Deepwater Horizon and Business Ethics
The stakes of unethical behavior for companies have just been raised: behave unethical and you might end up as the topic of blockbuster. It demonstrates how central ethics has become in our globalized world. Ethical matters are often at the center of leaders’ rhetorics in politics, economics and society. Corporations, more often than not, do not risk putting their reputation in danger because of unethical behavior.
And in doing so, these companies also lose the opportunity of making more profit. Ethics and profits go hand in hand. Corporate Social Responsibility (CSR), as studies show, has a positive impact on finance, on processes, on customer relations of companies: Return on Assets (ROA): around 13-18%, Return on Sales (ROS), around 8-17%. Moreover, people in many countries are willing to pay more for fair trade products, for example, ranging from 5 to 36 per cent, with at least 10 per cent on average. In the global economy, in the time of social networks, in a time where companies face risks to reputation as well as to judicial payments, ethics, even more than before, is a key to success.
Well organized Competition increases Ethics
I believe, competition plays a key role here in combining ethics and economics. Yes, many critics believe that competition is destructive to ethics. And certainly, it can be, if it works according to very bad rules. Competitive markets can mutate into both very inefficient and unethical social scenarios which work only to the advantage of some few instead of being in the mutual interest of all. However, competition can also work in favor of ethics, by stimulating innovation, by distributing the benefits of the market to many and not only to a few, by creating pressure on the powerful. The great philosopher Bertrand Russell once wrote:
“I do not think that ordinary human beings can be happy without competition, for competition has been ever since the origin of man, the spur to most serious activities. We should not therefore attempt to abolish competition, but only see to it that it takes forms which are not too injurious.”
But competition needs order, so that it can work towards ethical goals. And order must be developed on many levels:
Politics is the first level, but its importance is more and more limited. Especially national politics touches its limitations in many instances. For example, the current refugee crisis in Europe does not need a national, but at least a European – if not worldwide – solution. These and many other issues politics cannot tackle alone: The UN Sustainable Development Goals, passed in 2015, acknowledge that: they are but the most recent element within a chain of agendas that link the political plans of action to the sphere and the interests of business.
On the level of business, there is the old ideal of the “honest businessman”, which appears – in different forms certainly – in different cultures around the globe. It is most often expressed as a set of personal virtues. Today however, the honest businessman – or rather: the honest businessperson – should aim for structural changes in their company. They should aim for visions, for management systems, and for incentive mechanisms that allow more responsibility, sustainability and ethics to be incorporated into the corporate world. Here, concepts like “Creating Shared Value” can be good yardsticks for developing and maintaining the necessary reputation and trust for both doing business in the global world and being ethical. Recent scandals show again that no company is well advised to put its reputation at risk.
Finally, there is the level of civil society: there are the NGOs and the many other groups and organisations as well as social networks that belong here. They play a crucial role as an element of the order framework on an international level.
Business ethics cannot be conceptualized independently of its social conditions. The market’s order framework is crucial for setting incentives that can work in favour of the implementation of ethical norms. In the end, if ethics is to be viable in the globalized world, it must be compatible with long-term economic interests.
Luetge, C. (ed.) (2013): Handbook of the Philosophical Foundations of Business Ethics, 3 vols., Heidelberg/New York: Springer.
Luetge, C., Armbrüster, T., and Müller, J. (2016): Order Ethics: Bridging the Gap Between Contractarianism and Business Ethics”, Journal of Business Ethics 136 (4), 687-697.
Luetge, C.; Jauernig, J. (eds.) (2014), Business Ethics and Risk Managment, Heidelberg: Springer.
Luetge, C.; Mukerji, N. (eds.) (2016): Order Ethics: An Ethical Framework for the Social Market Economy, Heidelberg/New York: Springer.
Luetge, C.; Strosetzki, C. (eds.) (2017), Der ehrbare Kaufmann: zwischen Bescheidenheit und Risiko, Heidelberg: Springer.
Luetge, C. (2016): Responsibilities of Online Service Providers from a Business Ethics Point of View, in: Taddeo, M.; Floridi, L. (eds.), The Responsibilities of Online Service Providers, Heidelberg/New York: Springer.
Prof. Luetge is one of the first ethicists to apply the method of laboratory experiments to ethics. Among his major recent publications are: „Order Ethics or Moral Surplus: What Holds a Society Together?” (Lexington, 2015), „Experimental Ethics” (Palgrave Macmillan, 2014), the "Handbook of the Philosophical Foundations of Business Ethics" (Springer, 2013). In 2007, he was awarded a Heisenberg Fellowship by the German Research Foundation. He has commented on political and economic affairs on Bloomberg, Financial Times and numerous other media.