We have locked at several arguments attempting to establish that ethics should not be brought into business and we found them all wanting. Is there anything to be said for the opposite claim-that ethics should be brought into business? One way to argue that ethics should be brought into business is simply by pointing out that, because ethics should govern all voluntary human activities and because business is a voluntary human activity, ethics should also govern business. In short, there is nothing about business that would prevent us from applying the same standards of ethics to business activities that should be apllied to all voluntary human activities.

Another argument for the view that ethics should be part of business points out that business activities, like any other human activities, cannot exist unless the people involved in the business and its surrounding community adhere to some minimal standards of ethics. Business is a cooperative activity whose very existence requires ethical behavior. First, any community business will collapse if all of its managers, employees, and customers come to think that it is morally permissible to steal from, lie to, or break their agreements with the company. Because no business can exsit entrirely without ethics, the pursuit of the business requires at least a minimal adherence to ethics on the part of those involved in business. Second, all business require a stable society in which to carry on their business dealings. Yet the stability of any society requires that its members adhere to some minimal standards of ethics. In a society without ethics, as the philosopher Hobbles once wrote, distrust and unrestrained self-interest would create “a war of every man against every man,” and in such a situation life would become “nasty, brutish, and short.” The impossibility of conducting business in such a society – one in which lying, theft, cheating, distrust, and unrestrained self-interested conflict became the norm-is shown by the way in which business activities break down in societies torn by strife, conflict, distrust, and civil war. Because business cannot survive without ethics, then, it is in the best interests of business to promote ethical behavior both among its own members as well as within its larger society.
Another persuasive way to argue that ethics should be brought into business is by showing that ethical considerations are consistent with business pursuits, in particular with the pursuit of profit. That ethics is consistent with the pursuit of profit can be shown by simply finding examples of companies where a history of good ethics has existed side by side with a history of profitable operations. Companies that have combined a good history of profit with exemplary ethical climates include Intel, Timberland, Hewlett-Packard, Cisco Systems, Levi Strauss, Southwest Airlines, Patagonia, Procter & Gamble, and Starbucks Coffee.
Yet pointing to individual companies in which the pursuit of ethics has existed side by side with the pursuit of profit does not fully demonstrate that ethics is consistent with the pursuit of profits. Many chance factors affect profitability (overcapacity in a particular industry, recessions, weather patterns, interest rates, changing consumer tastes, etc.). Consequently, these companies may be nothing more than the few companies, in which ethics by chance happnened to coincide with profits for a period of time. Is there any evidence that ethics in business is systematically correlated with profitability? Are ethical companies more profitable than other companies?
There are many difficulties involved in trying to study whether ethics companies are more profitable than unethical ones. There are many different ways of defining ethical, many different ways of measuring profit, many different ways of deciding whose actions count as the actions of the company, many different factors that can affect a company’s profits, and many different dimensions along which companies can be compared. Despite these difficulties, several studies have examined whether profitability is correlated with ethical behavior. The result have been mixed. Although several studies have found a positive relationship between socially responsible behavior and profitability, some have found no such relationship. No studies, however, have found a negative correlation, which would have indicated that ethics is a drag on profit.Other studies have locked at how socially responsible firms perform on the stock market and have concluded that ethical companies provide higher returns than other companies. Together, all these studies suggest that, by and large, ethics does not detract from profit and seems to contribute to profits.
Are there any other reasons to think that ethics should be brought into business? Consider an argument based on the prisoner’s dilemma. A prisoner’s dilemma is a situation in which two parties are each faced with a choice between two options: Either cooperate with the other party or do not cooperate. If both parties cooperate, they will both gain some benefit. If both choose not to cooperate, neither gets the benefit. If one cooperates while the other chooses not to cooperate, the one who cooperates suffers a loss and the one who chooses not to cooperate gains a benefit. The story that gives the prisoner’s dilemma its name is agood illustration of this kind of dilemma. Two men who are arrested for robbing a store secretly agree that neither will confess that they committed the crime. The police commissioner separates the two men and tells each prisoner the same thing. If neither admits that the two of them robbed the store, they will both be kept in jail for a year. If both prisoners confess to robbing the store, each will get 2 years in jail. If one of them quiet and the other confesses, the one who keeps quiet will get 3 years in jail and the one who confesses will go free.
