Is there such a thing as business ethics?

A discussion on business ethics and why so many people believe that businesses can’t be ethical.

When I was offered the opportunity to teach a course in business ethics at the University of Waterloo, the prospect was most interesting and challenging. Disconcertingly, the reaction of friends and colleagues ranged from “Good for you, that’s important; sounds like fun” to “Business ethics? Isn’t that an oxymoron?”

And that skepticism about business ethics extends down to the student level. When discussing a case study that includes a newly graduated accountant being asked to keep a second, fraudulent set of books, I ask the students what they would do in similar circumstances. Many of them admit they might go along with the fraud, at least for a while (“long enough to get a good reference”). When asked why, many rationalize that “it’s the accountant’s first job” or “maybe all business operates that way.”

By the end of the semester, I hope the students better understand that there are consequences for their actions, that they have some inkling about why good people do unethical things and that they realize they do, in fact, have choices. But I continue to be disconcerted by the widely held assumption that there is no such thing as business ethics and that all businesses operate unethically if they can get away with it.

There is no doubt that the temptations are strong. Businesses are rewarded for success, as are business leaders. At least in the short term, profits can be maximized by cutting costs, even at the risk of customer or supplier safety. Failing to disclose a product-safety issue or allowing offshore factories to operate in unsafe working conditions may pay off — and you try not to think about the human consequences, although you may worry about the public relations risk if people die. Finding ways to avoid disclosing financial risks on the balance sheet or ways to characterize illegal bribes as consulting fees are everyday occurrences. Given the cutthroat competition of global business, it’s not surprising that many people believe that everyone in the business world will (and should) seek to do anything to maximize profits (or share price or bonuses, depending on the point of view) short of breaking the law — or short of getting caught breaking the law.

At the same time, we do not believe that we are ourselves unethical. Other people might do bad things or the system might be stacked against people who try to play by the rules, but we each believe we would not knowingly cheat or cause harm. So if most of us are good, why do we believe that business can’t be ethical? Do we really think that if a few people cheat, the rest of us have no choice but to follow?

I am not (I hope) naive. But I am sure that in the long term, business in general and the professions in particular rely on the trust of their customers, their clients and the market to be successful. Unethical behaviour erodes trust because it makes people feel they are being cheated. And people who feel cheated will go elsewhere. Recent studies have attempted to quantify what fraud costs the economies of the BRIC countries in terms of lost investment. But it isn’t just the new economies that need to worry.

It’s important that we have a conversation about business ethics. The intention here is not to preach or pontificate, but it is my intention to ignite some controversy. What are the ethics of offshoring, of rising CEO salaries, of companies that make goods such as tobacco that harm people, of boards of directors that are made up entirely of white men?

Is transparency really the solution to bad behaviour? Can Wall Street ever be trusted again? I would love to hear your ideas.