A guide to acceptable and ethical behavior as defined by the organization.

With the recent boom in business ethics comes a curious irony: the more entrenched the discipline becomes in business schools, the more bewildering—and even off-putting—it appears to actual managers.

The more entrenched the discipline becomes in business schools, the more bewildering it appears to managers.

Signs of the boom are everywhere. Over 500 business-ethics courses are currently taught on American campuses; fully 90% of the nation’s business schools now provide some kind of training in the area. There are more than 25 textbooks in the field and 3 academic journals dedicated to the topic. At least 16 business-ethics research centers are now in operation, and endowed chairs in business ethics have been established at Georgetown, Virginia, Minnesota, and a number of other prominent business schools.

And yet, I suspect that the field of business ethics is largely irrelevant for most managers. It’s not that they are hostile to the idea of business ethics. Recent surveys suggest that over three-quarters of America’s major corporations are actively trying to build ethics into their organizations. Managers would welcome concrete assistance with primarily two kinds of ethical challenges: first, identifying ethical courses of action in difficult gray-area situations (the kind that Harvard Business School Lecturer Joseph L. Badaracco, Jr. has described as “not issues of right versus wrong,” but “conflicts of right versus right”); and, second, navigating those situations where the right course is clear, but real-world competitive and institutional pressures lead even well-intentioned managers astray.

The problem is that the discipline of business ethics has yet to provide much concrete help to managers in either of these areas, and even business ethicists sense it. One can’t help but notice how often articles in the field lament a lack of direction or poor fit with the real ethical problems of real managers. “Business Ethics: Where Are We Going?” asks one title. “Is There No Such Thing as Business Ethics?” wonders another. My personal favorite puts it wryly, “Business Ethics: Like Nailing Jello to a Wall.”

What is the matter with business ethics? And more important, what can be done to make it right? The texts reviewed here shed light on both questions. They point to the gulf that exists between academic business ethics and professional management and suggest that business ethicists themselves may be largely responsible for this gap.

Far too many business ethicists have occupied a rarified moral high ground, removed from the real concerns and real-world problems of the vast majority of managers. They have been too preoccupied with absolutist notions of what it means for managers to be ethical, with overly general criticisms of capitalism as an economic system, with dense and abstract theorizing, and with prescriptions that apply only remotely to managerial practice. Such trends are all the more disappointing in contrast to the success that ethicists in other professions—medicine, law, and government—have had in providing real and welcome assistance to their practitioners.

Does this mean that managers can safely dismiss the enterprise of business ethics? No. In the past year or two, a number of prominent business ethicists have been taking stock of their field from within. Much like managers trying to reengineer their companies’ business processes, they have called for fundamental changes in the way the enterprise of business ethics is conducted. And they are offering some promising new approaches of value to both academic business ethicists and professional managers.

What follows, then, is a guide to business ethics for perplexed managers: why it seems so irrelevant to their problems and how it can be made more useful in the future.

Why Should Managers Be Ethical?

To understand the gap between business ethics and the concerns of most managers, it pays to recall how managers and management academics thought about business ethics before it became a formal discipline. Indeed, much of the research and writing in contemporary business ethics can be understood as a disgruntled reaction to the way ethical issues usually were addressed at business schools—in particular, to the traditional answers to the fundamental question: Why should managers be ethical?

Starting well before World War II and culminating in the 1960s and 1970s, the dominant approach to the moral dimension of business was a perspective that came to be known as corporate social responsibility. Largely reacting to neoclassical economics, which holds that the sole responsibility of business is to maximize its immediate bottom line subject to only the most minimal constraints of the law, advocates of corporate social responsibility argued that ethical management requires more than merely following the dictates of the law or signals of the market, the two institutions that otherwise guide business behavior. Rather, ethical management is a process of anticipating both the law and the market—and for sound business reasons.

For example, when managers voluntarily undertake socially responsible actions beyond the bare legal minimum required (in environmental protection, say, or antidiscrimination policy), they tend to forestall punitive social regulation. As corporate scholar E. Merrick Dodd, Jr. stated in a 1932 Harvard Law Review article, the purpose of ethical management is “to catch any new spirit” and embody it in voluntary standards “without waiting for legal compulsion.” Or as Berkeley professor Edwin Epstein more recently and succinctly put it, “being ethical heads off the law.”

