The Problem with “Business Ethics”

Amidst the ongoing recriminations concerning responsibility for the 2008 financial crisis, business leaders continue to be listed among the guilty. Of course any objective analysis of the financial crisis soon indicates that politicians and central bankers were just as, if not more responsible for facilitating the financial perfect storm.

Still, the financial crisis has raised questions about the prevailing moral culture within the business community and the ethical formation they are receiving. As Professor Michael Jacobs astutely observed in the Wall St Journal: “As we try to understand why our economy is so troubled, fingers are increasingly being pointed at the academic institutions that educated those who got us into this mess. What have business schools failed to teach our business leaders and policy makers?… Would Bernie Madoff have acted differently if he had aced his ethics final?”

For several decades, there has been no shortage of ethics-courses for aspiring business leaders at innumerable business schools. Naturally, as long as people have free will, no formation can guarantee that business executives won’t sometimes make imprudent or simply wrong decisions. But the sheer number of bad decisions and, in some instances, morally-evil actions by some business leaders before and during the financial crisis must surely cause us to reassess the content of business ethics classes.

A brief perusal of any number of business schools’ curricula soon indicates that some are doing excellent work in this area. Generally, however, the picture is discouraging. Business schools have not proved immune from the tide of ethical relativism — and the political correctness that often substitutes for serious moral reflection — that has swept the West since the 1960s.

Far too many business schools consequently refuse to seriously engage questions of right and wrong, virtue and vice. Ethics is either reduced to “corporate social responsibility”, which invariably translates into promoting politically-correct agendas (and an often-implicitly negative view of business), or the attitude of “if it’s not illegal, it’s permissible”.

Neither of these stances is adequate if private enterprise is to be allowed to assume its characteristics as a genuine vocation. They also encourage the development of technocratic mindsets within business schools. This leads to business students being turned into people who, theoretically, can be charged with managing any form of business.

Business, however, is about more than management. It also involves stewardship (inasmuch as managers have moral and fiduciary responsibilities to their clients and investors) and entrepreneurship — the actual creation of wealth. Many business leaders would be shocked to discover that studying entrepreneurship remains optional in many business schools today.

This underlines another problem for some business schools. It’s not clear that all business professors are convinced of the morality of economies based on free enterprise, limited government, and rule of law. This ambivalence cannot help but be communicated to their students and becomes something they take with them into the marketplace. It is very difficult for business schools to teach the moral habits associated with successful business when many business professors regard private enterprise and markets as, at best, useful but morally-insignificant phenomena.

Unexpectedly weighing into this discussion recently was Pope Benedict XVI. Affirming in his encyclical Caritas in Veritate that business executives’ responsibilities go beyond — though always include (CV 21, 37, 38) — profit-making, the pope notes the contemporary plethora of courses, seminars, and research into business ethics. He remarks, however, that “the adjective ‘ethical’ can be abused” “when the word is used generically”, and can “lend itself to any number of interpretations”, many of which actually undermine human flourishing (CV 45).

Hence, though Benedict speaks approvingly of the rise in ethics-consciousness in the worlds of finance and business, he cautions that simply attaching the label “ethical” to a given enterprise tells us nothing about the actual morality of its practices. What ultimately matters, the Pope affirms, is the precise vision of morality — and therefore the understanding of the human person — informing not simply a particular business, but the entire economy (CV 45).

Obviously business schools that simply outline different “visions” of ethics and then leave the rest to chance in the name of tolerating all views (however incoherent) have little to offer here. By failing to engage morality in terms of determining the truth of the good or evil of particular business choices on the basis of right reason (and hence open to believer and non-believer alike), they merely lead their students into the intellectual and moral dead-end of “my opinion, your opinion, and everyone else’s opinion.”

Part of the genius of successful business is constant and prudent innovation and adaption to new circumstances. When it comes to reforming business ethics instruction, those institutions that educate so many business executives should be capable of no less.

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  • goral

    Business ethics is putting a statement on the oversized packaging that the product is sold by weight not volume because the buyer is too dumb to realize that contents settle during shipping.
    Some of us might think that’s deceiving but the proper business school term is
    Besides the price of the item is $1.99 which is well below $2.00

  • bythesea

    At the most recent company I worked for (about 300 employees, electronics manufacturer) the President told the employees at one of the employee meetings that “A little greed is good.” He would make statements like this, and then search all of the faces in the cafeteria, where the meeting was held, to see what the individual reactions were. A person who has been running a business for decades can easily tell with such a litmus test who is on board with the corporate philosophy and who is not. Now, if I as an employee did not agree with this, how could I hope to voice my disagreement (even respectfully) without getting fired, or forced out of a job. It’s hard to even keep a straight face when you hear that “a little greed is good” yet you know that while everyone may be tempted to greed, it is not a good corporate standard to have. And once you have disagreed, once you have broken with the party line, they don’t want you. You are a liability. And it can be very difficult to be re-employed in the same industry if you have been dismissed. After all, what company wants to hire a “rabble rouser?”

    I suspect business schools also kow-tow to this “a little greed is good” philosophy. Companies support schools financially. A business school can’t be supplying businesses with “rabble rousers.” At the end of the day, the bottom line is the metric used. The employees you have kept, and the employees you have let go are a mere footnote. It is not a human enterprise, it is a money making enterprise. “A little greed is good.”