Business Ethics: Shades of Grey

May 13, 2011
Would your business behavior pass these three ethical tests?

In a long-running show on PBS called “Ethics in America,” a moderator presented hypothetical ethical dilemmas to a panel of prominent individuals from a variety of disciplines (medicine, law, industry, politics, the military and so on). The participants assumed the roles of the players in the dilemmas, making a series of decisions that would bring the scenarios to their often surprising conclusions. Throughout each show the moderator would interject ethical twists and turns, adding layer after layer of complexity and ambiguity. And by the end of the hour, viewers were reminded that ethical decisions are rarely, if ever, black and white, but are instead steeped in myriad shades of gray.

Business, like life, is a series of decisions. Many of those decisions are made without the need for deep thought, but others require us to sort out ethics-related “shades of gray.” And like ethics in everyday life, business ethics is often steeped in apparent contradictions.

“The point of business is to make a profit, and there’s nothing wrong with that,” says Kyle Scott, lecturer and author of three books, including the just-released Federalism: From Normative Theory to Practical Relevance. He adds, however, that at face value this perfectly acceptable goal may seem to conflict with what might be termed ethical behavior.

Of course, ethical dilemmas in business are nothing new. From the appalling working conditions of the pre-OSHA era to the modern-day Enron and Bernie Madoff scandals (to name just a few), ethicists have more than enough material with which to make their points. And while economic ups and downs tend to have a transient impact on our decision-making, Scott, who teaches American politics and political theory at the University of Houston, notes that the broader ethical environment tends to remain somewhat constant.

“When times are hard, people may be willing to take bigger risks, with ethics often taking a back seat to the need to survive,” he says. “We’re more likely to bend the rules when we’re hungry, and there’s an argument to be made that doing so for such reasons is more excusable than bending the rules in the interest of greed.”

Interestingly, however, Scott also notes that better economic conditions can give rise to both ethical and non-ethical decisions and behavior. “Knowing that our families are fed and our businesses and employees are doing well can make it easier to go the extra mile to do what’s right. It can, however, also give rise to a sense of invincibility, making it easier for greed to take over.”

What has changed is the degree of transparency with which our personal and business decisions are made. Today, it is virtually impossible to make a move, ethical or not, behind closed doors. This, says Scott, may be a good thing.

Nowhere to Hide: Everyone is Watching
The advent of social media has indeed changed the playing field for those who would act in an unethical manner. Today, reports of breaches in ethics saturate the media with lightening speed, and are instantaneously passed along to everyone with a computer or cell phone.

“One of the foundations of ethical behavior is our willingness to do the right thing whether or not anyone else would ever know,” says Scott. He equates this with the development of a conscience in children, who first do what’s right to avoid the external consequences (i.e., punishment) of poor choices. Gradually, however, children internalize the concept of right and wrong, making the right choices simply because they’re the right choices.

Realistically, however, knowing that every move we make is essentially being watched by those close to us and by the public at-large serves as an effective motivator for doing the right thing.

“Today, nearly every move of every business person is scrutinized,” says Scott. “In this sense, social media and the unprecedented dissemination of information may indeed serve as the watchdog we need to curb ethical violations.”

Should You or Shouldn’t You? Weighing the Relative Ethics of your Decisions
But even in this new era of unprecedented transparency, everyone makes decisions that are less than 100% ethical. “It’s a fact of life,” Scott observes. “No one can be expected to live their lives as Socrates would suggest, doing only what is ethical, moral and just at every moment of every day.”

This reality notwithstanding, we should of course try our best to lead our lives, both business and personal, in as ethical a manner as possible. To that end, Scott puts forth three “tests” intended not as strict standards but instead as guidelines with which to weigh the relative ethical component of our decisions. These tests also can help to make us fully aware of the implications of such decisions.

The Kid Test: Is your Explanation One You Would Accept from your Children?
April 15th is fast approaching and the previous year has been a tough one. As a small business owner you’ve taken in some cash revenue that wouldn’t be terribly difficult to hide. Should you declare it or hide it?

At one time or another, nearly every taxpayer in America has struggled with this issue, often justifying the “hide it” option with the “everyone does it” rationale. After all, who hasn’t fudged or outright cheated on their taxes at one time or another? Stated differently, that’s the way the world works and this is what you need to do to compete, right?