“The Cost of a Corporate Conscience,” W. Michael Hoffman (Business and Society Review Spring 1989).

“Do Good Ethics Ensure Good Profits?” a Symposium (Business and Society Review Summer 1989).

Business Ethics: The State of the Art, edited by R. Edward Freeman (New York: Oxford University Press, 1991).

Corporate Strategy and the Search for Ethics, R. Edward Freeman and Daniel R. Gilbert, Jr. (Englewood Cliffs, N.J.: Prentice Hall, 1988).

“New Directions in Corporate Social Responsibility,” Norman Bowie (Business Horizons July–August 1991).

“Corporate Social Responsibility: A Critical Approach,” R. Edward Freeman and Jeanne Liedtka (Business Horizons July–August 1991).

Ethics and Excellence: Cooperation and Integrity in Business, Robert C. Solomon (New York: Oxford University Press, 1992).

Business Ethics Quarterly (January 1991).

“Virtue and Role: Reflections on the Social Nature of Morality,” Lisa Newton (Business Ethics Quarterly July 1992).

“Shrewd Bargaining on the Moral Frontier: Toward a Theory of Morality in Practice,” J. Gregory Dees and Peter C. Cramton (Business Ethics Quarterly April 1991).

Good Intentions Aside: A Manager’s Guide to Resolving Ethical Problems, Laura L. Nash (Boston: Harvard Business School Press, 1990).

The social responsibility approach not only took an expansive view of the law but also urged managers to take an expansive view of the market. In the short term, ethical behavior may prove costly to a company’s bottom line. But according to the advocates of corporate social responsibility, ultimately the market will reward such behavior. “In general, socially responsible deliberation will not lead management to decisions different from those indicated by long-range profit considerations,” the management scholar Wilbur Katz wrote in 1950. Or in the by-now famous words of former SEC Chairman John Shad: “Ethics pays.”

Most managers were able to assimilate this response to the question “Why be ethical?” fairly easily under the heading enlightened self-interest. Indeed, by now the tenets of corporate social responsibility have become conventional wisdom in managerial circles. Organizations like the Business Roundtable publish studies with titles like “Corporate Ethics: A Prime Business Asset.” And top corporate executives regularly use the logic of enlightened self-interest, reflected in the statement by former Dow Chairman Robert W. Lundeen: “We found that if we were not running our business in the public interest, the public [would] get back at us with restrictive regulations and laws.”

It was one thing, however, for social responsibility advocates to provide a broad and appealing answer to the question: Why should managers be ethical? It was quite another to answer the obvious follow-up: How can managers determine the ethical course in any particular situation and stick to it in the face of competing pressures?

To address this question, social responsibility advocates set out in the 1970s to create a brand-new managerial discipline: business ethics. One idea was to bring experts in moral philosophy into the business schools. Training in moral philosophy would give business ethicists the analytical frameworks and conceptual tools necessary for making fine-grained ethical distinctions and discerning the appropriate course in difficult ethical situations. Once “retooled” in management, the moral philosophers could apply their sophisticated frameworks to the day-to-day moral problems that managers face.

However, things have not worked out quite the way traditional advocates of corporate social responsibility had hoped. Largely because of their background in moral philosophy, a discipline that tends to place a high value on precisely those kinds of experiences and activities where self-interest does not rule, many business ethicists found the precepts of corporate social responsibility profoundly dissatisfying. As a result, they have spent a great deal of scholarly time and energy tearing down the social responsibility position in order to erect their own. Indeed, far from taking a step closer to the real-world moral problems of management, several prominent business ethicists have chosen to reopen the fundamental question: Why should managers be ethical?

The Myopia of Moral Philosophy

Business ethicists have two basic problems with the enlightened self-interest answer to the question of why managers should be ethical. First, they disagree that ethical behavior is always in a company’s best interest, however enlightened. “There are no vanilla solutions,” writes Bentley College ethicist W. Michael Hoffman in his article, “The Cost of a Corporate Conscience.” “To behave ethically can cost dearly.” In other words, ethics and interests can and do conflict.

