeal to the authority of claimed moral imperatives — tends to predominate in politics precisely at times when the advocated political objectives are poorly grounded, due to the inherent weakness of those who promote them. Direct appeal to morality in such political discourse is used as an imaginary substitute for identifiable material and political forces which would secure the realization of the desired objectives.” — István Mészáros 1

The argument for a new environmental ethic, simply put, is that the dominant worldview in modern society considers human needs to be more important than those of nonhumans. So long as such anthropocentric ethics predominate, the destruction of the natural world will continue unabated. Robyn Eckersley writes:

If humans are taken to be more valuable beings than other species, then it would always follow that any human need, want or desire must necessarily take priority over the need or interests of nonhuman nature, no matter how critical or essential the latter needs may be. 2

What is needed, therefore, is a new system of ethics that recognizes the moral right of nonhuman nature to exist and develop without human interference and regardless of human needs.

“Simulacra of Morality”

The founders of ecocentric philosophy were convinced that they were making fundamentally important major advances in philosophy and ethics. Roderick Nash described the conclusions of environmental ethics as “revolutionary,” claiming that they were “arguably the most dramatic expansion of morality in the course of human thought.” 3 That sounds radical, but in practice, evolutionary ethics has proven very difficult to pin down. Conflicting interpretations of non-anthropocentrism and intrinsic value multiplied.

The debates go on and on, reminiscent of medieval scholastics discussing how many angels can dance on the head of a pin. The philosopher Alasdair MacIntyre says that in our time, “in moral argument the apparent assertion of principles functions as a mask for expressions of personal preference.” The result is “simulacra of morality” characterized by interminable debates in which there is no rational way to choose between the various positions. 4

That is certainly true of the debates among environmental ethicists. After fifty years of discussion, there is no agreement on what ecocentrism and biocentrism and intrinsic value and other key terms might actually mean in practice. The most notable feature of these debates is how abstract they are. Book after book discusses environmental ethics while making few concrete references to actual environmental problems. Instead, we are presented with “social/moral theories which presuppose a world radically different from the one we occupy, thereby rendering them irrelevant as solutions to the problems which face us in the real, non-fantasy world.” 5

A case in point is Richard Sylvan’s widely cited “last man” argument for a new environmental ethic. Under the basic chauvinism that characterizes existing Western ethical systems, he wrote, it would be morally acceptable for the last man on earth to systematically and deliberately destroy every other living thing on the planet. 6 This fantasy has been justly called radically under-described. What happened to everyone else? Did they all die at once, or was this a long process? Could one man actually destroy every living thing? Why would the last man destroy everything? Is it wanton destruction, or an act of despair, or some bizarre religious rite?

Even if we willingly suspend disbelief in Sylvan’s Twilight Zone scenario, why should anyone believe that the existence (or not) of ecocentric ethics would have any effect whatsoever on the behavior of the last man—or of anyone else, for that matter?

MacIntyre’s critique of moral discussions that “apparently can find no terminus” has rarely been better illustrated. The participants in these debates are professional academic philosophers using the most sophisticated tools of argument and analysis that the field has developed. The fact that they cannot agree strongly suggests that there is something fundamentally wrong.

Morality versus Moralism

In an article revealingly titled “Environmental Philosophy IS Environmental Activism: The Most Radical and Effective Kind,” environmental philosopher Baird Callicott insists that the quest for non-anthropocentric ethics has direct practical application:

If all environmental values are anthropocentric and instrumental, then they have to compete head to head with the economic values derived from converting rain forests to lumber and pulp, savannas to cattle pasture, and so on. Environmentalists, in other words, must show that preserving biological diversity is of greater instrumental value to present and future generations than is lucrative timber extraction, agricultural conversion, hydroelectric impoundment, mining, and so on. For this simple reason, a persuasive philosophical case for the intrinsic value of nonhuman natural entities and nature as a whole would make a huge practical difference. 7

To take this seriously, we have to believe that only the absence of a “persuasive philosophical case” has allowed giant corporations to continue destroying forests and savannas.

Imagine the president of Exxon or Monsanto explaining to shareholders that profits are down because a professor had alerted them to the intrinsic value of nonhuman natural entities. Imagine the shareholders applauding vigorously and voting him a big bonus for extending moral consideration to ecosystems! In the real world, a mountain of hard scientific evidence, including detailed accounts of the probable impact of global warming on both human and nonhuman nature, has made no practical difference to greenhouse gas emissions. The power and profits of the fossil fuel industry and its allies determine the environmental agenda, not science or ethics.

