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Four Myths About Business Ethics

Here are four important myths about business ethics. There are surely many myths about business ethics, but these 4 in particular cause trouble, and pose significant challenges for anyone trying to have a productive discussion about right and wrong in the world of business. Myth #1. “Business ethics” is an oxymoron. The idea that “business […]

Here are four important myths about business ethics. There are surely many myths about business ethics, but these 4 in particular cause trouble, and pose significant challenges for anyone trying to have a productive discussion about right and wrong in the world of business.

Myth #1. “Business ethics” is an oxymoron.
The idea that “business ethics” is somehow a contradiction in terms is based on a serious misunderstanding of what ethics is and what the world of commerce is like. Indeed, it’s much closer to the truth to say that the term “business ethics” expresses a redundancy, since commerce is quite literally impossible without ethics. Every single commercial transaction requires some level of trust, and without a shared commitment to some level ethical behaviour, you simply do not get trust. Indeed, economists are more than ready to point out the huge range of ethical norms that underpin the modern economy and make it run more efficiently.

Myth #2. Ethics is just a matter of opinion.
Again, false. While ethics does of course have something to do with having an opinion, it’s also about having opinions that you can defend to other people. While there certainly are a few really tough moral questions about which we might agree to disagree, we should also recognize that on many ethical issues there are better and worse answers. Poor answers to ethical dilemmas are typically rooted in factual mistakes and logical inconsistencies. We shouldn’t settle for those. We should talk them through. (And, as a I blogged recently, having an opinion doesn’t come to much if you can’t sell that opinion to others.)

Myth #3. There’s no such thing as “business ethics,” because ethics should be the same everywhere.
There are two main reasons why ethics, while essential to business, isn’t just exactly the same in business as it is in other domains of life.

First, business poses special challenges. The enormous productive capacity of corporations and other large organizations also brings the potential to do substantial harm, both to the lives of stakeholders and to the natural environment. So we face questions in the world of commerce that we just don’t face in other parts of our lives. Second, the special social role of business implies a tailor-made set of ethical principles. One of the defining characteristics of business is that it is competitive: companies are naturally driven to do better than others in their field. This kind of behaviour is socially beneficial — consumers benefit when companies compete vigorously to produce a better product, at a better price, than the other guy. In practice, we can really look at business ethics as having two importantly different components. One component consists of the rules needed to civilize a tough, competitive game. This part of business ethics essentially has to do with the norms-and-principles that ought to govern business’s behaviour with regard to outsiders. The other component of business ethics is about the ethical rules that ought to be embodied in relationships within the organization. Here, we do value cooperative behaviour; so managers work hard to shape corporate culture to enable employees to trust each other and to work together toward shared goals. Business is morally complex that way.

Myth #4. Business ethics is just a matter of laws and regulation.
This is not just false, but dangerous. The tendency to confuse ethics and law is tempting, especially in an age in which the business section of the newspaper increasingly refers to “ethics laws” and “ethics regulations.” But we shouldn’t be misled by that short-hand way of speaking. If you think about it for just a minute or two, there are in fact lots of ways in which law and ethics come apart. There are plenty of things that are legal but unethical; and there are also behaviours that are illegal, but arguably ethically OK. The short explanation for the fact that law & ethics don’t overlap perfectly is this: laws are made & enforced by government. But governments can’t be everywhere, and if they could, we wouldn’t want them to be!

These surely aren’t all the myths there are about business ethics. But these strike me as four that are particularly common, particularly troublesome, and particularly clearly wrong.