Ervin Laszlo, with Christopher Laszlo
( Biographical information)                 ( Biographical information)

Business Ethics

Some Principles and Orientations

(May 2000)

Ethics is becoming business, in both senses of the term. Ethics is good for business—it is "becoming for" business. And ethics already "is" business—soon big business.

In the late 70s and 80s the dominant trend was the green wave. In the year 2000 and beyond it will be the ethical leadership wave. Why? Very likely because businesses have become powerful enough for the public to realize that they are powerful. Evidently and undeniably, corporate behavior enters into the lives of people and communities. If corporation affect people's and communities' lives merely in search of profit, the effect on these lives is not always positive. And when it isn't, it creates resentment. Because business is powerful and influential, people expect it to be responsible for what it does. This is something new in the world of business. It goes beyond the "shareholder value is all there is" philosophy, and the "profit and growth is the sole objective" concept.

Will companies become the moral leaders of tomorrow's society? Hardly. But they will have to become conscious of the morality of their actions if they want to have good relations with their customers, clients and suppliers, not to mention the political leadership and the general public of their places of business. Making a conscious effort to be ethical will turn out to be a basic instrument for ensuring good relations, a good name, the confidence of the stakeholders, and the valuation of the market. Big businesses who deal with people directly are recognizing this already; small companies and Internet businesses do not do so yet. But it would be also in their interest to wake up to this emerging fact of business life.

Suppose that a company recognizes that it's in its own best interest to act ethically. How can it tell what is ethical? What is the applicable ethical standard?

As a rule, business ethics confuses a general standard with an explicit directive for action. This, however, is like confusing the general standard of the ten commandments with a directive to do x or y in a concrete instance. Ethical norms are abstract principles, not blueprints to be followed in any and all circumstances. Such principles are needed, however, and in today's environment are even essential. This can be illustrated with three ethical principles as examples.

1. Ensure that your company acts in a way that permits other industry players to remain viable. This goes for suppliers, distributors, alliance partners, and—yes—competitors too. This doesn't mean the end of competition, only the end of life-and-death competition. Its a useful standard because winning a struggle for life-and-death is almost as bad as losing it. It flattens the field, reduces diversity, and brings all the negative concomitants of a monopoly, whether global, national, or local. (This is becoming more widely recognized today. People may still envy Bill Gates for his wealth, but now fewer admire him, and an increasing number does not appear to want to emulate his tactics.)

2. Weigh the impact of your actions on the social and ecological sustainability of your operating environment. This introduces a factor that was not present in the profit-and-growth and shareholder-value equations. Yet it has become a basic requirement for the attainment of these classical objectives. Ensuring social sustainability means avoiding engaging in practices and creating conditions that lead to tensions and stresses among people, and might trigger a crisis and eventually a breakdown. The locus of the tensions can be inside or outside the company—staff, clients, as well as the local community are equally parts of the company's social environment. Ensuring ecological sustainability, in turn, means the same thing in regard to the environing ecosystems. Avoiding actions that lead to stresses and the risk of breakdown in nature, the same as in society, is part and parcel of the ethical standard applicable to business corporations. It is a standard that was hardly if at all recognized until recently.

3. In designing and implementing medium-to-long-term corporate strategies, consider the developmental dynamic of the systems that underlie your operating environment. This goes beyond Principle (2), for it introduces a longer-term foresight factor into company operations. Avoiding tensions and stresses and averting crises and breakdown is vital in the short-term, but it doesn't necessarily serve the business in the medium-to-long-term. What is good today, may well be disastrous tomorrow. What is good tomorrow, however, is not an arbitrary decision, but a condition in which the company "goes with the stream." Human communities, the same as natural ecologies, have a developmental dynamic of their own. Anticipating it within the corporate planning horizon is in the company's best interest. The price of neglect can be high. It can include the polarization of society, the plight of urban and rural poor, the pollution air, water, and soil, the overuse of natural resources, and "cathedrals in the desert" that serve as stark reminders of the folly of introducing socially and culturally inappropriate technologies.

In the last analysis the above principles go way beyond the ethical commonplaces bandied about today, such as "integrity," "respect for the individual," and "honoring the customer." They are behavioral standards of universal validity. Essentially, they are the standards that the crew of a spaceship must abide by. Members of the crew must behave in a way that

(1) allows the rest of the crew to live and to work,

(2) keeps the spaceship in good working order, and

(3) is consistent with the developmental dynamics of the ship and its environment.

Behavior that satisfies these standards is ethical; that which blocks or hampers them is not. But specific behaviors are not prescribed by the standards: they need to be developed in light of concrete circumstances. Each company needs to write its own ethical code, appropriate to its particular branch of business, its particular share of the market, and its particular geographic-cultural locations. But such a company code must have a universally valid core—the set of basic ethical standards to which the company is committed.

Writing the company's ethical code is up to the companies themselves—or to the specialized ethics consultants they hire to advise them. It is encouraging to note that an increasing number of global players undertake to develop an ethical code not just from motives of self-interest, but also because their managers experience a "sense of discomfort" when confronted with ethically questionable actions.

Above all, it is encouraging that ethics is becoming business. It is time that the boardroom of corporations should become sensitized to ethical issues. The next step is to help managers come to the realization that there is a common core to the business of business ethics—a core that can be operationally specified to apply to individual companies and individual cases. That realization will open the door to concrete steps to research and apply the specification of the standards in ways that serve the shared interest of business and society.

Upholding the common core of ethical standards with determination and commitment is what distinguished truly ethical leadership from one that is merely occasionally ethical. Ethics is a matter of commitment, and not an opportunistic tactic dictated by considerations of expediency. In a "CNN world" of instant worldwide information flows, joined with the heightened sensitivity of the public to the impacts of corporate behavior, upholding considered ethical standards serves the best interest of every company. Those that careen from one ethics crisis to the next may appear ethical to some of the people all of the time, or to all of the people some of the time, but they will not prove themselves ethical to all of the people all of the time. And sooner or later they will pay the price.