"There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits".
Whether or not you agree with this statement, it is true that the business world's attitude to ethics has changed a great deal since Milton Friedman wrote it in 1970.
The ethics claimed by businesses generally align with the norms of society itself, which (arguably) are becoming more civilised and ethical over time. Just a generation ago, it was considered acceptable and normal to mistreat gay people (although of course plenty of right-minded people didn't think that, even then). Now, most people would view that as unethical, and laws have been passed to ensure business reflects this change. Also, in the wake of a series of corporate scandals, regulation has been tightened in other areas to try and protect consumers, economies and (ahem) the environment.
And then of course there's the internet. In this age of instant information, when news of poor corporate behaviour spreads like wildfire and public shaming is only a post away, most companies have to at least be seen to behave ethically in order to avoid a consumer or political backlash.
We are all now familiar with ethics policies and terms like CSR. When asked, most spokespeople will talk the talk about their companies' ethical credentials. But have things really changed that much?
Is appearing to be ethical good enough?
Does it matter if apparently-ethical behaviour is just another technique by which to maximise profits? Can we not view the motivations for 'ethical business' as the corporate version of psychological egoism? Unless you are interested in philosophy, you probably don’t dwell on the motivation behind apparently altruistic personal acts and, likewise, if a company acts ethically then should you care if its real reason is to make more money?
I agree with this up to a point – the point at which these companies do something unethical, which I believe is inevitable in the long run. It is very difficult for a company to consistently behave in an ethical way if its motivation to do so is purely financial. The obvious example of this is when a company's ethical policy is merely a marketing tool that results in a disconnection between the company's written code of ethics and its real life practices. For example, Enron Corporation had a comprehensive ethics policy yet it filed for bankruptcy in 2001 as a result of accounting scandals.
Of these two supermarkets, which do you view as being more ethical: Tesco or Waitrose? Have a quick look at what each says about how it treats its suppliers on these pages: John Lewis Partnership Sourcing and Ethical trading at Tesco.
Both sound pretty good huh? To try to assess how these policies match the reality on the ground I took the unscientific, but easy, route of typing "criticism of Waitrose" and then "criticism of Tesco" into Google. The results were interesting: the top results for "criticism of Waitrose" were an article about how much David Cameron likes it (because the customers are nicer, apparently) and an article about how sustainable and responsible it is – a model for our national supermarkets. You can do your own research on Tesco, although I will mention that the subject "criticism of Tesco" has its own page on Wikipedia, which was the top result in my search.
Although Waitrose appears to be doing a better job than some (even leaving out its decision to partner with Shell) I’m not sure any supermarket chain demonstrates complete integrity throughout its practices. All are involved in some degree in greenwashing activities such as polluting chemical agriculture, unsustainable fishing, inhumane farming and excessive packaging.
Why aren’t all companies ethical?
It seems to me that in practice very few companies, especially large corporations, can be said to behave ethically at all times. Yet I also believe that most people would answer “yes” to the question: “Do you think all companies should behave ethically?” So why don’t they?
In the online book Power and Accountability Robert A.G. Monks describes his thoughts on seeing a river in Maine that’s been polluted by industrial discharge from an unnamed company: “Who wants this to happen? Not the owners of the company, the shareholders. Not the managers or employees, who want to live in a healthy environment. Not the board of directors, not the community, not the government. I could not think of anyone connected with the company emitting the effluent who wanted the result I saw. This was an unintended consequence of the corporate structure”.
Legal Scholar and Professor of Law at the University of British Columbia Joel Bakan describes the modern corporate entity as: “an institutional psychopath”. In the documentary The Corporation, Bakan claims that corporations, when considered as natural living persons, exhibit the traits of antisocial personality disorder or psychopathy (see the Wikipedia article Criticisms of corporations for more on this).
How can companies ensure they behave ethically?
If problems start when a company takes on a life of its own, how can a company behave as a collection of real people instead of a faceless machine that values profit above all else (including ethics)?
It could start by enabling employees to think for themselves, rather than being told what to do or having to constantly refer to policies. And it could motivate them in ways other than just financial to avoid short-termism and other unhealthy behaviour that is often caused by a profits-only focus. This last point is reiterated by research by John White in which he found that “Companies that are doing unethical business are typically focused on the short term gains. Companies that have figured out ways to be both ethical and profitable have mastered a sustainable business model”.
If this sounds familiar then you’ve probably read the same leadership books as I have (and of course Daniel Pink's Drive). I am describing some of the characteristics we are told a company will need in the 21st century to survive: distributed authority, intrinsic values and a culture that favours adaptability over top-down strategy.
Is it pure chance that this latest business thinking is aligned with ethical principles? I would say not – it’s simply recognition that the best results come from properly motivated employees operating in an environment that maximises the intellectual creativity and involvement of their whole team. And decisions made by real people, as opposed to a corporate entity, are much more likely to be ethical.
By Martin Wilson, co-founder of Bright Interactive, an agile web and software development company based in Brighton, UK.
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