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Business Ethics in the Global Market
By Tibor R. Machan
Hoover Institution PressCopyright © 1999 Board of Trustees of the Leland Stanford Junior University
All rights reserved.
The Universal Principles of Business Ethics
Contrary to popular belief, there are universally valid principles of business ethics. These principles operate everywhere in the world, and apply to international trade as well as to local business. Although skepticism about such universal principles of business ethics is rife, it results largely from confusions about the nature of business, ethics, and business ethics. When these basic concepts are properly understood, it can be seen that the diversity and complexity of actual circumstances, and the varied tastes and values that undeniably obtain in different parts of the world, are perfectly compatible with universal principles of business ethics.
The universal principles of business ethics can be usefully incorporated into an Ethical Decision Model, which can help business people to resolve the moral problems they confront when doing business in exotic as well as in familiar locations. By making it clear that business has an ethical infrastructure, the Ethical Decision Model can also clarify the correct way to deal with disorderly jurisdictions and pariah regimes.
Sources of Skepticism
It is undoubtedly true that notions of acceptable business conduct vary widely across national boundaries. The "descent from heaven" that senior Japanese regard as their normal pension provision, and as a proper expression of traditional respect for age and experience, looks like avuncularism and a source of conflict of interest to the West. What northern Europe and North America castigate as bribery and corruption is the normal way of prioritizing and facilitating transactions in substantial parts of the Third World. And the interest that the West considers to be the normal fee for the rental of money is condemned by fundamentalist Islam as usury.
What constitutes acceptable business conduct also differs within the West. The American and British democratic preference for "one share one vote" is not shared by the French, who allocate additional votes to shares held for longer periods. As recently as 1994, insider trading continued to be legal in Germany, despite having been ruled out in the United States in the 1930s and having been illegal in Britain since the 1980s. In France, bribes are still not officially considered to be a misuse of corporate funds.
Even within a single country, acceptable business practices can vary dramatically. The norms of Wall Street are not those of Main Street. What is taken for granted in Silicon Valley may seem alien in the Rust Belt. And conduct that is encouraged in a lawyer is typically denounced in a banker or a pharmaceutical company executive. Such variations in practice often raise doubts about the possibility of universal principles of business ethics.
That skepticism has been underpinned by a variety of pernicious intellectual fashions. One is the notion that business ethics is an American invention, with no relevance outside of the United States. This is a view put forward both by non-Americans who regard business ethics as an unacceptable foreign imposition, and by Americans who fear being the bearers of an imperialist doctrine. It also gains some credence from the fact that business ethics as an industry is indeed a largely American phenomenon. A series of major scandals, followed by legislation, led to official ethics programs and the employment of "ethics officers" becoming a prudential requirement for much of American business. Reflecting that domestic concern, the majority of books and courses on business ethics are written by and for Americans. Such works use predominantly American language and examples to make their characteristically American points; those points, in turn, tend to reflect American preoccupations, including the political correctness that has corrupted much of American society in the last decade.
That the business ethics industry is American, however, does not mean that business ethics is. In order for business ethics to be American, two further conditions would have to be satisfied. First, what is offered in the name of "business ethics" by the American business ethics industry would have to represent all that is properly meant by "business ethics." In fact, quite the opposite is true: far from exhausting the subject, what is characteristically presented in the name of "business ethics" by American ethicists has little to do with either business or ethics.
Even if it did, the second condition for inferring from an American business ethics industry to business ethics' being American would still not be satisfied. Contrary to what is assumed by such an inference, the truth of an intellectual discipline is independent of the identity of those who promote and teach it. Some disciplines, of course, like some games (baseball and cricket, for example) are historically associated with particular nationalities. There are even ways of conducting both games and intellectual pursuits that are associated with notional national characteristics. But the definitive contents of both are necessarily nationality-independent.
It is noteworthy that although cross-cultural differences have always existed, their tendency to undermine belief in universal values is a relatively modern phenomenon. The Greeks were supremely confident that their values were superior to all others; the term they used to denote those who did not speak their language — "barbarian" — is now a synonym for a savage. The Romans imposed their ways on most of the known world with military force and educational zeal. The British empire was built by men who dutifully shouldered the "white man's burden" to extend the benefits of civilization to unfortunate folk who lacked them, and consequently were to be pitied.
