Teaching Business Ethics in an Environment of Mistrust

Etzioni’s main complaint was that he “clearly had not found a way to help classes full of MBA’s see that there is more to life than money, power, fame and self-interest.” The MBA students were disappointingly fond of business, including advertising, as far as Etzioni was concerned. Some even endorsed the idea of “consumer sovereignty,” meaning that consumers pretty much have the opportunity to make up their own minds as to what they will purchase, even in the face of persuasive advertising. In response Etzioni cried out: “But what about John Kenneth Galbraith’s view [which] argues that corporations actually produce the demand for their products, together with whatever they wish to sell—say male deodorants.” He thus implied that consumer sovereignty is a myth—people are coerced by advertisements to buy things they “really” don’t want.

We could dwell here on Etzioni’s substantive criticisms of business students and professionals, and we would find that they aren’t very telling. For example, there is a famous response to Galbraith’s debunking of the consumer sovereignty doctrine that Etzioni fails to mention. In a piece only rarely used in business ethics texts, “The Non Sequitur of the ‘Dependence Effect,’” F. A. Hayek has argued that although desires are indeed created, in a sense this is just what occurs with all innovations—artistic, scientific, religious, or whatnot. When a new symphony is written, it may “produce” a demand; people may take note of it and find it preferable to other music. So, whenever a new service or product is introduced, it obviously is hoped that someone will desire it once he or she sees its point and judges it as having merit.

No doubt there are consumers who will buy things on a whim and even waste their money on what is clearly bad for them. As against some neo-classical economists’ protest that “the free exchange process benefits all participants on the market,” it needs to be granted to Galbraith and Etzioni that there are market failures, that is, wrongs that can occur within the system of free exchange. Indeed, it is quite possible that in some cases one or even both parties, after the fact, will find that they have failed to benefit from trade. Yet that isn’t crucial—human fallibility is certainly not confined to market behavior and has a much wider impact when government planners are given broad powers. What is doubtful is that Galbraith or anyone else is more competent than we are at deciding what is the right thing for us to buy.

Thus, judging by how Etzioni tells us he went about teaching his business ethics course, it is no wonder that his students responded without much enthusiasm. What our professor apparently did was not teach business ethics but engage in the familiar academic pastime of business bashing.

Anti-Capitalism in Academia

It is no surprise that Harvard MBA students found the standard approach to business ethics teaching objectionable. The message in such courses is that what people in business are doing is from the ground up morally suspect, perhaps even contemptible. It is an activity that we must, perhaps (at least for the time being), engage in but if we could only get away from it we could go out and live a decent, respectful, human life. This notion—that capitalism is just some unavoidable but nasty period of humanity’s existence that will, fortunately, soon be overcome, with the capitalist class promptly liquidated when the time is ripe—has overtaken our universities because, sadly, a large portion of Western intellectual history plays fight into its hands.

It is especially important to counter these views when millions of people around the world have discovered the hopelessness of socialist and Communist systems that prohibit business and denounce commerce as evil. If these views prevail, soon after economic recovery the moral conscience of these people will once again guide them toward such anti-capitalist social arrangements.

Perhaps I ought to state some of my own credentials for discussing this topic. I have taught business ethics at the College of Business and the Department of Philosophy at Auburn University in Alabama. Formerly I taught the same course at the Department of Economics at the University of California, Santa Barbara, as well as Franklin College in Lugano, Switzerland, and the University of San Diego. In these courses I treat the profession of business as every bit as capable of being honorable as any other profession. It is with this assumption that I discuss with my students various problems of ethics that might arise within business, such as unjustified dishonesty in advertising, unjust discrimination in employment and promotion, the problems of nepotism, or the complications involved in trading with foreign colleagues who adhere to standards that seem to be morally insidious. Business ethics students find none of this objectionable—even when it is suggested that often in life the so-called bottom line of profit isn’t the bottom line at all.

Similarly, in teaching medical, educational, legal, or engineering ethics, the objective is to take general and mostly familiar ethical theories and show how they might be made applicable to the problems that have to be tackled within special disciplines. What would utilitarianism say about surrogate motherhood or the problem of honest communication in the case of fatal diseases? How do we apply the tenets of Christian ethics or those of ethical egoism to the problems of risk aversion in the building of high-rise apartments or automobiles?