Second, they object that even when “doing good” is in the company’s best interest, acts motivated by such self-interest really can’t be ethical. Moral philosophy tends to value altruism, the idea that an individual should do good because it is right or will benefit others, not because the individual will benefit from it. For many business ethicists, motivation can be either altruistic or self-interested, but not both. A participant in a symposium called “Do Good Ethics Ensure Good Profits?” (recently sponsored by Business and Society Review) put it as follows: “To be ethical as a business because it may increase your profits is to do so for entirely the wrong reason. The ethical business must be ethical because it wants to be ethical.” In other words, business ethics means acting within business for nonbusiness reasons.

Morality can often mean acting within business for nonbusiness reasons.

Each of these criticisms has its kernel of truth. Clearly, ethics and interests can conflict. Take the example of a racially segregated company in the South during the 1930s. Remaining racially segregated was ethically wrong. Yet active desegregation would have flown in the face of then-prevailing public norms and most likely would have been penalized severely by market forces over both the short and long terms.

When ethics and interest do not conflict, business ethicists have a point too. Certainly, there is ethical value in doing the right thing because it is right, not just because it serves one’s interest. And in the real world of business, altruism is one of the many motivations that do shape managers’ behavior.

However, the problem is that many business ethicists have pushed both these lines of reasoning to extremes. In the case of the potential conflict between ethics and interests, the fundamental issue for a manager is not whether such conflicts sometimes (or even frequently) occur, but rather how he or she handles them when they occur. Business ethicists have offered too little help with this problem so far. Often, they advance a kind of ethical absolutism that avoids many of the difficult (and most interesting) questions.

For example, in Business Ethics: The State of the Art, a recent volume of essays by leading business ethicists, edited by R. Edward Freeman, University of Kansas ethicist Richard T. DeGeorge states, “If in some instance it turns out that what is ethical leads to a company’s demise,” then “so be it.” A participant in the Business and Society Review symposium echoes this sentiment by arguing that if ethical actions mean that a company’s profits are reduced, then “it must accept such a trade-off without regret.” Managers would be hard-pressed not to view such prescriptions as restatements of the problem, rather than as workable solutions.

In some cases, absolutism leads business ethicists to devalue such traditional business interests as making a profit or succeeding in the marketplace in favor of supposedly more important ethical demands. Take the example of one of the major works in the field, published in 1988: Corporate Strategy and the Search for Ethics, by R. Edward Freeman and Daniel R. Gilbert, Jr. According to the authors, no corporation is truly ethical unless it has banished all forms of external motivation for employees. What do Freeman and Gilbert mean by external motivation? Nothing less than traditional managerial tools such as authority, power, incentives, and leadership. Relying on such motivational tools, they argue, is just a sophisticated form of coercion and therefore “morally wrong.” In order to be ethical, companies have to make sure that employees’ work tasks are compatible with their own personal “projects,” thus making external motivation unnecessary. While acknowledging that their view is not “practical,” Freeman and Gilbert insist that it is not “optional.” If corporations “cannot be run along the lines we propose,” they argue, then “we would prefer to give up the idea of the corporation.”

Such views may resonate with some moral philosophers but are of little help to managers. Like it or not, corporations do exist, and most managers work in them. These managers still lack solutions for the basic problem of how to balance ethical demands and economic realities when they do in fact conflict.

Surely, business ethicists are not pure moral theorists who needn’t worry about the practicality of their prescriptions. Any business ethics worthy of the name should be an ethics of practice. But this means that business ethicists must get their hands dirty and seriously consider the costs that sometimes attend “doing the right thing.” They must help managers do the arduous, conceptual balancing required in difficult cases where every alternative has both moral and financial costs.

Any business ethics worthy of the name should be an ethics of practice. But this means that business ethicists must get their hands dirty.

Similarly, in situations where there is no conflict between ethics and interest, business ethicists must address what Robbin Derry has termed “the paradox of motivation” in her contribution to Business Ethics. The fact is, most people’s motives are a confusing mix of self-interest, altruism, and other influences. Instead of grappling with this complexity, however, many business ethicists have tied themselves in knots over the notion that a managerial act cannot be ethical unless it in no way serves the manager’s self-interest. This kind of sterile parsing of complex human motivation leads to the untenable position that managers are being genuinely ethical only when it costs them. Put simply, ethics has to hurt.

