What are Business Ethics?

The Market Power blog noticed something that also tweaked my interest, in an article from the Chronicle of Higher Education:

Today's M.B.A. students are not as ethically challenged as recent
reports make them out to be, according to the findings of a study being
released today at a global conference of business educators and
leaders. In fact, 81 percent of those responding to a recent survey
believe businesses should work to improve society, and 78 percent of
them want "corporate social responsibility" integrated throughout their
core courses.

The survey results will be presented during a three-day
conference, "Business as an Agent of World Benefit," at Case Western
Reserve University, in Cleveland. The conference, which began on
Monday, has drawn 440 management educators and business leaders, as
well as about 1,000 online participants.

I know this issue has been debated in circles, but I still have real heartburn defining business ethics as "corporate social responsibility."  In my mind, and as reinforced by cases like Adelphia and Enron, the number one overriding ethical responsibility of corporate managers is their fiduciary responsibility to the company's owners.  Second is their responsibility to comply with the law (though sometimes the law is so muddled and contradictory that may be difficult).  Third is the obligation to be honest in dealings with employees, suppliers, and customers and to honor the commitments that the company has made to all three. 

In this context, asking a manager to divert the company's resources away from honoring these commitments or providing a return on the shareholder's investment, instead focusing them on some other nebulous entity called "society," is wholly unethical. 

  • Matthew Brown

    Though one wonders whether the students were just answering what they thought the questioners wanted to hear.

  • Mike Lutz

    Apparently the goal is to turn businesses into micro government bureaucracies, spending other people's money as they see fit. While there may valid business reasons for some such spending (community relations? positive publicity?), the key word is valid - increasing shareholder value.

  • Hallie

    I think you may not be looking broadly enough at the concept of "corporate social responsibility." What you've defined as CSR sounds more like strategic philanthropy - which can have business value (i.e. support for community organizations that improve education, leading to an educated, employable workforce; support for local health organizations, leading to healthy employees, healthy consumers; etc.). Where CSR can provide real, practical value is in the integration of sustainable practices into the business. It makes sense to do things like conserve energy (cost-savings) or engage employees in volunteer initiatives (increased morale, loyalty and productivity). I think an ethical business has to maximize shareholder value...but that isn't mutually exclusive from socially responsible efforts.

  • http://www.two--four.net/weblog.php Billy Beck

    "Where CSR can provide real, practical value is in the integration of sustainable practices into the business. It makes sense to do things like conserve energy (cost-savings) or engage employees in volunteer initiatives (increased morale, loyalty and productivity)."

    When you boil 'em down, those are responsibilities to the business. Not "society".

  • Hallie

    Agreed - cost-savings and creating an environment for productive employees are responsible business practices...which is why corporate social responsibility isn't about doing good out of kindness or altruism. CSR benefits the business while having a positive impact on society. I think businesses can be more innovative in the way they look to cut costs and increase productivity or improve market share by taking a look at their current business practices and seeing how they might integrate sustainable initiatives. Taking it a step further, CSR can be viewed as a kind of risk management activity. If a business is behaving in a way that upsets consumers, how successful can that business be? (why do you think companies like Nike, the Gap and others have adopted socially responsible practices?)