MOST business ethics problems are not really problems of business. Companies such as the ice- cream maker Ben and Jerry's and Body Shop are not, strictly defined, businesses. Company giving to charity is not just immoral, as Milton Friedman believed, it is theft.
Elaine Sternberg's book reaches these conclusions by taking a very precise definition as her baseline. A business, she says, is an organisation whose purpose is to maximise long-term owner value by selling goods and services.
For a business to be ethical, it must act in accordance with two fundamental principles - ordinary decency and distributive justice. Ordinary decency includes honesty and fairness and excludes lying, cheating, stealing, killing, coercion, physical violence and most illegality. Distributive justice requires that rewards should be in proportion to the contribution made to the business.
The central theme of the book is that what constitutes ethical conduct in business depends critically on business's purpose, as defined above. Many business wrongs are examples of what Dr Sternberg describes as 'teleopathy'. ('Telos' is the Greek word for end, or purpose.) Choosing the wrong end, misunderstanding the end in question and pursuing the right end in the wrong way are all examples.
'Owner value' is defined exclusively in financial terms. If the likes of the Roddicks or Ben and Jerry wish something other than maximum financial value from their companies they are entitled to do so - but to the extent that they pursue other ends they are simply not engaging in business.
There is a let-out clause in that ancillary purposes may be pursued, but the genuinely held belief of many companies that they are following enlightened self-interest in their corporate community involvement programmes is not explored in this book.
Keeping the focus so closely on this tightly defined purpose enables blame to be readily off- loaded. If managers in Joe Smith plc have encouraged inappropriate expectations of job security, say, exceeding their legitimate authority in doing so, a company which then takes over Joe Smith has no ethical obligation to provide that job security.
One of Dr Sternberg's most useful concepts is that of critical information. Much of the unethical conduct of large organisations, she says, occurs because people with critical information lack power, while those with power lack essential information.
Just Business is closely argued, logical and well written. And yet . . . life isn't like this. The author appears to be stuck in an outdated paradigm.
Even the references to 'businessmen' jar on the eye. Choosing such a restrictive definition of business permits a denial of responsibility and demonstrates a rejection of the holistic nature of society which may have been acceptable in the 1980s but not today.
Why should the essential purpose of business not include contributing towards a society in which business can flourish? Why do people have to keep their working lives separate from their home lives and only exercise social responsibility in an individual capacity?
It must be comforting for business people to be told that their business has no responsibility for anything other than maximising long-term owner value, using ordinary decency and distributive justice as means to that end. An ethical consultant who tells them this will have a receptive audience. The problem is that society - in other words, the customers - might take a different view.
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