“Lucrative timber extraction, agricultural conversion, hydroelectric impoundment, mining, and so on” do not continue because of bad philosophy, but precisely because of how lucrative they are. Morality has nothing to do with the plunderers’ decisions: so long as it is profitable to destroy the earth, and there is no counterforce that can to stop them, they will continue to do so, even if they undermine the sources of their wealth and the conditions that make the earth livable.

That is not to say that anti-ecological behavior should not be condemned on moral grounds—rather, it is to insist on the vital distinction between morality and moralism. As Perry Anderson writes, that distinction helps overcome the tendency of moral judgments “to become substitutes for explanatory accounts of history”:

Moral consciousness is certainly indispensable to the very idea of socialism: Engels himself emphasized that ‘a really human morality’ would be one of the hallmarks of communism, the finest product of its conquest of the age-old social divisions and antagonisms rooted in scarcity. Moralism, on the other hand, denotes the vain intrusion of moral judgments in lieu of causal understanding. 8

Moral judgments in lieu of causal understanding—that phrase should be inscribed over the entrance of every department of environmental ethics.

1. István Mészáros, Beyond Capital (New York: Monthly Review Press, 1995), 656. 2. Robyn Eckersley, “Beyond Human Racism,” Environmental Values 7, no. 2 (May 1998): 174. 3. Roderick Nash, The Rights of Nature (Madison: University of Wisconsin Press, 1989), 7. 4. Alisdair MacIntyre, After Virtue (2013; New York: Bloomsbury, 1981), 22. 5. Keekok Lee, Social Philosophy and Ecological Scarcity (New York: Routledge, 2019). 6. Richard Sylvan (then Routley), “Is There a Need for a New, an Environmental, Ethic?,” Proceedings of the XVth World Congress of Philosophy 17th to 22nd September , 1973, Varna, Bulgaria. 7. J. Baird Callicott, “Environmental Philosophy IS Environmental Activism: The Most Radical and Effective Kind,” in Don Marietta, Jr., and Lester Embree, eds., Environmental Activism , 19–35 (Lanham, MD: Rowman and Littlefield, 1995). 8. Perry Anderson, Arguments within British Marxism (New York: Verso, 1980), 85.

Supreme Court justices around a table, struggling to keep up with an overload of cases piling up on the floor (1885)

Presidential immunity and the ‘Dark Age Ahead’

By Kurt Cobb , Resource Insights

I’ve been thinking about Jane Jacobs’ book, Dark Age Ahead, as I’ve contemplated the idea that former presidents of the United States should be immune from prosecution.

April 28, 2024

Discussion Session with the Good Grief Network: Lessons and Practices for Facing the Great Unraveling

LaUra Schmidt of the Good Grief Network will lead an interactive session featuring grounding exercises, reflections on the webinar with Lise van Susteren and Dekila Chungyalpa, chances to share your experiences with eco-anxiety, and deep listening among colleagues.

April 27, 2024

Crazy Town 85. Escaping Globalism: Rebuilding the Local Economy One Pig Thyroid at a Time

By Asher Miller , Rob Dietz , Jason Bradford , Resilience.org

From the top of a skyscraper in Dubai, Jason, Rob, and Asher chug margaritas made from the purest Greenland glacier ice as they cover the “merits” of globalism. International trade brings so many things, like murder hornets and deadly supply chain disruptions. The opposite of globalism is localism — learn how to build a secure local economy that can keep Asher alive, hopefully at least through the end of the season.

April 24, 2024

What is Ethical Leadership and Why is it Important?

Ethical leadership is not only the right thing to do, it is key to driving an organization's success.

Valerie Kirk

Errors, bad behavior, and poor judgment in leadership can negatively impact a company’s brand and reputation. For business success, it’s critical for organizations to fill their C-suite with ethical leaders.

Ethical leadership involves leaders and managers making decisions based on the right thing to do for the common good, not just based on what is best for themselves or for the bottom line. While profits are important, ethical leaders take into consideration the needs of customers, communities, and employees in addition to company growth and revenue when making business decisions.

Ethical leaders encourage their team members to model this behavior, too. They help to build a workplace culture that values transparency, collaboration and inclusion, and where everyone feels safe to share their voice.

