Is business ethics an oxymoron? - Editorial - Cover Story

Business Horizons, Sept-Oct, 1994 by John W. Collins

Is "business ethics" an oxymoron? Are doing business and being ethical so contradictory that it is impossible to be both an effective business manager and an ethical individual? No doubt many--perhaps most--would answer "yes" to both these questions. But if it is true that management effectiveness and individual ethics are mutually exclusive, why would anyone want to be a manager? Can it be that all of the people who are or want to be managers are willing to sell their souls?

The thesis of this article is that business and ethics are not contradictory. Indeed, good ethics is synonymous with good management. Two principles based on ethical theory are presented that give ethical purpose to management while at the same time making managers more effective. The perception that business and ethics are contradictory is based on a generally accepted view of what managers are supposed to do and, thus, how they are supposed to act. We begin by examining that view.

The Role of the Manager

What do most people believe managers should do? To the extent that there is a social norm concerning the manager's role, people who assume that role will be apt to fulfill that norm. Social norms and role expectations are powerful drivers of behavior.

The traditional view of the managerial role is relatively clear. It has been stated frequently by people writing about management. For instance, Milton Friedman, in his essay "The Social Responsibility of Business Is to Maximize Its Profits" (1970), says:

[A] corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.

In a similar vein are Albert Carr's comments "Is Business Bluffing Ethical?" (1968):

[A]s long as a company does not transgress the rules of the game set by law, it has the legal right to shape its strategy without reference to anything but its profits. If it takes a long-term view of its profits, it will preserve amicable relations, so far as possible, with those with whom it deals. A wise businessman will not seek advantage to the point where he generates dangerous hostility among employees, competitors, customers, government, or the public at large.

These two statements define the manager's role on the basis of two principles:

* Profit maximization is the exclusive goal of business management.

* The expectations of others (as reflected in law, ethical custom, and potentially hostile reactions) serve as constraints on a manager's ability to achieve the exclusive goal of profit.

It is from this traditional view of the managerial role that people conclude that business ethics is an oxymoron. Business is seen to encompass the pursuit of self-interest, and ethics is recognized as involving consideration of others. Concern for self and concern for others clash; hence, business and ethics clash.

The Interdependent Environment of Business

As long as the role of management is defined in terms of profit maximization, the conflict with ethics remains. But suppose describing the role of manager in terms of profit maximization not only conflicts with being ethical, but also is dysfunctional as an approach to management. Then it would follow that the traditional role of manager should be changed, perhaps in a way that does not conflict with ethics.

The traditional description of the role of manager is dysfunctional because it draws a manager's attention away from the essential part other people play in the achievement of profit.

Such a description doesn't just fail to point out the importance of other people in fulfilling that role, it actually portrays them as a constraint on profit maximization. However, participants in business activities are interdependent on each other for success. They need to cooperate with one another to achieve their objectives. For example, a company cannot succeed without the help of its employers, suppliers, and customers. Managers cannot succeed without the help of superiors and subordinates.

Situations of interdependence are referred to as non-zero-sum games. A zero-sum game is one in which there must be a winner and a loser. In non-zero-sum games, however, there can be a winner and a loser (win-lose), two losers (loselose), or two winners (win-win).

Certainly, most managers recognize the existence of interdependence and create win-win situations daily. For instance, most managers don't constantly insult their subordinates because they know if they do their subordinates will be uncooperative--and that cooperation is essential to getting most jobs done.

What about situations in which interdependence is not so obvious? How apt are managers to recognize the existence of interdependence and the need for cooperation in such situations? It seems that the second principle of the managerial role, which describes other people as constraints on the achievement of the exclusive goal of profit maximization, would likely cause managers to fail to recognize less obvious situations of interdependence. If others are seen as constraints, they are apt to be seen as adversaries with whom one should compete rather than cooperate.