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P H I L O S O P H Y F O R B U S I N E S S ISSN 2043-0736
http://klempner.freeshell.org/businesspathways/
Issue number 46
16th June 2008
CONTENTS
I. 'American Business' by Tom Veblen
II. 'Competition, Profit and Responsibility' by Geoffrey Klempner
III. International Society for Philosophers at Facebook
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EDITOR'S NOTE
Back in January, I had the great pleasure of meeting Tom Veblen, author of the
book The Way of Business which was featured in Issue 30 of Philosophy for
Business. Tom took the opportunity of a visit to London to make a day-trip to
Sheffield for lunch at our home accompanied by his wife. We had a fascinating
conversation which gave me greater insight into Tom's vision of business
'superiority'. In his fourth contribution to P4B, Tom returns to his favourite
theme, the question of what is distinctive about the American model of business
and private enterprise.
In my article, taken from unit 8 of the Business Pathways 'Ethical Dilemmas'
program, I consider the two main issues that worry critics of business: the
idea of competition in a society where success is rewarded and failure
punished, and the question of whether any amount of profit from a transaction
should be considered 'too much' -- and who decides.
I am pleased to announce that there is now a page for the International Society
of Philosophers on Facebook. Below, you will find details of how to join the
group at Facebook and a link to the ISFP Facebook page.
Geoffrey Klempner
-=-
I. 'AMERICAN BUSINESS' BY TOM VEBLEN
In 1993 a dozen intellectually curious business practitioners set out to better
understand the prospect for American business. Their continuing dialectic -- The
Superior Business Firm Roundtable -- provides useful insights into the
principles underlying the practice of business, the meaning of business and
business superiority, and the role of business in society.
The Way of Business: An Inquiry into Meaning and Superiority, authored by the
Roundtable's convener, provides a perspective on the Roundtable's discussions
through 2006. The book's purpose is to increase understanding of business's
role in the modern world. It deals therefore with the totality of business --
the social environment in which it is embedded, the cultural determinants that
bound it, the unique features of it technique and operations, and the character
and aspirations of its practitioners.
The First Principles of Business
American business practitioners are persons of practical bent whose overriding
absorption is to 'do the thing,' (business) here and now, in a competitively
effective manner. Their drive is to create and manage wealth as a means to
advance human well-being. Sovereign individuals and cultural stewards, they
collaborate politically and socially with their fellow citizens to shape and
advance the society of which they are a part.
Following 'the way of business' the superior practitioner endeavors to create
and sustain a superior state of being in which humility, gratitude, good faith,
and passion inform the intellect; all the while seeking to comprehend the grand
scheme of things, master the art of business, create a winning scheme, and act
(ordering the venture to sustain creativity, growth, and conservation;
collaborating to assure its competitive and cultural effectiveness; showing the
way to right ends). It is then, regardless of happenstance, that the superior
practitioner presses on, doing his or her best.
The superior practitioner understands business as a science, thinks of it as an
art form, and recognizes that sustained accomplishment depends in large part on
the creativity of its practitioner.
Nine principles inform The Way of Business and those who follow it:
1. 'Do the next best thing.'
The only constant in business is change. As with all living things,
practitioners and firms are perpetually in a 'state of becoming' -- growing,
conserving, creating, declining, dying.
This imagery recognizes the fundamental nature of business -- that it is
complex and evolving. Superior business practitioners and firms use a heuristic
business process to effect their transformation. Systemically distinguishing
fact from fiction, they are quick to apply what they have learned.
Thus it is that business practitioners who experiment,
seeking 'the next best thing to do,' are advantaged.
2. 'Make things work right around here.'
Why is it that some humans strive for perfection, knowing full well it is
unattainable?
There is no fully satisfactory answer to this question, but we do know that the
drive exists and that human endeavors are enriched by it,
The desire to make things work right -- the 'instinct of workmanship' -- lies
at the very heart of business accomplishment. The business process, in its most
elegant form, seeks to express this instinct throughout the firm, engaging an
entire business cohort in the search for business opportunity (discovery), the
decisions on how best and when to proceed (strategy), and the integration of
the business techniques and systems required to successfully execute the
strategic plan (administration).