They can also help organizations recruit and retain top talent. Professionals are increasingly seeking out companies whose leaders strive to do the right thing. Generation Z, who will make up 25 percent of the workforce by 2025, demands leadership ethics more than generations that came before them.

“Gen Z is not going to negotiate. They have really strong values and ethics, and they don’t bend them because of intimidation or because they are just getting a paycheck,” said Michael McCarthy, instructor at Harvard Division of Continuing Education’s Professional & Executive Development and host of the “ Happy at Work ” podcast. “The idea of letting harmful or hurtful behavior slide is not acceptable.”

Leaders who weigh ethical considerations before making key business decisions drive a company’s long-term success.

The 6 Main Principles of Ethical Leadership

Having ethical leaders isn’t as simple as hiring “good” people. Companies should strive to fill their leadership ranks with people who embody the principles of ethical leadership. The six main principles include:

Respect includes valuing others’ skills and contributions. While historically respect in the workplace may have been one-way (leaders demanding respect from employees), in an ethical work environment, respect is mutual.

Mutual respect leads to healthier workplace relationships where both sides appreciate and support what the other is doing and feel secure in talking through issues and challenges. Healthy relationships create positive work environments, which drives increased productivity.

Current and upcoming business leaders should take mutual respect into account as workforce expectations continue to shift.

“I tell current leadership to respect Gen Z. They have values and morals, and you’re going to have a better organization because of them,” McCarthy said. “They aren’t going to put up with the old hierarchy that doesn’t offer mutual respect.”

2. Accountability

Ethical leaders hold themselves accountable for their actions. They make decisions based on integrity and stand behind their work. They also lead by example, communicate openly about challenges, and don’t look to place blame on others for any shortfalls.

Leaders make ethical decisions based on doing what is right for employees, customers, and the community. Because these constituents are always top of mind for ethical leaders, they often have a strong sense of service. They engage in activities such as charitable giving and volunteer work to give back to their communities — and encourage their teams to do the same.

Leaders who are transparent build trust amongst their organizations and amongst customers.

To build and maintain trust, leaders must be good communicators who speak openly and honestly about issues. Regardless of the issue’s severity or unpopularity, leaders’ responsibility to be clear and candid empowers others to make the right decisions with the information they have.

Honesty and transparency also help to build a brand’s reputation, leading to long-term customer loyalty.

Justice is not just about following the law, but about ensuring that everyone is getting what they deserve. Ethical leaders approach situations with a focus on treating everyone fairly, and they expect their teams to treat each other and customers the same way. Through their actions, they build equitable work environments where everyone feels respected.

6. Community

Ethical leaders view their companies as communities and consider everyone involved when evaluating situations and making decisions. By viewing their organizations this way, they build equity and inclusion into their decision-making process and create work environments that encourage collaboration across teams.

Learn more about Harvard DCE’s Ethical Leadership program

Examples of Positive and Negative Ethical Leadership

The following three examples are of companies that were faced with ethical dilemmas and how different leadership styles led to vastly different outcomes.

Johnson & Johnson

One of the most famous examples of ethical leadership was the case of the Tylenol cyanide poisonings in the early 1980s. Seven people died of cyanide poisoning, and the only connecting factor was that they had all taken extra-strength Tylenol. During investigation, it was discovered that the tablets were laced with cyanide.

Johnson & Johnson’s leaders acted quickly and pulled all Tylenol products off the shelves — 31 million bottles, worth over $100 million — and stopped all production and advertising. The swiftness of their decision, although costly, put customers’ well-being first and saved lives.

They partnered with law enforcement to find the perpetrator and subsequently developed the first-ever tamper-resistant packaging. They were transparent with the public about what they were doing to ensure this tragedy never happened again.

The Tylenol brand recovered from the incident, largely because of Johnson & Johnson’s ethical leadership team’s swift action and transparent care for customers.

In 2008, JetBlue left passengers stranded on the tarmac at the John F. Kennedy International Airport for more than five hours during a snowstorm. The delay had a ripple effect — JetBlue had to cancel more than 1,000 flights over the following five days.

In response, JetBlue’s CEO wrote a letter of apology to customers. He also directed his team to draft a customer bill of rights, which outlined customers’ rights to information about flights and information about compensation in the event of delays or cancellations.

The CEO also participated in a public apology tour, taking full responsibility for the incident rather than blaming it on the weather.

