A successful business, from a purely economic perspective, would be one that is profitable. For a business to be lucrative, one must have a discerning eye to discover fruitful investments; prudent spending so as not to become mired in financial woes, and effective communication skills to sell the product and gain customers. Hence, it is ostensibly unnecessary to have “ethical practices”, provided one is ruthlessly persuasive and pragmatic. However, using profit as the sole yardstick to determine if a business is successful is rather rigid, even dogmatic. A more useful definition of a successful business is one which commands prestige, has respect for its employees and customers, and operates in an above-board fashion. It cannot be denied that a business founded on ethical practices such as an open and amicable relationship with employees and customers, as well as a steadfast commitment to high quality workmanship would inspire confidence and loyalty. Such a business would be far more able to weather the cyclical ups and downs of the economy. Yet, it is important to realise that business has become an integral part of society and fulfils a crucial social role. Success, then, may not merely be defined in an economic sense but expanded to include its effectiveness as a force for social good: i.e what is beneficial for all members of society. Therefore, while business acumen is key to running a thriving establishment, it must be fortified by a fundamental commitment to avoiding harm to people and the environment.

In a theoretical sense, ethical practice has never been a part of running a business. A priori, business is fundamentally detached from the notions of good and evil as a consequence of its transactional nature. Since business has been stripped to its essential definition; a contractual agreement to provide a good or service in exchange for something of equal value, business has been divested of value judgments. The abstract moral ideas of “wrongness” or “rightness” have nothing to do with business. This detachment from morality was what led to the institution of slavery, which was built on the misfortune of others. Slavery, the heartless and cruel exploitation of fellow humans was a deplorable act and a hideous blot on the history of mankind, yet for centuries it drove the economy as an easy and inexpensive means of labour, where generations of lowly serfs toiled in the sun while their owners profited at their expense. In more recent times, the videogame industry employs crunch-time, the standard industry practice of clocking endless unpaid overtime. It is seen not as a contingency plan but as a natural part of game development, used to cut costs and make the most ambitious games on the shortest schedules. Conventional perceptions of ethical practice have no place in a realm where profit is in itself, the correct thing to do. The publishers have set the deadlines, and there is no option but to crunch if the game development studios are to keep the investors happy and retain their financial backing. Despite the hundred-hour work weeks, game developers continue to churn out award-winning AAA titles that earn the industry obscene amounts of revenue. Slavery and its modern-day counterpart, unpaid overtime are pertinent examples of how business may still flourish in the absence of ethical practice.

           It is no surprise then that ethical practice is not the deciding factor in economic endeavour. Instead, a knack for business is most important. In a globalised economy, where foreign competition fight for market share domestically with cutthroat prices, it is folly not to optimise the business to be price competitive. Businesses can only absorb so many losses before they become insolvent and must close down. Keeping the company’s financial status situated is even more of a priority for publicly listed companies, who have shareholders to answer to and must ceaselessly generate more profit every quarter to keep shareholders congenial and continuously increase the company’s total enterprise value. Therefore, discounting financial shenanigans, economic success hinges on the uncommon capacity to decipher the ebb and flow of the economy despite its capriciousness and seizing opportunities as they come. Yet to cultivate an accurate and deep understanding of the financial world is no easy task. The world’s premier investor, the acclaimed Warren Buffett, has honed his business acumen since his formative years, and accredited his success to a cautious long-term strategy of studying financial statements and understanding the market before making decisions. A prudent, rational and calculative approach benefitted Buffett plentifully; he was a millionaire by 32, a billionaire by 60 and today he has amassed a fortune in the billions. Hence, business acumen is key to a successful business.

In  fact, adhering to ethical ideals can be considered to be too much of a burden to firms. While it is admirable to empower the worker by upgrading his skills and turning him into a more productive and efficient worker, the reality is that businesses are taking avoidable risks. By investing heavily into human capital, they run the risk of workers learning the relevant skills, and then hopping to a better paying job with the competition. Abiding by ethical ideals has cost the business time and money, both of which are precious resources. Worse still, it is unclear whether upgrading workers is ethical. Turning a human into a production unit which performs a single perfected task is by no means empowering him. It has robbed him of creativity and self-expression in his work and has made him into something which is replaceable and ultimately, disposable; effectively an emasculation  of a human being. The discriminate scrutiny of the consequences of what typifies ethical practice is complicated, and is not strictly the domain of the business, whose objective is chiefly economic in nature.