To grasp how strained such a position can become, consider the following argument made by Norman Bowie, an ethicist at the University of Minnesota’s Carlson School of Management, in his article “New Directions in Corporate Social Responsibility.” Bowie argues that a company adopting an inner-city elementary school is acting ethically only if other companies don’t do the same thing. Bowi’s curious logic: When only one company pours resources into a school, it’s likely that the company won’t recoup its investment. Indeed, it is other companies that almost certainly will benefit by hiring the school’s better educated graduates. The fact that “some firms will ride free” on the expenditures of the sponsoring company guarantees that those “firms who [do] give money to solve social problems are altruistic.”

If, of course, enough other companies were to start sponsoring schools, it would be possible for them all to recoup their investment by hiring from a much larger pool of better educated students. But then the spectre of self-interest would raise its head, and the purity of the sponsoring companies’ motivation would become muddied. If there were no free riders, there would be no moral companies. An odd argument, to say the least. Some business ethicists used to caution that doing wrong is profitable only when most others are doing right. Now, apparently, they are arguing that doing right is demonstrably moral only when most others are doing wrong.

Can a manager be truly good only in a bad corporation, as some scholars claim? An odd argument, to say the least.

A few business ethicists have used a similar kind of reasoning to criticize companies that try to create incentives to encourage ethical behavior on the part of their employees. If a manager works in a corporate culture that rewards her for doing good, how can her behavior be considered ethical? In his contribution to Business Ethics: The State of the Art, Daniel Gilbert suggests that when ethical behavior is encouraged by “external stimuli,” such as senior executives who “model proper behavior” or “provide others with incentives designed to induce proper behavior,” then the behavior isn’t really ethical. The strong implication is that a manager can be truly good only in a bad corporation.

If a hint of self-interest is present, in other words, then altruism—and hence ethical motivation—can no longer be assumed. Ironically, neoclassical economists, who believe that all human behavior is essentially self-interested, share this view. There is, of course, an essential difference that underlies this similarity: neoclassical economists hold that self-interested motivation is not immoral; but, for many business ethicists, mixed motives deserve and receive no moral credit.

Mistakes and Missed Opportunities

Of course, many business ethicists have tried to go beyond the question “Why be moral?” to shed light on the hard ethical questions managers face. Even when they do so, their work has tended to suffer from one or more of three typical tendencies. First, it is too general—consumed with offering fundamental proposals for overhauling the capitalist system rather than ethics strategies to assist managers who must work within that system. Second, it is too theoretical—preoccupied with philosophical abstractions and anything but “user-friendly.” And third, it is too impractical—concerned with prescriptions that, however morally respectable, run so contrary to existing managerial roles and responsibilities that they become untenable. As a result, such work in business ethics simply hasn’t “taken” in the world of practice, especially when compared with the work of ethicists in other professions such as government, medicine, or law. These professions are, of course, monopolies and hence can more easily impose ethical strictures on their practitioners. But that’s just part of the problem.

Too general.

Business, like government, is not just a profession. It is also a system in which everyone, managers and nonmanagers alike, must live. As a result, the classic moral analysts of business and government have tended to be grand philosophers like Karl Marx or Friedrich von Hayek. Rather than focusing on professional norms and behavioral modes, such thinkers have advanced systemic critiques that often question the very premises of economic and political systems such as capitalism or socialism.

Why do scholars tend toward abstract moral theory? Because business is not just a profession. It is also a system in which everyone must live.

Medicine and law provide an instructive contrast. Because these fields are more traditional professions, their greatest moral analysts have tended to be practitioners like Hippocrates or Oliver Wendell Holmes. Such thinkers accepted and worked within the basic premises and norms of their professions. And that context has allowed them and others to come up with ethical precepts of practical value to actual doctors and lawyers.

Although management increasingly has come to be viewed as a profession in this century, a heritage of systemic moral criticism tempts business ethicists to be grand philosophers. In his contribution to Business Ethics, for example, Richard DeGeorge calls for the field to address questions such as “Is capitalism ethically justifiable? If so, how? If not, why not? Is socialism ethically…preferable?”