His transparency and accountability created trust with customers, who stayed loyal to the airline.

Wells Fargo

In September 2016 , it was revealed that employees of Wells Fargo, one of the largest banks in the United States, opened millions of unauthorized accounts in order to meet aggressive sales targets. This widespread fraudulent activity was the result of a work culture that prioritized quantity over quality and pushed employees to engage in unethical practices.

Company leaders denied knowledge of fraudulent practices. The bank was hit with significant financial penalties, but because of the lack of accountability, they damaged the trust of their customers and investors. They reported a 50 percent profit loss in the quarter following the scandal.

Meeting the Ethical Challenges of Leadership

Companies cannot underestimate the power of different leadership styles on their growth and long term success. Those who practice ethical leadership have positive corporate cultures where employees are engaged, motivated, and feel good about coming to work. Companies without ethical leadership face lower productivity and high turnover rates, impacting the organization’s bottom line.

Ethical leaders aren’t just born with these skills — they develop them over years of experience and training.

Harvard DCE Professional & Executive Development offers a two-day Ethical Leadership program that helps leaders develop skills to make ethical choices and lead companies through challenging dilemmas.

Topics covered include:

Making ethical decisions with conflicting responsibilities
Building a moral framework within yourself and the organization
Understanding the role of employees in both their professional and personal lives
Navigating a slippery slope when seemingly good people do bad things
Building a corporate culture that values moral behavior

Learn more about the ethical leadership program, including how to register.

Leaders looking to expand their ethical leadership skills should also consider the two-day Authentic Leadership program , where they will learn how to develop mindfulness and authenticity to build trust, create engagement, and promote productivity.

Explore all Executive Leadership and Management courses

About the Author

Valerie Kirk is a freelance writer and corporate storyteller specializing in customer and community outreach and topics and trends in education, technology, and healthcare. Based in Maryland near the Chesapeake Bay, she spends her free time exploring nature by bike, paddle board, or on long hikes with her family.

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Don’t be intimidated! With some preparation, research, and practice, you can master negotiation strategies to get the salary you deserve.

Harvard Division of Continuing Education

The Division of Continuing Education (DCE) at Harvard University is dedicated to bringing rigorous academics and innovative teaching capabilities to those seeking to improve their lives through education. We make Harvard education accessible to lifelong learners from high school to retirement.

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What’s the Matter with Business Ethics?

Andrew Stark

It’s not that managers dislike the idea of doing the right thing …

With the recent boom in business ethics comes a curious irony: the more entrenched the discipline becomes in business schools, the more bewildering—and even off-putting—it appears to actual managers.

AS Andrew Stark is assistant professor in the Faculty of Management at the University of Toronto and research associate at the university’s Centre for Corporate Social Performance and Ethics.

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What Is Business Ethics?

Understanding business ethics, why is business ethics important, types of business ethics.

Implementing Good Business Ethics
Monitoring and Reporting

The Bottom Line

What is business ethics definition, principles, and importance.

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

Business ethics is the moral principles, policies, and values that govern the way companies and individuals engage in business activity. It goes beyond legal requirements to establish a code of conduct that drives employee behavior at all levels and helps build trust between a business and its customers.

Key Takeaways

Business ethics refers to implementing appropriate business policies and practices with regard to arguably controversial subjects.
Some issues that come up in a discussion of ethics include corporate governance, insider trading, bribery, discrimination, social responsibility, and fiduciary responsibilities.
The law usually sets the tone for business ethics, providing a basic guideline that businesses can choose to follow to gain public approval.

Investopedia / Katie Kerpel

Business ethics ensure that a certain basic level of trust exists between consumers and various forms of market participants with businesses. For example, a portfolio manager must give the same consideration to the portfolios of family members and small individual investors as they do to wealthier clients. These kinds of practices ensure the public receives fair treatment.

The concept of business ethics began in the 1960s as corporations became more aware of a rising consumer-based society that showed concerns regarding the environment, social causes, and corporate responsibility. The increased focus on "social issues" was a hallmark of the decade.

Since that time, the concept of business ethics has evolved. Business ethics goes beyond just a moral code of right and wrong; it attempts to reconcile what companies must do legally vs. maintaining a competitive advantage over other businesses. Firms display business ethics in several ways.

Business ethics ensure a certain level of trust between consumers and corporations, guaranteeing the public fair and equal treatment.