Decisions on investment, practice, and technology are particularly crucial in
devising a winning business strategy, while the systems of human resource
management, finance, information, and logistics are particularly crucial in its
execution. Then too, the wise practitioner knows that the best thing to do next
in business is never clear-cut, that it is best, therefore, to reserve
decisions on action until the last possible moment.
Business firms that work consciously at improving their
decision process hold an advantage.
3. 'Serve the customer and the market.'
A business is defined in fundamental ways by its customers and marketplace.
The American culture celebrates individual sovereignty (self rule). In practice
this philosophic stance leads through free and open markets to democratic
politics, private enterprise, and scientific inquiry. In all three of these
spheres the 'customer' -- i.e. voter, investor, skeptic, buyer -- is king.
In business, those who work to serve their customer and
market have an advantage.
4. 'Promote the good.'
America is a collaborative society in which all of society's affiliative
endeavors -- education, government, business, worker association, religion,
research, the military, political party -- compete to advance their own and the
Collaborative's well-being.
Our culture, though welcoming change and the possibility of improvement in the
social condition, acknowledges that there is a price to be paid for social
progress.
In the real world, to advance human well-being, real people -- individually and
collectively -- must take risks and make real sacrifices. In striving for a good
society, we hold that progress is justified only when it provides good for the
greater number. We rely on marketplace competition and the rule of law,
ameliorated by the democratic political process, to resolve justly the
trade-offs. The future, where nothing is certain, can only be addressed in
terms of the desired ends and means.
Those in business who strive to advance the common good are
advantaged.
5. 'Deliver on promises.'
Business endeavors of significance require collaboration and collaboration
requires trust.
Quality stakeholders -- exhibiting clarity and unity of purpose, knowing the
right questions, and persisting in the face of the inevitable setbacks in
business -- are the basis for continuous improvement and superior performance.
Business firms that deliver on their promises attract
quality stakeholders and are advantaged.
6. 'Socialize.'
Applying the art of business -- discovering, producing and distributing
products, services, and techniques; providing jobs; rewarding stakeholders;
perfecting the market; supporting civic enterprise -- the business firm and
practitioner fulfill their social roll in creating and managing wealth. But it
doesn't end there.
In America, self-government is the idea. 'We, the people,' intend to govern
ourselves, gaining authority as individuals by acting responsibly and accepting
accountability, under law, for our acts and words.
The superior practitioner internalizes this ethic and weaves his or her firm
into the very fabric of its community, socializing to understand the full
dimension of the tasks at hand and participating in the creation of the
community's future.
Those in business who socialize understand better their
culture and gain an advantage.
7. 'Think and act globally.'
A new social order championing political freedom and justice is emerging. A
product of the European Enlightenment and American experimentation it intends
to advance the human condition through the rule of law, representative
democracy, protection of private property, and promotion of private enterprise.
Societies embracing this new order are making significant progress -- morally,
intellectually, materially. That's the good news. The bad news is that many
societies, wittingly or not, refuse to adopt the liberating concepts of
individual sovereignty, political inclusiveness, and free markets. And so,
falling behind, become sloughs of despond and breeding grounds for violence.
The authoritarian regimes, exploiting this situation, are an existential threat
to the world's collaborative societies which, threatened, are mobilizing their
peoples to assure their social identities and security.
Business practitioners who think and act globally position
themselves to anticipate the threats and opportunities that
attend the emerging new collaborative world order and are
advantaged.
8. 'Prepare for enterprise.'
The instinct for enterprise -- the urge to venture forth, to explore, to
discover, to go 'viking' in pursuit of a grand vision -- is surely one of the
most powerful of human proclivities.
Episodic and severely time constrained, successful enterprise favors energetic,
self-reliant, self-starters. The astute practitioner, preparing for enterprise,
acknowledges the primacy of growth, creativity, and conservation as measures of
performance and the necessity for initiation, workmanship, and stewardship to
advance the endeavor.
