Business ethics in the 21st century

Business ethics in the 21st century

It is essential for business firms to not only become ethical but also to remain ethical (Kaptein 2015, 1). Business ethics has had a rough time about its position in business schools and the business world at large. Because of its objectivity, ethics is a murky subject that is so inherent. Moral philosophy or ethics is a philosophical branch that entails defending, systematizing, and recommendation of right and wrong forms of conduct. The branch of ethics involves matters of value. Economics, on the other hand, is the social science that involves studying of consumption, distribution, and production of goods and services focusing on how economies work as well as the behavior of economic agents and how they interact. In the world of business, ethics and economics relate to the notion that ethics must be imposed in an economic relation. In other words, economic ties should be moral.

In the book “Business ethics in the 21st century,”, Norman Bowie argues that economics is a foe and explains his argument in the third chapter “economics, friend or foe of ethics.” Bowie states that in the business institutions and firms, it is discovered that ethics are most opposed by the financial departments (Bowie 2013, 31). Concerning the financial departments of today, the claim of these departments, being the most hostile when it comes to business ethics, is valid. Financial departments involve handling of a firm’s cash and valuable assets, which can be tempting because these departments are dominated and occupied by economists who might want to economize the firm’s resources and use the remaining for personal gain. According to moral philosophy, this act is unethical. Bowie continues to explain that traditional equilibrium economists can oppose a code of ethics for several reasons. He says that the economists provide an argument that a free market capitalist system is Pareto-optimal with specific assumptions being made.

Pareto-optimal is the state where no one in the market can make the system better off without being worsened off. Bowie’s first argument for the economy as a foe to ethics is what he refers to as adherence to psychological egoism (Dunn 2009, 1). Psychological egoism is the doctrine that the behavior of everyone in the business market is motivated by the zeal to increase personal gain, everyone acting in his or her self-interest. The notion that everyone in the business is aiming at maximizing utility is made to mean the same as psychological egoism.

According to Bowie, psychological egoism has some difficulties. First, if the doctrine of psychological egoism is an actual theory, then there is no point in emphasizing on imposing ethics. This is so because the moral point of view in the case of psychological egoism will require everyone to do what is right regardless of whether they are doing it for someone else’s gain or personal gain. However, this is not possible in the psychological egoism context because everyone is just concerned about maximizing his or her utility, which can be done through moral as well as immoral acts. The theory of psychological egoism thus opposes the significance of imposing moral philosophy in a company. Secondly, psychological egoism doctrine appears not to be true since there are many different cases where people work and act for the benefit of others and not themselves (Bowie 2013, 32). Thirdly, psychological egoism doctrine is made vacuous by the point that trying or attempting to be concerned about someone else is also a form of an individual’s interests. Many people out there show concern to others genuinely and with no hidden personal gain agendas. However, what people are interested in knowing when it comes to the case of concern is, will the promises made be kept, especially when the concern is not about personal gain? In a lecture, Bowie provides an example to show that psychological egoism does not exist. He would offer one person in the audience $20, let us name this member F. The condition, however, is that member F is supposed to share the amount with another person, G, regardless of the quantity of the amount offered (Dunn 2009, 1). According to the psychological egoism theory, person G will take the share given even if it is by far too small since both people aim to gain whereas if G refuses the offer, then both of them will be worse off. In reality, if the share given to person G is small, then he or she will reject it, arguing that the share is less, thus unfair. This will leave both F and G with no money proving that economic self-interest is not always the sole motivator in cases of business economics. This is so because person G is motivated by receiving a fair share and not just any amount as long as it is a gain. Thus, adherence to classical equilibrium economics involving all the assumptions surrounding it makes economics a foe to ethics. However, classical equilibrium theory is aged, and the world of economics has moved past it.

Another foe that Bowie discusses is the assumptions of agency theory, which include the relationship between agents and shareholders. In the management departments, it is clear that there are differences between agents and their principals, especially following the agency theory, whereby agency theorists behave as if everybody is a psychological egoist. The agency theorists assume that agents should act as they please and not on their principal’s behalf, forgetting that they bare agents of that particular principal (Bowie 2013, 32). People that believe ethics are not involved in economics have to it that a CEO of a firm will act in his or her self-interest at the expense of the shareholders (Dunn 2009, 1). Bowie dislikes the pessimism of the agency theorists, whereby they assume that CEOs can act at the expense of the shareholders without recalling the fact that the executives can cheat or lie for their gain, which is often happening lately. The assumptions surrounding the agency theory, therefore, make economics a foe to ethics since these assumptions lead to actions that are against the moral philosophy.

From Bowie’s arguments, it is significant that economics and ethics go one way. His cases prove that economics is an enemy to ethics concerning some assumptions surrounding specific theories. For instance, in a firm, many departments handle different domains, and one of them is the financial department, which involves economics. As stated earlier, Bowie points out that studies show that hostility is mostly demonstrated in financial departments when moral philosophy is concerned. Bowie’s argument on the adherence to psychological egoism helps in understanding that it is not always that people act for their self-gain. Also, his argument points out that the theory of psychological egoism does not support ethical acting because, for example, in a situation where employees in the financial department are only concerned with what they gain personally and not the benefit of the firm or shareholders. These employees can do anything to ensure they achieve something, and this includes cheating and stealing. The assumptions behind the psychological theory and agency theory confirm that economics is a foe to ethics and not a friend. However, there can be a shift from an enemy to a friend where economics and ethics are concerned. People ensuring that they take a firm’s ethics as one of its many assets can make this switch. This means that employees should act according to the moral philosophy of the company. For example, in a firm, agents should work under their principals and not from their interests. Besides, the motivation to work should not only be utility maximization. This aspect will lead to the performance of unethical acts to attain self-gain. Imposing a code of ethics alone is a way to help in ensuring that ethics are adhered to in a company. However, a system of ethics alone is not enough to make a huge impact. Having an ethical climate in a firm proves to be more productive. This involves imposing ethical standards in distribution, employment, and production activities in the company. To ensure that ethics are imposed and adhered to, fairness should be fundamental. Acting and working for the right purpose and not self-gain. By challenging some assumptions that surround human nature and the economic pattern, changing economics from a foe to a friend of ethics is possible.