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Can Ethics and Profit be Reconciled?

As a business ethicist, I have spent my life addressing the task of putting ethical principles to work in business.  Many have written about the tension between ethical values and the capitalist logic that gives preeminence to profit maximization.  This tension is real and expresses itself vividly today despite attempts to reconcile the two.

The most notable attempts have been innumerable “global codes” adopted by NGOs and businesses which address specific commercial behaviors.  Among these are supply chain standards for the treatment of employees, global environmental standards regarding water use and pollution, commerce in “conflict minerals,” and commitments to fight corruption.  The hope has been that these global codes and other standards would solve four fundamental problems faced by global businesses:

  1. Competitive disadvantage: Only by cooperative and widespread adoption of ethical business practices will businesses feel they can act responsibly and not put themselves at a competitive disadvantage.  The reality is that no voluntary global code will ever solve this problem.  There will always be a business ready to ignore the code’s standards to save money. There will always be a country where legal standards are more lax and some companies can operate more cheaply.

  2. Pressure from financial markets: Markets have increasingly demanded uninterrupted profitability, even on a quarterly basis.  Many business leaders, who believe good ethical decision-making usually serves long-term profitability, feel constrained to avoid decisions that serve humanity and are more ethical in order to keep short-term performance at high levels.  This, of course, is bad both for the stakeholders whose interests are ignored and for the economy.

  3. Lack of legal authority: In some countries professional managers don’t have the legal right to make decisions that favor broader human welfare.  Corporate charters in the United States and many other countries specifically oblige boards of directors and managers to serve the interests of the equity owners and no one else.  While there is some room for business judgments or ethical decisions, they must be argued as being clearly related to the long-term interests of the shareholders.

  4. No global ethic or global ethical consensus: Companies face conflicting ethical expectations from different national cultures.  Some businesspeople abdicate all responsibility at this point and say they will meet only the legal expectations in each jurisdiction in which they operate.  Indeed, such a “compliance philosophy” has become the dominant working practice of many, if not most, global corporations.

These realities suggest that there will never be a definitive answer to how to apply a global ethic in the world of economics.  Profit and ethics will always be in tension.  But as we move forward, businesses will make better ethical decisions if they remain open to continuing dialogue with their own staff, as well as other stakeholders outside the company who will be affected by its behavior. 

Business, Ethics
legal,Illuminate

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