After Business Ethics

Abstract

Lamenting the deplorable state of business ethics is, itself, a staple of the deplorable state of business ethics. But if, as its many critics claim, business ethics continuously fails to deliver on its promise, what could take its place in management education? After business ethics—How else can we integrate ethics into the curriculum? This article argues that an ethical grounding of business theory and corporate practice requires a critique of conventional economics, replacing the mechanistic paradigm that predominated economics over the last 200 years with a humanistic alternative.

Introduction

Business ethicists are first and foremost among the detractors of their field (Dierksmeier, 2011; Hühn, 2014; Seele, 2018, to name only a few). They happily chastise, among other failings, the predominance of empirical studies in the field’s academic journals and their all-too-often piffling theoretical contributions while at the time lamenting the loftiness and virtue-signalling of normative studies that delight in unfolding yet another, if frequently impracticable, moral point of view. Valid though such concerns about research in the field may be, in what follows I am taking issue with them only indirectly. My direct focus lies on business ethics education, as it is in its standard pedagogy that the shortcomings of the discipline of business ethics appear most marked. The remedy must be sought and found, then, also from a didactic angle, or so I shall argue. I will advance my argument by a critique of conventional business ethics instruction in the second section. Next, in the third section, I sketch a more promising alternative a ‘humanistic management education’, before concluding which changes in business schools are to be called for in the final section.

Business Ethics in the Classroom

When we observe how business ethics has long since been taught in the Anglophone world, we witness a conundrum that probably befalls all instructors in the field. On the one hand, they are beholden to lofty mission and vision statements of their schools which promise to advance a panoply of moral goods (social justice, ecological sustainability, diversity, and so forth). On the other, there is a notable reluctance by many business students to take such talk seriously, since they feel that ‘out there,’ in the sphere of ‘real’ business, it’s a ‘dog-eat-dog’-world which through relentless competition weeds out the soft-hearted (Dierksmeier, 2011; Ghoshal, 2005, Hühn, 2014). Appeals to ethics appear from this angle as feckless at best and self-defeating at worst. Most standard textbooks, if not ignoring such concerns altogether, aim to counter them with a smattering of anecdotal evidence that ‘ethics paid’ in given scenarios, or by selectively citing studies that support the notion of ‘doing well by doing good’. Unsurprisingly, such token efforts hardly suffice to allay students doubts. What is more, students’ feasibility concerns are compounded by a morality confusion for which the textbooks themselves are responsible.

After introductory chapters that pronounce the desirability of ethical behaviour in a world that increasingly comes under pressure from business practices lacking social and/or ecological sustainability, business ethics textbooks typically set out to introduce, in a few pages each, some ‘major schools’ or ‘preeminent authors’ of ethical thinking. Deontology/Kant, Teleology/Aristotle, Utilitarianism/Bentham, Contractarianism/Rawls and similar couplings tend to make the cut (Crane et al. 2019; De George, 2014; Shaw 1996). Differences between these conceptions are briefly mentioned before their respective relevance for ethical decision-making is elucidated by suitable examples. After that, since hardly any current author wants to come over as dogmatic, students are informed that, extant disagreements notwithstanding, all these theories have something going for them. Which to apply in practice, and how—such questions are typically deferred to the judgment of the future practitioner.

The paradoxical outcome is that students could rest satisfied with such scant information only if they already were seasoned in both their moral and managerial judgment. This is, of course, a counterfactual condition and one to boot that, if fulfilled, would imply students hardly needed any textbook guidance. For real students, in short, the textbooks offer too little, for the fictional students blessed with uncommon capacities of judgment, they provide too much. What results is normative confusion on part of students inclined to give ethics a try and a confirmed moral relativism on the part of those who suspected the entire idea of bringing morals to boardrooms to be baloney (Dierksmeier, 2016a).

Business ethics educators, to sum up thus far, confront two intertwined problems: a general doubt that morals matter for business practice and a more specific uncertainty which ethical direction to take when encountering moral challenges in corporate decision-making (Freeman & Sollars, 2021). Either problem can only be solved in tandem with the other, as I will show below. We must address at once the mistaken belief that business exists in one world (the ‘real’ one) whereas morals reside in quite another (ideal) sphere and the notion that whilst there are ‘economic laws’ that unequivocally direct the former, that pretty much ‘anything goes’ when it comes to the latter (Dierksmeier, 2019).