These are the problems of some branches of applied ethics. Any such field presupposes that people want to be decent human beings in the conduct of their professions. They want to be good persons in the different roles they play in their lives, and all they really need is some enlightenment about special problems in these areas. This means taking the general ethical precepts or principles they should live by and probably have already assimilated into their lives, and showing their implications for these special areas.

That is how to teach professional ethics properly. The professor doesn’t simply take a side and try to badger students into agreeing with him. Rather the tenets of the major ethical systems are aired, and the different implications they may have for the special areas of human conduct are explored.

In a book I recently edited and contributed to, Commerce and Morality, Douglas J. Den Uyl and I wrote an epilogue entitled “Recent Work in Business Ethics: A Survey and Critique.” It appeared earlier in the American Philosophical Quarterly. The piece makes it clear that what the various major business ethics books and business ethics writers have been saying and what they teach have nothing in common with the way I teach business ethics. Nor, in fact, does it parallel the content of applied ethics courses for other professions.

In fact, I found that the accepted approach to teaching business ethics is seriously biased. It doesn’t even cover the topic that name’s the course. Such courses are ironically—considering that “truth in labeling” is one of those public policy matters urged in them—mislabeled as “business ethics.” What is going on here is not the teaching of business ethics but the maligning and attempted taming of business. We meet up with it throughout the country’s universities. Most of these courses are concerned not so much with the subject matter of ethical conduct within the profession of business as with the denigration of the profession and the advocacy of public policy to reform it.

Denigrating the Pursuit of Prosperity

Most business ethics courses and textbooks tend to involve going to the students and essentially demonstrating to them that the very objective of commerce is morally shady. For these teachers and writers, the pursuit of prosperity is, if not immoral, at least amoral—without any moral significance in human life. This is despite the long tradition of ethical teaching in which the pursuit of profit could well be construed as an aspect of prudence, a trait of character that has, after all, been regarded as the first of the cardinal virtues.

Instead of seeing business as the institutional expression of prudence, business as a profession is mostly distrusted and denigrated. Accordingly, the only way to be ethical in business is to abdicate. Short of that, one is at least required to wash one’s hands after leaving the executive suite.

As business ethics is conceived in much of academe, decent or moral persons in this profession must demonstrate to others that they are not seriously committed to business after all. The only reason business exists is that it turns out to be a pre-condition for doing some really good things in life. But a decent person in business is one who pays attention not to making money or earning a good return on investment but to rectifying social ills, what is now called being “socially responsible.”

Most teachers and authors in the field of business ethics view corporate commerce in the tradition of mercantilism—corporations are entities created by the government to serve some public purpose. Professor Richard DeGeorge, who has authored numerous texts and articles in business ethics, adheres to this view, as does Ralph Nader. Both see people in the business world as entrusted with a public purpose; they shouldn’t aim at economic success. They also ignore the point, made in reply by Robert Hessen, in his In Defense of the Corporation (Hoover Institution Press, 1979), that the idea of business corporations as entities created by the state harks back to a conception of society within the feudalist and mercantilist tradition. In that view citizens are subjects and thus lack personal sovereignty. Once this theory is understood as unjustifiably elevating some persons, namely, those exercising state power, to a superior status reigning over others, the implication is clear: The government-created-entity view of business corporations takes citizens to be essentially servile, especially in their economic endeavors.

Instead, as Hessen explains, business corporations should be seen as voluntary associations whereby people hire professionals to perform tasks so as to reap profits from them—i.e., as a means for gaining some prosperity.

Searching for Moral Substance

When business ethicists look to economists as the moral defenders of the institution of business, they will find, apart from a few cases, very little that is of moral substance. Yet that shouldn’t be surprising—as students of commerce, economists seek a technical understanding of the workings of business. They don’t dwell on moral issues, just as other social scientists don’t. But moral philosophers shouldn’t take advantage of that—and they usually don’t when it comes to other social sciences.

Instead of looking to economists to explain why business might be an honorable activity, business-bashing ethicists should look to fellow ethicists. There are some who see in business activity a perfectly legitimate form of prudential behavior, aiming at the prosperity of the agents and their clients. And they should then try to come to terms with the arguments of these people from their field, ones that try to establish the moral propriety of such prudential conduct.