From the joint standpoint of the parties involved, the best outome in a prisoner’s dilemma is for both parties to cooperate in their agreement. Mutual cooperation will leave them each better off (only 1 year in jail) than if both do not cooperate (2 years in jail). However, if the parties to a single prisoner’s dilemma are rational and self-interested, they inevitably choose not cooperate. A rational self-interested party will reason like this “The other party has only two choices: to cooperate or not cooperate. Then I will be better off if do not cooperate. Suppose he chooses not to cooperate. Then again it is clearly better for me no to cooperate. So in neither case, it is better for me not to cooperate than cooperate.” Because both parties will reason this way, both parties will end up not cooperating (and both will go to jail for 2 years). In short, when people must choose between cooperating or not cooperating in rules or agreements, and when each has more to gain by not cooperating, then rational self-interest suggests that people should not cooperate in keeping the rules of agreements.
If the reader takes a moment to think about it, it becomes clear that we encounter prisoner’s dilemmas in every part of our lives. In fact, wherever there are agreements or mutual expectations, competitions or games, rules or norms, there are prisoner’s dilemmas. Our lives are filled with situations in which we can cooperate with others by sticking to an agreement or a rule, or we can choose not to cooperate and instead tryo take advantage of the other party by breaking the agreement or rule. In such cases, rational self-interest seems to tell us that we can gain an advantage by not cooperating and that, consequently, noncooperation is better than cooperation.
Much of ethics, of course, consists of rules that each of us can choose to follow or not follow and so ethics, too, creates a prisoner’s dilemma. If everyone cooperates in following the rules of ethics-do not steal, do not lie, do not injure, keep your promises, do not cheat-we will each be better off. Because a person can often gain an advantage over others by breaking the rules of ethics (e.g., by stealing or cheating), it seems that it is more rational to not cooperate in the rules of ethics than to cooperate. The prisoner’s dilemma, then, seems to show that the rational self-interested person should be unethical in business when there is something to be gained through unethical behavior.
However, this conclusion is based on a false assumption. We have assumed so far that prisoner’s dilemma situations are isolated interactions between people who never interact again. In real life, individuals have to deal with each other repeatedly or have ongoing relationship ith each other. When individuals have to deal with each other in repeated prisoner’s dilemma situations and one individual takes advantage of the other in one interaction, the victim can retaliate by doing the same in the next interaction. This threat of future retaliation makes it more rational for the parties in a series of repeated exchanges to cooperate than to try to take advantage of each other. Through cooperation, the parties will gain the advantages conferred by mutually beneficial activities, whereas noncooperation will lead to a deteriorating series of costly clashes. The most important lesson of the prisoner’s dilemma, then, is that when people deal with each other repeatedly, so that each can later retaliate against or reward the other party, cooperation is more advantageous than continuously trying to take advantage of the other party.
The prisoner’s dilemma analysis of ethics has significant implications for ethics in business. Business interactions with employees, customers, suppliers, and creditors are repetitive and ongoing. If a business tries to take advantage of employees, customers, suppliers, or creditors through unethical behavior today, than the latter will likely find a way to retaliate against the business when they meet again tomorrow. The retaliation may take a simple form, such as refusing to buy from, refusing to work, or refusing to do business with the unethical party. Or retaliation may be more complex, such as sabotage, getting others to boycott the unethical party, or getting even by inflicting other kinds of costs on business. A business can sometimes, even often, get away with unethical behavior. In the long run, however, if interactions are repeated and retaliationis a real threat, unethical behavior tends to impose costs on the business, whereas ethical behavior can see the stage for mutually advantageous interactions with cooperative parties.
The prisoner’s dilemma argument, then, implies that, over the long run and for the most part, it is better to be ethical in business than to be unethical. Although being unethical toward another party in business may sometimes pay off, over the long run unethical behavior in business tends to be a losing proposition because it undermines the long-term cooperative relationship with customers, employees, and community members on which business success ultimately depends.
We should note that the prisoner’s dilemma argument is sometimes criticized because it assumes that people are isolated individuals motivated only by self-interest. This criticism is correct, but it misses the point of the prisoner’s dilemma argument. The prisoner’s dilemma argument tries to show that even if people were individualistically motivated only by self-interest, they would still have a good reason to be ethical in…….