Chapter 1 What For Business Ethics PDF

CHAPTER
What for Business Ethics?
Moral philosophy and business ethics

Why business ethics should be a necessary endeavour
The legalist challenge to business ethics
Common-sense and mass media scandals
The positivistic challenge to business ethics
The ideological challenges to business ethics

The classical challenges

The contemporary challenges
The main topics of business ethics

References
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Business and Morality
Business ethics is a brand new field of research, focused on the specific moral issues of the economic activities. R. T. De George, one of
the most prominent authors in this discipline, defines business ethics
as the ethical outlook, whether implied by behaviour or explicitly
stated, of a company or individual engaged in business. Behaviour
and statement can of course come apart, so that one might say of a
certain corporation: Their ethic is allegedly one of service to the
community, but their woeful environmental record shows what they
really believe.1
In a second sense, business ethics is that set of principles or
reasons which should govern the conduct of business, whether at the
individual or collective level.2 If we assume that there are many ways
in which people should not act in business, business ethics in this
second sense refers to the way people should act.
In its final, and most commonly used, sense, business ethics is
an area of philosophical enquiry, with its own topics of discussion,
specialists, journals, centres, and of course a variety of different
ethical positions. In this sense, Roger Crisp suggests that business
ethics refers to the philosophical endeavours of human beings to grasp
the principles constituting business ethics in its second sense, usually
with the idea that these should become the ethic of real business and
business people.3
The mere reading of Crisps definition could explain why so
many business people are quite sceptical about the relevance of business ethics to their day-to-day problems and practical dilemmas.
Instead of making facts look more simple and easy to understand,
philosophers seem to speak about another world, dealing with artificial speculations, which have nothing in common with the usual
concerns of people engaged in business. But that is not true. In plain
English, the distinguished philosopher from Oxford wants to tell that,
as a philosophical inquiry, business ethics seeks to evaluate and to
support with reasons the moral values and norms which should govern
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the economic game, hoping that its explanations will make a contribution to the improvement of the everyday moral practices in real
business.
MORAL PHILOSOPHY AND BUSINESS ETHICS
Just like medical or legal ethics, business ethics is an applied ethical
theory. More precisely, the concepts and methods of ethics, as a
general theory, are invoked in dealing with the specific issues of a
certain field of activity, such as health care, law and legislation or
business.
But what is the meaning of the word ethics? A few years ago,
sociologist Raymond Baumhart asked business people, What does
ethics mean to you?. Among their replies, the most common were the
following: (1) Ethics has to do with what my feelings tell me is right
or wrong. (2) Ethics has to do with my religious beliefs. (3) Being
ethical is doing what the law requires. (4) Ethics consists of the
standards of behaviour our society accepts. (5) I dont know what
the word means. These replies might be typical of our own. The
meaning of ethics is hard to pin down, and the views many people
have about ethics are shaky.
Like Baumharts first respondent, many people tend to equate
ethics with their feelings. But being ethical is clearly not a matter of
following ones feelings. A person following his or her feelings may
recoil from doing what is right. In fact, feelings frequently deviate
from what is ethical.
Nor should one identify ethics with religion. Most religions, of
course, advocate high ethical standards. Yet if ethics were confined to
religion, then ethics would apply only to religious people. But ethics
applies as much to the behaviour of the atheist as to that of the saint.
Religion can set high ethical standards and can provide intense
motivations for ethical behaviour. Ethics, however, cannot be confined to religion nor is the same as religion.
Being ethical is also not the same as following the law an idea
which will be argued several times, and on different grounds, in this
book. The law often incorporates ethical standards to which most
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citizens subscribe. But law, like feelings, can deviate from what is
ethical. The slavery of African Americans before the American civil
war and the apartheid laws from South-Africa, only recently abolished, or the discrimination of women in the fundamentalist Islamic
countries are grotesquely obvious examples of laws that deviate from
what is ethical.
Finally, being ethical is not the same as doing whatever society
accepts. In any society, most people accepts standards that are, in
fact, ethical. But standards of behaviour in society can deviate from
what is ethical. An entire society can become ethically corrupt. Nazi
Germany, Bolshevik Russia or late Ceauescus Romania are good
examples of morally corrupt societies. Moreover, if being ethical were
doing whatever society accepts, then to find out what is ethical, one
would have to find out what society accepts. To decide what I should
think about abortion or euthanasia, for example, I would have to take
a survey of Romanian society and then conform my beliefs to
whatever society accepts. But no one ever tries to decide an ethical
issue by doing a survey. Further, the lack of social consensus on many
issues makes it impossible to equate ethics with whatever society
accepts. Some people accept abortion or euthanasia, but many other
do not. If being ethical were doing whatever society accepts, one
would have to find an agreement on issues which does not, in fact,
exist.
What, then, is ethics? I shall equate ethics with moral philosophy which is a philosophical inquiry of morals and morality.
Ultimately, the ethical theory is an attempt to give a rational answer to
one fundamental question: What one should do? Quoting a wellknown definition, stated by Henry Sidgwick, we can say that ethics,
conceived as a theoretical approach of the moral life, means any
rational procedure by which we determine what individual human
beings ought or what it is right for them to do or seek to achieve
by voluntary action.4 More precisely, ethics has two meanings. First,
as moral philosophy or theoretical approach, ethics refers to well
based standards of right and wrong that prescribe what humans ought
to do, usually in terms of rights, obligations, benefits to society, fairness, or specific virtues. Ethics, for example, refers to those standards
that impose the reasonable obligations to refrain from incest, rape,
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stealing, murder, assault, slander, and fraud. Ethical standards also

include those that enjoin virtues of honesty, compassion, and loyalty.
And, ethical standards include norms relating to rights, such as the
right to life, the right to freedom from injury, and the right to privacy.
Such standards are adequate patterns of behaviour because they are
supported by consistent and well founded reasons.
Secondly, as a practical approach, normative ethics refers to the
study and development of ones ethical standards. As mentioned
above, feelings, laws, and social norms can deviate from what is
ethical. So it is necessary to constantly examine ones standards to
ensure that they are reasonable and well-founded. Ethics also means,
then, the continuous effort of studying our own moral beliefs and our
moral conduct, and striving to ensure that we, and the institutions we
help to shape, live up to standards that are reasonable and solidlybased.
As a general theory, ethics is not concerned with any particular
category of people, its questions being asked from the standpoint of
mankind. What one should do in order to fulfil his or her desires,
goals, and ideals, in such a way that would make possible the most
flourishing life of an individual, no unnecessary harm being done to
any other people, but letting everyone else to seek freely his or her
personal achievements, and even making a contribution to a better
society? this is the core of all ethical investigations. The applied or
practical ethics ask the same question, but from the standpoint of a
particular category of people. What a doctor or a nurse should do in
their professional activities namely healthcare? What a lawyer
should do when acting as a judge, as a councelor or as a prosecutor?
Our specific question is: What business people should do in doing
business? Which are the moral responsibilities and duties of a businessman? As a common-sense problem, this question has been asked
since the ancient times, but only recently it had become the central
issue of an academic field of research: business ethics. Why did this
happen? Which are the social and economic changes that have made
common-sense opinions and beliefs on what business people should
do in their real life to be judged as outdated and inadequate, requiring
a theoretical approach of the reasonable ethical standards which
should govern business in the contemporary world?
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WHY BUSINESS ETHICS SHOULD BE A NECESSARY

