What are the Roles of Ethics in Entrepreneurship?

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By: Site Engineer, Staff

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The question may be asked, what has ethics to do with entrepreneurship? In the alternative, they may ask, what has ethics to do with business because to be an entrepreneur means to run a business at one’s own financial risk?

Has an entrepreneur anything to do with ethical considerations? After all, business is business. This also implies that ethics is ethics that both business and ethics belong to two domains of human life which are distinct in themselves that both have nothing in common and finally that there is a connection between ethics and entrepreneurship.

While these and other related questions are, indeed, good questions, they are at the same time misconceived. These questions demonstrate the lack of understanding and appreciation of the role of ethics in human life, in human affairs and all human endeavors. How ethics plays this important role in human endeavors of any kind including entrepreneurship will be closely examined in this chapter.

What is Ethics?

In our time, ethics can be defined as the moral principles which determine the rightness wrongness of particular acts or activities. So, ethics relates to the morality of behavior. Henceforth, we shall use the phrase “moral principles” in place of ethics.

We also speak of ethical standards which means to conform to an accepted standard of good behavior, for example, in a profession or trade. We also speak of moral standards which is synonymous with ethical standards.

Moral Rules and Our Society

Human action is determined and informed partly by cultural values, partly by the socially recognized ways of attaining them. By cultural values, I mean the aims that are regarded as the essentially proper purpose of human activity in a particular society. In other words, socially defined values are to be attained by socially defined means.

We are not suggesting that in any society, the rules of action are nothing other than social imperatives, or that the only basis of such rules need only be social. Rather, some rules of action, no matter their origin or import are ultimately part and parcel of the heritage of a society. A good example of some of such rules is moral rules.

Moral rules are society’s rules. Many people take that to be a truism. Moral rule arises as a social convention, are maintained as social conventions and these rules are, to varying degrees, morally binding on the members of that society. These rules, to be credible, must leave the members of that society a generous degree of moral freedom. Moral rules are the product of a social contract. They are mutually agreed upon rules among the members of a given society. The agreement is a tacit one. None of us formally agreed to abide by the rules of society. Rather, we learn that other people will expect us to obey them and that we expect them to obey them as well. Same time we learn to behave accordingly. It is this combination of mutual expectation and corresponding appropriate behavior that constitute the social contract.

What precisely belongs to the social contract that constitutes our shared morality? It is simply that moral rules are mutually agreed upon rules intended to provide reasons for acting that override reasons of self-interest when the interests of individuals conflict.

Included in the long list of such rules are the rules against lying, promise-breaking, theft, cheating, greed, libel and slander, rape and other sexual offenses, dishonesty, injustice, selfishness, and the like, as well as those against various forms of physical violence.

Why are these moral rules required in the first place? It requires society cooperation, and cooperation requires trust. If moral reasons did not override reasons of self-interest in most cases, individuals could have no assurance that their trust was well placed. The reasonable expectation would be that others will act on reasons of self-interest, not of morality.

The other question is, why do we need this contractual arrangement at all? What purpose does it serve?

Every society needs this agreement for its good, welfare, and survival:

  1. Morality cannot be exempt; it is a part of the community of ideas.
  2. Nothing is more fundamental than convictions on what is good and evil, and so an absence of agreement (consensus) in morality will be an absence of agreement: on the most fundamental ideas in society.
  3. Society has a community of ideas, the fact of an aggregate, of people merely living together is not sufficient to explain society.
  4. Some fundamental agreement among members of a society furnishes the cohesion without which society cannot survive.

Against this background, there is the conclusion that such an agreement is necessary for the existence and survival of society. Three points can be deduced from this argument.

First, there is the claim that society cannot exist without some fundamental agreement on moral matters.

Second, there is the further claim that for a society to survive, it must preserve itself through the provision of such fundamental agreement.

Third, there is a claim arising from the first two that a society has a compelling need for such a fundamental agreement.

It follows that moral rules are not arbitrary. Given a shared sense of the good, plus some commonsense assumptions about human motivation and expectation, certain kinds of agreements in certain kinds of situations naturally follow. Without agreements of these kinds, human life would gradually become “short, nasty and brutish”.

So moral rules are worked out not only to settle conflicts of interest but to advance shared conceptions of the good, not only to make society possible but to make it a good one, according to some shared conceptions of the good.

Does this fundamental agreement translate into an ironclad consensus? There is a need for caution on two related grounds.

Firstly, there is the assumption that there is only one set of moral beliefs or judgments. This overlooks the actual disagreements that exist on many controversial moral issues like abortion, capital punishment racial and sexual discrimination child labor, prostitution, and many others.

Secondly, moral Dilemmas are presented simplistically.