These are important questions. But to the considerable extent that business ethicists dwell on them, what they generate is more often high-flown social philosophy than ethics advice useful to professionals. To cite one example, in a recent Business Horizons piece entitled “Corporate Social Responsibility: A Critical Approach,” R. Edward Freeman and Jeanne Liedtka urge managers to “see corporations…as places in which we can be fully unrestrained human beings, places of ‘jouissance’ rather than grey flannel, places of liberation and achievement rather than oppression and denial.”

Too theoretical.

Both medicine and management are referred to as “sciences.” Business ethicists share with medical ethicists the challenge of having to bridge a gulf between their own preoccupations with morals and the harder, more “scientific” nature of the professions they study. In contrast, because government and law address the normative values of a particular political community, they are more receptive to the language of values found in moral philosophy. Medical ethicists have gained credibility within their more scientific field by displaying an understanding of the relevant hard medical-science issues. Business ethicists, by contrast, have attempted to gain credibility within their professional field primarily by girding their work with abstract moral theory.

Norman Bowie’s contribution to Business Ethics addresses this “crisis of legitimacy” that business ethicists face in the “scientific” world of the business school. Many mainstream management scholars, he writes, see ethics as “subjective,” “soft,” and “normative,” while regarding their own fields—finance, say, or marketing or accounting—as “objective,” “hard,” and “scientific.” Bowie defends his field in part by pointing out that business ethics possesses the “complex body of knowledge” that defines a “true discipline.” And by way of offering evidence, he notes that business ethics has “at least two major theories, utilitarianism and deontology” as well as a number of “peer-refereed journals.”

To peruse recent issues of the Journal of Business Ethics is to get a strong sense of the kind of research that has resulted from this need to establish theoretical or scholarly bona fides. The point of one recent article, for example, is to argue that “utilitarian and situation ethics, not deontological or Kantian ethics…should be used in a regional code of conduct for multinational companies operating” in sub-Saharan Africa. The point of another is to “defend the view that from a purely rule-utilitarian perspective there is no sound argument favoring the immorality of hostile liquidating takeovers.”

Ethical theory can help illuminate the moral problems managers face. But no other field of professional ethics has felt the need to couch its analyses so in the language of pure moral philosophy. In his new book Ethics and Excellence: Cooperation and Integrity in Business, University of Texas philosopher Robert C. Solomon writes that “such theorizing is…utterly inaccessible to the people for whom business ethics is not merely a subject of study but is (or will be) a way of life—students, executives, and corporations.” Unfortunately, academic insecurity is causing business ethicists to direct their work away from addressing the real needs of managers and toward satisfying the perceived rigors of academic science in their field.

Too impractical.

Even when business ethicists try to be practical, however, much of what they recommend is not particularly useful to managers. To understand why, a comparison with law is helpful. In business, as in law, ethicists are increasingly asking individual practitioners to modify their commitments to their traditional principals in order to satisfy the competing interests of nonprincipals. Managers, for example, are urged to weigh the consumer’s interest in healthier products against their obligation to provide shareholders with the healthiest possible dividend. And lawyers are now being encouraged to weigh an opposing party’s right not to be viciously cross-examined against their own client’s right to the most vigorous possible defense.

Such questions are less characteristic of either government or clinical medicine. Rarely do we ask our government officials to put the claims of foreign citizens on a par with our own when they come into fundamental conflict. Nor have we felt comfortable asking a doctor to weigh the claims of another doctor’s patient against his or her own; if helping one patient comes at the cost of helping another, we expect policymakers, not individual doctors, to make the necessary tradeoffs. At present, the most central ethical issues in clinical medicine and government arise when the diverse interests of the same principals come into conflict—for example, when a patient’s interest in being told the truth conflicts with her interest in having peace of mind, or when the interest some citizens have in liberty competes with the interest others have in equality.

In one important respect, then, business ethicists and legal ethicists have an especially difficult row to hoe. Many of their current recommendations simply go against the grain of the traditional professional-principal relationship. This added difficulty doesn’t necessarily mean that business ethicists should abandon their views of right and wrong. If they seek to influence the practice of management, however, they must advance their proposals with a heightened sensitivity to practitioners’ understanding of their professional-principal responsibilities. As Kenneth Goodpaster argues in his thoughtful contribution to the premiere issue of Business Ethics Quarterly, “the challenge…is to develop an account of the moral responsibilities of management” that posits a “moral relationship between management and stakeholders” even as it protects “the uniqueness of the principal-agent relationship between management and stockholder.”