ENDEAVOUR
At first glance, business ethics might be considered as an AngloAmerican academic fashion, spreading all over the world, just like
Coca-Cola, Levis blue geans, Hollywood movies or rocknroll
music. As a matter of fact, even in the American universities, business
ethics is not yet an important field of research and a well established
academic discipline. After the Enron scandal, the issue of teaching
business ethics in the US B-schools raised fiery debates. Last year
BusinesWeek published an article written by Brian Hindo Where
Can Execs Learn Ethics? The author says: Given the ethical lapses
at Enron, Andersen, Sothebys and Christies, Merrill Lynch and,
most recently, the clouds hanging over Tyco and ImClone, it would
seem logical for business schools to put a sharper focus on teaching
future business leaders to do the right thing. Sure, most B-schools are
loudly condemning such ethical breakdowns. But what are they doing
to really combat recurrences of such behavior? The short answer: Not
much.5 Very recently, in her article Ethics Is Also B-Schools Business, published by the same review, Jennifer Merritt argues the same
point. To clean up ethics in corporations, she claims, you have to
start at the beginning of a career. Business school, that is. At first
glance, it might seem obvious: B-schools, like the corporations their
grads work for, must do more to promote ethics everyone says so.
And nearly all MBA programs and increasingly, undergraduate
business programs have added ethics courses to their curriculums,
dating back to scandals such as the savings & loan crisis. But a class
here and there isnt enough to set future managers on the straight and
narrow.6
Brian Hindos article received a lot of enthusiastic letters,
expressing the total approval of the readers, even though not all of
them agreed with his view. For instance, Patrick R. Rogers, PhD,
Associate Professor at North Carolina A&T University, says: Your
premise that ethics should, or even could, be taught in schools of
business is questionable at best, irresponsible at worst. Ethics are
personal and well-defined early in life. The best a business school can
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do is to try to get students to consider a broad range of stakeholders in

the decision-making process. However, that is a far cry from teaching
them right and wrong. Maybe [Enrons Jeffrey] Skilling and [Andrew]
Fastow are just bad guys. Of course, maybe if we had just taught them
right and wrong while they worked on their MBAs, Enron never would
have happened. Come on!7 In an interview taken last month by
Jennifer Merritt, Thomas Donaldson, professor at University of Pennsylvanias Wharton School, claims that the most pressure to teach
and study ethics has come from students and corporate executives.
[...] The hardest nut to crack has been the faculty.8 Donaldson refers
to the resistance which faculties oppose to the development of the
systematic study of business ethics, resistance justified by the lack of
funds for research in this field. In America, the reward system inside
each discipline is tied in some way, at all schools, to publication of
research. Only a few journals are stronger in ethics than in other
subjects, and ethics is not as tangible a subject as, say marketing or
decision science, making it harder to assess the depth of research in
ethics. Additionally, few professors actually concentrate on ethics as a
discipline, because it does not promise a bright academic career. In
other words, the deans hesitate to increase the importance of business
ethics as long as this discipline does not find a generous and stable
funding.
One of the readers of BusinessWeek, Michael Forde, Toronto,
Canada, asks an innocent, but very deep question: Why do ethics
have to be cost-justified? In our early upbringing, we were all, I suppose, instructed and shown exemplary behavior indicating why ethics
were essential to good character and humanity. When our kids challenge us on our ethical posture, should that discussion focus on the
rate of return, cost-benefit, or net present value of simply doing the
right thing? Have conscience and morality been laid off, outsourced,
or taken the buyout package? I for one refuse to accept money/profit
as the highest arbiter of all values. We adults cannot reject moral
behavior for its own sake, [while demanding] that from our children.9
As for the students, some of them would be interested in ethics,
but very few take courses in this discipline; most of them choose to
study those core objects and hard skills which the recruiters seek,
because they are professionally more qualified and productive. Ron
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Cenfetelli, another Canadian reader of BusinessWeek, has a point in

saying that Business education has moved from an education model
to a student-as-customer model. Just as in a restaurant, if your customers dont like spinach and they dont want to buy it, you dont
force it on their plate. Students respond to such attempts at broader
education by lowering the scores [they give their schools] on annual
ranking surveys. Its as if children could dock their parents salary for
making them eat their vegetables. In the case of B-schools, lower
survey rankings mean less tuition revenue, corporate support, and so
forth.10 As you can see, even in its home country, business ethics is
not yet accepted and respected by everyone.
But what about Romania? It might be thought that, willing to
imitate the Western models, we are now beginning to study and teach
business ethics, even though our economic system is not yet
compatible with the free market economy in the developed capitalist
countries and here we can see the revival of an old Romanian story:
the adoption of modern, up-to-date Western patterns, uselessly and,
sometimes, ridiculously applied on an Eastern, old fashioned and
underdeveloped social reality. In Titu Maiorescus salient words,
shape with no content or form without matter.
I dont see the matter this way. One of the most powerful causes
of the slow steps we have taken on the path to a functional, efficient
and competitive free market economy is the widespread and deeply
rooted corruption in our society. Supposing only for the sake of
argument that business ethics was no more than an academic
fashion in the Western world, the transition of Romania to
capitalism requires, among other things, a continuous and strenuous
educational effort, meant to explain the negative consequences of an
unethical behaviour in business, and to convince the people that, in
the long run, we cannot become a prosperous and democratic society
if we do not impose on ourselves and on our partners strict and
demanding ethical standards. On the other hand, the progress of our
economy requires an intense and constant partnership between the
Romanian companies and solid foreign investors, so that we must be
aware of their ethical codes and observe the Western standards of
morality in business.
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But even in the most advanced countries there are still a lot of
people who do not take business ethics very seriously, considering it
as an artificial and futile inquiry, almost completely irrelevant to the
business people and their practical problems.
Maybe those who are sceptical about business ethics have a point
and perhaps in some respects this new discipline really is an academic
fashion. Whether as a reaction to the 1980s yuppie culture, or a
reflection of the caring, sharing 1990s, says Elaine Sternberg,
business ethics has become fashionable. But quickly she adds:
Unlike hoola hoops or Rubik cubes, however, business ethics is not
just a passing fad.11 Every fashion has its history, and each history
has its roots and its meaning. Business ethics was born in the USA,
after 1960, as a part or consequence of an ideological debate concerning the essence of capitalism versus socialism. In the United States,
the radical left and the orthodox marxist-leninist groups have never
brought a major influence. At that time, most of the American leftwing intellectuals were not advocating a dogmatic socialist doctrine.
Adopting a large variety of critical perspectives, from a classical
liberal point of view to anarchist and utopian visions, they were
criticizing the post-industrial capitalism as a society dominated by the
huge and malefic power of the multinational corporations, accused of
considerable social damages and serious violations of justice. The big
corporations have taken up the challenge, and started an active
defense, trying to prove they were not only innocent, but even the
most effective agents of the economic growth and social progress.
One might see the roots of business ethics in those left-wing incriminations of the alleged immoral practices of the big corporations, and
in the efforts made by the financial giants to clean their bad
reputation. At a second glance, business ethics might be thought of as
an attempt of the big corporations to embelish their public immage,
proving that managers and business leaders are not ferocious sharks,
obsessed exclusively with maximising their profits, but good and
responsible citizens, deeply involved in social justice and constantly
concerned with moral issues.
Even though they might be more or less true, these two characterizations academic fashion and propaganda campaign of the powerful corporations are not the only possible ways to define business
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ethics. No fashion could last four decades and spread constantly all
over the world if it was entirely artificial. The Anglo-American school
of economics is well known for its pragmatism, and business ethics
would not have resisted and become a major discipline without a real
object of investigation. We have to assume the reality of certain
practical and morally significant aspects of capitalist economy which
deserve a systematic research and an academic status.
On the other hand, the big corporations would not be interested in
convincing the public of their concern for business ethics if the public
paid no attention to the moral issues, and if the morality of business
was regarded with a total indifference by the ordinary people,
attracting only a few members of the academic community. The money
spent by the powerful companies on attesting their ethical behaviour
proves the existence of a serious and widely spred criticism of their
business activities. Exposed by the press, dragged into financial
scandals, law suits or even criminal trials, more and more companies
began to adopt and to develop their own codes of ethics, meant to
consolidate a so-called company culture, devoted to a set of stated
moral values which must guide the current activities of all the
members of a firm.
Therefore, we have to admit that, beyond the academic artificiality of certain scholastic arguments, and beyond the interest of the
big corporations in the improvement of their public image, there must
be a core of real and important questions which keep business ethics
alive, as a genuine field of research and debate. Especially the last
two decades brought forth spectacular social, political and technological changes, as well as shifting attitudes and outlooks of the
stakeholders of different business activities. Many of the most prominent trends of the 1980s and 1990s focused attention on business
ethics, and made it something that businesses ignore at their peril.
Consumerism, social responsibility, demographic changes, privatisations, investigative journalism, global markets, environmentalism,
management theories [...] all have raised public awareness of business
conduct and the need for business to respect business ethics.12
The actions of governments, for example, have brought business
ethics issues into sharp relief. Some of these issues have just become
urgent and extremely controversial in our transition to a functional
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free market economy. In the Western countries, as well as in present