Principles of Business Ethics

It's essential to understand the underlying principles that drive desired ethical behavior and how a lack of these moral principles contributes to the downfall of many otherwise intelligent, talented people and the businesses they represent.

There are generally 12 business ethics principles:

Leadership : The conscious effort to adopt, integrate, and emulate the other 11 principles to guide decisions and behavior in all aspects of professional and personal life.
Accountability : Holding yourself and others responsible for their actions. Commitment to following ethical practices and ensuring others follow ethics guidelines.
Integrity : Incorporates other principles—honesty, trustworthiness, and reliability. Someone with integrity consistently does the right thing and strives to hold themselves to a higher standard.
Respect for others : To foster ethical behavior and environments in the workplace, respecting others is a critical component. Everyone deserves dignity, privacy, equality, opportunity, compassion, and empathy.
Honesty : Truth in all matters is key to fostering an ethical climate. Partial truths, omissions, and under or overstating don't help a business improve its performance. Bad news should be communicated and received in the same manner as good news so that solutions can be developed.
Respect for laws : Ethical leadership should include enforcing all local, state, and federal laws. If there is a legal grey area, leaders should err on the side of legality rather than exploiting a gap.
Responsibility : Promote ownership within an organization, allow employees to be responsible for their work, and be accountable for yours.
Transparency : Stakeholders are people with an interest in a business, such as shareholders, employees, the community a firm operates in, and the family members of the employees. Without divulging trade secrets, companies should ensure information about their financials, price changes, hiring and firing practices, wages and salaries, and promotions are available to those interested in the business's success.
Compassion : Employees, the community surrounding a business, business partners, and customers should all be treated with concern for their well-being.
Fairness : Everyone should have the same opportunities and be treated the same. If a practice or behavior would make you feel uncomfortable or place personal or corporate benefit in front of equality, common courtesy, and respect, it is likely not fair.
Loyalty : Leadership should demonstrate confidentially and commitment to their employees and the company. Inspiring loyalty in employees and management ensures that they are committed to best practices.
Environmental concern : In a world where resources are limited, ecosystems have been damaged by past practices, and the climate is changing, it is of utmost importance to be aware of and concerned about the environmental impacts a business has. All employees should be encouraged to discover and report solutions for practices that can add to damages already done.

There are several reasons business ethics are essential for success in modern business. Most importantly, defined ethics programs establish a code of conduct that drives employee behavior—from executives to middle management to the newest and youngest employees. When all employees make ethical decisions, the company establishes a reputation for ethical behavior. Its reputation grows, and it begins to experience the benefits a moral establishment reaps:

Brand recognition and growth
Increased ability to negotiate
Increased trust in products and services
Customer retention and growth
Attracts talent
Attracts investors

When combined, all these factors affect a business' revenues. Those that fail set ethical standards and enforce them are doomed to eventually find themselves alongside Enron, Arthur Andersen, Wells Fargo, Lehman Brothers, Bernie Madoff, and many others.

There are several theories regarding business ethics, and many different types can be found, but what makes a business stand out are its corporate social responsibility practices, transparency and trustworthiness, fairness, and technological practices.

Corporate Social Responsibility

Corporate social responsibility (CSR) is the concept of meeting the needs of stakeholders while accounting for the impact meeting those needs has on employees, the environment, society, and the community in which the business operates. Of course, finances and profits are important, but they should be secondary to the welfare of society, customers, and employees—because studies have concluded that corporate governance and ethical practices increase financial performance.

Businesses should hold themselves accountable and responsible for their environmental, philanthropic, ethical, and economic impacts.

Transparency and Trustworthiness

It's essential for companies to ensure they are reporting their financial performance in a way that is transparent. This not only applies to required financial reports but all reports in general. For example, many corporations publish annual reports to their shareholders.

Most of these reports outline not only the submitted reports to regulators, but how and why decisions were made, if goals were met, and factors that influenced performance. CEOs write summaries of the company's annual performance and give their outlooks.

Press releases are another way companies can be transparent. Events important to investors and customers should be published, regardless of whether it is good or bad news.

Technological Practices and Ethics

The growing use of technology of all forms in business operations inherently comes with a need for a business to ensure the technology and information it gathers is being used ethically. Additionally, it should ensure that the technology is secured to the utmost of its ability, especially as many businesses store customer information and collect data that those with nefarious intentions can use.

