Ethics in business come of age

BUSINESS ethics? The ultimate oxymoron, surely? In fact ethics is now big in business. Courses, like bioethics, which medical students take to prepare for the moral dilemmas they would face, are now available for many Irish business students.

The subject, huge in the US, is beginning to be taken seriously on this side of the Atlantic. This year, Dr Joanne Stohs, a visiting lecturer from the University of Wisconsin, is giving a course to commerce undergraduates in UCD.

The current divide in business ethics, Dr Stohs said, is between the proponents of "shareholder theory", who believe a manager is responsible only to his shareholders, and those who hold to "stakeholder theory" who argue managers must recognise obligations towards the wider community.

In many ways the rapid development of this branch of applied ethics is a response to economist Milton Friedman's 1970 diatribe, The social responsibility of business is to increase its profits, and to the rampant free marketism of the 1980s based, to a large extent, on Friedman's ideas and associated with President Ronald Reagan in the US and Britain's Margaret Thatcher.

"Supporters of shareholder theory argue that a manager who considers interests other than those of the owners is behaving inappropriately," said Dr Stohs. "Any action taken without the approval of the shareholders amounts to an unfair tax on them".

Properly applied this means a manager who, for instance, makes a contribution from company funds to charity is, in effect, stealing, unless he is satisfied the PR benefits to the company will outweigh the amount contributed.

Business is, of course, the most macho of occupations - and because of its tendency to focus on maximising profits regardless of the consequences, has been subject to government regulation everywhere.

Things are changing, however. In the US, many corporations are rushing towards self regulation, employing ethics officers, and drawing up elaborate codes of conduct to cover the different situations that arise in the workplace. A Fortune magazine survey oft top 500 firms showed nearly 90 per cent of them, and about half of smaller firms, had ethical codes that provided specific guidance for different business situations. Dr Stohs estimated some 20 perk cent of Irish companies had followed the trend.

Typical problems addressed included the rights and wrongs of whistle blowing, how to deal with suggestions of price fixing as well as issues such as sexual harassment and affirmative action.

Cross cultural differences are a key area. In the 1970s, the Carter administration made it a criminal offence for US businessmen to offer bribes abroad. The legislation was relaxed under Mr Reagan because it was proving impossible to do business in some parts of the world without greasing the occasional palm. Similar dilemmas arise from dealing with companies that may, for instance, benefit from child labour in the Third World.

There is some disagreement about the best way in which to "teach" business ethics. Though Dublin City University is to follow the UCD example and have a stand alone course delivered by a philosopher, Trinity has considered and rejected the idea in favour of an integrated approach where each lecturer was responsible for dealing with the ethical issues in his or her field. Whistle blowing, for instance, is dealt with in the course on accounting.

This boiled down to a difference over whether it should be taught out of philosophy faculties, as in the US, or dealt with in a more common sense, practical way.

Two of the most controversial topics in business ethics are dominating the run up to the US presidential election. Both President Clinton and Republican Mr Pat Buchanan have made speeches condemning downsizing, the way in which already successful companies aimed at increasing profits even further by getting rid of staff, and globalisation, the practice of moving jobs out of the US and into the cheap labour economies of the Far East.

Classic shareholder theory holds that such practices are the proper way, but increasing numbers of people are insisting big business has wider ethical responsibilities and must be forced to face up to them by legislative change if necessary.

As for the future, the subject seems here to stay. The moral dilemmas produced by modern capitalism are, said Dr Stohs, "particularly acute and it must surely be better to apply reason to solving them rather than not to think about them at all".