The Role of Ethics in Building Successful Businesses - Part Two

This paper is in two parts - part one introduces ethics and business, and explores a primary requirement for any business which aspires to be successful - trust. Part two, here, covers the contribution which ethical insights can make to the creation of trust and thereby business success.

What Can Businesses Learn From Ethics?

In part one, our conclusion was that the creation of trust is a primary business goal for all businesses and all individuals in business life. Without trust there can be no business, and the more trust there is the more business there will be to do.

The question now, then, is how we turn that two-fold commitment - to keeping commitments and not lying on the one hand, and dealing fairly and reasonably with others on the other - into a set of clear nostrums which we can follow, and that we can inculcate into our staff so that they follow them. This is where we can learn from the formal discipline of ethics.

In ethics there are a number of approaches that are generally suggested as being the most viable approaches to ethics. Three of these are as follows*.

• Consequentialism - the idea that we should be guided by the expected consequences of our actions, and that the consequences we should desire are the greatest happiness (or flourishing) of the greatest number. Therefore, it is not the rightness or the wrongness of the particular course of action that we choose per se that is most important, it is the consequences of that action. The thinkers most associated with setting out this approach originally are Jeremy Bentham and John Stuart Mill, who in the nineteenth century put forward an approach to ethics they called utilitarianism.
  
  
• Deontology - the idea that it is the act that is most important rather than the consequences of that act, and that the acts we carry out should be decided on the basis that others have as much right for regard and consideration as we have; and that our acts should reflect a commitment to giving others due regard and consideration. Immanuel Kant is the thinker most associated with setting out this approach. He came up with what he called the categorical imperative, in his terms the supreme rule to guide behaviour. In fact Kant's categorical imperative has three different formulations, arguably the same imperative from different viewpoints, two of which I will mention here:
  
  
  • act only on that maxim [rule] which you can at the same time will as a universal law". This is a version of the so-called Golden Rule - we should do to others what we would want them to do to us in the same circumstances - using the idea of a universal law (one that applies to all people at all places and all times) as a reference point for us to bear in mind when contemplating an action); and
    
    
  • so act as to treat people as an end and not as a means only" (my paraphrase). In other words, we should recognise that others are not just tools for the achievement of our own goals, but individuals of worth in their own right who have the right to equal consideration as ourselves.
    
    
• Virtue ethics - the idea that it is not the acts, or the consequences of those acts, that are of primary concern, but the inculcation and fostering of virtues. The virtues include such things as truth-telling, generosity, integrity, and so on. The suggestion is that, by focusing on building up our virtuous tendencies we will naturally act in a virtuous manner and our actions will naturally tend to have good consequences. This theory is not so much about helping us decide what we should do, but rather, once we know what to do, how do we ensure that we do it.In other words, we often know we should do such and such, but self-interest gets in the way and we do something else. Virtue ethics takes the view that by practicing being virtuous, over time we become virtuous, so the emphasis is on getting into the habit of acting in a virtuous manner so that eventually we act virtuously without thinking about it.
  
  
  
  

The Deontological Approach to Ethics for Business Success

All three approaches have their place, but for present purposes I want to focus on the latter two. This is because, with consequentialism, there are occasions when you can say that it is right to break your word or to treat certain people shabbily if the greater good is thereby promoted. In a situation where, as a business, you want to build a reputation of trust, you will not be helped in achieving this if the approach you adopt permits actions which will reduce trust (which lying or treating people shabbily clearly will).

There may be times of course, when lying or treating certain people shabbily is the course you decide to take in the best interests of the business. That may be so, but the temptation will be to have recourse to these sorts of actions more often than is optimal if you adopt a theory of ethics that permits those sort of actions.

Therefore, it is suggested that businesses, as a matter of business policy and public commitment, adopt a deontological approach to ethics (even if there are times when this approach is a step too far for the business). The two stances set out by Kant - treat others as you would like to be treated yourself, and treat others as ends rather than just as means - are the stances most likely to lead to the greatest fostering of trust and the greatest reputation for trustworthiness, integrity and fair dealing. These will, as a consequence, lead to the greatest long-term success.

Building these into your dealings with colleagues, and employees generally, as well as in relations with other companies, will do the most to create trust.

It is a strange thing that, when in a position of power, we so often demand that others meet these standards but we do not see the need to meet them ourselves. For example, we expect people reporting to us to treat us as we like to be treated, but we often do not feel we need to do it in return. And we often are happy to tell of occasions when we deceived others and got away with it, without seeing that this undermines our reputation for trustworthiness and will also tip off others that they should not feel too particular about treating us with integrity in turn.

In summary, trustworthiness, as fostered by the above nostrums, has all sorts of advantages for businesses. It reduces transaction costs inside the company and between companies by reducing the amount of time and effort all parties feel they need to put in to doing our best to ensure they are dealt with fairly. It encourages people and companies to enter into transactions they would otherwise steer clear of, enabling the business to attract more business, and enabling the recruitment of staff the business otherwise would not be able to recruit.

Loss of trustworthiness, conversely, has all sorts of corrosive effects, as witnessed by the economic fortunes of those countries where corruption is rife and where the legal rights of individuals and companies are not always respected or enforceable in law. Within companies, if employees know that all staff are treated equally and fairly, they will put their efforts into meeting company goals; whereas, in companies where it is believed by staff that they are not treated equally or fairly, and where success is seen to come from deception or lying (or even where deception and lying, when found out, is not thought to be a serious problem), staff will put their efforts into finding ways to advance their interests which do not align with company goals.

The virtue ethics approach, while not in itself useful for deciding what to do, is useful in that it puts forward the view that good habits should be the focus of effort. By inculcating good habits (i.e. habits derived from practicing the two versions of Kant's categorical imperative) in a company's ethos, and ensuring that good habits are seen as contributing to success, the chances of building a reputation for trustworthiness and integrity on a long-term basis are much higher.

Metamarketing can help you and your company create and implement policies designed to increase trust and thereby contribute to business success, based on Kant's categorical imperative and on adopting the application of the imperative into all aspects of business life.

* One other approach, which I have not discussed in this paper, is the phenomenological approach, and particularly the approach taken by Emmanuel Levinas which, in a nutshell, is to take the Other (considered as another subject with equivalent status to ourselves, and their interests) as primary even over my own subjectivity and interests).

While I would put Levinas's ethics high on own my list of ethical approaches and, ultimately, may favour it over others, it does not lend itself easily to business practice, both because it does not allow neat encapsulation in short, easily understandable phrases (a virtue of Kant's ethics) and also because it sets the bar unrealistically high in terms of ethical practice.

Having said the above, the method by which I have arrived at proposing Kant's ethical nostrums is phenomenological more than Kantian. Kant would not have been happy to see his ethics used to further business success rather than, as he expected, instilling in us our duty to do right regardless of outcomes.

© Martin Ludlow 2009

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