A workplace should be inclusive, diverse, and fair for all employees regardless of race, religion, beliefs, age, or identity. A fair work environment is where everyone can grow, be promoted, and become successful in their own way.

How to Implement Good Business Ethics

Fostering an environment of ethical behavior and decision-making takes time and effort—it always starts at the top. Most companies need to create a code of conduct/ethics, guiding principles, reporting procedures, and training programs to enforce ethical behavior.

Once conduct is defined and programs implemented, continuous communication with employees becomes vital. Leaders should constantly encourage employees to report concern behavior—additionally, there should be assurances that if whistle-blowers will not face adversarial actions.

A pipeline for anonymous reporting can help businesses identify questionable practices and reassure employees that they will not face any consequences for reporting an issue.

Monitoring and Reporting Unethical Behavior

When preventing unethical behavior and repairing its adverse side effects, companies often look to managers and employees to report any incidences they observe or experience. However, barriers within the company culture (such as fear of retaliation for reporting misconduct) can prevent this from happening.

Published by the Ethics & Compliance Initiative (ECI), the Global Business Ethics Survey of 2021 surveyed over 14,000 employees in 10 countries about different types of misconduct they observed in the workplace. 49% of the employees surveyed said they had observed misconduct and 22% said they had observed behavior they would categorize as abusive. 86% of employees said they reported the misconduct they observed. When questioned if they had experienced retaliation for reporting, 79% said they had been retaliated against.

Indeed, fear of retaliation is one of the primary reasons employees cite for not reporting unethical behavior in the workplace. ECI says companies should work toward improving their corporate culture by reinforcing the idea that reporting suspected misconduct is beneficial to the company. Additionally, they should acknowledge and reward the employee's courage in making the report.

Business ethics concerns ethical dilemmas or controversial issues faced by a company. Often, business ethics involve a system of practices and procedures that help build trust with the consumer. On one level, some business ethics are embedded in the law, such as minimum wages, insider trading restrictions, and environmental regulations. On another, business ethics can be influenced by management behavior, with wide-ranging effects across the company.

What Are Business Ethics and Example?

Business ethics guide executives, managers, and employees in their daily actions and decision-making. For example, consider a company that has decided to dump chemical waste that it cannot afford to dispose of properly on a vacant lot it has purchased in the local community. This action has legal, environmental, and social repercussions that can damage a company beyond repair.

What Are the 12 Ethical Principles?

Business ethics is an evolving topic. Generally, there are about 12 ethical principles: honesty, fairness, leadership, integrity, compassion, respect, responsibility, loyalty, law-abiding, transparency, and environmental concerns.

Business ethics concerns employees, customers, society, the environment, shareholders, and stakeholders. Therefore, every business should develop ethical models and practices that guide employees in their actions and ensure they prioritize the interests and welfare of those the company serves.

Doing so not only increases revenues and profits, it creates a positive work environment and builds trust with consumers and business partners.

New York University Stern Center for Sustainable Business. " ESG and Financial Performance: Uncovering the Relationship By Aggregating Evidence From 1,000 Plus Studies Published Between 2015 – 2020 ."

Ethics & Compliance Initiative (ECI). " The State of Ethics & Compliance in the Workplace ," Pages 16-22.

Ethics & Compliance Initiative (ECI). " 2021 Global Business Ethics Survey Report The State of Ethics & Compliance in the Workplace: A Look at Global Trends ."

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Arguments for a Better World: Essays in Honor of Amartya Sen: Volume I: Ethics, Welfare, and Measurement

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1 Chapter 1 Why Economics Needs Ethical Theory

Published: December 2008
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Amartya Sen has worked tirelessly to establish the importance of ethics in economics. This chapter adds a little to his arguments. Whenever economics tries to determine how the economy ought to be structured or managed, it makes an ethical judgement. But economists use various devices to hide from themselves their need for ethical theory. The chapter describes and criticizes some of their devices. The main one is to found an account of value on people's preferences. In this way, economists hope to avoid making judgements of value themselves, but instead leave them to the people. However, this device entails implausible ethical commitments of its own. Economists need to found their recommendations on their best ethical judgements. They must make their judgements explicit, and they must be ready to defend them with good arguments.

