The Daily MBA

Tips, Tools, and Techniques to be a Better Entrepreneur

Topic #3: Business Ethics

Talking Points

  • Maximizing shareholder wealth at what cost
  • Ethics knows no boundaries, be it physical or emotional
  • Just because it’s legal does not make it ethical.
  • The MBA Oath is a great start
  • The shift to maximizing stakeholder value

Discussion

Ethics is an important part of any profession. The way practitioners of the art behave says volumes about the profession. When it comes to business, there has been a serious lack of an ethical cannon. This has hurt the profession. Ethical standards form the foundation in which a profession is built on. Without a clear ethical cannon, anything goes. This “free for all” is ripe for gaming and breeds behavior that soils the profession.

Leadership Has Responsibilities

The manager is someone who people follow. The example she sets ripples throughout an organization as well as the community. Poor behavior and loose ethics creates environments where it’s acceptable to cheat, lie and steal as long as the ends justify the means. As unethical attitudes proliferate, other people, outside of management, copy these behaviors. Inevitability, the environment reaches such a toxic state that institutions start to breakdown.

The Shift to Corporate Social Responsibility

There has been some debate as to the real purpose of a business and now it should interact with society. Milton Friedman’s 1970’s article in The New York Times Magazine stated that “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.” Many people disagree with this approach since it really does not take into account the broader impact of a business or industries operations. The best example is global climate change and how the selling of fossil fuels affects the worlds climate. The impact of maximizing oil company profits has lead to global climate change that injuries society in irreversible ways. Corporate Social Responsibility (CSR) has increasing appeal to shareholders because of the social shift to being more sustainable. Some european countries (like Denmark) have a CSR law that requires companies to either state their CSR policy or list that they don’t have one. CSR has its critics. The main argument being that some corporations will have CSR programs just for Public Relations (PR) reasons. Not exactly the most ethical way to behave.

Self Regulation

The MBA Oath movement has brought the debate about business ethics back to the individual. Companies are made up of individuals and if those individuals behave ethically, then the company will behave ethically. This makes a lot of sense since a company is really not a living, breathing thing. It’s a construct created by law to hold assets and engage in actives that benefit it’s creators. The MBA Oath transcends the corporate structure and puts the responsibility for ethical behavior on the people running it. Their main ethos is to “create value responsibly and ethically.” The voluntary oath has eight points that center around the responsibility of a manager to society, company and individual workers. Individuals have to make the choice to behave ethically. No law or outside regulatory body can truly enforce ethical behavior. It has to come from the individuals sense that behaving ethically is good for society and good for business.

Things To Ponder

  1. Write a paragraph on your ethical foundation. Where do you think it came from?
  2. Research three ethical dilemmas like a whistleblower, turning in an alleged criminal or using poorly written contracts to swindle. How would you handle the three you researched? Why do you think the persons involved did what they did?
  3. Recount three times where someone has broken your trust or did something unethical to you. How did you feel? What part of the behavior gave you the most problems?
  4. Look up three companies you do business with. Do they have a corporate social responsibility policy?
  5. List three business leaders you respect and admire. What are their ethics?

Exploring Further

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