Romania, privatisation programmes have required previously government-owned enterprises to conduct themselves more as businesses. In
response, they have undertaken large-scale redundancies and awarded
their executives sharply increased remuneration. Questions have arisen
as to the ethics of such actions, and indeed as to the proper objectives
of the enterprises themselves: is it to serve the public welfare or the
interest of their shareholders?
With governments attempting to withdraw from sectors they have
dominated for decades, questions have arisen more generally as to the
extent to which business should fill in the gaps. Hopes that business
might support the arts or sponsor invention or further education are of
course not new. What is relatively new, however, is the transformation
of hopes into expectations, and stronger still, into demands: what was
once voluntary beneficence is ever more frequently regarded as social
responsibility. Also new is the extent to which business is being called
upon to cure all the ills of society: not just to make safer products or
improve employment conditions, but to save endangered species and
alter fundamental social attitudes. (Of course, this is a controversial
issue only in the West; until now it never crossed our fresh-made
millionaires minds to support art, invention, healthcare or education
at best, some of them are spending their easy money on sponsoring
football clubs, golf courses or boxing fights, while others pretend to
be great hunters of wild animals.)
Questions of business ethics have also been prompted indirectly
by the action of government, through their effect on the economy.
Whereas the boom years of the 1980s raised questions about business
profligacy, and the role and legitimacy of takeovers, the subsequent
recession has forced business to make hard choices about cutbacks
and layoffs and paying their suppliers. With their very survival at
stake in the face of global competition, businesses have had to
seriously consider patterns of conduct which have proved notably successful overseas.
Awareness of business ethics questions has also been raised by
the growing media attention paid to business. As business has increasingly come to be front page news, so has business misconduct. At least
in this respect, we can be proud of standing in line with the West
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Romania had in the last decade its big media scandals but, unlike the
West, we are still waiting for our big legal trials.
The actions of stakeholders groups have also made business ethics
more important. Increasingly, the best employees in the developed
countries are attracted not just by pay and perks, but by job satisfaction, potential for growth, and the ethical character of their
employers. With the number of candidates from the traditionally
favoured groups expected to decline, a firms ethical stance may
therefore be a key determinant of its ability to attract and retain
preferred staff. And whereas past consumer movements concentrated
on the qualities of the product, the new trend is to vigilante consumerism, in which consumption choices take into account the character
of the producting firm. So the firm that wants to attract increasingly
critical customers must have a care for business ethics.
Shareholders are also attending to the ethics of companies they
own. In ethical investment movement, investment decisions are
based on companies attitudes and behaviour, rather than on solely
financial criteria. And in both the US and the UK, institutional
investors have started to rebel against bad business practice. No
longer content to express their dissatisfaction by selling their shares,
or limited in their ability to do so by the very size of their holdings,
shareholders have started to take an active interest in the way their
firms are run, vetoing management proposals and voting out management. Such shareholder activism is spreading world-wide: American
investors in overseas companies are exporting their concerns along
with their capital. So firms everywhere are increasingly liable to be
assessed on the basis of the quality of their corporate governance, a
key element of business ethics.
An increased focus on business ethics has also been provoked by
the changing nature of business itself. Business has become more
international, complex and fast-moving than once it was. New issues
have arisen, and the easy certainties of the local club have been
replaced by a multinational, multicultural context in which standards
seem constantly in flux. As a result, even old familiar issues are
harder to resolve: businesses need to consider explicitly matters that
once could have been taken for granted.
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Paying heed to business ethics has also been made more essential
by changing corporate strategies and structures. Total quality management and organisational process reengineering and benchmarking
have all led to traditional practices being overthrown. Layers of management have been stripped away and hierarchies flattened. As a
result, authority has been devolved more widely throughout businesses: key decisions are being made at ever lower levels and by
greater numbers of employees. It is therefore essential for everyone in
the business, not just the top management, to have a thorough understanding of business ethics; all need to be aware of the organizations
key values and aims, and how they are meant to be reflected in the
businesss conduct. For business ethics to be disseminated throughout
the organisation, however, it must first be understood. Understanding
is especially important, because the new structures also lead to new
complexities of information management and team assembly and
organisation for which there may be no traditional precedent. For
empowerment of employees to be successful, a proper
understanding of business ethics is vital.
These are the most significant changes that made business ethics
to become an important area of research, debate and controversy. But
the specific problems of business ethics are not always obvious. They
must be looked for, found, defined, and refined. Pursuing its inquiry,
business ethics still has to meet several challenges, all meant to argue
its futility and its lack of relevance, on different grounds.
THE LEGALIST CHALLENGE TO BUSINESS ETHICS

Some people believe that the whole morality of business could be
summed up in one single principle: Obey the law or Observe the
legal regulations. What else could be asked for a businessman? Why
should he keep more and different rules than anybody else? And yet,
it is not so difficult to distinguish between law and morality in modern
business activities.
In principle, there is a moral obligation to obey the law. Almost
every legal system enshrines much moral teaching, and moral considerations have an important influence on the interpretation and
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development of the law. The legal system would break down unless
most people obeyed most laws most of the time, and unless witnesses
told the truth, and judges reached honest verdicts, without being made
to by the threat of coercion. A legal system fails to do its job when
laws are ambiguous and contradict each other, when the lawyers and
policemen are corrupted, and when a significant number of people get
in the habit of breaking the law, without even the slightest feeling of
guilt, shame or remorse. Consequently, morality is not second to legal
justice, like an idealistic, but unnecessary jewel or make-up put on the
rough, but strong body of the law. On the contrary, the morality of a
nation is the back-bone of the legal system, and if the back-bone is not
upright and strong, the whole body of the legal system would be
slanting, uggly and impotent, vicious and pervert. When corruption,
bribery, and political pressure tend to distort the fair competition in
the market, and to destroy the natural mechanisms of a free-market
economy, to obey or to break the law might become a critical moral
decision, as long as more and more businesses come to be forced to
choose between legality or bankruptcy.
Many sceptics about business ethics would probably submit that
keeping the law is primarily a moral commitment, but some of them
would make a second claim, perhaps more difficult to reject. They
would say that, beyond the moral decision of a honest businessman to
keep the law, there is no room left for any other kind of ethical
commitment. Many thinkers deny the possibility of business people
having responsibilities or ethical obligations. A businessman has no
alternative, in view of the competition of the marketplace, to do anything other than buy at the cheapest and sell at the dearest price he
can. In any case, it would be irrational if, indeed, it were possible
not to do so. Admittedly, there is a framework of law within which he
has to operate, but that is all, and so long as he keeps the law he is
free to maximise his profits without being constrained by any moral
or social considerations, or any further sense of responsibility for
what he does. But this is not true, for several reasons.
In the first place, there are some primitive moral rules, spontaneously born within the framework of business relations, early in the
beginning of capitalism, which only much later became legal norms,
but these primitive rules, intrinsic to the economic life, still are, and
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will always be primarily moral obligations. For example, Keep your

promises is an universal moral rule, which in business means
Perform your contracts. Long before its legal institution, this moral
norm has been the fundamental rule in business, and even today the
so-called gentlemen agreement is the basic norm of economic
transactions, which simplify and accelerates the circulation of
capitals.
Secondly, the legal regulations are often influenced by various
extra-economic factors: social ideals, political interests or religious
faith, which have consequences in the field of economy. Sometimes
these consequences conflict with the logic and morality of business.
For instance, an inefficient company, loaded up with large debts, and
which has no real good prospects, must be penalized; economically
speaking, its bankruptcy is the only ethical solution. If, for social or
political reasons, the goverment decides to keep in business such a
company, legally spending taxpayers money, it might be socially or
politically convenient but, from an economic standpoint, it is not
ethical. The morality of business requires equal rules for all the
players in the economic game, otherwise it would not be a fair
competition. Sometimes, specific social or political circumstances
force the government to favour, by legal regulations, certain economic
activities, certain forms of property, social classes, professional
categories and so on, and this kind of legal discrimination violates the
moral rules of business. Summing up, business has its own intrinsic
moral rules, meant to guarantee a fair competition, aiming at a
maximum profit which can be obtained by means of efficiency, and
not by stealing, lying, cheating, etc. The legal system must satisfy not
only strictly economic necessities, but also many extra-economic
requirements, and that is why so often the law conflicts with the
morality of business, creating unequal terms of the economic competition.
This conflict between morality and law goes far beyond the
economic life. Every law can be judged as moral or immoral. Think
about apartheid or slavery, lower wages for women, child labour etc.
They all have been legal, until the people had realized their deep
immorality, which finally determined major changes in the legal
system. There are matters still at issue: most of the Western democ-
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racies have abolished the death penalty, even though not all of their
citizens believe in the morality or the social efficiency of this change
in the penal system. Other democracies still inflict the capital punishment for the most dangerous and cruel crimes, but many of their citizens consider the death penalty morally wrong. Sometimes the law is
more enlightened and more progressive than the social consciousness
and the public opinion. Think about the gay liberation movement, the
right of homosexual couples to get married or to adopt and raise
children; think about abortion, euthanasia, transplant surgery, artificial insemination or genetic cloning: in many developed countries
they are already legal, even though many people still oppose fiercely
these practices, which in their opinion appear to be deeply immoral
(not necessarily for religious reasons).
One might say that all of these three distinctions between law and
morality are scholastic speculations or, at least, disputable
matters of belief, involving conflicts of attitude, which no reasonable
argument could resolve. If we could quarrel indefinitely about moral
issues, the only practical way of knowing what we should do in
specific circumstances would be to obey the law, either we consider
the existing legal norms as morally good or wrong. So that, once
again, whats the use of business ethics? Well, we have a few answers
which do not involve academic subtleties, but very practical reasons
why business ethics might be really useful.
In the first place, the law cannot, and must not regulate every
aspect and each moment in our lives. The legal system offers only a
general normative framework of the economic life, whose diversity
generates a lot of impredictable evolutions and irregular circumstances, which it would be quite impossible to anticipate and freeze in
some inflexible patterns of legally correct behaviour. But when the
law has nothing to say, morality is the only available guide of our
actions. Legally, every person is free to choose his or her inheritors.
Morally, it is not indifferent if somebody gives his assets after his
death to his relatives, to Salvation Army, to a scientific research fund,
to a religious cult, to a terrorist organization or to his dog. Legally,
you are free to spend your money in any way you like, except a
number of explicitly forbidden activities; morally, it is a significant
difference between spending your money on gambling, drinking or
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shooting lions in Africa, and making a good investment. Legally, a