Humanistic Management Education

Another way to carve up the issue is to view morals as necessarily an integral part of the fabric of corporate life (Dierksmeier, 2016a,b). Business is, after all, but humans exchanging goods and services with humans, and no human interaction is ever free of moral expectations (whether they be met or frustrated). The usual rewards and sanctions that people bestow on those who meet or violate their moral demands must then have some role in business also. As such social benefits and costs tend to accrue in step with how desirable or undesirable a given conduct is judged to be; this allows us to reformulate the ‘feasibility problem’. The salient question is now no longer the rather abstract one whether it can pay at all to be moral in business; it transforms into the more specific and much more interesting consideration how concretely to align principles and profits as well as perpetrations and penalties (Arce & Gentile, 2015).

Excellent management is not governance-by-statistics but an attempt to facilitate and support entrepreneurship and innovation. The former may deal in averages and relish the preciseness that ex post-generalizations afford. The latter, albeit informed by the former, must address the particulars of a specific business from an ex-ante perspective—with all its attendant risks (Rönnegard, 2015). A ‘business case’ is to be found, or created, based on an unavoidably uncertain estimation of what customers (might) desire. The road to success lies where a realistic view of human wants and needs inspires the design of products and services, that is, where accurate perception meets imaginative creation. Hence, the case for ethics in business: As entrepreneurs’ perceptions of their human clients expand through the inclusion of moral preferences, the scope for potential value propositions enlarges as well (Dierksmeier, 2016b). Social, ethical and ecological entrepreneurship pursues goals and strategies that, absent its underlying moral anthropology, would seem irrational—and thus succeeds, where it does, not despite of, but because of, its moral direction (York, 2009).

Once lifted to this plane, the ‘confusion problem’ likewise becomes more tractable. Given that the costs and rewards for unethical or ethical conduct do not arise ‘ex machina’ but from and within concrete human relationships, a necessary, though not sufficient, step is to get clear on the espoused and embraced values of all parties involved. A sober analysis of stakeholders’ normative perceptions appears no longer, as within the mechanistic frame of conventional economics, as a futile exercise in wishing-well. Rather, it will be considered par for the course by managers interested in preserving their license, and optimizing the costs, to operate within society (Freeman, 2010).

Extant normative expectations, moreover, carry themselves moral weight. Valuing persons as such and each equally, the sheer fact that people at a given time and place endorse certain values signals their operative importance. To be clear, such instrumental perspectives do not and cannot establish an absolute and overriding normative prerogative for any one such value. Yet, certainly, a prima facie argument can be made for at least regarding these values carefully if one is serious about respecting those who hold them. What is more, for the instrumental perspective to be credible and thus to succeed over the long term, it must be sensitive to what its clients perceive to be the intrinsic worth of the values they proclaim. Managers need not share the normative beliefs of their stakeholders to manage their expectations appropriately. But they must understand where these expectations are coming from and what they entail. Some immersion into the worldviews that engender these values—and thus more than a smattering of moral literacy and ethical sensitivity—ought to belong to the managers’ toolkit.

A circumspect humanistic management education would, consequently, give wide berth to an exploration of the moral expectations of an increasingly globalized circle of stakeholders. An introduction into the intercultural differences and commonalities of ethics (Dierksmeier & Hoegl, 2014; Frischherz et al., 2023), a familiarity with the methods of reconciling values where they contrast in principle or conflict in practice, a training in the operationalization of values in and through corporate strategy, and, not least, their monitoring all the way down the supply chain, are just a few of the implications for a novel management education ensuing from a humanistic approach to business.

Aristotelians will be quick to add that people become, over time, what they practice which can justify moderate hopes for an ethical spill-over of such immersive practices on their practitioners. The recipients of a humanistic management education are, after all, not homines oeconomici bereft of all moral predilections but members of the species homo sapiens which comes—as child psychology, ethnology, anthropology, neurology, empirical game theory and behavioural economics confirm—preinstalled with a basic tendency for favouring fairness and decency (Colander et al., 2009). Morals need not be introjected into the human species from the outside. What they require for their fruition is rather cultivation and habitualization in practice as well as their critical reflection with a view to providing guardrails against both relativism and dogmatism (Dierksmeier, 2016a).

Clearly, this is far cry from the moot deliberations of yesteryear’s business ethics that first pondered its principles outside or apart from the world of business before then considering how to ‘apply’ them there, all the while accepting, if grudgingly, the ironclad depictions of that world proffered by mechanistic economics. For to repeat, a humanistic turn would insist and focus on the integration of values downright into corporate strategy: central, not peripheral to the value proposition of a firm; foundational for, not augmentative or merely corrective regarding its operations, and, importantly, viewed as an investment, not a cost. The optimal way to accomplish these goals differs from locality to locality, and from time to time, as well as across sectors; it will thus forever pose a thorny question worthy of the sweat of the brightest minds in each industry—and thus offer a fine value proposition for any business education that aspires to offer something truly useful which is, at once, hard to imitate or standardize (Dunne & Martin, 2006).

