Business Ethics is often criticized on the grounds that its inclusion in the business education curriculum has not improved the ethical performance of business. This critique is grounded in two false assumptions: (1) individual and institutional ethical behavior can be measured and compared over time; and (2) ethical behavior can be taught in the classroom.
Traditional MBA subject matter is not held to either of these tests. For example, with respect to finance, students are given tools for effective financial planning, analysis, management, and oversight but it is understood that they will employ these methods with varying degrees of success or failure that are difficult, if not impossible, to measure because they have disparate motivation and ability for maximizing financial curriculum benefits for themselves and society. Why is more expected of ethics than other subjects are able to deliver? Such demands effectively undermine the academic prestige of business ethics and provide fertile ground for the media to use anecdotal descriptions of individual malfeasance to challenge its value.
Suppose instead that we look at the problem the way Aristotle or Hobbes might have done. Aristotle would ask how we can design institutions that in turn produce leaders who are able to promote moral improvement and excellence for all enterprise participants. Hobbes would argue that Aristotle’s objectives are not achievable but that well structured institutions bear the primary, if not the exclusive responsibility for the behavior of citizens, employees, or other members of those institutions. Indeed, it is not fanciful to say that there is a direct line of thought from Hobbes to the US Sentencing Guidelines Compliance system.
Business Ethicists are also prone to erroneous views. The most damaging of these is the explicit or implicit assumption that there is a right or wrong alternative and that people make intuitive choices that are, depending on whether you share Hobbes’s or Rousseau’s view of human nature, either generally right or usually wrong. Yet business ethics dilemmas are seldom resolved through a binary right/wrong choice. More often than not, these problems involve two ethically defensible alternatives – that is what makes them dilemmas. Resolving them is not a choice between right and wrong but a determination whether or not to engage in legal activity that permits exploitation of market failure situations (information asymmetries, externalities, monopoly/monopsony, free-riding) or to show moral restraint.
Two examples of these kinds of decisions are: (1) whether to withdraw a product when the company has some but not conclusive information about its danger; and (2) what kind of working conditions companies and their suppliers can allow in developing countries. The right or wrong choice for an employee or an individual company depends on the interplay of three considerations: (1) the institution’s history and sense of itself; (2) the company’s constitution, which is broadly defined as its policies, precedents and institutional wisdom. In a modern business organization with diverse enterprises and cultures this constitution is — as Justice Oliver Wendell Holmes said of the US Constitution — “made for people of fundamentally different views”; and (3) what in the Rawlsian sense, is the ideal community of which the individual would want to be a citizen and that the company aspires to be?
The most formidable task the teacher confronts in this exercise is to persuade business students that markets actually can fail because if markets always maximized the welfare of participants, to the degree that their strongest fans claim, then exploiting them would not be just an ethical choice; it would be a moral obligation. Getting students to cultivate habits of mind that enable them to recognize market failure in its many forms and to weigh the appropriate personal and company response to these problems is the primary task of the business ethics curriculum.
This process entails serious methodological rigor that is noticeably lacking in those institutions that have failed due to ethical malfeasance. Weak institutions and leaders, not the failure of the business ethics curriculum, are the explanation for these outcomes. For this reason, the proper focus of Business Ethics is institutions and the people who will someday lead them.
To achieve this end, the teacher must ask two questions about a business ethics course: (1) does the subject matter and teaching methods used enhance students’ ability to frame, analyze, and resolve ethics issues? and (2) does the curriculum improve a business leader’s capacity for creating an organization that is open to identifying problems in an open and non-retaliatory environment that has rigorous, fair, fact- based processes for resolution?