good investment is one which makes a profit, without breaking the
law; morally, an investment in a casino or a peep show bar is not
equal to an investment in a hospital or a waterplant.
Secondly, most often the law tells us how to proceed, but not
what should be done. The law is concerned with the available means
of our actions, but not with our purposes, decisions and choices. The
legal system cannot answer questions like these: Which is better,
retrench the work force so that the company can recover and perhaps
rehire these people later, or keep full employment with possible dire
consequences for the company, including bankruptcy? Should a
business allow itself to be the object of a hostile takeover, which
could result in the loss of many jobs of those currently employed? Or
should it resist the takeover by paying greenmail (buying the stock
of a corporate raider at higher than market price so the raider will go
away)? Or should the company load itself up with debt to decrease its
attractiveness to a raider, even though this may reduce the companys
profits? How do we asses the raiders promises to make the business
more efficient by stripping away waste and strenghtening the companys competitiveness, thereby increasing the real value of the
company to the shareholders? How would you answer these questions
if you were an employee of the company? But what if you were a
manager? A shareholder? A member of the community where the
business is located? If we cannot clearly see all the ethical ramifications of our actions, we are often unable to isolate all the morally
relevant aspects of the situation and choices become difficult, since
in virtually every relationship with stakeholders, there are issues that
are ethical dilemmas, even though theyre legally clear.13
One final reason why business ethics could be sometimes useful,
beyond the strict conformity with the law, is the national character of
legislation. Of course, there are international laws or multinational
legislations, like those already adopted by the European Union, but
still a good deal of legal regulations are specific to each national state.
For instance, some medications are forbidden in the USA, but they
can be produced in America and sold to other countries, especially
from the Third World. Therefore, it is legal to protect the health of the
Americans, and to jeopardize the health of other nations. But is it
32
ethical? Advertising of cigarettes is more and more restricted in the

West, but the restrictions vary from state to state, and in the Third
World usually there is no restriction. Therefore it is legal to eliminate
smoking in the Western countries, and to increase the number of
smokers in the rest of the world. But is it also ethical? In countries
like Romania, for example, the legal regulations concerning the
protection of the environment are less strict than those adopted by the
most developed countries. As a result, we have a lower cost of a
product manufactured in such a country, because the industrial
equipment, less sophisticated, but more polluting, requires a smaller
investment. It is legal to protect the environment in the rich countries,
and to inflict environmental damages in the poor parts of the world.
But what about the ethical aspects of the matter?
To sum up: Obey the law is indeed a fundamental principle of
any free market economy and of any democratic society, but it does
not resolve all the problems of the economic life, and cannot be an
universal key for all practical dilemmas that an economic agent has to
confront. Consequently, business ethics cannot be reduced to the
respect of the legal system and can prove that it has its irreducible
object of investigation.
COMMON-SENSE AND MASS MEDIA SCANDALS
The legalist point of view is not the only challenge to business
ethics. Many people think that big business is more or less incompatible with morality. Even jokes reflect such attitudes: I hear you
are taking a course in business ethics; must have the smallest textbook
in the world. Even the term business ethics is thought of as an
oxymoron, a contradiction in terms, like square circle, gourmet diet
meals or cruel kindness. Part of the problem is in the presentation
of business leaders by the entertainment media. When is the last time
you can recall that either a film, a television program or a newspaper
article presented a business leader as an example of virtue, a
concerned and active citizen, family oriented, an important member of
charitable boards, and a generous contributor to worthy causes? The
more typical presentation is the business leader as a scheming,
33
untrustworthy, and dishonest manipulator of others (in the American

movies) if not as an ordinary thief and a nasty crook (in our press).
J. R. Ewing, the main character of the TV serial Dallas, is
Hollywoods archetypal mover and shaker, and this stereotype may
have a gradual impact on attitudes. The PBS documentary Hollywoods Favorite Heavy claims that by the age of 18, the average
[American] kid has seen businessmen on prime-time TV attempt over
10,000 murders.14 As for our Romanian kids and young people, the
press and the television present each and every day not only fictitious
characters, like J. R. Ewing, but real persons, which are at least
dubious business leaders, if not mere scandalous rascals and shameless robbers. Consequently, business ethics, says Sternberg, is commonly associated in the media with environmental disasters and
financial scandals, with bribery and sexual harassment and competitive dirty tricks.15 We have to admit that many people are sceptical
about business ethics because they strongly believe that big business
naturally ignores the moral rules, unscrupulously putting the maximum
profit above all.
Apparently, this strong accent put by entertainment and news
media on the scandalous behaviours, which frequently occur in big
business, should exert a positive influence, making business ethics
look more important and more attractive. In fact, this rush for scandals plays an ambiguous part, which is, in some respects, detrimental
to the social perception of business ethics.
The prevalence of business scandals in the last years has helped
fuel a growing public interest in business ethics. For the majority of
people, whose knowledge of business issues and practices is derived
largely from what they see on television or read in the papers, the
issues raised by these scandals are the issues of business ethics; and
even for those with deeper or more extensive knowledge, they are
perceived as the main issues. Scandals, then, shape our perceptions of
the ethical issues confronting business. Moreover, the process of turning events into scandals (of publicity, comment or debate) constitutes
our primary response as a society to these issues.
It is partly through scandal and exposure that we seek to identify
what is criminal and to prevent its recurrence, and scandal does sometimes bring about moral improvement. When a piece of wrongdoing
34
catches the headlines or is so widely gossiped about that it is common

