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What Do We Mean By Business Ethics?

While this is back-to-school week for some, I’m now back from school, having just finished teaching a business ethics course for executive MBA students.

The first question raised in this class – “What do we mean by business ethics?” – may be of interest not only to students but also to organizations and their advisors seeking to address the recommendations of the OECD anti-bribery working group that companies should “develop and adopt adequate internal controls, ethics and compliance programmes…” (emphasis added).

In the most traditional sense, business ethics is generally based on several schools of philosophy, particularly Aristotle’s virtue ethics, Bentham’s utilitarianism and Kant’s deontology.  But other disciplines are relevant, too – particularly when one views ethics as not only providing a framework for identifying what is right and wrong but also for ensuring that individuals act in desirable ways based upon such knowledge.

One of these disciplines is psychology. In his truly fascinating book Experiments in Ethics (Harvard 2008), Anthony Appiah recounts how much philosophy has become unmoored from a practical understanding of human nature, but how this gap is now being closed by, among other things, behavioral science. Both that book and the equally important Blind Spots by Max Bazerman and Ann Tenbrunsel (Princeton 2011) describe countless behaviorist experiments showing the startlingly small role that pure rational thought often plays in shaping real-life ethical decision making.

There are three dimensions to how this behavioral ethics knowledge is relevant to MBA students – and to others in the business world. First, it can help them be alert to a wide range of possible ethical pitfalls in their individual careers. Second, it can aid managers in ensuring that their organizations act ethically. Third, behavioral ethics learning can make them more effective citizens (a word used broadly here), an increasingly important role given the many ills the world now faces requiring the attention of business people.

The discipline of management itself should also play an important role in business ethics instruction, particularly regarding the second of the above three dimensions (ensuring that one’s organization acts ethically). Although compliance programs arise from legal standards, at bottom their design and operation are based on the application of sound management practices to the particular challenge of promoting lawful and ethical conduct by organizations. Bringing management skills and knowledge to the field of ethics – for instance, as reflected in the recent UN human rights due diligence standards – is something that business students (and business persons) can do well.

Aspects of economics are important to business ethics, too, particularly to understanding how incentives can promote both ethical and unethical behavior. While this has always been true, the unprecedented attention in the past few years to moral-hazard based risks is helping bring economics into the business ethics mainstream. Not surprisingly, given the training that they often have in economics, many MBA students show a keen interest in and facility for this aspect of business ethics. (For more on this see The First Word On Compliance Incentives.)

A central feature of anthropology is, of course, the study of human culture, and cultures can play an immensely important role in shaping ethics-related outcomes. In my class, students are asked to consider the impact of various types of business-related cultures – organizational, industry and geographic – on ethics. The ability to do so outside the class can be essential to safeguarding the interests of individuals and their companies.

Then there is the discipline of law itself. Much in the same way that philosophy and psychology were torn asunder, so many have sought to present law as a force alien to ethics. While this might be a fair criticism of a purely mechanistic approach to law, it fails to account for the extent to which law is intended to embody the ethical judgments of communities. Appreciating this can enrich a businessperson’s understanding of both law and ethics.

Finally, while all of these fields of knowledge are relevant to teaching ethics in business school, they can be equally important to providing ethics training to senior managers and boards. And, such individuals may indeed enjoy going “back to school.”


Jeffrey M. Kaplan, a partner in the Princeton, New Jersey office of Kaplan & Walker LLP, has practiced in the compliance law field since the early 1990’s. He serves as Adjunct Professor of Business Ethics at NYU’s Stern School of Business. He can be contacted here.

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1 Comment

  1. Ethics is concerned with “doing the right thing” in terms of morals, fairness, respect, caring, sharing, no false promises, no lying, cheating, stealing, or unreasonable demands on employees and others, etc. In addition, business ethics calls for corporate social responsibility (CSR) and addressing social problems such as poverty, crime, environmental protection, equal rights, public health and improving education. We need a practical approach rather than a philosophical one, with “leadership by example.”

    Business decisions often concern complicated situations which are neither totally ethical nor totally unethical. Therefore, it is often difficult to “do the right thing,” contrary to what many case studies will have you believe!

    Leaders have to deal with potential conflicts of interest, wrongful use of resources, mismanagement of contracts, false promises and exaggerated demands on resources, which include personnel. Is it the seller’s duty to disclose all material facts regarding the product/ service in question or is it the buyer’s responsibility to find out the pros and cons of what he or she is getting into? Should the seller answer each question exactly as it was asked, and ignore some pertinent information? Or should he or she merely address the spirit of the question? Is the buyer responsible for due diligence? This is a gray area.

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