UK: THE BOOK PAGE - MORAL SUPPORT FOR MAKING PROFITS. - Dr Elizabeth Vallance, chairman of St George's Healthcare Trust, finds that a new autobiography prompts thoughts about the link between ethics and aims.

Last Updated: 31 Aug 2010

Dr Elizabeth Vallance, chairman of St George's Healthcare Trust, finds that a new autobiography prompts thoughts about the link between ethics and aims.

At the Cutting Edge By Sir Fred Catherwood Hodder & Stoughton; 232pp £17.99

There is often some suspicion, even embarrassment, among managers about business ethics. The view is widespread, in the English-speaking world at least, that moral values are personal to the individual and that it's rather bad form to take one's beliefs to the office. According to this view, too much chat about ethics can only deflect people from the main task of business, which is to make money. It is claimed, furthermore - since it has become fashionable to talk about the 'social responsibility' of business - that companies are being forced to take on the role of government: to regenerate the inner cities; to protect the environment; to deal with everything from educational deprivation to racism.

Sir Fred Catherwood's account of his long and distinguished career in business and politics gives the lie to this somewhat naive and tendentious outlook. His story illustrates, in very practical terms, that deeply held values (in his case Christian, although they might equally be humanist or some other) do not inevitably produce woolly thought and limp wrists but may be central to the achievement of business aims. Rather than it being a bit wet to spell out ethical issues, on the contrary, lack of ethical awareness can mean the end of brilliant careers as well as the loss of profit, time and reputation.

Sir Fred is surely right. Business ethics is not about introducing irrelevant concepts into business activity. It must start from the business aim. Business is not government or charity; business people are not politicians or social workers; corporations are not government departments or philanthropic institutions; ICI is neither the Department of Social Services nor Oxfam.

The aims of business are commercial aims. Business is in business to make profits. If it's not making a profit, it's soon out of business. Business ethics cannot simply be a plea to the business community to 'be nice', support community projects and be kind to customers regardless of the benefits or costs. It has to be able to show that ethical action is not, at least in the longer run, out of step with the business aim.

Recognition of the underlying commercial aim does not, however, mean that the obligation to serve shareholders - ie to make a profit - invalidates the need to take account of other stakeholders. Indeed it's unlikely that a business will create the climate for success unless it takes account of its customers, its employees, its suppliers and the wider community - in fact all of those who impinge on its ability to do its job and achieve its commercial aims.

Business ethics is simply concerned with right action in business, which means treating all stakeholders with justice, honesty and fairness. It does not suggest that special standards and values apply to business, or that ordinary moral values do not apply, or that we have to adapt our moral standards to make them appropriate or relevant for business. Nor does it offer an alternative, less rigorous, moral code which makes it easier to achieve the goals of business. Rather, it uses existing moral frameworks and theories to explore dilemmas which arise specifically in the business sphere.

So far, so good - but so what? Why is business ethics important? Partly because it is crucial, in pursuing the commercial aim, to take very seriously how employees are treated, whether customers feel cherished, how the wider community perceives the business. Perhaps even more basic is the fact that, in business, we take ethical decisions all the time - whether we like it or not. The values in terms of which we take these decisions can be implicit or explicit. If left implicit, they cannot provide a consistent decision-making framework for the organisation. But once they are made explicit, they can be discussed and debated. They become part of the culture of the organisation: people know how to act and react and are aware of what is expected of them.

Again, the risk attached to not acting ethically can be very high, and not just in terms of financial exposure. Millions off your market capitalisation when your sins are discovered may be less damaging in the long run than loss of reputation, of management time and energy, of morale in the workforce, of the trust of customers and shareholders. These are the real risks to the business.

Does this simply boil down to the banal assumption that good ethics is good business? I think not. It would be disingenuous to claim that being ethical will always get you the contract. Individuals may well be unethical and get away with it, at least for a time. A trader may contrive to sell tawdry 'solid gold' bracelets to the gullible at £10 a piece if his 'company' works out of a suitcase in Oxford Street. But those who depend on repeat business, and who intend to survive beyond the end of the week, must consider the ethics of their activities and how this may affect their chance of success.

Business is not there to make people better moral agents but business without an ethical core is liable to defeat its own end. Business ethics is not a panacea, but a systematic concern with ethical relationships and responsibilities is often the most efficient and effective way to do business - and, perhaps more important, to stay in business.

The Top Ten Business Hardbacks

Beyond Certainty: The Changing World of Organisation

By Charles B Handy

Hutchinson; 176pp; £12.99

The State We're In

By Will Hutton

Cape; 352pp; £16.99

Re-engineering Revolution: The Handbook

By Michael Hammer & Steven A Stanton

HarperCollins; 352pp; £18

The Way to Win: Strategies for Success in Business and Sport

By Will Carling & Robert Heller

Little, Brown; 328pp; £16.99

Terence Conran: A Biography

By Nicholas Ind

Sidgwick & Jackson; 304pp; £25

Company Man: The Rise and Fall of Corporate Life

By Anthony Sampson

HarperCollins; 416pp; £20

The Warren Buffet Way

By Robert G Hagstrom

Wiley; 288pp; £17.95

Re-engineering Management

By James Champy

HarperCollins; 256pp; £17.99

Re-engineering The Corporation

By Michael Hammer & James Champy

Nicholas Brealey Publishing; 223pp; £16.99

The Fool and his Money: How to understand money markets

By Martin Baker

Orion; 256pp; £20.

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