It is only in the past fifty years or so that cultural differences have routinely been associated with cultural relativism, which is the view that no one culture is any better, or any worse, than any other. Cultural relativism has stemmed partly from a revulsion against authoritarianism. Regrettably, some of the world's most repressive regimes have been based on claims to absolute truth; tyrants have often claimed ethical as well as military superiority. Seeking to combat Fascist and Communist authoritarianism, prominent advocates of the free society have responded by attacking the notion of absolute truth. But though the objective is laudable, the strategy is misguided, and the target mistaken: protecting liberty requires limiting the use of coercive force, not denying the possibility of truth. Tolerance is perfectly compatible with absolute truth and absolute values, so long as those truths and values are not forcibly imposed.
Another source of cultural relativism was the 1960s revolt against received values of all sorts, especially within free societies. Reacting against a provincialism that ignored or undervalued different ways of life, and against military attempts to impose those values abroad, 1960s radicals indiscriminately rejected all received wisdom, particularly that which claimed any superiority for Western ways. Campaigns to achieve equal rights for racial minorities and women further attacked traditional assumptions. These trends, reinforced by permissive education, combined to undermine belief in all absolute values.
Cultural relativism has thus become very widespread, and has fostered a general unwillingness to make or accept universal pronouncements, including ones about business ethics. To some extent this reflects an appropriate diffidence. If business ethics were nothing but the assertion of a personal or a national preference, or a codification of local practice, then claims of universality would indeed be presumptuous. But however becoming such diffidence might be, it should nevertheless not extend to doubting the possibility of transnational business ethics: the fact that it does, reflects fundamental confusions about knowledge and business, ethics and business ethics.
The most fundamental confusion underlying skepticism concerning universal business ethics is philosophical skepticism about the possibility of knowledge of any sort: if the world cannot be known, neither can ethical truths about it. Such doubts have been expressed throughout the history of philosophy; the doctrine of skepticism indeed takes its name from the Greek Skeptics. In its pervasive modern form, however, generalized doubt is a legacy of Descartes. Though Descartes himself was left in no doubt, thanks to the saving grace of God, few philosophers since him have been confident of the existence of a world outside their own minds. Even when they have regained some notion of an external world, it has been too attenuated to sustain objective knowledge or, a fortiori, ethical knowledge: theories that cannot comfortably accommodate bodies have little hope of making sense of human action or of ethics.
Because they lack an adequate ontology, both of the most prominent modern ethical theories — Kantian deontology and Utilitarianism — are conspicuously unable to give satisfactory accounts of ordinary ethical judgments. If (counterfactually) being good simply means acting so as to maximize utility, or acting in a way that is universalizable, most common ethical judgments cannot be justified. Justice, for example, is reduced to mere utility or procedure; there is no room for the notions of merit and desert that are commonly and rightly associated with the term. Equally, such theories cannot accommodate the fact that context is relevant to moral judgments without reducing ethics to relativism or consequentialism.
In the absence of an appropriate philosophical foundation, ethical statements cannot be objectively ranked; there is no reason why any one statement should be preferred to any other. If ethical statements are no more than expressions of taste or preference, their truth becomes wholly relative to the person making them. The statement "Murder is wrong," made by Smith, reduces to "Smith believes murder is wrong," or "Smith dislikes murder."
Establishing the possibility of objective knowledge is an essential philosophical project, and one that can be successfully accomplished. It is, however, necessarily beyond the scope of this short paper. Fortunately, it also is one that need not be undertaken here: most business people do not suffer from philosophical skepticism. They do not doubt that their colleagues or their desks are real.
Popular skepticism about the possibility of universal business ethics is more likely to stem from a failure to distinguish three things that business people do encounter in their daily lives: (1) decisions about what actually should be done in particular circumstances, (2) the codification of circumstantial precedents and rules of thumb, and (3) the basic principles underlying ethical decisions. Although specific decisions and moral codes do vary widely, basic principles do not. Clarification about the nature of ethics and ethical principles, and about the operation of rules and the nature of business, can do much to demonstrate that variations in practice neither require nor justify relativism about business ethics.
The first thing to note is that the term "ethics" is typically used to refer to a variety of different things. Sometimes it refers to moral codes and/or the actions enjoined by them. At other times, it is used to refer to principles and/or to the study of philosophical doctrines. When dealing with received opinion, such common usages will be observed, both with respect to "ethics" and "business ethics." When strictly used, however, the term "ethics" refers properly to a subsection of philosophy, that which seeks to identify and clarify the presuppositions of human conduct having to do with good and evil. Business ethics is the application of ethics to, or in, specifically business situations and activities.