You might also consider another popular rationale; namely, comparing the government (an abstract, faceless entity) to you and your employees (real people with real needs). If you play out that particular rationale to its end, you might also tell yourself that the government will undoubtedly waste much of your hard-earned money while you need to deal with the real-life issues of trying to keep your business going and putting food on your table and those of your employees and their families. And, in the end, what are the chances that anyone will ever know what you’ve done?

This is where the “kid test” comes into play, Scott explains. He suggests asking yourself if the “everyone else does it” rationale (comparable to “all my friends are doing it”) is one you’d accept from your children when discussing, for example, anything from drug use to cyber bullying. Furthermore, is it acceptable for your children to do something they know is wrong simply because they won’t get caught?

Parents play an enormous role in helping to shape their children into the adults they will become. Similarly, says Scott, “managers and business executives have a hand in making the world what it is, and have earned the ability to make choices for themselves and for others. We owe it to our shareholders and employees to earn a profit, but we also owe it to these individuals—and to our families and ourselves—to act ethically. As decision-makers, we need to decide which is more important at any given time.”

The Power Test: Do you Convince or Coerce?
Your accountant is skeptical about your plans to hide your cash earnings. She tells you that her involvement in such an endeavor would make her feel uncomfortable. How should you respond to her concerns?

Business decisions that involve convincing another individual of your point of view are complex, especially when they involve those who depend on you, and the job you provide, as their means of support.

When attempting to convince others of your point of view, the ethical approach is to present your argument in a persuasive manner without robbing others of their ability to decide for themselves, says Scott. “If you need to manipulate or coerce someone into going along with your plan or achieving your goal, you should rethink that plan,” he cautions.

Most people understand and accept that the workplace is not a democracy, and that subordinates must take directives from above. But Scott is careful to distinguish between telling an employee that there will be consequences if a project isn’t finished by day’s end and threatening termination if that employee fails to go along with what he or she feels is unethical. “When you strip people of their capacity to reason for themselves or act upon what they have reasoned to be the best choice, you’re denying them their dignity and are therefore acting unethically,” he explains.

The Happiness Test: Will your Decision Provide Long-Term Happiness or Just a Temporary Fix?
Whether hiding cash income or cutting corners to reduce costs, the money saved could move you one step closer to that purchase you’ve been hoping to make. But will that purchase really make you happy?

“Happiness is a tricky thing,” says Scott, who explains that we often don’t know what makes us happy, except from experience. Money is the most obvious example. We tend to think that money and the material goods it allows us to buy will bring happiness, only to find that happiness based on material possessions tends to be fleeting; as soon as we get “product A” we tend to want the next and better “product B.”

Conversely, Scott notes that, “making the ethical decision has the potential to bring happiness that is lasting rather than fleeting.” He points out that Socrates, for example, would assert that what makes us happy is also what makes us better people. “We become better, and thus happier, people when we’re guided by higher desires, such as those for justice and moderation,” he says. “For example, everyone gets hungry, but we don’t need to eat ourselves into a coma as though everyday were Thanksgiving. In this case, moderation is a higher desire, which guides the base desire of hunger.”

The Bottom Line
Few would argue that ethics in the business world is a top-down proposition; the behavior modeled by those in positions of power sets the standard for the entire company. Fortunately, there are numerous examples of employers who make highly ethical choices in the interest of their employees, customers and business, even to their own personal detriment. And those who behave ethically do ultimately reap the bottom-line benefits, says Scott, who explains that colleagues, customers and shareholders take notice of ethical business practices and reward them accordingly.

Nonetheless, it would be naïve to think that everyone can, or even should, always act as ethicists would have us act. “It would be unethical to let your business fail because you don’t want to do what’s necessary to keep it going,” says Scott. “But you shouldn’t behave badly simply because it’s easier than making the ethical decision, or because you’re too motivated or self-interested to say no to a decision you know is wrong.”

The bottom line, says Scott, is that decisions are never made in a vacuum. “Every decision we make has a ripple effect, affecting everyone involved. The key is to learn from our mistakes, and to determine how we can make better decisions the next time around.”

Laura Bruck is a Cleveland-based freelance writer who specializes in manufacturing, medical and emergency response topics.

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