Instead business ethicists tend in the main to argue with people who aren’t prepared to debate the fine points of moral philosophy. Thus, these business ethics teachers find little resistance from most business students to their attempt to discredit the moral foundations of bona fide business. This way they make it appear that the field is nothing but an arena of naked greed, mounting to little more than sheer vice. As even the founders of modern economics used to say, with commerce what we see is private vice—greed—linked with public benefit—the nation’s increase of wealth.

Because of disdain toward business, business ethics courses tend not to focus on ethics proper—in how to be ethical in the performance of the tasks of the profession. Instead, they discuss what public policies we need to get business on the right track. They worry about how to force business to be socially responsible and less concerned with this morally low objective of making a profit.

Most business ethics courses and textbooks are preoccupied with politics, not ethics. Their question is, “What is it we need to do to tame business by government intervention, by regulation, by litigation?”

The answer is, “Invent a host of new rights that consumers and workers are supposed to have, rights that in our political system, based on protecting human rights, are owed government protection.” These rights include workers’ rights to decent wages, or women’s wages based on comparable worth, the right to fairness in the marketplace, to job security, to safety and health protection on the job, and so forth. Never mind that the market may not enable employers to pay and to comply with all this, never mind what workers agree to of their own free will. Business ethicists are busily advocating a deluge of regulatory measures that require commercial agents to comply or go under.

This implies that what people in business are after—profit, which is to say, prosperity—is really not an honorable objective. We simply shouldn’t let people run free when they want to acquire wealth by peaceful means. If we allow commerce at all, they say, it needs to be kept under stringent controls. This is accomplished through innumerable government regulatory bodies at the Federal, state, county, and municipal levels.

It makes little impact on business ethics teachers that often such public policies stifle what little real chance people have for economic solvency. It certainly doesn’t faze them that they limit the freedom of commercial agents. After all, since no real moral merit can be found in the pursuit of profit, therefore even in case of the slightest moral demand upon those in the field, their professional objectives must be sacrificed. Solvency is of some concern, but certainly let’s not be serious about it.

I’m painting a bleak picture, I know. Others who teach business ethics might be more optimistic. They may know teachers who are somewhat balanced in their approach. But the literature in the field—including major scholarly books and articles, as well as textbooks-follows the lines that I have described.

Prevailing Views of Employment

In discussions of the employment relationship, most business ethics authors and professors argue that there shouldn’t be employment at will. That is, employers ought to be constrained forcibly—by government regulation or litigation, not by freely entered-into contracts—in their judgment as to whom they hire, fire, demote, or promote. This is defended on the grounds that employees are powerless, compared with employers, and they are entitled to a property interest in their jobs.

Most business ethicists also argue that employees should be forbidden from making certain kinds of decisions—choosing to work at higher risks than what is reasonable (as figured by risk analysts in academe or in the federal government). OSHA will then proceed to regiment the workplace accordingly. If employees wish to take “unreasonable” risks for higher pay, they are forbidden to do so. Government imposes a given set of standards on every business—never mind how new and how much in need of some initial cost-cutting the business might be and never mind individual differences in employee priorities.

Answers to these arguments are rarely supplied in business ethics texts and courses—except for citing some ideas from neo-classical economists who almost uniformly deny the existence of objective morality in the first place and have no direct ethical response to such complaints about the market.

Take another area. Here the objective of most business ethics professors is to show that most employees shouldn’t be subordinated to managers. They argue for so-called employee rights that should diminish if not annihilate the position of management. The employer is viewed as a tyrant, oppressor, and exploiter, and this needs to be countered with some effective legislation and court decisions.

It doesn’t matter that some employees prefer working for employers who take bigger risks and thus are expected to reap greater returns. Different business establishments might also require different types of organization—in some there won’t be room for shared management roles if they are to be run efficiently. None of this matters and will be subordinated to the will of the state, with the fervent approval of many who teach our college students the ethics of business.

So we have in academe a sustained attack on the profession of business. Where students seek guidance in their preparation for the profession through the study of ethical theories and the special problems of commerce, they receive a message that their chosen profession is dishonorable and would best be totally uprooted. It is no wonder, then, that they avoid business ethics if they can, or look upon it with suspicion and fear.