Few business ethicists have risen to this challenge. In the same issue of Business Ethics Quarterly, for example, Norman Bowie uses the uncontroversial proposition that the manager “has obligations to all corporate stakeholders,” as a starting point for a radical redefinition of the managerial mission. His conclusion: the “primary obligation” of the manager is “to provide meaningful work for…employees.” Even if one believes this assertion to be true, such a claim is so alien to the institutional world inhabited by most managers that it becomes impossible for them to act on it.

Towards a New Business Ethics?

There are signs, however, that at least some business ethicists are beginning to grapple with these shortcomings. They are questioning the direction their field has taken and urging their colleagues to move beyond their current preoccupations. Although a number of their ideas have been simmering for years, the critics’ discontent signals the beginning of what might be a more productive direction. Think of it as the new business ethics.

While differing in their specific approaches, advocates of the new business ethics can be identified by their acceptance of two fundamental principles. While they agree with their colleagues that ethics and interests can conflict, they take that observation as the starting point, not the ending point, of an ethicist’s analytical task. In the fittingly final essay of Business Ethics, Joanne B. Ciulla provides a breath of fresh air when she writes, “the really creative part of business ethics is discovering ways to do what is morally right and socially responsible without ruining your career and company.”

Second, the new perspective reflects an awareness and acceptance of the messy world of mixed motives. Accordingly, the key task for business ethicists is not to make abstract distinctions between altruism and self-interest but to participate with managers in designing new corporate structures, incentive systems, and decision-making processes that are more accommodating of the whole employee, recognizing his or her altruistic and self-interested motivations. Such structures, systems, and processes should not “be construed as the personal yielding to the corporate or the corporate giving in to the personal,” suggests Fairfield University business ethicist Lisa Newton in her article “Virtue and Role: Reflections on the Social Nature of Morality.” Instead, they should integrate the two roles. And the “name of that integration,” writes Newton, “is ethics.”

The new business ethics acknowledges and accepts the messy world of mixed motives and moral conflicts.

Within this broad area of agreement, practitioners of the new business ethics pursue a variety of interesting and useful approaches. In Ethics and Excellence, for example, Robert Solomon goes back to Aristotle’s conception of “virtue” to devise an ethics of practical value to managers. For Solomon, being virtuous does not “involve radical demands on our behavior.” Indeed, such demands are “completely foreign to Aristotle’s insistence on ‘moderation.’” According to Solomon, Aristotle used the word “moral” simply to mean “practical.”

In Aristotelian fashion, Solomon proceeds to establish a set of workable virtues for managers: for instance, “toughness.” Neither callously self-interested nor purely altruistic, virtuous toughness involves both a “willingness to do what [is] necessary” and an “insistence on doing it as humanely as possible.” Throughout his book, Solomon discusses toughness (and other morally complex managerial virtues such as courage, fairness, sensitivity, persistence, honesty, and gracefulness) in the context of real-world situations such as plant closings and contract negotiations.

In an article in Business Ethics Quarterly entitled “Shrewd Bargaining on the Moral Frontier: Toward a Theory of Morality in Practice,” J. Gregory Dees and Peter C. Cramton develop another useful approach around the idea of “mutual trust.” Dees and Cramton rightly emphasize that ethical actions don’t take place in splendid isolation; in practice, for example, ethics seems to rest on reciprocity. “It is unfair to require an individual to take a significant risk or incur a significant cost out of respect for the interests or moral rights of others,” they write, “if that individual has no reasonable grounds for trusting that the relevant others will…take the same risk or make the same sacrifice.”

This is an important departure from the absolutist perspective of much contemporary business ethics, particularly from the notion that only when others are not making comparable sacrifices can we gain moral luster from doing so. Their “mutual trust” principle allows the authors to find a moral justification for deception in certain kinds of difficult business situations, even as they urge business ethicists to help managers “find strategies for bringing practice closer to moral ideals.” And in what could well be a manifesto for the new business ethics, Dees and Cramton argue that “the most important work in business ethics” is not “the construction of arguments to appeal to moral idealists, but the creation of actionable strategies for the pragmatists.”