knowledge, the publicity itself can disable the wrongdoer, and others
who fear exposure can be put off and change their ways. More generally, the publicity can concentrate attention on what makes a given
activity wrong and can alert people who think it is wrong to other
people sometimes hordes of other people who think as they do. In
this way a moral climate can be changed, at any rate for a time.
Perhaps recent scandals caused by the collapse of the pyramidal
games such as Caritas or FNI (National Fund for Investment), the
fraudulent bankruptcy of Bancorex, Albina Bank, BIR (International
Bank of Religions), Columna Bank etc. made their contribution to a
healthier financial environment in our country. And perhaps the
repeated scandals caused by dubious privatizations, political protection for contraband trade, tax dodging, bribery, environmental
damages etc. have had a moralizing effect on the Romanian business
community. Perhaps. But will they alter the wider moral climate?
It is possible. It took scandals in the financial markets to inspire
moralizing films such as Oliver Stones Wall Street or Michael
Manns The Insider. Perhaps the existence of works like this is
already evidence that the scandals have had an effect. The same
scandals that inspired these films are sometimes before the minds of
business leaders who speak about the importance of business ethics to
their firms or to business generally. However, though they have no
doubt done something to make ethical issues topical, I fully agree
with T. Sorell and J. Hendry, when saying that we would like to deny
that scandals in general, and especially the lavishly publicized
financial scandals, are a good guide to the ethical issues that confront
business. We would like to deny, too, that they provide the right sort
of stimulus for a change in the moral climate surrounding business.16
Sorell and Hendry support their position with several strong arguments.
To begin with the scandals that inspired Wall Street, there is the
obvious point that activity on the financial markets is unrepresentative
of business or commercial activity in general. The moral risks of
being entrusted with other peoples investments and some kind of
inside information are not the same as the moral risks of trying to
manufacture motor cars at the least cost. The moral risks of making a
35
ships load as big as possible and its journey times as short as possible
are not the same as the moral risks of producing cheap beef or cheap
eggs. In short, if justice is to be done to the breadth of the moral
challenges in business, then one had better not get transfixed by shady
practice among the stockbrokers or bankers.
A second drawback of the well-publicized scandals is their
tendency to focus on big business and big deals, as if business ethics
was only a matter, or primarily a matter, for firms with huge turnovers
or corporations with employees by the thousand. Sorell and Hendry
refers to the UK, where firms employing nine people or fewer made
up 90.1 per cent of all businesses in 1990, and where 78 per cent of
businesses had turnovers of under 100,000 per annum; considering
this economic structure, an ethics for big business would be an ethics
for an extremely small sector of business. Moreover, and to return to
the question of moral risks, it is clear that some are more urgent for
small than for big business. A one- or two-man building firm that
exists from contract to contract probably runs a greater risk of overstretching its workforce and failing to carry out its commitments to
customers than one with the scale to reallocate employees when
necessary. A restaurant with big debts and a clientele reduced by an
economic recession may run a greater risk of overcharging than a big
fast food chain. A small business may be in competition with sectors
of a black or underground economy and therefore feel pressure to
keep some of its transactions out of its official books. These are moral
risks, but they are far removed from those of financial trading floors
and large corporate board-rooms.
Leaving aside the details of the best-publicized scandals in business, scandals in general may not be a good starting point for ethics in
general. Scandals are occasions when a public sensibility is offended,
and for a public sensibility to be offended is not necessarily for anything unethical to be done. When black civil-rights protesters first sat
down in whites-only cafeterias in the American south, it scandalized
local whites, but the fact that it scandalized them does not mean that it
was wrong for blacks to sit down in whites-only cafeterias. On the
contrary, it is more defensible to say that the wrong lay in what was
not scandalous, in what was accepted as natural: namely, the existence of cafeterias that barred people who were black. The same could
36
be said about bribery in our society: a large number of people give

and take bribe naturally, and nobody is really scandalized, even
though almost everyone knows that bribery is a wrong national habit.
There is another way in which the scandalous wrongdoing may, with
repetition and the passage of time, come to look like commonplace
and unscandalous. Perhaps some forms of drug dealing are cases in
point. To sum up, scandalous behaviour need not include wrongdoing
and wrongdoing need not scandalize. Or, in other words, scandal is an
uncertain indicator of what is unethical.
Focusing on shocking scandals, mass media is detrimental to the
credibility of business ethics in at least two respects: First, the public
is presented almost exclusively with unethical behaviours in business,
and this one-sided view strenghtens the common stereotype that business is not compatible with being ethical. That is why so many people
think that business ethics is an oxymoron. Secondly, the spectacular
scandals which make the headlines suggest the point that business
ethics deals only with the issues of the big businesses and big corporations. The truth is that not all business leaders are corrupted and
not all of the small businesses are exonerated from ethical dilemmas.
We need more cases on positive ethical outcomes says Thomas
Donaldson. The attention to failure has [...] put the emphasis on
legality and compliance. And so weve missed opportunities to focus
on more positive or creative cultures that show good ethics.17 The
same point is made, even more clearly, by Sternberg, who claims that
media scandals do not constitute the whole or even the main part of
business ethics. Contrary to popular belief, ethical issues can arise in
respect of any and all business activities. As a result, the need to
consider business ethics is not an optional extra, but a central, inescapable fact of business life. Ethical concerns permeate every aspect
of business activity, because ethical concerns permeate all human
activity.18
THE POSITIVISTIC CHALLENGE TO BUSINESS ETHICS
It is not business ethics concern to prove that not all business people
are thieves and crooks; this is a matter of social experience. Business
37
ethics must demonstrate that moral behaviour is a necessary condition

of good business or, in other words, that someone cannot become and
keep on being a successful business leader if he or she is not concerned with the morality of his or her conduct in business briefly,
that good ethics is good business. If it would be able to support with
reasons this principle, and to demonstrate all of its logical and
practical consequences, business ethics could exert a more or less
significant influence on the real economic life. But this point raises
some important and difficult questions, like these: Is it possible such a
demonstration? And, if possible, would it bare a beneficial or a bad
influence on real business?
One of the challenges to business ethics comes from the philosophers who think that ethical problems cannot be really resolved by
means of rational arguments. They base their claim on a point of view
advanced in the early twentieth century by a group of thinkers who
argued that philosophy should be based solely on the analysis of
statements of fact. If a statement could not be verified that is,
proved either true or false by methods of scientific analysis these
philosophers rejected it on the grounds that it was not meaningful.
Statements that did not pass muster under the scientific criteria could
be used to evoke strong emotions, persuade others to follow ones
example, or express ones own private point of view; but without the
rigors of empirical proof, no statement was to be accorded worth. In
this view, all the ethical judgments and principles seem to be
deprived of rationality. Ethics is not and cannot be a scientific form
of knowledge; it only tries to persuade, appealing to emotions,
feelings, interests and social habits. Like any other moral statement,
good ethics is good business cannot be proved true, just as its
opposite, wrong conduct is good business cannot be proved false.
The ethical arguments do not prove anything. They seem to be
acceptable only for those people who take for granted the moral
principles. But if someone, who is not inclined to believe that good
ethics is good business, questions the principle, asking: Why should I
accept this statement?, one cannot give him empirical proofs.
Known as positivism, and sometimes referred as logical positivism because it uses logical techniques of formal analysis, this point of
view initially attracted a great deal of support because it seemed to be
38
scientific. But further reflection showed that this was not the case. For
one thing, such a limiting attitude towards what counts as worthy
eliminates most scientific theories and laws because they cannot stand
up to the tests of empirical proof demanded by positivism. Why?
Because scientific theories and laws themselves determine what
counts as empirical proof and are generally viewed as organizing
principles for the analysis of empirical data and not verifiable by the
empirical means. Worse for positivism, however, is that it could not
even prove the truth of its own assumptions. When a positivist argues
that only statements that can be empirically tested are meaningful,
the positivist is making a statement that itself cannot be empirically
tested. These and similar difficulties with the positivist approach have
pretty much caused it to be abandoned.
Though positivism may be dead as a philosophical theory, it is
still alive and well in some business approaches. Case studies can be
used to bolster the view that more and more facts, additional data, and
the piling up of information will somehow lead the analyst to the best
course of action. There is an approach to business ethics that devotes
most of its concerns to the gathering of empirical data and to
analysing the views of people in business regarding their business
practices. Even some textbooks on business ethics approach the topic
in this way. There is certainly nothing wrong with the gathering of
facts, for data collection and analysis of facts can often lead to
improved business decisions. But this approach does not capture the
important issues raised by values and really reflects a limited, positivistic view of ethics. Ethics deals with values, and values are not the
same as empirical facts.
Ethics deals with questions like these: What is the moral good?
What makes an action good or bad? How are we to judge the moral
worth of an action or a goal? These are philosophical questions, and
to answer them demands that other questions likewise be considered:
How can we justify a moral point of view? Is the intention or the consequences of an action the basis for assigning moral worth? How are
we to balance the individuals good with the overall social good? And
what do we mean by good in the first place? The positivist is right
when he claims that such questions cannot be answered by methods of
mathematics and physics, but the point is that we still have to choose
39
between dismissing all of the ethical issues, which means to put them
at the lowest level of arbitrary and purely subjective decisions de
gustibus non disputandum or there is no account for taste and
forcing our reason to clarify the meaning of the ethical terms, supporting with valid reasons our moral decisions and value judgments.
Should, must, ought: this is the language of ethics. Philosophers
describe this as the prescriptive use of language. When we use such
terms we are not describing how people do behave, but are making
claims about how they should behave. Ethics, then, is prescriptive, not
descriptive. An analogy could be made between ethics and logic,
which does not tell us how people usually think and what are the
customary rules of common-sense, but demonstrates the objective
rules of valid inferences, whether everyone follows these rules or not.
In other words, logic shows us how we should think if we were to
make no mistake, and the fact that many people think sometimes
incorrectly does not invalidate the logic principles. Just as logic
demonstrates the right way to think, ethics tells us how we should
behave if we were to do the right thing, and the fact that many of our
actions violate the moral rules does not mean that these rules are not
valid but totally arbitrary. Of course, there is only one set of logical
principles, and logic is universal, above all the cultural differences but
there are many sets of moral principles, and the ethical systems vary
from one culture to another and change as time goes by. That is why
ethics cannot stand equal to logic in its strictness and precision, but
this is not the point. The point is that ethics, like logic, is a
prescriptive, not a descriptive form of knowledge. That is why case
studies offer the matter to be analysed, but not the concepts and
principles of business ethics, which must be demonstrated by deductive reasoning.
THE IDEOLOGICAL CHALLENGES TO BUSINESS ETHICS
But even though business ethics was no more than a persuasive discourse, this would not prevent it from bearing a real social influence
on business. On the contrary. In the social life, rhetorical persuasion is
often more efficient than the scientific arguments. Therefore, even if
40
we had serious doubts about the cognitive worth of ethical statements