Into the Moral Underground

There is yet another result: it is very difficult to induce people in business to behave themselves properly, given how utterly confused they must be by now concerning moral issues associated with their profession. It’s as if we were trying to teach ethics to people we also label professional criminals. Once we have declared an activity to be categorically wrong, it is nearly impossible to upgrade it. We have driven the profession of business into the moral underground; it’s no wonder that business people find themselves confused as to how to lead an upstanding professional life.

And those in business, as many of them will admit—usually to their children who then report it in the classroom—are virtually schizophrenic about their profession. They can’t be proud of what they do when they discuss it at home; they are unable to tell their children, as a doctor or an educator is able to tell his or hers, that they are engaged in something honorable outside the home and that the culture respects them for it.

No, business or commerce is a kind of shady thing always under attack, and of course people in academe—as well as too many artists, politicians, movie producers, and, oddly enough, members of the business community itself—tend to sanction this reputation. After all, programs such as “Dallas” are being sponsored by corporations, as are all the sitcoms in which, for example, someone might be making a decision as to whether to become an elementary school teacher or a business executive, and the entire half hour is devoted to a humorous but biting exploration of how rotten a decision it would be if it turned out to favor joining the profession of business.

All this, of course, is quite tragic. It is probably debilitating in many more ways than I have suggested—psychologically, morally, and culturally. We are a society in which pages and pages of each newspaper are devoted to business. It is deemed a most important aspect of our lives on the one hand. On the other, however, the very people who play key roles in the drama cannot take full human pride in their activity in the way other professionals can.

Why Berate Business?

But why is this all going on in university departments of philosophy, and even in business schools? Why is it that business has such a bad press?

Many answers have been given. Some say it has to do with envy. That’s probably the most prevalent analysis produced by those, such as Ludwig von Mises and Helmut Schoeck, who observe and want to understand the anti-capitalist mentality. Others discuss the fact that many people dislike and distrust economic power, which they believe can be used to exploit innocent and helpless folks. Doesn’t government get “bought” by business? Thus, doesn’t the blame for governmental misconduct lie with this profession? And there is also the claim that members of the business profession actually brought all this upon themselves when they wouldn’t rely on the rules of the free market to play the game of commerce but urged the state to help them out in times of hardship, as did Lee Iacocca when Chrysler was in trouble.

Such explanations are unconvincing. The reason the envy premise doesn’t explain very much is that there are lots of areas of life in which people are excellent or outstanding and aren’t so righteously envied and denigrated as they are in the business world. Business isn’t just envied, it is resented.

People win the Nobel Prize, become star singers or actors, and while there may be some shameful envy associated with this, most people recognize theirs as legitimate accomplishments and tend to honor them, flock to their movies, go to their concerts, and so forth, rather than attack them with hateful indignation and try to drag them down.

As to economic power, here the problem is that power has many sources, some more or less popular, and when we lament economic power we are confessing our distrust of economics. If power comes from being a celebrity or very beautiful or a great prose writer or a brilliant artist or a magnificent television commentator, we don’t seem to have much trouble with that.

And concerning business’s willingness to turn to the state, consider that these days practically everyone runs to government with his or her pet project. If government advances ecological interests, this is deemed to be an honorable project. If artists are given support, ethicists seem not to mind very much—nor are they disdainful about taking a few thousand tax dollars in support of their next ethics book (e.g., from the National Endowment for the Humanities).

There is a more fundamental reason why business has gotten such a bad rap. At the level of ideas this is a very ancient reason, one that comes from some very honored philosophers—Plato in particular, and to some extent Aristotle. Indeed, most major philosophical and theological figures in Western history must take the blame.

The Intellectual Roots of Hostility

The basic intellectual underpinning of the hostility to business is the idea of dualism or, more particularly, idealism. Idealism in philosophy means, roughly, that the most important reality is ideas and not nature. Put differently, it is the spiritual realm, not the natural that is of primary significance. Dualism is the view that two major elements of reality exist, the natural or material element and the spiritual or intellectual element. Dunlists commonly choose the intellectual or spiritual as the one with higher substance, as the more important one.