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IMAGES

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GD Topic Ethics or Profit
Ethics is concerned with what is good for individuals and society and is also described as moral philosophy. Profit is a financial benefit that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs and taxes. Relation between Ethics and Profit.
What Are Business Ethics & Their Importance?
Business ethics are principles that guide decision-making. As a leader, you'll face many challenges in the workplace because of different interpretations of what's ethical. Situations often require navigating the "gray area," where it's unclear what's right and wrong. When making decisions, your experiences, opinions, and perspectives ...
Are Business Ethics Important for Profitability?
Although it may not be the first variable considered in analyzing the profits of a company, business ethics is an equally important catalyst to the success of a company. Key Takeaways
1.3: Ethics and Profitability
Simply put, being ethical is simply good business. A business is profitable for many reasons, including expert management teams, focused and happy employees, and worthwhile products and services that meet consumer demand. One more and very important reason is that they maintain a company philosophy and mission to do good for others.
1.2 Ethics and Profitability
Simply put, being ethical is simply good business. A business is profitable for many reasons, including expert management teams, focused and happy employees, and worthwhile products and services that meet consumer demand. One more and very important reason is that they maintain a company philosophy and mission to do good for others.
Why Are Business Ethics Important? A Guide
Key Takeaways. Business ethics involve a guiding standard for values, behaviors, and decision-making. Ethics for business have changed over time but they're important for every company. Running a ...
Student's Guide to Writing Critical Essays in Business Ethics (and
Knowing how to write critical essays in Business Ethics is an important element of success. I enjoyed reading through these helpful tips. This is useful information that will help in college and beyond. Supporting evidence is an important part of writing a sound paper. Like you mentioned in the blog, it can't be based on bias or ignorance.
Business Ethics
Exchange is fundamental to business. 'Business' can mean an activity of exchange. One entity (e.g., a person, a firm) "does business" with another when it exchanges a good or service for valuable consideration, i.e., a benefit such as money. 'Business' can also mean an entity that offers goods and services for exchange, i.e., that ...
Is there Such a Thing as a Good Profit? Taking Conventional Ethics
This paper will show that if we take conventional ethics seriously, then there is no moral justification for business profits. To show this, we explore three conventional ethical theories, namely Christian ethics, Kantian ethics and Utilitarian ethics. Since they essentially reject self-interest, they also reject the essence of business: the profit motive. To illustrate the relationship, we ...
11.3 Ethics and Profitability
11.3 Ethics and Profitability. Few directives in business can override the core mission of maximizing shareholder wealth, and today that particularly means increasing quarterly profits. Such an intense focus on one variable over a short time (i.e., a short-term perspective) leads to a short-sighted view of what constitutes business success.
The Ethics of Profit
Private companies have a responsibility to society to earn a profit. That is the only way to secure jobs, make investments, and innovate. It is also the only way for a firm to meet its obligations to its employees and its business partners. Earning a profit must fall within the bounds of ethics and decency.
The Balancing Act: Profit, Ethics, and Social Responsibility in Business
In the complex realm of modern business, there exists a perpetual balancing act a delicate equilibrium between profit, ethics, and social responsibility. It is a realm where financial success meets moral compass, and where the pursuit of self-interest converges with the greater good of society. This article embarks on a journey to unravel this ...
The Never-ending Conflict Between Ethics and Profit
Overall, it is important to find the right balance between ethics and profit because the business has long-term interests of acting ethically. One idea is that mangers can increase profits by locating the business in countries where environmental protection laws are less strict, or reduce labor costs by paying only the minimum wages for a ...
Profit, Prudence and Virtue: Essays in Ethics, Business and Management
However, finding the ethical failings in either context is a difficult and controversial enterprise, and proposing remedies for either one is even more challenging. The essays collected here represent a sincere and high-minded attempt to bring the broadest possible perspective to the task by questioning the most basic assumptions and underlying ...
Where Morals and Profits Meet: The Corporate Value Shift
Clearly, business ethics issues have been around a long time. Do you see a marked difference in the types and degrees of ethical breaches occurring in the past, compared to more recently? Paine: Business ethics, of course, is as old as business itself, but formal academic study of the subject is, as your question suggests, comparatively new ...
The Moral Status of Profit
This explains why many people find the profit orientation of firms to be morally counterintuitive. Most of everyday morality is aimed at getting people to act more cooperatively, whereas profit-maximization is essentially a free-rider strategy. Keywords: business ethics, profit, competition, adversarial ethics.
Profit vs. Ethics
The founders of ecocentric philosophy were convinced that they were making fundamentally important major advances in philosophy and ethics. Roderick Nash described the conclusions of environmental ethics as "revolutionary," claiming that they were "arguably the most dramatic expansion of morality in the course of human thought." 3 That ...
Ethics or Profits. Which is more important?
How is Ethics related to Economics? To Education? 6. Answer this Case: ETHICS vs PROFIT. A large American company participates in a highly competitive industry. To meet the competition and achieve profit goals, the company has chosen the decentralized form of contribution, market penetration, and return on investment.
What is Ethical Leadership and Why is it Important?
Ethical leadership involves leaders and managers making decisions based on the right thing to do for the common good, not just based on what is best for themselves or for the bottom line. While profits are important, ethical leaders take into consideration the needs of customers, communities, and employees in addition to company growth and revenue when making business decisions.
What's the Matter with Business Ethics?
With the recent boom in business ethics comes a curious irony: the more entrenched the discipline becomes in business schools, the more bewildering—and even off-putting—it appears to actual ...
What Is Business Ethics? Definition, Principles, and Importance
Business ethics is the study of proper business policies and practices regarding potentially controversial issues, such as corporate governance , insider trading , bribery, discrimination ...
Ethics vs. Profit
Ethics vs. Profit. Satisfactory Essays. 857 Words. 4 Pages. Open Document. I. Background of the Case. A large American company has chosen the decentralized form of organization and each manager is measured on the basis profit contribution, market penetration, and return on investment. If one fails to meet the objectives established, it is ...
Chapter 1 Why Economics Needs Ethical Theory
The ethics may be important—it may even override the answer from economics—but nevertheless the answer from economics is independent of the ethics. For instance, take the value of human life: the question of what sacrifices it is worthwhile for us to make in order to save some people's lives.
Ethics and profits do not go together
By critically evaluating the statement "Ethics and profits do not always go hand in hand." goes wrong in most cases because ethics are very important in every business. No business can exist on unethical means. Ethics and profits both are essential for the survival of business. "One can do well by doing good" meaning one can succeed in ...