and arguments, this would not clear away the question if business
ethics exerts a beneficial or a negative influence on real business.
As above mentioned, there are people who believe that business
has nothing to do with ethics. But not all of them have the same point
in mind. The conservatives emphasize the word business: in their
view, any moral claim on business means bad business. The free
market economy must be let alone to function exclusively on its own
rules. If we mix up business and morality, both of them will be
disturbed. On the contrary, the left-wing thinkers emphasize the word
ethics: in their view, capitalism and especially big business are
deeply immoral in their very essence, and the only way to make social
and moral justice is the struggle against capitalism. Of course, this is a
deliberately simplified picture, based on the classics of economics.
Let us look briefly at their views on this matter.
The Classical Challenges

The challenge from the right on business ethics comes from those
who argue that the only duty of business is to make profit. In a totally
free marketplace, where people are allowed to seek their own selfinterest, the forces of competition will produce the quantity and
variety of material goods essential to civil society. This was basically
the point of view of the eighteenth-century philosopher and economist
Adam Smith (1723-1790). In one of the most famous quotations from
his book An Inquiry into the Nature and Causes of the Wealth of
Nations, Smith claims that it is not from the benevolence of the
butcher, the brewer or the baker that we expect our dinner, but from
their regard for their own self-interest. In a free market the forces of
supply and demand act as a sort of invisible hand again, to use
Smiths salient phrase that restrains individual greed and stimulates
productivity. The term invisible hand, though used only once by
Smith in his book, has come to be a kind of mantra for the unrestrained economy, a laissez-faire approach to the marketplace.
Critics of business activity on the left of the political spectrum
often see business as inherently immoral. One of the most severe anta-
41
gonists, and certainly the most influential, was Karl Marx (18181883). He based his analysis of the state of industrialized Europe on
what he experienced of the practices of industrialized countries in the
nineteenth century, and by any standards the plight of workers was
desperate. Long hours, little pay, scant or nonexistent benefits, and a
complete lack of job security characterized the situation of workers of
mid-nineteenth-century Europe. Marx set about to discover the causes
of this misery and to suggest a cure.
The classic model of economics is that there are three factors in
economic growth: land, labour, and capital. The workers have no land
or capital. All they have is their labour, and the organization of productive capacity of industrial states conspires to protect the interests
not of the workers but of the owners of the means of production that
is, the owners of the mills, factories, shipping lines, railroads, and
other productive capacities of the society. Similarly, the government
uses its power to protect and extend the control of those who own the
means of production and will even use the police or the military to
enforce the claims of the owners. Marx expresses these criticisms of
industrialized economies in many ways, but three of the claims that
are prominent in his critique are the inevitability of the class struggle,
the surplus value theory of labour, and the alienation of the workers.
We will look briefly at each of these criticisms.
1 Marx begins his analysis with the claim that the most fundamental facts about any society are the economic arrangements whereby
people produce goods and services. He called these arrangements the
economic substructure. From this economic substructure, flows the
social superstructure, which includes all the social and cultural
arrangements of that society, the educational system, art, and even
religion. For example, in feudal society the economic substructure
was based on the ownership of land, with power centered in the hands
of a few individuals culminating in the king. These economic realities
led to an ideological view that legitimized this state of affairs, and we
can see this in the art of the times, the philosophy, even the religion,
which defended the divine right of kings to rule. In industrialized
cultures, primacy shifted from the ownership of land to the ownership
of capital, the means of production. Marx calls these owners the
bourgeoisie, as opposed to those who only had their labour to sell,
42
the proletariat. The class struggle Marx envisions was between

bourgeoisie and proletariat, a struggle that he thought would become
so intense that it would inevitably result in a revolution, the outcome
of which would be the passing of the ownership of the means of
production to the workers. From the marxist standpoint, any kind of
ethics is part of the ideological superstructure, objectively determined
by the economic interests of the ruling class namely, the bourgeoisie
in the capitalist society. Therefore, business ethics could not be more
than a set of rules governing the competition between the capitalists,
but it is not at all concerned with the workers claims or rights. The
main purpose of capitalist ethics is to provide the class system with a
hypocrite moral legitimacy.
2 Also included in Marxs analysis of the proletariat was their
relation to the labour they sold, the only economic factor under their
control. When workers put in a fourteen-hour workday (not uncommon in the nineteenth century) and receive for that work a sum of
money, that monetary reward does not represent the full value of the
workers labour. There is the surplus value of labour that the owners
of the means of production appropriate for their own benefit. For
example, let us say a worker produces $20 worth of value and
receives only $8 in wages. The $12 difference represents surplus
value, which the worker gives up to the owners. For Marx, the seizure
of this surplus value by the owners is tantamount to robbery. In a
capitalist society, the owners convert this surplus value of labour into
additional wealth that they use to expand their control of capital
further in the form of larger factories, bigger production facilities, and
even more powerful industrial empires. The lower the wages paid to
workers, the greater the surplus value; and the dynamics of capitalist
economies, Marx argues, is to force workers into ever longer workdays at ever lower pay. Starting with such a premise, even the word
business ethics is not only an oxymoron, but even a cynical joke, as
long as the fortune of the owners is based on the work they steal from
the wage-labourers.
3 The economic forces that Marx describes not only lead to the
inevitable clash between bourgeoisie and proletariat but also produce
an alienated worker. For Marx, alienation includes three things:
workers are separated from the products produced by their labour; the
43
capitalist owner converts the surplus value of labour into more

capital, further alienating workers from the fruit of their labour; and
workers are alienated from each other when forced to compete for
scarce opportunities to sell their labour.
Throughout Marxs writings is the sense that he has discovered
scientific laws of social development. He sees revolution in industrial
societies as the outcome of the inevitable class struggle between
proletariat and bourgeoisie. He does not so much call people to
revolution (though he and Engels did write a revolutionary tract, The
Communist Manifesto) as announce the inevitability of capitalisms
collapse. From the vantage point of one hundred and fifty years, we
can easily diagnose Marxs many errors. The revolutions he announced did not occur in industrialized countries; rather, Marxist
regimes came into power in preindustrial societies (Russia, China,
Cuba) and were imposed on the industrialized economies of Eastern
Europe by the might of the Red Army. Neither did Marx envision the
self-correcting forces that would transform the robber baron capitalism of the nineteenth century. Social policy changes that outlawed
child labor, imposed a limited work week, set minimum wages,
prevented monopolistic business practices, and brought the power of
government into the marketplace to prevent workers being placed in
unsafe environments and the destruction of the environment were
changes in capitalistic economies that Marx could not imagine.
Neither did he catch a glimpse of employee stock ownership plans,
profit-sharing arrangements, the emergence of labour unions with their
ability to counterbalance the power of industrial empires, the ownership of productive capacity by millions of shareholders and workers
through their pension plans, or the often vast social safety net provided by governments to protect workers from the cyclical changes in
business activity, such as unemployment compensation, job retraining
programs, and government guarantees for worker pension plans.
Though most Marxist regimes around the world have collapsed,
and the Marxian critique is now seen as based on only one phase of
the development of capitalistic societies, there are still those critics
who harbor some sympathies for Marx. For these critics, profit is still
viewed as a kind of robbery, and they suspect that Marx may have
been correct in his diagnosis of the inherent incompatibility of the
44
interests of workers and owners. To be sure, business sometimes do

still behave, if given a chance, in the classic nineteenth-century way
and Romania offers a lot of dramatic examples. Relations between
labour unions and owners are sometimes warlike, and not all businesses have the interest of their employees high on their list of
corporate priorities. When businesses violate their public position by
illegally restraining trade, polluting the environment, engaging in
unfair marketing practices, misrepresenting their products, subjecting
their work force to known hazards, or otherwise behaving in a way
that violates the social contract within which they function, these
behaviors only reinforce the scepticism that many outside observers
bring to their analysis of business.
The Contemporary Challenges

