Business “Ethics”: How to Define Right and Wrong

In the Stanford Encyclopedia of Philosophy’s entry on business ethics, many interesting points are raised on how to define, explain, and apply the concept of business ethics. Our class has already spent a considerable amount of time trying to define ethics and how they fit into our society, our government, and our businesses, and I suspect that those discussions were only the tip of the iceberg. So I was not surprised to find the article awash with conflicting definitions and views, which were both fascinating and frustrating to read about.

As the article explains, the concept of “business ethics” goes way back- try almost 4000 years ago! At it’s very simplest, business ethics can be broken down into guiding a company’s actions based on whether they are right or wrong. Now, this is where it gets tricky; who gets to define right and wrong? One of the most interesting sections of the article was International Business Ethics, where they discuss several types of research on transnational business ethics. It had not occured to me before, but as I read, I realized that this was perhaps the hardest set of business ethics to define. We have enough trouble dealing with applying a set of ethics to a company based in our own society- imagine trying to figure out right or wrong in a society that is totally different from ours.

For example, I found Maitland’s proposition on sweatships extremely intriguing. He argues that sweatshops are “an important rung on the ladder to economic development” in developing countries, and trying to eliminate them is only harmful. Although my gut reaction to sweatshops is sadness for their workers and horror at the stories I have heard of terrible working conditions, I realized that Maitland is right.  What other opportunities would a worker in a sweatshop have? I doubt that many of those employees are working at the sweatshop just because they felt like it.

As my thoughts went down that path, I then wondered about the boycotts we throw at companies who are known to use sweatshops. Nike, for example, has a long, dirty, and quite public history with sweatshops (Wikipedia’s entry offers a quick and comprehensive summary for those who are unfamiliar). The news occasionally carries updates on which company we are now no longer allowed to support, because of their “unethical” (the magic word appears again) or dirty labor practices. But what happens we don’t support that company anymore?

We’d like to think that this rotten company changes their ways and the bad guys go away, everyone is happy, and all is right in the world. But really? What if they do shut down those factories? What happens to all of those workers who depend on those wages, as meager as they may be? Say what you will about the terrible working conditions, but the fact is that they employ hundreds and thousands of people who may not be able to work anywhere else, and now have no way to support themselves for at least a short while- if not forever. Taking away the wages of the less fortunate, just so we can sleep soundly at night, knowing that we’re not supporting “bad people” or “bad companies”?

Trying to re-evaluate our mindsets towards right and wrong is an important part of our discussions on ethics. Sweatshops may be wrong in our minds, but to their workers, maybe they are right. The examples detailing examples of bribery are another example of having to find the correct situational mindset of right versus wrong. Your company can do a lot of good, help a lot of people, develop new products, whatever you’d like to say, but only if they can get that permit, which is only if they pay that official. What do you do? Sacrifice your good deeds that might help thousands to punish the one bad official’s behavior? An interesting topic for a discussion…

Aside from the international business ethics, examining shareholder theory within the context of business ethics was also one of my favorite sections. My favorite section was explaining how to view the firm, using either firm-state analogy or firm-contract analogy. Firm-state analogy says that a firm’s citizens (stakeholders) are like citizens of a society, and gives each stakeholder “the rich citizenship rights characteristic of liberal democracies” for their firm. On the other hand, the firm-contract analogy says that a firm exists based on a complex web of agreements among its many stakeholders, which makes the firm “less an actor (much less, a polity) than a Schelling point around which agreements get made”.

Both of these theories are new and different ways for me to define a firm, and I find myself agreeing more with the firm-state analogy. When a firm gets in trouble- say Bucknell University is found to be guilty of discrimination in its admission policies- who decides who gets punished? The entire university will suffer at least a little; staff will be fired, students and alumni will be shamed by peers and the news. But who gets the worst punishment? The actual staff in charge of admitting applicants? Their boss(es)? Top administration who failed to notice the trend? In this way, I think that a firm is more like a country than a series of agreements. A student could easily be considered a stakeholder in the firm of Bucknell, but certainly discriminatory practices were not part of the agreement that student made. Instead, I see it as a much more similar situation to when a country does something wrong. Although citizens may be punished, ultimately it is the government who suffers the worst consequences of the country’s actions.

The entire article was an interesting read, and one that I recommend to anyone interested in business or philosophy. The debate of right vs wrong has been going on for centuries, and I doubt it will be solved any time soon. However, being educated on how to approach the idea of ethics, especially in business situations, is the best way to make proper decisions. Hopefully the ideas within this article will help the future of the world’s firms make positive actions in the future.