Good Ethics Good for Business
By Paul Schumann
Business ethics is in the headlines again.
One recent example is that a peanut company allegedly knowingly sold salmonella-contaminated peanut products. The contaminated peanut products were sold to companies that made more than a thousand food products, including peanut-flavored cakes, candies, cookies, crackers, ice cream, and snack bars.
Bad ethics is bad business. Unethical decisions make a business riskier. For example, if the allegations turn out to be true, the peanut company that knowingly sold salmonella-tainted peanut products will have a hard time regaining the trust of the companies that bought the contaminated products and made peanut-flavored food products that were sold to consumers. This puts the peanut company’s future viability as a business at risk. This also puts at risk the stockholders who have entrusted their investments and therefore their future well-being to the management of the company.
Furthermore, the peanut company managers have put at risk the companies that bought the contaminated products and that used them to produce peanut-flavored consumer food products. In addition, to the extent that consumers become worried about eating peanut-flavored products, the peanut company managers have put the entire peanut industry at risk.
The peanut company managers have also put at risk both the employees of their company and the employees of the companies that bought the contaminated product. These employees rely on their jobs for their welfare. Thus, the mangers have put employees and employees’ families at risk.
And, of course, the managers have put at risk the consumers who ate the contaminated products. According to news reports, hundreds have been sickened, many have been hospitalized, and some have died.
Unethical decisions not only increase risks, they also increase demands by the public for tougher business regulations. For example, current regulations apparently do not require food companies to report salmonella contamination test results to the Food and Drug Administration. As a consequence of the manager’s conduct, there are now growing demands for regulations that would require food companies to report product test results to the FDA.
Just because something is legal does not guarantee that it is ethical. In some cases, ethics might require more than what the law requires. For example, while current laws may not require companies to report contaminated food products to the FDA, ethics might. In other cases, a law might itself be unethical. For example, “Jim Crow” laws that until 1964 required segregation and discrimination against Black Americans in some states were the law, but these laws were unethical.
Managers need to manage ethically. To do so, ethicists have advocated a seven step ethical decision-making process:
1) Determine the facts. Managers need to make an honest effort to understand the situation.
2) Identify the ethical issues. Managers need to analyze their decisions looking carefully for possible ethical issues. If managers’ decisions affect the well-being of other people, then the decisions involve ethics.
3) Identify the stakeholders. Managers need to identify which specific individuals and groups are potentially affected by the managers’ decisions.
4) Develop alternatives. Managers need to use their moral imagination to develop as many options for managing the situation as possible.
5) Evaluate the ethics of each alternative. Managers need to evaluate the ethics of each alternative that they’ve developed by answering the following questions:
—Does the alternative do the most good and the least harm for all of the stakeholders considered together?
—If the managers were to switch roles with each stakeholder, would the managers be willing to have the alternative done to them?
—Would it be a better world if everyone used the alternative all the time?
—Does the alternative treat each stakeholder with respect and in ways that the stakeholders have freely consented to be treated?
—Does the alternative provide every stakeholder with equal human rights?
—Does the alternative provide all stakeholders with equal opportunities while rewarding stakeholders in proportion to their contributions?
—Does the alternative provide stakeholders with what they need in ways that are sustainable?
—Does the alternative appropriately care for the stakeholders?
—Does the alternative display good character virtues (such as courage, honesty, and industriousness) and not bad character vices (such as cowardice, dishonesty, and laziness)?
6) Choose the best alternative. Managers should use their evaluation of the alternatives to find the best choice.
7) Monitor the results. After making their decision, managers should monitor what happens and learn from the outcomes.
By consistently following the seven step ethical decision-making process, managers can make ethical choices, reduce risk, and enhance the long-run prospects of the business.
(Schumann is a professor of management at Minnesota State University Mankato. He teaches and conducts research in the areas of business ethics and human resource management. He can be reached at paul.schumann@mnsu.edu)