There is the assumption, for instance, that it is always morally wrong to lie or to harm others. This ignores the fact that in some moral situations lying arid harming may be deemed right in certain kinds of circumstances.

Society, Work, Business, Morality, and Entrepreneurship

  1. How does morality connect with a business?
  2. Is there a standard to be referred to?
  3. If there is what is that standard?

A standard is a model to be followed or imitated, established by custom and consent. It is a degree of quality, a level of achievement; regarded as desirable and necessary to be followed.

Work means a mental and physical activity undertaken to achieve and involving the expenditure of effort. Work is usually contrasted with play or recreation. Work is what a person does to earn a ‘living’ employment. An entrepreneur does business to earn a living.

A workplace or a business environment is a miniature representation of a whole system. It is a miniature representation of society. The same persons who work in a particular place are primarily members of a wider society that encompasses the workplace or business environment. An entrepreneur does not and cannot operate outside society.

The workplace has no meaning outside the social system of which it is a part. If anything, a business environment derives its meaning and relevance from the social system of which it is a part. It is a product of that system.

While society can exist without entrepreneurs, the latter has no chance of existing outside a given society. There are perhaps two reasons for this.

Firstly, the moral standards of a particular business cannot be radically different from that of its parent community. A business has no chance of survival when this happens.

Secondly, while it is permissible for a business to evolve some set of moral standards that are peculiar to it, care must be taken to avoid situations that can give rise to moral dilemmas. It must avoid situations that make moral choices uncomfortable by avoiding double and simultaneous compliance, society or the business place.

I have suggested that the moral standards at work must not be radically different from what obtains in its host community. The reason is fairly obvious. Just as a community needs a fundamental agreement on certain matters for its continued survival so a business needs a fundamental agreement for its operations. Its workers need to be tutored in that fundamental agreement, just as they were tutored, through the socialization process, on the fundamental agreement of their society.

Just as society sanctions it members for non-compliance, so a business sanctions members of its workforce. For obvious reasons, there may be a qualitative difference between both sanctions. Just as ordinary citizens are active moral agents who exercise their moral freedom to the fullest, so are members of staff in a typical business environment. Finally, just as moral rules and standards are required for the good of society so they are equally required for the good and order of a business place. They must be a shared sense of good.

There must be a fundamental agreement to the effect that lying, theft, cheating, dishonesty, inefficiency, unfairness, injustice distrust, undue favoritism. Lack of firmness, lateness to work as a habit, lack of devotion to duty, arrogance, disloyalty, lack of decency, selfishness lack of consideration of others, lack of fellow feeling, clannishness, lack of compassion, lack of safety measures at work, fraud, etc, are not permissible. They are not morally legal. Moral standards should be endorsed and encouraged by an entrepreneur. An entrepreneur must be an epitome of moral excellence, able to teach and inspire others.

Cumulatively this vices-cannot lead-to-an enhanced-productivity. “At their worst levels, they can directly lead to antagonism, suspicion and mutual distrust between management and workers and among workers themselves.

These are the moral problems that can destroy the most astute entrepreneur. These are part of the risks that must be avoided. The reason is that while entrepreneurs often endeavor to minimize financial risks, they never take account of moral risks. It is not only financial problems that can lead to the collapse of a business. Moral problems need to be accounted for in this regard.

When moral problems (for example fraud, over-invoicing, maintenance of a corruption network) are deep-seated and embedded in a business environment, the most dedicated, astute, experienced and knowledgeable entrepreneur will fail. Moral failures neither ensure nor guarantee success in any human endeavor. On the contrary, such failures hasten the decay and collapse of human effort in many spheres and an entrepreneur is not exempted. No one is.

It is not only financial mismanagement that can ruin business ventures, immoral, but turpitude is also even much more ruinous. Most, if not all, cases mismanagement are in themselves good examples of moral failures in terms of character. They are criminals. Here morality and law converge for the good of society.

An entrepreneur who is dishonest, insincere, untruthful, disloyal to friends and business colleagues cannot succeed. An entrepreneur who has no consideration for other people is self-centered and myopic will not succeed. So is an entrepreneur who business associates.

Simply put, an entrepreneur who disregards the interests of society or reduces such interests to self-interest will not succeed in the long run because public interest is always to be preferred to private interests.

In the absence of trust and thus of cooperation, intimacy is merely a patchwork. Mutual trust is possible only between people who are moral agents, who share and are aware that they share common ideas about right and wrong conduct. An entrepreneur cannot dispense with trust with cooperative efforts and ties and hope to succeed.

Why should it be so? Why should it be the case? There is a simple answer to these questions. It is that there is no human conduct that escapes any moral qualification. This means that every human act or omission is subject to moral judgment in terms of commendation and condemnation. This moral qualification and judgment are possible because morality is logically before politics, government, law, and business. It is before any order of values.