Not surprisingly, to the extent they believe that human beings are composed of these two elements, those who hold these views usually select for special treatment and honor the intellectual element of human life. Indeed, in Aristotle’s ethics the truly happy or contemplative life is the one lived entirely at the level of thought or intellect. In Plato’s ethics as well as in his politics, at least at first reading, those people who specialize in mental labors—who flourish intellectually—are the most worthwhile. These then are the people who ought to be accorded the role of leadership and guidance in society. The rest—especially those occupied with the mundane tasks of trade—must be subordinated to their will.

Following this philosophical viewpoint, subsequent Western thinking fell in line. Many popular religious readings tended toward a denigration of prosperity and wealth-seeking. The institution of usury, one that characterizes the tasks of most banking and lending establishments, was condemned for centuries and found to be unnatural for human beings. And we still are told by many moralists that earning interest on money is close to the lowest form of money-making.

The only time in Western philosophy that we escaped this kind of thinking was during a very radical swing toward the other extreme. This came with Thomas Hobbes’s turn to radical materialism. Hobbes, in the 17th century—following his enthusiasm for Galilean physics and science in general (which was itself given sanction through the reintroduction of Aristotle’s work in Western culture by St. Thomas Aquinas)—completely denied the spiritual or intellectual realm. For him and his followers everything is matter-in-motion, and the whole world can pretty much be understood in terms of physics.

Due largely to Hobbes’s influence and to that of his followers, such as Bernard Mandeville and Adam Smith, business in modern times has made some gains, at least on the practical front. Commerce has at least become legitimatized—some of the more severe disdain toward it, which had once resulted in outright bans of much of what now passes for business, is no longer institutionalized in our legal system.

Instead, what remains is a moral or ethical suspicion toward business that, however, feeds into the legal mechanism via extensive restrictions against commerce. Consider that even the First Amendment is abandoned when judges rule on commercial speech! Yet the value-free nature of the brief respite given business hasn’t saved the institution from descending nearly to its earlier disreputable status.

Suppose now that we still find reality as well as human beings divided into two spheres. And suppose we designate the spiritual or intellectual sphere a higher level of reality. Then it is not surprising that those who work at supplying our material needs and wants will not be highly honored and may even be held in moral suspicion. They are threatening to divert our attention from what is truly important.

In any case, this is what I take to be one serious way to understand why business is treated so shabbily in our culture. There are probably other reasons involved, although arguably they are not so fundamental as those I have been discussing.

Marxist Materialism

There are some apparent difficulties with the position I have advanced. One might be tempted to argue that Marxism is an exception to my analysis. After all, isn’t Marxism a materialistic philosophy, and doesn’t it at the same time denounce business?

First of all, Marxist materialism is a peculiar kind, dialectical materialism. It still abides by the notion of a finn hierarchy of nature. And the top of the hierarchy in human social life tends to be the intellectuals, especially in Marxism-Leninism. Those engaged in intellectual labor are regarded as of a higher caliber than those who merely do menial work. And actually one of the functions of capitalism in Marxist philosophy is to eventually do away with menial labor and thus make us ready for pure intellectual labor in Communist society.

Furthermore, according to Marxism, until in the future when humanity will be rewarded for its labors, most of us are supposed to wait around and act pretty servile. And when that future has arrived, one of the rewards to humanity will be that most of our generalized work will be intellectual, while the tedious and harsh work will be done by machines created in the capitalist phase of human history.

Marxism, in addition, holds that capitalists, who are producing for the masses what the masses ignorantly want, engender market anarchy rather than a rational economic order. But a rational order would produce what is right—that is, aside from basic necessities, goods and services arising from our intellectual talent such as musical composition and philosophical criticism.

At this juncture I am not going to criticize at great length the basic thesis underlying the denigration of business. My aim has been to pinpoint the intellectual source of this attitude and why business ethics is treated as it is at our universities and colleges. Some of my criticism is already implicit in what I’ve said.

Yet let me put myself on record by saying that I think the fundamental mistake is to divide human beings into separate selves and not to recognize that what they are is of one cloth, and that if they are important, they are important in all respects, in the whole of their nature as human beings. A human being is an integrated entity, and the entirety of this entity needs to be cared for and honored, not just some special part of it.