Nowadays all the critics of contemporary capitalism agree that, in its
present forms, the market economy still brings forth indesirable social
effects and, consequently, business activity must be restructured in
accordance with certain ethical values. But these values are not the
same for the present right and left wings of the political spectrum. An
excellent summary is offered by M. R. Griffiths and J. R. Lucas:
Two tides of fashionable thought have flowed and ebbed. Left-wing
egalitarians believed that business was bad, profits immoral, and
everyone ought to be paid the same. For many years they occupied
the high moral ground, and had the better of right-wing realists,
who believed that business was business, the profit motive the only
one that could move a rational man, and all moral considerations
irrelevant to the proper conduct of business affairs.19
The conservative critics claim that the contemporary free market

economy is suffocated and obstructed by an excessive legislation,
prescribing extra-economic requirements, which hinder businesses
and limit the economic efficiency. The immoral effects are caused by
the fact that economy is not let alone to function by its own inherent
rules. The central value of these critics from the right is the individual
liberty, and they plead for a minimal ethic, intrinsic to business act-
45
ivity. A contemporary advocate of a completely free market after the

model of Adam Smith is Milton Friedman, a University of Chicago
professor and Nobel laureate (1976). In his well-known book, Capitalism and Freedom, Friedman claims that in a free market economy
there is one and only one social responsibility of business to use its
resources and engage in activities designed to increase its profits so
long as it stays within the rules of the game, which is to say, engages
in open and free competition, without deception or fraud.20 His view
is simple: keep government out of the marketplace. Let business do
what it will, and the forces of the marketplace will restrain the greed
of unscrupulous entrepeneurs who produce a shabby product at
exagerated prices. How does this work? Consumers will not buy a
shoddy product, so its producer will be driven out of business. If a
producer places too high a price on products brought to the marketplace, other producers will enter the market, creating an oversupply
and driving down prices. Eventually the market will produce a kind of
equilibrium where enough producers produce enough products to
satisfy consumer demands at a reasonable price.
It is hard to argue against a free market these days, given the fact
that much of the world is rushing to embrace the idea. The planned
centralized economies of Eastern Europe and the former Soviet Union
could not match the economies of the West in levels of productivity
and quality, and they all but collapsed under the weight of bureaucratic inefficiency and waste. Friedman seems to be vindicated in
another way, too: he argues that individual freedom and economic
freedom go hand in hand. One cannot have a truly free society unless
the marketplace is free as well. Friedman, however, is nothing if not
consistent. He extends his model of economic freedom broadly,
including the issuing of licenses to practice a profession (everything
from selling real estate to the practice of medicine). Should the
government require special licenses and proof of competence before
allowing people to enter a profession? Not at all, Friedman says. The
market will drive out inferior quality and reward excellence. No need
for the heavy hand of government to do these things. Friedman also
argues that business has no social responsibility, and that to use the
profits of a company for social goods is to make a decision for the
shareholders that they should make for themselves. Businesses serve
46
society best, Friedman argues, when they keep to their true mission,
wich is to make a profit. If by business ethics we mean the social
responsibilities of business, Friedman councels business to stick to
business and leave social concerns to others. The governments
proper task is to be mediator and enforcer of laws and contracts. Its
role, he says, is to provide a means whereby we can modify the rules,
mediate differences among us on the meaning of the rules, and to
enforce compliance with the rules on the part of those few who would
otherwise not play the game.21
Few people agree completely with Friedman: we want physicians
licensed in order to provide at least some assurance of competence,
we expect government to set standards of purity for our food and
drugs, and we have found through bitter experience that some activities of business, such as insider trading and stock manipulation, need
to be curtailed by law and threat of punishment. But notice that we all
agree that there must be a framework of rules of conduct if we are to
have anything resembling civil society. Notice, too, that the best way
to keep government out of the marketplace is for business people to
conform their activities to principles of good ethical behaviour. In
short, ethics can be thought of as the rules and principles rational
human beings use to live together in peace, harmony, and one hopes
prosperity.
The critics from the left stick to the idea that market economy is,
by virtue of its intrinsic mechanisms, indifferent to moral claims, if
not merely deeply immoral. Their central value is the social justice,
which, in their view, cannot be achieved letting business to do what it
will, but only by means of the economic policy of government. This
policy must subordinate business activities to the public good, and the
profits made by entrepeneurs and companies must be controlled by
the state and put into the service of the social community. But the leftwing has now a problem. According to Griffiths and Lucas, The
collapse of communism, however, has left the capitalism triumphant,
but many now are unhappy at the selfish individualism it seems to
foster, and yearn for a greater recognition of community
values. Although the efficiency of capitalism is undeniable, and,
more importantly, the security if offers against the totalitarian
inclinations of the possessors of political power, it seems abrasively
47
tough-minded about the plight of those who lose out in the

competitive market, those who are poor, disadvantaged, or
unemployed. Left-wing critics are full of compassion and sympathy,
but seem much happier spending other peoples money than making
their own. Business, though no longer wicked, is still not esteemed. It
is like refuse collection and sewage disposal, activities perhaps
necessary, but not greatly thought of.22
Despite these antagonistic views, the critics on the right, as well
as those from the left have one common target: the big corporations,
accused of having too much power. The left intellectuals believe that
the huge multinational companies are too strong in their relations with
the government, the defender of the public good while the conservatives claim that the big corporations are too strong in the marketplace, in their relationships with the independent small entrepeneurs,
modifying or even breaching the natural laws of a free market economy.
But not everybody is discontended with the capitalistic society.
The main stream in business ethics does not deny the shortcomings of
the free market economy, but has no doubt that this economic system
is by far the best practical solution ever experienced. Consequently,
the problem is not to look for another social and economic system, but
to improve the existing one. From this point of view, the economic
life does not have a special morality of its own, conflicting with some
deeper and more universal ethical values. The antrepeneurs and the
business people must not be required neither more, nor less than any
other social agent, and they must not respect specific norms and
values, different from those recognized by the ordinary citizens.
Therefore, business ethics is not a social criticism, but an application
of the general moral values and principles.
THE MAIN TOPICS OF BUSINESS ETHICS
The controversies among the critics and the defenders of capitalism
belong to a specific kind of philosophical analysis, which Sorell and
Hendry call the essentialist approach of business ethics. In their own
words, this particular way of securing a broad coverage of the moral
48
territory means to focus on morally significant characteristics that all

businesses have in common, or morally significant characteristics that
are essential to the system in which business operates. For instance, if
it is a defining characteristic of a business that it sets out to be profitable, and if there is something morally wrong with seeking profit,
then one could say something about the morality of all businesses by
commenting on the morality of its essential feature: pursuing profit.23
The essentialist approach could be pursued with the aim of showing
that business was morally suspect, as in Marxist attempts to show that
profit is the theft of something from wage-labourers. Or it could be
pursued with the aim of showing that business was morally creditable,
as when business or the market economy is represented as the
embodiment of an ideal of unforced service to ones fellow human
beings.
Marxist criticism of capitalism based on a certain theory of the
origin of profit has already been identified as essentialist, and Marxist
critiques of multinational business operations in the Third World are
both numerous and influential. More recently, free market diagnoses
and solutions of the problems of the newest developing world
Eastern Europe have become commonplace, and with them have
come moral prescriptions for ways of organizing society that are most
in tune with the market. There are undeniable attractions in gearing
business ethics to the supposed moral worth of the free market or to
the supposed immorality of making profits. And the contention
between essentialist approaches may generate a kind of insight that is
not otherwise available. No one who has heard both doctrinaire freemarketeers and doctrinaire Marxists is likely to be won over to either
side, but hearing both sides can improve ones understanding of
capitalism in ways that the detailed examination of business case
studies or national economic histories cannot.
However, the essentialist approach is not the dominant view in
business ethics. Most of the specialists in this field adopt what Sorell
and Hendry call the generalist approach. It, too, tries to get beyond a
narrow view of business, but not by latching on to moral characteristics of business in general. Instead, it keeps the variety of business
activity and the variety of moral risk to the fore. Both the essentialist
and the generalist approach try to get beyond particular businesses, or
49
sectors of business, to business in general, but the essentialist

