Clarity About Business Ethics

by | Dec 13, 2020 | Business

Altruism is not the only moral code; there is an alternative that facilitates long-term profit maximization.

When a CEO was given my book, How to Be Profitable and Moral, he exclaimed: “But I don’t want to be moral!” His response reflects a common view among businesspeople that being moral means altruistic self-sacrifice for the sake of others and leads to losses, not profits.

The vast majority of businesspeople are conflicted about ethics when (and if) they think about it. They recognize the moral code that dominates the culture: altruism, which guides putting others’ interests always first. But like the CEO in my story, they cannot reconcile altruistic self-sacrifice with pursuing business success and therefore often don’t think about ethics in everyday decision making.

Yet, many still believe that it’s good for business to act ethically but they haven’t identified their moral principles explicitly. Some may act altruistically on occasion (perhaps out of guilt for making profits), and many value principles such as honesty. This group lacks consistent moral principles and cannot therefore identify ethical issues in business clearly and deal with them effectively.

A minority of businesspeople (perhaps including the CEO above), reject ethics outright as impractical and attempts to maximize profits mostly without the guidance of moral principles. Some may adhere to honesty when convenient, but others will exploit others opportunistically when they perceive a good chance of getting away with it. They rationalize: “Business is ruthless; if I don’t do this, my competitors will.” This group isn’t large; if it were, the economy would collapse as there would be too many exploiters and not enough producers.

And yet, being confused about ethics and lacking consistent moral principles prevents these two groups of businesspeople from being as successful as they could be. Here is my argument as to why and how they should be clear about ethics:

Altruism is not the only moral code; there is an alternative that facilitates long-term profit maximization. While “altruistic” is widely held as a synonym of “moral,” there is an alternative that doesn’t condemn but advocates the pursuit of self-interest, including success in business. That moral code is rational egoism. Instead of lose-win outcomes of altruism, rational egoism provides consistent moral principles that lead to win-win outcomes through mutually beneficial trade (and no sacrifice of anyone).

My business ethics students, including executives, are often surprised to learn about rational egoism, as it is not widely taught even in business programs. Yet, it resonates among students for its promotion of business success. They often declare at the end of the course: “We are all rational egoists now.”

How to achieve clarity about ethics? The first step is to reflect on our moral principles and their compatibility with success in business. If we find that the principles and profit-making conflict, we must either discard those principles or get out of business.

The discarded moral principles need to be replaced with ones that promote profit-making. But why not just give up moral principles altogether? Because we are fallible and have no automatic knowledge about how to achieve our goals on a sustained basis. This is why the minority of businesspeople that exploit others given the chance and the majority that applies contradictory principles (some self-sacrifice, some self-interest) cannot sustain profitability. We need principles, moral principles in particular, as guidance. Rational egoism provides the moral principles to guide long-term profit-making, which makes possible all the values we enjoy today, from food to vaccines.

How to learn about rational egoism? This code was developed by Ayn Rand, building on Aristotle, so reading both her novels (especially Atlas Shrugged) and non-fiction writings is a good place to start. Leonard Peikoff’s Objectivism: The Philosophy of Ayn Rand adds further clarity, as does Tara Smith’s Ayn Rand’s Normative Ethics: The Virtuous Egoist. My book presents a direct application of rational egoist principles to business and refers to the books recommended here.

To reap the full benefits of the principles of rational egoism, it is not enough just to read about them. They (such as rationality, productiveness, and justice) give explicit advice on how to act in the daily business of creating goods and services and trading them for profit. Therefore, the moral principles must be understood and applied, so that they develop into second nature and become our characteristic way of acting.

For example, I offer one of my business heroes, John Allison, the retired CEO of the Fortune 500 bank BB&T. He represents a third, small group of businesspeople that have adopted the moral code of rational egoism, applies it as consistently as possible and has the long-term successful performance to show for it. Fortunately, that group is open and its success possible to everyone, restricted only by one’s willingness to learn.

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Jaana Woiceshyn teaches business ethics and competitive strategy at the Haskayne School of Business, University of Calgary, Canada. How to Be Profitable and Moral” is her first solo-authored book. Visit her website at profitableandmoral.com.

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