Business Insights

What Are Business Ethics & Why Are They Important?

What Are Business Ethics?

Ethical Responsibilities to Society

Ethical Responsibilities to Customers

Ethical Responsibilities to Employees

Why Are Business Ethics Important?

How to Implement Business Ethics

Become a More Ethical Leader

About the Author

1.3: Ethics and Profitability

Profitability and Success: Thinking Long Term

CASES FROM THE REAL WORLD

Stockholders, Stakeholders, and Goodwill

Which Corporate Culture Do You Value?

Critical Thinking

The Equifax Data Breach

A Brief Introduction to Corporate Social Responsibility

1.2 Ethics and Profitability

Profitability and Success: Thinking Long Term

Link to Learning

Cases from the Real World

Stockholders, Stakeholders, and Goodwill

What Would You Do?

The Equifax Data Breach

A Brief Introduction to Corporate Social Responsibility

Business Ethics Journal Review

Student’s Guide to Writing Critical Essays in Business Ethics (and beyond)

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Peer-Reviewed Business Ethics Journals (not an exhaustive list!)

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Bibliography

Business Ethics

1. Varieties of business ethics

3. The ends and means of corporate governance

5. Firms and consumers

6. Firms and workers

7. The firm in society

Acknowledgments

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11.3 Ethics and Profitability

Profitability and Success: Thinking Long Term

Competition and the Markers of Business Success

Stockholders, Stakeholders, and Goodwill

Which Corporate Culture Do You Value?

The Equifax Data Breach

A Brief Introduction to Corporate Social Responsibility

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The Balancing Act: Profit, Ethics, and Social Responsibility in Business

Profit vs. Ethics

The Pursuit of Profit

Ethical Dilemmas in Business

Balancing Profit and Ethical Considerations

Social responsibility in business

Understanding Corporate Social Responsibility (CSR)

Impactful CSR Initiatives

Integrating Social Responsibility into Business Models

Challenges and Ethical Considerations

Ethical Challenges in Pursuit of Profit

Balancing Short-Term Gains with Long-Term Sustainability

Reputation Management and Ethical Crises

Complexity of Supply Chains

Ethical Decision-Making

Future trends

Evolving Business Paradigms

The Role of Technology and Globalization

Emerging Trends in Social Responsibility

Ethical Supply Chains

Ethical Marketing and Transparency