In a similar vein, Thomas Donaldson of Georgetown and Thomas Dunfee of Wharton have emphasized the central role of “social contracts” in devising what Donaldson calls a “minimalist” as opposed to “perfectionist” view of the moral expectations that can be placed legitimately on companies. Social contracts are the implicit moral agreements that, having evolved over time, govern actual business practice. The task of the business ethicist, Dunfee writes in Business Ethics Quarterly, is first to identify and make explicit these diverse ethical norms and then to evaluate them against certain universal, but minimalist, moral principles.

Some existing social contracts would fail such a test: racial discrimination in real-estate sales, say. But many would not. For example, the fact that using insider information is considered more acceptable in real estate than in securities transactions does not necessarily mean that real estate agents somehow don’t have their moral act together. Absent a fundamental moral principle against using nonpublic information, the ethics of doing so in any given case will depend on the “goals, beliefs, and attitudes” of the relevant business community.

This emphasis on social context finds an intriguing echo in Norman Bowie’s work. In “New Directions in Corporate Social Responsibility,” Bowie, in effect, turns around the ethical telescope. “If managers and stockholders have a duty to customers, suppliers, employees, and the local community,” he argues, then it follows that these social actors also have duties to managers and stockholders. For example, environmentalists who want companies to produce more environmentally friendly products also must work to convince consumers to pay the added cost often necessary for manufacturing such products. In other words, business ethics is not a matter of concern for managers alone. It is everyone’s responsibility.

Finally, in Good Intentions Aside: A Manager’s Guide to Resolving Ethical Problems, Boston University School of Management Professor Laura L. Nash attempts to deliver on Joanne Ciulla’s recommendation. Assuming that managers already have good intentions, the task for business ethics is to go beyond “sermonizing” in at least two ways. First, all managers face “hard issues whose solutions are not obvious,” where the “reconciliation of profit motives and ethical imperatives is an uncertain and highly tricky matter.” It is precisely the need to find those solutions and reconciliations that business ethics should address.

Second, Nash contends that business ethics should concern itself with designing and developing organizations for managers who, like all human beings, display the “normal range of ethical instincts [and] have a desire to see that these instincts are not compromised at work.” Good Intentions Aside thus zeros in on what Nash calls “the acute dilemma”—“situations where you do not know what is the right or wrong thing to do”—and the “acute rationalization”—“situations where you know what is right, but fail to do it” because of competitive or organizational pressures.

Nash develops a set of commonsense approaches to help managers deal with these two types of situations. She calls it the “covenantal ethic,” defined as “a manager’s primary obligation…to see that all parties in a commercial endeavor…prosper on the basis of created value.” As an example, Nash cites The Stride Rite Corporation, the $500 million manufacturer of children’s shoes. Unlike the products sold by many discount retailers, Stride Rite shoes are designed with a “longstanding, quasi-medical dedication to foot care.” The company is also a shrewd marketer, using appealing shoe designs and aesthetically pleasing boutiques. The result: a socially responsible company that is more profitable than traditional “bottom-line” manufacturers. Nash reports that former Stride Rite Chairman Arnold L. Hiatt “refused to be sucked into the ethics versus bottom line” conundrum. “‘We’re unashamedly out to make a profit,’” she quotes Hiatt, “‘and we’re very concerned about [children’s] health… We run the business on both concerns.’”

Moderation, pragmatism, minimalism: these are new words for business ethicists.

Moderation, pragmatism, minimalism: these are new words for business ethicists. In each of these new approaches, what is important is not so much the practical analyses offered (as the authors acknowledge, much remains to be worked out) but the commitment to converse with real managers in a language relevant to the world they inhabit and the problems they face. That is an understanding of business ethics worthy of managers’ attention.

A version of this article appeared in the May–June 1993 issue of Harvard Business Review.

What is defined as ethical behavior?

What is ethical for an organization is also?

Which factors affect ethical behaviour of employee in an Organisation?

What is ethical in an organizational sense?