The economist Milton Friedman argues
that “there is one and only one social responsibility of business - to use its
resources and engage in activities designed to increase its profits so long as
it stays within the rules of the game, which is to say, engages in open and
free competition without deception or fraud”(1).
These “rules of the game” are to be
understood as a particular society's laws. In a nutshell, Friedman is arguing
that business people are ethical if and only if they struggle to increase their
profits and that they are entitled as part of that struggle to do whatever the
law permits.
As long as a person's profit-maximizing
actions conform to the law and professional rules, he is, in Friedman's view, acting
ethically.
Ethics is not
rules.
The activities of businesses under the
Nazi regime should be sufficient to show that morality (2) and law are
distinct. Helping to build extermination camps was legal and good for profits
but it was not ethical. Even in a more just society, laws often state only a minimum
requirement, usually what is enforceable in practice, rather than what is
right.
Yet Friedman’s answer is the most common
one in business today.
Friedman’s approach to ethics is limited
because rules cannot cover every situation. An ethical code that simply gives
detailed rules and nothing else will sink under pressure either from clever
people who find ways round the rules or from new situations the rules don’t
cover.
Another very real problem for investors who
take law as their professional moral guide is the different laws that operate
in the different countries where they do business. While the sale of the
pesticide DDT is illegal in the EU, it is legal in many less developed
countries. Does that make it morally acceptable to invest in factories
producing DDT in poor countries?
What distinguishes ethics from rules is
that rules tell you how to act while ethics tells you how to think before
acting.
If rules are the bricks with which we build
the house that shelters us from greed and selfishness, then the foundations of
that house are ethics. Without ethical foundations, the house of rules will
collapse under the growing weight of regulations and the pressure of financial
storms.
So what is
ethics?