For the present purpose, it suffices to highlight that and how the humanistic approach which demands and legitimates our regard for the extant values of all stakeholders also limits their respective sway. The gist of the humanistic stance is as clear as it is simple. First, where and when values or the ways of their implementation are such that they undermine the equal rights of other persons, they must be curtailed. Second, where and when actions strengthen the capacity of other people to live according to their values, they should be fostered. The freedom to act in consonance with one’s own values conceptually entails a responsibility for empowering others to do the same (Dierksmeier, 2018). Individual economic freedom is to be promoted exactly to the degree that it resonates with universal freedom.

From this angle, taking on responsibility for others, be they present or future persons, is not a quantitative constraint on an agent’s economic liberty but a proper manifestation of its qualitative nature, realizing practically what legitimates theoretically this very freedom in the first place (Dierksmeier, 2018). The resultant normative conscription of economic freedom is no accidental add-on to its factuality but merely spells out what makes for its validity. As an aside for readers worry about the fate of liberalism and the open society: Absent this immanent qualification, the idea of freedom cannot successfully make a higher claim over and against other normative orientations (many of which would have few scruples in reducing or abolishing said freedom altogether in the name of what they consider good and/or holy) and must so, eventually, also fail to adjust their competing claims in ways consistent with an open society.

Conclusion

At this point, a critical reader may object that, desirable though the postulated changes in management learning might be, they might leave students in an awkward double-bind as they conflict with the conventional economics taught to business students the world over (Ferraro et al., 2005). Indeed, there lies the rub (Lin, 2014).

At first blush, however, no such problem seems to exist. Recent economic research is often strikingly in tune with the intellectual premises of a humanistic management education, just witness the list of recipients of the economist’s equivalent to the Nobel Prize over the last 30 years. On the contrary, to the extent that there is a red thread that connects the most innovative research of economists over the last decades, it is apparently one weaving together works that reframe and reform the mechanistic paradigm of nineteenth-century economics in a humanistic fashion, be it through theories of bounded rationality, embedded decision-making, the impact of culture on strategy and the intricate ways in which political or spiritual traditions influence the business–society interface. The latest economic research increasingly rescinds the reductive axioms of yesteryear, centred as they were on the fictional homo oeconomicus (Brodbeck, 2014), in favour of an enhanced regard for the much richer texture of the factual human condition in all its social and moral complexity (Komlos, 2023; McHargue Dadres et al., 2015).

What does stand in the way of a humanistic management education is rather that this research typically does not reach the classrooms in business schools (Phillips et al., 2004). Whether from an effort to simplify economics for pedagogical purposes (as benevolent critics suggest) or as only second rate economists teach economic introductory courses at business schools (as less benevolent critics aver), the outcome is as indisputable as it is dismal: Economic lore long since outcast from leading economics journals survives happily within the textbooks and classrooms that business students encounter in their first years (Giacalone & Thompson, 2006). Until management scholars overcome such superannuated economics, pedagogical contributions towards humanistic management will face headwinds. Divorced from a thoroughgoing deconstruction of mechanistic economics and its rebirth of economics as a social science of human interactions, students will view ‘values talk’ just in economic contexts as sceptical as they would regard efforts at a moralization of gravity in the physics classroom (Dierksmeier, 2011). For a humanistic management education to lead whither business ethics forever pointed but rarely lead students, a humanistic economics—as advanced today by Amartya Sen—must be taught in business schools (Altman, 2023; Lutz & Lux, 1988; McCloskey, 2011; Mirowski, 2000).

Only students well-versed in economic philosophy and the history of economic ideas can make an autonomous use of the analytical lenses—mechanistic, biologistic, humanistic and so forth—proffered by economists and thereafter select them as needed, with a clear understanding of their respective merits and demerits. It is, in other words, not simply about replacing past modes of business education exempt of morals with newer ones replete with ethical exhortations. Let us not fight doctrines with dogmas. Being serious about ethics in business should rather imply an ethical regard for the students themselves, taking seriously their moral autonomy, their capacity of independent judgment and critical thinking. In the interest of that goal, we should redesign business instruction by offering a genuinely humanistic economics for students’ theoretical orientation coupled with practice-oriented humanistic management training. Students need to know both what’s possible and how to make it real; only when the twain meet, can the lofty aspirations of business ethics succeed.