What and who we are is itself a product of our connectedness with our backgrounds and with others in our environment. Our structures of knowledge, our characters, personalities, and our language are all inherently social. Desirable dispositions of character such as integrity, compassion, generosity and undesirable ones such as duplicity, greed or insensitivity are aspects of our relationships with others.

Without this relationship, we simply cannot have such dispositions. Neither can we have personalities that are gracious, diplomatic hostile, compassionate or mean-spirited? Without the social context within which we define ourselves there is little of us left.

Since morality is a social contract for the enhancement of relations among people, the social dimensions of a moral challenge at business are always of central significance. It is for this reason that we need to endorse the principals of solidarity and reciprocity.

Importance of the Moral Order

There is no society without morality, that is, a society without moral standards. We have also suggested that there cannot be a social life without morality. In other words, there cannot be any social, political, business, legal arrangement that has a relation with moral principles or values. We qualified this suggestion by saying that morality is logically before political, government, business, etc. We urged the view that human life outside society is meaningless. Membership of society offers the possibility of being human and of being moral agents.

Without moral principles and values, there would be no business principles and values. It is ridiculous to suggest otherwise. A business arrangement that is not imbued with moral principles and values is inhuman. Nothing is of humanity in the arrangement of that sort. Such an arrangement, because it is devoid of the moral element fails to even approximate human nature as we know it or as we find it.

A system whether political, economic, judicial or business that functions by successfully undermining the primacy of the moral order is bound to fail, and will fail. Moral rules, principles, values since they are primordial are first in any order of societal values. Moral principles, rules, and values are primeval because they are concomitant with human nature. Our moral nature predates the political, economic, business and judicial aspects of our being.

Moral Advice to an Entrepreneur

An entrepreneur must take account of the fact that human beings end in themselves. They should not be used as means to other ends desirable or not.

There should be no attempt to dehumanize or denude the humanity of others, in pursuit of pecuniary interests.

Human beings deserve respect simply because they are human, not because they are wealthy or poor, manager or messenger.

An entrepreneur should do nothing to undermine the respect we all earn in virtue of our common humanity.

The dignity and integrity of others should be promoted, protected and ensured.

Whatever matters to human beings in any situation, trust is the atmosphere in which it thrives. Without trust, no business will endure. None will ever mature. An entrepreneur who cannot be trusted, especially by colleagues and the public, in general, cannot succeed.

Trust engenders cooperation. The spirit of cooperation between people is an important aspect of life. It is even more so in business situations. It seems fairly obvious that any form of cooperative activity requires the co-operators to trust one another to do their bit.

Promises are part of what makes us human. We make promises to friends, relations, neighbors colleagues, etc. Promises do involve some real trust in the other person’s goodwill. It is essentially important that in a business environment promises must be kept.

If there are good, objective and morally defensible reasons for breaking a promise, business associates must be informed in advance. It is an act of gross mistrust and dishonesty not to do so. An entrepreneur must endeavor to avoid breaking promises just for the fun of it. Doing so repeatedly can lead others to conclude that one is insincere, unreliable, untrustworthy and unserious, and not worthy of the trust of others.

Many things in our lives as human beings may not be made possible without truth. Truth-telling is at the background of our lives as human beings. On truth depends much on our success or failure in life. It is no less in business dealings.

We need truth to come to terms with the facts in a particular business deal. We need truth so that justice is done. We need truth so that we make informed decisions. An entrepreneur who is untruthful is insincere, unreliable and cannot be trusted.

Meaningful business deals cannot be conducted in an atmosphere that is tainted with suspicion arising from the realization that one cannot be trusted to tell the truth. No matter what the situation is.

The Golden Rule applies in all human situations. What you do not want to be done to yourself, do not do unto others, is a universal moral principle. An entrepreneur who does not bother about the import of this principle may not be able to maintain credible, lasting and meaningful business relationships with business associates. Without this relationship, an entrepreneur has no chance of succeeding.

The prerequisite of justice in the elementary form of “to each his/her due” is an important moral principle in any community.

But justice cannot be done without truth. An entrepreneur who is incapable of determining:

  1. what is due from him to his fellow citizens and
  2. what is due to him from them may not be trusted with the management of men and materials.

Conclusively, the moral standards subscribed to by an entrepreneur must not be different from that of society. Any attempt to invent deviant standards that may be inspired by self-interest will necessarily pitch an entrepreneur against society. When such conflict arises an entrepreneur is always at a loss, materially and financially. The most important losses are self-esteem, self-worth, and self-confidence. These are not items that can be easily replaced.

 

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