Critical thinking in business contexts

Business as an Ethical Calling: My Personal Philosophy

The last several decades have seen American enterprises beset by a number of ethical scandals, spanning from the accounting fraud of Enron and WorldCom to that of the recent subprime housing debacle and credit crisis of 2008. As a result, there has been a call to integrate ethics into the business studies curriculum and to try to temper the cutthroat atmosphere amongst ambitious aspiring executives. Concerns about treating the environment with care, the need to respond demands for a more diverse workplace, and sustainability issues are all shaping the ways that corporations present themselves to the public. But the requirement for-profit corporations to be, well, profitable, remains. Examples of successful businesses that pay homage to ethical concerns do exist but the idea of the perfectly ethical business remains elusive. However, I personally believe that because of changes in the current corporate culture of America, the idea that ethics must invariably be sacrificed to profitability is false. While it is true that ethics can be a balancing act, and not every issue is as black-and-white as following the law vs. not following the law, a business must operate with some sense of an ethical mindset to sustain customer loyalty -- and even to cut costs.

According to classical theories of firm responsibility, however, firms are not supposed to prioritize ethics over profits. Shareholders, the de facto owners of a corporation, buy stock with the intention of gaining financially, and a CEO cannot use 'other people's money' to further his or her own agenda. If cutting workers' salaries are a feasible means to increase profits, then so be it. But there are a number of problems with this perspective, even from a self-interested point-of-view. For example, corporations that fail to take into consideration the safety hazards of products, even when they continue to technically obey the letter of the law, have met with lower sales, such as the beef manufacturers of the controversial additive 'pink slime.'

On a systemic level the idea that corporate ethics is an oxymoron is being challenged. At top Ivy League schools such as Harvard Business School and Wharton, and "across the country, MBA programs have responded to growing criticism that graduates are fixated foremost on shareholder profits. Amid the unending financial scandal and the worst downturn in decades, the curriculum has shifted toward sustainability, long-term profitability, and integration of specialties" (Stonington 2011). The hope is that changing the mindset of the next generation of corporate leaders will foster the creation of a more ethical community, in which all enterprises do not put profits above people.

Some companies have attempted to capitalize upon current trends to increase profitability and sustainability in conjunction. For example, Interface Global, the world's largest producer of modular carpet, has set a "goal to source 100% of our energy needs from renewable sources by 2020" ("Energy," Interface sustainability, 2012). Interface uses renewable energy sources whenever possible, including solar and wind energy, and "as of 2010, eight of nine factories operated with 100% renewable electricity, and 30% of our total energy use was from renewable sources" ("Energy," Interface sustainability, 2012). Interface enables customers to return used carpet to be recycled to reduce waste. Cutting down its use of nonrenewable fuel and materials has resulted in cost savings and increased profitability for the company. Its lean model of enterprise works in harmony with its overall organizational goals.

Given that consumers are seeking more ethical corporate models in terms of the companies in which they purchase stock, ethical conduct on the part of corporations is often seen as a financial as well as a moral necessity. Some of the ethical scandals have beset corporations such as Nike and Apple have been particularly damaging in terms of public relations because of the fact that the companies are dependent upon young customers who are extremely sensitive to the image they project, in terms of what they are wearing. A company cannot simply use ethical rhetoric. Particularly in the age of the Internet, in which consumers can carefully research the companies whose products they are buying, discrepancies between the branding of the company and actual treatment of workers and use of company resources can be easily researched.

One of the greatest sticking points for many companies is that of the ethics of employing workers in developing nations for low wages. Using lower-wage workers enables the company to sell products at a lower price point, making them more accessible to a wider range of American consumers. But critics contend that it is unfair for large, wealthy corporations to pay workers a pittance, while they make products for the first world which they could ill-afford to buy themselves. Large companies also do not necessarily invest in the infrastructure of the developing world nations out of which they operate. However, others believe that such labor can help workers. An example of a beneficial arrangement is the college sports apparel company Knights Apparel, which opened up an 'experimental' factory in the Dominican Republic which pays workers a living wage. "Paying the 120 workers the 'living wage' -- or $500 a month -- means the factory's cost will be $4.80 a T-shirt, 80 cents or 20% more than if it paid minimum wage. Knights will absorb a lower-than-usual profit margin, selling the shirts for $8 wholesale, with most retailers marking them up to $18" (Conor 2010). However, because Knights Apparel is a privately-held company, it does not have to answer to shareholders.

Ethical conduct can have an important role in 'branding' a company in a manner that can be salutary for the company's long-term future. Competing on the low-price model alone is not the only way to build a brand name. A good example of this is Whole Foods, a company which sells organic produce with no artificial ingredients. Although Whole Foods is priced at a higher price point than general supermarkets, it has still proven to be extremely popular. Whole Foods advertises that it is an ethical business, as well as offers ethical food. According to Whole Foods: "Our Whole Planet Foundation fights poverty through micro-lending in communities around the world that supply Whole Foods Market stores with products. We underwrite the administrative costs so every dollar donated goes directly to those who need it most" ("Community giving," Whole Foods, 2012). Its 'branding' of ethics is essential to its success -- else why would people pay more to shop at Whole Foods? Of course, the problem is that when Whole Foods has been criticized for its moral behavior, it looses more brand credibility than Wal-Mart or another organization that advertises itself primarily upon its price point.