Do Good Ethics Ensure Good Profits?

Business and Society Review, Summer 1989

TO BE ETHICAL as a business because it may increase your profits is to do so for entirely the wrong reason.  The ethical business must be ethical because it wants to be ethical.  If, as a consequence, its profits are reduced, it must accept such a trade-off without regret.  Of course, companies must be profitable in order to attract capital, stay alive, and grow.  For better or worse (and I believe it’s for the better), that’s the way the game is played in non-Communist countries.  That’s the price, in effect, for economic autonomy.

But it does not follow that maximizing profit need be the aim of every business.  My personal view is that profit is a means to other ends, not an end in itself.  The “ends” of an enterprise should be what you want to do (e.g., make the best pizza in town) and how you want to do it (e.g., with concern for the humanity of your employees).  Implicit in this is the principle that sufficient, not maximum, profit is the appropriate goal for ethical businesses.  (I realize there is a difficulty here for publicly held businesses; they may not have the freedom that privately held companies have to pursue sufficient rather than maximum profit.  For publicly held companies, it may be necessary to persuade stock­holders that ethical conduct does in fact maximize profit.)

My own company, Working Assets (which is privately held), sees itself as having two bottom lines.  One measures the extent to which revenues exceed expenses.  The other measures our social and political impact.  If we do well on the former and poorly on the latter, we’re not succeeding.  (We make our political impact by providing easy-to-use donation-linked services — like credit cards and long-distance calling — that raise funds for progressive nonprofits at no cost to them or to our customers.)

If willingness to see profit as a means rather than as an end is a prerequisite for ethical businesses, the deeper question still remains: What do we actually mean by ethical business conduct?  I suspect there are as many answers to this question as there are people who consider themselves ethical.  My Webster’s Unabridged defines ethical as “conforming to the standards of conduct of a given profession.”  That doesn’t help much.  My own opinion is that ethics in business means more than just conforming to prevailing standards or laws.  It means approaching business in the spirit of service rather than self-enrichment.  It means always viewing your enterprise as contributing to rather than extracting from society.  It means running your company as if it were accountable not just to investors but also to workers, customers, the community, and ultimately the planet which sustains us all.