Hand In Glove

Based on research by Duane Windsor 

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• Virtuous behavior doesn’t necessarily conflict with rational self-interest and stakeholder wellbeing, Windsor finds. 
• A near-universal principle of ethics is to do no harm without an acceptable moral justification, which could be a basic premise for businesses. 
• Businesses should only be willing to cause harm if it can be justified in narrow circumstances, such as in legitimate competition that might harm a rival firm.

Flames filled the air and the saltwater licked fire as thick, hot oil spread through the Gulf of Mexico. The Deepwater Horizon explosion killed 11 people and resulted in incalculable environmental damage. In the aftermath, government agencies found British Petroleum responsible for one of the worst offshore disasters in history, arguably the result of corporate cost-cutting and inadequate safety precautions.

How do tragedies like Deepwater Horizon fit with the popular idea that firms are the best police for their own industries? Is there even such a thing as a foundation for business ethics – one on which most people would agree?

Rice Business professor Duane Windsor set out to define such a foundation, arguing that virtuous behavior in the business world does not necessarily conflict with rational self-interest and stakeholder wellbeing. Such an ethical foundation could even function in fields where scarcity often predominates and players must fight for advantage, Windsor argues.

Sound business ethics can be based in a variety of philosophical and spiritual systems, according to Windsor. Many religions, including Islam and Judaism, explicitly promote business ethics. Philosopher Immanuel Kant argued that an act is not right or wrong because of its consequences, but based on whether it fulfills the supreme moral duty he labeled the Categorical Imperative.

Virtue theory takes a different approach, arguing that character, rather than duty, should underpin human actions. And utilitarianism maintains that actions are right if they lend themselves to the greater good of the majority.

What about in the workplace, though? Can a moral science for business really spring from a universal foundation? And can such a foundation be non-controversial and coexist with the assumption that managers act rationally for self-interest?

In each of the theories mentioned above, a fundamental ethical principle is to do no harm without an acceptable moral justification. A moral science of business ethics should proceed from this simple premise, which is nearly universally agreed upon, Windsor argues.

At the same time, many business decisions obviously cause harm to someone: competitors, dismissed employees, or out-negotiated suppliers. These decisions are not necessarily morally wrong, though, if they can be justified and if they are accepted or regulated by the political community. Even so, the question remains: Is economic rationality compatible, or by nature antithetical, to business ethics?

 Adam Smith advocated for separating business from morality, praising self-interest and scoffing at those who affected to act in the public interest. In Smith’s view, competition would regulate self-interest, courtesy of the market’s famous invisible hand. Modern businesspeople who oppose ethically-based business education still agree, arguing that markets are self-correcting and that voluntary self-regulation is sufficient.

The AACSB, the main accrediting group for American business schools, takes a different position, maintaining that ethics, social responsibility and sustainability should play a pivotal role in business school curricula. Nevertheless, the AACSB does not promote discussion of how uniformly to implement these standards. Instead, a technical or scientific approach – one that emphasizes economics and psychology – has shaped business school ethics in the United States.

And some in the business world actually object to the teaching of business ethics, calling the endeavor quixotic. Moral values, they argue, are subjective, and conventional business ethics tends to simply fuel self-serving rationalization. Some in this school of thought argue that the sole purpose of business is to maximize wealth for owners.

Cultural relativism also stymies ethics education for students of international business, since what’s ethical in one country may be downright criminal in another.

Windsor takes a very different view. American firms should adopt a principled basis of operation, he argues, and refuse to cause unjustified harm. Although arguments can be made about what constitutes harm and whether some forms of harm are acceptable, some types of harm should not be acceptable in any industry.

All firms, Windsor argues, should avoid practices that lead to direct harm. But harm may not always be as direct as an oil spill. The so-called Vitamin Cartels that wreaked havoc on pricing during the 1990s show how monopolization can harm consumers, while AT&T has been fined for deception and fraud in communications transmission.

None of these acts of harm, Windsor says, can be justified. Instead, he writes, American business leaders need to concern themselves with moral leadership and social responsibility. In his view, the primary job of business is to create social good. That principle means protecting the wellbeing of the organization, its employees, its customers – and the world around them.

Duane Windsor is the Lynette S. Autrey Professor of Management and Strategic Management at Jones Graduate School of Business at Rice University.

To learn more, please see: Windsor, D. (2016). “Economic Rationality and a Moral Science of Business Ethics.” Philosophy of Management, 15, 135-149.

This paper, presented at the 2015 Philosophy of Management Conference at St. Anne’s College, University of Oxford, was recognized as the best paper of the conference.