What is the point of ethics in business?
For most people in professional contexts, ethics means compliance. It is really not.
For most people in business, ethics is synonymous with compliance. It is whatever is written in that tedious document called The Code of Ethics, which nobody ever reads. Even the people who wrote it seem to have done so blindfolded. The document is full of things you can't do because they are considered "unethical." Thanks for reminding me not to take bribes, as if I needed to be told that. Occasionally, the document covers things that you should do, like having to report a gift of scotch whisky worth more than $75. However, this is a gross misconception of what ethics really is. So, what is ethics?
1. Defining the rules of the game
Ethics is a mechanism that promotes cooperation among humans. It creates willingness to stay in the group, trust each other and participate in communal affairs—for individuals, who are not genetically related. Social insects don’t need ethics because worker bees or ants are infertile. They don’t compete for their reproductive success. Humans do compete and having ethics is the only way for a human community to maintain itself in working order. Otherwise, mayhem ensues.
Hence elaborate “communal codes of ethics”, largely unwritten, that evolved to optimise in-group cohesion and out-group competition. They exist in every society on Earth and although they are not completely arbitrary, they are also not the same. That’s because groups compete, and ethics, the views on what’s good and what’s evil, is one of many things that gives groups a competitive edge.
If you’re starting a company or maybe joining a company, you can take conscious steps to influence the groups ethical code by re-defining what actions are considered good and bad. These are called moral innovations. Steve Jobs decided that he’s not going to ship junk: cheap stripped-down versions of his products because he treated his customers like he treated his family and friends, even if that meant losing a market share to other vendors. That’s one ethical innovation. You can do your own. As an outcome, your organisation will be more or less cohesive and more or less successful in the marketplace.
2. Reputation management
Nicer, more cooperative people attract more cooperative partners, so looking good is important. Thus, companies use ethics strategically, trying to position themselves as good actors: through ads and other corporate communication channels, through charitable donations, volunteer programs and socially responsible business practices.
Few years back a clothing company Patagonia run an ad with a slogan “Don’t buy this jacket”. As an environmentally conscious company (which they in fact were, from the moment of foundation), they took a stand against what they saw as mindless consumerism. The message was well received. It is probably true that a lot of these “socially conscious” ads are in itself attempts to deceive and thus are hardly ethical. But at least some of them are genuine attempts to do good.
3. Decision-making
Codes of ethics typically contain rules that describe situations we’re already familiar with, like that bottle of whiskey example above. This is prescriptive ethics; it tells you what to do in a known situation. However, ethics is also a discursive practice, a way to make decisions in unique and novel situations by exercising one’s capacity for moral reasoning.
Having a code of ethics that contains not only concrete and narrow rules of behaviour, but also broad principles, values and virtues creates foundation for ethical discussions among leaders. Core values might come useful in these discussions, and core values are part of ethical codes. Or at least they should be. Unfortunately, most corporate values are not really valued within their respective corporations and thus are completely unusable for the purposes of decision-making.
They are also poorly defined. Very few people understand what exactly is “trust”, “partnership” or “innovation”. Given that corporate documents about values are typically written by consultants who have little understanding of moral philosophy or psychology, it is no wonder they are so frequently useless. But they should not be. Here’s a piece of advice: go from values to principles. A value is one word, a principle is an if–then statement. Principles contain verbs. “Trust” is a value, “Default to trust” is a principle, because default is a verb. “Default to trust“ actually tells me what to do.
4. The meaning of work
What is the meaning of business? What is our mission, what are we trying to achieve apart from making money? Not only corporate values, but also mission, vision, purpose are questions of ethics, too. Businesses want emotional engagement from employees and customers, they want loyalty and devotion, which only come if the business has deep meaning beyond profits, if the business has soul. What is the soul of your business?
Soul is your ethical qualities, the ways you define good and bad. This is what gets judged during the Final Judgment, is it not? Traditionally, a lot of meaning in life was created by religion, but religion is in decline, especially in the weather nations. People who were soul-searching within the bounds of their religion, are now soul-searching elsewhere, including their day job, because, after all, work is a kind of a Service.
Sure, you can leave that undefined, but then you can’t reasonably expect loyalty and devotion. You can’t expect to have a cult following, or to become a Lovemark. Don’t expect your own life to have a lot of meaning either because if 1/3 of it is spend doing something that has no soul (and another 1/3 sleeping), then what is it really good for?
So, this is what ethics is all about. It’s answering that pesky, nagging question: what is life good for? Good luck finding the answer to that in your company’s code of ethics. Perhaps, just perhaps, it needs to be thoroughly re-written to live up to its bold name.
Want more? Here’s my presentation on the same subject with a lot more pictures and quotes.