Certainly from an ethical point of view to be prudent or conscientious about one’s life involves, also, taking good care of one’s material well-being: clearly this is acknowledged to some extent when we are prepared to care—and gain credit for caring—about our health. But at the same time as one grants the health profession an honorable standing—probably because it is a kind of derivative theoretical science—the very same reasoning should apply in granting the business professions an honorable standing.

Worthy of Respect

Professionals in business are clearly attending to some of the legitimate purposes of human life, namely, the securing of prosperity—f a pleasant, happy, spirited, and in the final analysis robust human life. And while they may not be the main contributors to a full life, they are surely very important to it and as such their work ought to be respected. Their profession deserves all the honors given to educators, doctors, scientists, lawyers, and politicians.

And when we teach business ethics to students who will probably enter that profession, we ought to teach them not to abandon their task, feel ashamed about it, set out merely to tame it, denigrate it, consider themselves freaks. Rather they should be guided in how to do this entirely honorable task in a way fully compatible with living up to all the basic moral requirements of a human life. And it should be made clear to them that when some moral point of view appears to denounce their profession, this is not necessarily the end of the story—the moral point of view might be in error. Let them figure out how to handle it, rather than trying to indoctrinate them to believe that business must be at fault.

Business people may be told that while they are business professionals, they probably also have the responsibility, in most cases, to be concerned about how to be good fathers or mothers or citizens. That doesn’t denigrate business. But it is another thing to tell them, “Well, you may carry on with the profession of business only because it’s something we need, but it is too bad you have to. And if you can do anything else, please don’t hesitate but do it.” Yet this is precisely the message communicated to us all the way from TV sitcoms to the classrooms of the Harvard Business School.

Now perhaps it will be noted that other professions are often ridiculed or scorned, so why make special note of business’s bad press? Yet while doctors, lawyers, politicians, and others do receive some friendly drubbing—at the hands of comics, Hollywood, and others—the business community is outright smeared and maligned. The frequency with which it turns out to be a business person who holds the smoking gun in anything from a cheap detective novel to the most expensive PBS mystery is staggering. Although Samuel Johnson may have believed that “There are few ways in which a man can be more innocently employed than in getting money,” this is not at all the viewpoint of those like Arthur Miller in Death of a Salesman or the screen writers of Wall Street who all seem to agree that people in commerce are “money-grubbers.”

Here in the United States, in turn, there is a new statism in the air, associated this time with the concerns we have about the environment. Despite the fact that socialist systems have coped far worse with this problem than the quasi-capitalist ones, many environmentalists continue to look to the government for managing the environment. And if it is suggested that privatization be tried, this will be resisted so long as people believe that making a profit is somehow a shady thing, especially when we face emergencies. Unless business and prosperity gain a better moral reputation, the main solution to our environmental problems will escape us, and we will continue to be plagued by ill-conceived and hopeless governmental approaches, the very ones that often created these problems in the first place.

Both justice and practicality favor re-conceiving commerce and the profession of business as morally respectable. And while the prospects of countering centuries of contrary opinion are dim, the effort to change our course seems to be well worth making. []

Ideas On Liberty

Business and Ethics

The latter part of the 18th century marks a watershed in human history. Walter Lippmann, writing about the capitalistic era which opened two hundred years ago, utters an incandescent truth about this startlingly novel way of conducting our economic affairs: “For the first time in human history men had come upon a way of producing wealth in which the good fortune of others multiplied their own.” Read that one again, for it is the basic axiom of the free market economy, so fundamental that it is overlooked by friend and foe alike. Lippmann continues: “For the first time men could conceive a social order in which the ancient moral aspiration for liberty, equality, and fraternity was consistent with the abolition of poverty and the increase of wealth.” (The Good Society, pp. 193-4)

This was the social order originally known as Classical Liberalism, built around the conviction that there is an inviolable essence in each person, which it is the function of the Law to protect. When the Law is limited to the administration of justice by securing the life, liberty and property of all persons alike, then people are free to peacefully pursue their personal goals, each respecting the right of every other to do the same. This is the good society operating under the moral law, the only kind of society in which a complex division of labor economy can flourish . . . .

Free market rules of business fall well within the moral law; and individual businessmen, large as well as small—s long as they stick to their last—measure up at least as well as members of other trades and professions.