approach works by saying what different businesses or sectors of
business have in common, while the generalist approach tries to
assemble a composite picture of business ethics in general, drawn
from moral characteristics that are peculiar to different branches of
business. Though the characteristics are drawn from different branches
of business, together they may be representative of the moral risks
facing business in general.24 Sorell and Hendry propose a sugestive
analogy. The difference between the essentialist and generalist approach is like the difference between an aerial photograph of a town
and a collection of photographs of its main landmarks taken at the
ground level. The collection of photographs correspond to generalism:
it leaves out a great deal and is openly selective, but it does show a
few important things in life-like detail. The aerial photograph, on the
other hand, while it includes everything, is unlikely to give an
impression of life on the ground.
Not questioning if we should do business to make a profit or not,
but taking as a given fact the free market economy and its rules, as
they are, the generalist approach investigates different sectors of business, with the aim of answering one fundamental question: What all
kinds of business people should do, besides maximising their profits,
so that their activities would be not only profitable the economic
imperative but also morally correct the ethical imperative? We
have tried to argue that, besides his moral duty to keep the law, every
honest, serious, respectable, and, in the long run, successful businessman must take some moral responsibilities and obligations, whose
standard is more or less higher than the minimal demands of the legal
system. What kind of responsibilities and obligations? It is not hard to
find the most important of them. Some of them are directed towards
particular classes of persons, sometimes called stakeholders, and
some attach to certain capacities or roles. C. B. Handy distinguishes
six different sorts of stakeholder, whose interests ought to be considered by those taking decisions: financiers, employees, suppliers,
customers, the environment, and society as a whole. He argues that
these six classes constitute a hexagon, within which a decision-maker
has to balance different, and sometimes conflicting, obligations.25
Further distinction may be drawn. Shareholders are in a different
50
position from other creditors. Obligations to society comprise obligations to the local community, to the nation and perhaps to the
international community and the whole of mankind. Many firms also
recognize some obligation to to their industry or trade. There are
certain obligations, as well as certain non-obligations, to competitors.
It is tempting to describe these as duties. Certainly, we could tax
a businessman to explain why he had failed to consider his shareholders, employees, locality, country or the environment, and if the
questions were brushed off with a Why should I? It is none of my
business, his reply would sound hollow. But the word duty denotes
a stringency of obligation that often does not obtain. The duties of
avoiding violence and of honesty are stringent, but many obligations
are prima facie only, and may be overridden by others. A business has
to survive, and that may require sacking not just an incompetent, but
even a hard-working, employee. Faced with the apparently insatiable
demands of morality, a businessman may feel inclined to follow
Machiavelli and relegate morality to a private world, as not being
practicable in the serious conduct of affairs. That is a mistake. We can
guard against that mistake by talking not of peremptory duties, but
grounds of obligation. I do not always have to keep redundant or
incompetent employees in work: but I have some obligation towards
them. If the survival of the firm depends on it, I must take the hard
decision: but I am not usually in that extremity, and may be able to
postpone the sacking, giving warnings in the case of incompetence,
and long notice in the case of redundancy. It is not a matter of hardand-fast rules. A businessman is not required always to be soft. But
neither need he be always ruthless as a matter of course.
Obligations to shareholders and employees, as well as obligations
of shareholders and employees, are primarily internal obligations,
arising out of shared concerns. Obligations to customers, suppliers,
creditors, and competitors are primarily external obligations, arising
from our recognition of the validity of the other persons point of
view as a necessary condition of making coherent sense of business
activity. But in each of these cases some of the other considerations
also apply, and the remainder are evidently mixed cases.26
Stating, analyzing, and explaining the internal and external moral
obligations of a businessman is an easy task as soons as someone is
51
convinced that making profit is not incompatible with an ethical conduct but, on the contrary, good ethics is good business. To argue this
general principle is the difficult task of business ethics. Perhaps the
most resisting obstacle is the general perception of business activities
as primarily if not exclusively competitive. If business means
competition, they say, then each one must take care of himself and
watch his back; no pity, no mercy, no weakness for anybody, since
everyone else is an enemy. In this view, business is not suited for the
bleeding hearts, idealists and dreamers, but a battle field in which
only the tough people can survive. Therefore, egoism seems to be the
best suited, if not the only successful strategy in business, while ethics
requires an altruistic behaviour. Consequently, business and ethics
appear to be antagonistic and incompatible. Let us see, in the next
chapter, if this perception of business as a merciless jungle-like battle
for survival is an accurate picture of business activities or not.
REFERENCES
1 Cf. R. T. De George, Business Ethics, 3rd edn, New York, Macmillan,
1990, ch. 1.
2 Cf. P. V. Lewis, Defining Business Ethics: Like Nailing Jello to the
Wall, Journal of Business Ethics, 14 / 1985, pp. 839-53.
3 Roger Crisp, A Defense of Philosophical Business Ethics, in Business
Ethics. Perspectives on the Practice of Theory, edited by Cristopher
Cowton & Roger Crisp, Oxford University Press, 1998, p. 9. For a
slightly different definition, see Laura Nash, Good Intentions Aside: A
Managers Guide to Resolving Ethical Problems, Boston, MA, Harvard
Business School Press, 1990
4 Henry Sidgwick, The Methods of Ethics, (7th edn 1907), Indianapolis /
Cambridge, Hackett Publishing Company, 1981, p. 1.
5 BusinessWeek on line, June 13, 2002 (www.businessweek.com)
6 Ibid., January 17, 2003
7 Ibid., July 8, 2002
8 Ibid., January 17, 2003
9 Ibid., July 8, 2002
10 Idem
11 Elaine Sternberg, Just Business. Business Ethics in Action, London, Little,
Brown and Co., 1994, p. 26
52
12 Idem
13 Michael Rion, The Ins and Outs of Ethics, BusinessWeek on line, May
14, 2001
14 Cf. David Stewart, Business Ethics, New York, McGraw-Hill, 1996, p. 17
15 Elaine Sternberg, Op. cit, p. 16
16 Tom Sorell and John Hendry, Business Ethics, Oxford, ButterworthHeinemann, 1994, pp. 7-8.
17 BusinessWeek on line, January 17, 2003
18 Elaine Sternberg, op. cit., p. 16
19 M. R. Griffiths and J. R. Lucas, Ethical Economics, London, MacMillan
Press Ltd., 1996, p. v
20 Milton Friedman, Capitalism and Freedom, Chicago, University of Chicago
Press, 1962, p. 133
21 Ibid., p. 25
22 Griffiths and Lucas, op. cit., pp. v-vi
23 Sorell and Hendry, op. cit., p. 8
24 Ibid., p. 9
25 Charles Handy, The Empty Raincoat, London, 1995, pp. 131-131; p. 143
26 Griffiths and Lucas, op. cit., p. 53

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CHAPTER

What for Business Ethics?

Moral philosophy and business ethics

The classical challenges

The main topics of business ethics

Business and Morality

What for Business Ethics?

Business and Morality

What for Business Ethics?

stealing, murder, assault, slander, and fraud. Ethical standards also

Business and Morality

WHY BUSINESS ETHICS SHOULD BE A NECESSARY

What for Business Ethics?

do is to try to get students to consider a broad range of stakeholders in

Business and Morality

Cenfetelli, another Canadian reader of BusinessWeek, has a point in

What for Business Ethics?

Business and Morality

What for Business Ethics?

free market economy. In the Western countries, as well as in present

Business and Morality

What for Business Ethics?

THE LEGALIST CHALLENGE TO BUSINESS ETHICS

Business and Morality

What for Business Ethics?

will always be primarily moral obligations. For example, Keep your

Business and Morality

What for Business Ethics?

shooting lions in Africa, and making a good investment. Legally, a

Business and Morality

ethical? Advertising of cigarettes is more and more restricted in the

What for Business Ethics?

untrustworthy, and dishonest manipulator of others (in the American

Business and Morality

catches the headlines or is so widely gossiped about that it is common

What for Business Ethics?

Business and Morality

be said about bribery in our society: a large number of people give

What for Business Ethics?

ethics must demonstrate that moral behaviour is a necessary condition

Business and Morality

What for Business Ethics?

Business and Morality

we had serious doubts about the cognitive worth of ethical statements

The Classical Challenges

What for Business Ethics?

Business and Morality

the proletariat. The class struggle Marx envisions was between

What for Business Ethics?

capitalist owner converts the surplus value of labour into more

Business and Morality

interests of workers and owners. To be sure, business sometimes do

The Contemporary Challenges

The conservative critics claim that the contemporary free market

What for Business Ethics?

ivity. A contemporary advocate of a completely free market after the

Business and Morality

What for Business Ethics?

tough-minded about the plight of those who lose out in the

Business and Morality

territory means to focus on morally significant characteristics that all

What for Business Ethics?