It must be acknowledged that the above line of reasoning was made on a critical assumption: businesses are economic systems that operate as silos. Discarding the premise that businesses function in isolation from society and is free from the social consequences of its actions, the above arguments become untenable and indefensible.

Society seeks to maximise social good, ergo society at large has a say in defining good business practices from bad ones. In accordance with this, it would be in society’s interest to curb the “success” of these businesses if it deems them to jeopardises its own. Conducting businesses at the expense of social good would then be considered as “unethical” in the eyes of society.  John D Rockefeller and the Sherman Anti-Trust Act are a prime example of society curbing economic success in favour of social good. Founded in 1870, Rockefeller’s Standard Oil company enjoyed hegemony in the oil industry, and undertook aggressive pricing tactics to eradicate local competition. Worried that Rockefeller, as founder, chairman and major shareholder, had too much influence over key strategic interests, the US government legislated the Anti-Trust Act and ended its monopoly on the oil industry  for the good of the country.

It can be concluded that the success of business without ethics is short lived. It is a categorical imperative that basic tenets of business, such as the existence of free markets, respect for private property rights and rule of law, are incongruous with the absence of personal liberty. An economy whose engine of growth is the exploitation of men and resources is unstable, as economic agents are constantly making no-holds-barred power plays and fighting for political power. A merger and acquisition deal for example, in a world without ethics, would descend into a chaotic war of attrition. These power plays introduce turmoil and uncertainty into the market, resulting in clouded decision making and costly mistakes, as well as squandering finite resources. If businesses are to survive in the long term instead of being so short lived, a stable economic environment conducive to business must be created, one in which the individual is valued and his rights respected. Furthermore, while legislations should be enacted to uphold the rights of the individual, business must go above and beyond the contractual nature of law and treat the individual fairly. The conduct of businesses should be based on moral principles instead of an unfeeling and clinical interpretation of the law. Exploiting legal loopholes would defeat the entire purpose of enacting such legislation. Hence, ethical practice should govern the interactions of businesses with their customers and their associates to ensure long term sustainability.

It would not be too bold to assert that ethical practice is not only a hallmark of a profitable business, but also is a characteristic of the social function of business. Social change, the aim of social enterprises, are effected foremost by ethical operation. By doing charity while doing trade, businesses fulfil corporate social responsibility as a stakeholder in modern society. In today’s metropolitan society, businesses are a foundational element, a stabilising force that provides economic security to households in the form of employment and income. At the same time, businesses rely on households for workers and consumption. This interdependence of businesses and households makes businesses a participant in society with heavily vested interests. Hence, businesses go beyond economic obligations by carrying out charitable initiatives for the community, such as corporate sponsorship of worthy causes, ranging from humanitarian non-governmental organisations to awareness campaigns on pandemic mental illnesses and socio-political issues such as LGBT prerogatives. Through philanthropic donations and public endorsement of these causes, businesses help campaigns to reach larger audiences and spread their message. These ethical practices amount to success because they are pivotal in achieving social change.

Taking into account all previous arguments and reasonings, it thus follows that it would be useful to examine the impact of ethical practice on businesses at different scales, so as to make a distinction as to when ethical practice is key. Arguably when the business is at the small to medium size, the customer and the seller share an intimate relationship. The seller knows his customers personally and emotional strings ensnare what would otherwise be a direct barter of goods and services. In such a case, ethical practice would be a high priority as maintaining the emotional bond is crucial to keeping customer. Conversely, when the business is large, such as a conglomerate, ethical practice is less of a deciding factor. The market is now served by faceless companies who make mass produced products for unknown purchasers, with whom they have a relentlessly matter-of-fact relationship. The interests of each party are now rationally calculated, unfettered by personal connections. Furthermore, large companies have the ability to weather the unhappy customer , as the customer is at an economic disadvantage, able to bring fewer resources to bear in a legal dispute. Hence, it is observed that the relevance of ethical practice in a business’s success is inversely related to its size.

In conclusion, while economic success can be achieved without ethical practice to some end, ethical practice is indeed an indispensable part of a business’s long term economic success. It is important to keep in mind that ethical practice sets the customer’s heart at ease and grows the business in a sustainable manner, especially so for small to medium enterprises. Additionally, businesses do not operate in a vacuum because society and businesses are interdependent, and therefore, ethical practice is of paramount importance when it comes to fulfilling the social role business plays.

—————————–

FAQ

How does ability to achieve social change link to having a successful business?

 

E.g. supermarket encourages people to waste less food by using ugly produce in its inhouse food products, dismantling stigma that ugly produce taste bad.

Advertisement