Discussion: How Could Ethics Enter Business?
- MODULE 5:
- Home
- Background
- Discussion
- Reading Questions
How Could Ethics Enter Business?
- Why Would Ethics Enter Business
- Join Discussion
How Could Ethics Enter Business? 
From the perspective of ethical concern, we can describe four types of organizations. This is one of the most important parts of business ethics - organizational ethics.
These four models are ideals - that is, there probably could never be any real businesses who perfectly represent one of these four models. Imagine these 4 business models being the 4 points of a box. All actual business are somewhere in the middle of that box, and really, probably all businesses move around that box continuously.
Each organizational model can be evaluated on five dimensions: 1) its stakeholder focus, 2) how ethics does (or does not) enter the organization, 3) what ethical value it takes most seriously, 4) its view of profits, and 5) its culture. It also might be helpful to combine these focuses into a single guiding question, as below.
Here is the basic overview:
Four Organizational Models
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1. The compliant business
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2. The unethical business
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3. The cooperative business
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4. The virtuous business
Guiding Question: How much money can we make for our shareholders while complying with the law?
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- Stakeholder Focus: The focus is on one of the stakeholders - the shareholder (equity owner/investor/stockholder). All other stakeholders are means to the end of maximizing shareholder value.
- How Ethics Enters the Organization: Through the law
- Ethical value: Only the ethical values embedded in the law, which includes laws that embody professional codes of conduct, basic rules of fair capitalism, and basic community standards
- View of Profits: All business decisions must be made with the goal of maximizing profits, with the law being the only constraint
- Culture: This becomes a 'bottom-line culture,' where employees (like all all non-shareholder stakeholders), are used as means to the end of maximizing shareholder value
Guiding Question: How much money can I make for myself?
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- Stakeholder Focus: None. All stakeholders are potential targets for exploitation. The business is happy to bend or break any laws if they think they can get away with it and it will benefit them.
- How Ethics Enters the Organization: It doesn't!
- Ethical Value: None
- View of Profits: Personal gain is the only thing that matters
- Culture: This becomes a 'back-stabbing culture' - all employees for themselves!
Guiding Question: Are we creating value for all of our primary stakeholders?
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- Stakeholder Focus: Balancing all stakeholder interests (but especially, the primary stakeholders)
- How Ethics Enters the Organization: In the way management treats its stakeholders
- Ethical Value: Trust, and any justice-based value that creates trust (e.g. treating suppliers fairly)
- View of Profits: Long-term profits are just as important as short-term profits. When you focus on nurturing stakeholder relationships, you unintentionally focus on long-term profits
- Culture: This becomes a high-trust culture. When an organization treats it's employee connections as relationships and not transactions, trust develops. Trust is a natural by-product of good relationships (in life, not just business!)
Guiding Question: What kind of organization do we want to this to be?
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- Stakeholder focus: Focus is on the culture of the business, so really, the important stakeholder is the employee. The belief is that an excellent work culture will bring out the best in its employees. The employees, in turn, will naturally treat the other stakeholders well as a habit.
- How Ethics Enters the Organization: Through the workplace/organizational culture
- Ethical Value: Virtue (internal excellence), and any justice-based value that contributes to the excellence of the work culture (e.g. respecting employees autonomy)
- View of Profits: When you have an excellent work culture, the profits take care of themselves
- Culture: In the first three organizational models, the culture is more or less a result of the focuses that the organization adopts. But this model is quite different, because you start with the culture and focus on it directly. It is, to put it bluntly, the result of emotional intelligence of the leaders (or emotional un-intelligence!)