Like defending objective knowledge, establishing the foundations of ethics from first principles is necessarily outside the scope of this paper: the grounds of ethical activity, like the existence of business, must here be taken as given. Certain implications of the philosophical nature of ethics are, however, crucial to the question of universality. The most important is that, as a purely theoretical discipline, ethics has no necessary connection to any existing system of religious belief, or any specific legal framework, or any particular moral code. As a result, many commonly cited variations of actual practice are simply irrelevant to the question of whether there are universal truths of business ethics: cultural diversity, even cultural relativism, does not and cannot justify ethical relativism.
Although ethics is essentially theoretical, there is nevertheless a metaphorical sense in which the techniques and principles of ethics proper can nevertheless be helpful in dealing with real life problems. Ethics can be of practical use insofar as the clarity of thought and awareness of key concepts developed in philosophical study help to inform action. It is in this extended sense that one may properly speak of "applied ethics," or the "application" of ethics to business, or of ethics "enjoining" specific courses of action.
Business ethics is simply the application of general moral principles to specifically business situations and activities. The function of business ethics is to resolve or at least to clarify the moral issues that typically arise in business: starting from an analysis of the nature and presuppositions of business, business ethics applies general moral principles in an attempt to identify what is right.
The Nature of Principles
The universality of business ethics depends on the status of the ethical principles employed: if they are universal, then so is it. The principles of business ethics identify the ethical conditions that must obtain for business as an activity to be possible. Because they are derived from the essential nature of business, the principles apply to business whenever and wherever it is pursued. Moreover, principles are universal by their very nature. That which is not universal may be a useful rule of thumb, or a practical guideline, or a summary of common practice, but cannot be a principle. And that is because the point of principles, including moral principles, is precisely that they should identify the unvarying, essential features of diverse situations, and thus provide a unifying framework that can make sense of actual problems as they arise in all their unpredictable variety and complexity.
This accords with our ordinary understanding of morality. Ethical values are widely expected to transcend specific interests, be they national or cultural or economic; business ethics is expected to provide a basis for assessing and guiding business conduct wherever it may occur. Just as money, by providing a common standard of financial value, permits making trade-offs between items as diverse as Apple computers and apple pies, so principles, by constituting constant points of reference, make discussion and decision-making possible across widely different situations. Unlike assertions of mere preference, moral principles provide a criterion of acceptable business behavior that can be argued for, and applied consistently over a wide range of actual people, places, and times. So principles are essential: without them one might have statements of intent, or descriptions of preferred practice, but not business ethics.
Unlike preferences, principles can be evaluated and ranked. Despite the relativist claims that no one's ideas on anything are any better or worse than anyone else's, it is not the case that all views, even moral views, are equally correct. On the contrary, starting with a philosophical understanding of the nature of man and the world, it is possible to abstract out ethical principles that can be seen to be genuinely better than the alternatives at making sense of the moral universe, and that do indeed express eternal verities.
Lying, cheating, and stealing are simply wrong. So are killing and cowardice, irresponsibility, breaking promises, and betrayal. Justice and fairness, in contrast, are always right, as is honesty. Whether or not they are actually observed or enforced, these values hold good everywhere, be it in love or war, business or pleasure ... Africa or Asia. These values may of course not always be easily reconcilable, and hard choices may have to be made among them; given the complexities of moral life, it may sometimes be necessary to forgo one moral value in favor of another. But the value forgone remains a value nonetheless: the need to rank values never transforms virtues into vices ... or vice versa.
Excerpted from Business Ethics in the Global Market by Tibor R. Machan. Copyright © 1999 Board of Trustees of the Leland Stanford Junior University. Excerpted by permission of Hoover Institution Press.
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Table of Contents
Introduction: Norms of Business Abroad Tibor R. Machan,
1 The Universal Principles of Business Ethics Elaine Sternberg,
2 Human Rights and Asian Values Amartya Sen,
3 Minimal Ethical and Legal Absolutes in Foreign Trade Robert W. McGee,
4 Strangers in a Strange Land: The Mitsubishi Sexual Harassment Case Ellen Frankel Paul,