When I put pen to paper — and yes, I still write this column the old-fashioned way each month — I try to inform our readers about timely issues in the world of economics. In each column, I attempt to explain how economic behaviors might impact southern Beaufort County. This month, I want to attack a broader topic that has recently captured the attention of the national media: business ethics. Specifically, I want to examine some ethical principles and moral or ethical dilemmas that present themselves in a business environment.
The current #MeToo movement has given rise to a nationwide conversation about what personal behavioral conduct is or isn’t acceptable. On a broader basis, I thought it might be interesting to look at the evolution of business ethics.
Curiously enough, the phrase “business ethics” only came into common use in the U.S. in the early 1970s. One must assume that prior to that time there were accepted norms of conduct in the workplace, as well as in the way business was conducted. In fact, Adam Smith, an icon of modern economic theory said: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public.” Ethics can then be said to regulate behavior that lies beyond governmental control.
As a byproduct of the savings and loan crisis of the 1980s, firms began to highlight their ethical standards in an attempt to distance themselves from the behaviors that essentially wiped out that segment of the financial services sector. The crisis and the attempts to leverage business ethics by competing firms gained the attention of academics and the media, much like today. There was a loud outcry to regulate and develop standards for business conduct that was met with pushback that maintained that mandated ethical standards would infringe upon the freedom of entrepreneurs and stifle growth.
More recently, the noted business author and consultant Peter Drucker was quoted as saying, “There is neither a separate ethics of business nor is one needed.” Drucker went on to say that corporate boards of directors have the duty to see that their companies “do no harm.” This is closely linked to the concept of “corporate social responsibility,” an umbrella term calling on businesses to act as responsible citizens of their communities, even at the cost of profits.
THE CURRENT #METOO MOVEMENT HAS GIVEN RISE TO A NATIONWIDE CONVERSATION ABOUT PERSONAL BEHAVIORAL CONDUCT.
Fast-forward to today’s business world, which is changing and evolving even as I write this. As a result of the financial crisis that begun in 2008, the public has once again focused on business ethics and how businesses impact the world we live in. Not surprisingly, our government has also weighed in and passed laws that seek to set boundaries for permissible business conduct. Both the Sarbane-Oxley Act of 2002 and the Dodd-Frank Act of 2010 are broadly characterized as laws attempting to regulate business conduct. The Sarbane-Oxley Act has led to increased corporate financial transparency and corporate responsibility by public companies in their financial reporting, while Dodd-Frank, which is currently being re-examined by lawmakers, has generated an unbelievable number of rules and regulations in the financial services sector but, to my way of thinking, has done little to change the underlying issues that gave birth to the financial crisis. Dodd-Frank was passed to protect U.S. taxpayers from future financial turmoil. The underlying issues I refer to are unbridled greed and a general lack of regard for doing the right thing — better described as “business ethics.”
As Drucker pointed out, business ethics are no different than human ethics. Corporations are made up of people who need to do the right thing. I believe that ethics are what you do when no one is looking. My advice? If you would be ashamed to read about yourself on the front page of The New York Times or The Wall Street Journal, then think twice about what you are about to do.
Elihu Spencer is a local amateur economist with a long business history in global finance. His life work has been centered on understanding credit cycles and their impact on local economies. The information contained in this article has been obtained from sources considered reliable but the accuracy cannot be guaranteed.
Elihu Spencer is a local amateur economist with a long business history in global finance. His life work has been centered on understanding credit cycles and their impact on local economies. The information contained in this article has been obtained from sources considered reliable but the accuracy cannot be guaranteed.