Preparing for enterprise, the superior business practitioner devotes himself to
right discovery, strategy, and administration, in order to position the firm for
sound problem-solving and decision-making, competitively effective action, and
the pursuit of agreed-upon objectives. We observe this preparing for enterprise
in all fields of human endeavor, be it science, politics, education, the arts,
the military, or whatever. And we observe it, prominently, in business.
Applied in everyday circumstance, these values position practitioners to invent
their own future, in 'real time,' through acts of will.
When done right business, just as any other performance art (take opera, for
instance), possesses the power to elevate its audience's vision and being and
thus, in certain circumstances, elevate the aims of an entire community.
In business, those prepared for enterprise gain an
advantage.
9. 'Press on.'
To solve the business problem, all dimensions of the human equation must be
comprehended: the intellectual to decide what actions to take and when to take
them, the emotional to sustain commitment and dedication to the venture, the
material to define responsibilities and accountabilities relative to the flow
of work and the tasks at hand, and the spiritual to satisfy the need for the
cohort to realize the larger meaning of its work.
The barriers to accomplishment are many. Puzzling them out is not simply a
matter of applying rational judgment. Common sense and passion too are required
to overcome the multitude of factors that frustrate even the most elegant of
business schemes.
According to Calvin Coolidge:
'Nothing in the world can take the place of persistence.
Talent will not; nothing is more common than unsuccessful
men with talent. Genius will not; unrewarded genius is
almost a proverb. Education will not; the world is full of
educated derelicts. Persistence and determination alone are
omnipotent.'
Business practitioners and firms that persist in the face
of adversity make their own luck and gain an advantage.
Precepts for Continuing the Dialectic
The Superior Business Firm Roundtable continues its dialectic, informed by the
following precepts:
- The fundamental purpose of business is to create and manage
wealth.
- The meaning of business and business superiority are
culturally determined.
- Business is a vocational art that favors the most
industrious, enterprising, and conjectural of its
practitioners.
- In the United States, ideas of human progress and private
enterprise are inextricably intertwined.
- A wide-ranging public dialogue on business superiority is
the best way to assure that American business expresses its
better nature.
In 1776, Adam Smith theorized in The Wealth of Nations that the most effective
way for an industrial nation to increase its wealth was to encourage commerce.
Nowhere in the world has Smith's theory proven more on target than in the
United States of America, a nation just in its infancy when Smith's theory was
published. Two centuries later, as a new global economy emerges and economists
debate how best to create wealth in the modern world, the forces that shaped
commerce in America warrant a closer look.
Starting as a clutch of adventurers and colonists, the American people have
transformed their nation, bit by bit, into a vibrant, aggressive,
urban-centered business civilization. It is, without question, the world's most
affluent society. Wealth, after all, means money and material possessions. More
abstractly, though, it can be 'individual well being' or, as Adam Smith chose,
'national well being.' By any of these definitions, America is a success story.
The creation of an American culture, a work-in-process called The American Way,
is an exceptional enterprise. Its centerpiece, an invention of remarkable
resilience, is a societal governance scheme combining free enterprise and
association, a free and open public dialogue, and a democratic (representative)
government. The idea of America, as expressed in such founding documents as the
Federalist Papers, the federal Constitution and its Bill of Rights, and the
Declaration of Independence, extended, reformed, and now embodied in the
political system, enables a society in which superior persons and institutions
seek to perfect their arts, on all planes striving for greater wisdom, harmony,
and achievement.
Americans are an inventive and irreverent bunch, guided by pragmatism,
idealism, and competition. Generally outgoing and optimistic, we celebrate the
individual and competence and hard work, while dreaming of community and
equality and leisure. The keys to social acceptance and a good life in America
have been (and remain) education, engagement, and real (income-producing)
property -- probably in that order. The pace of daily life is frenetic. Those
who disengage, or can't keep up, get left behind.
America's complexity both amazes and flummoxes us. There are more and more
vigorous and striving people, beguiling material things, compelling
technologies, and challenging ideas. Contending subcultures clash, a blend of
the pure and profane. Alienation is a recurring theme in America. The dark
sides of Americans -- greed, envy, dishonesty, exploitativeness, violence,
racism -- are endlessly debated in all sorts of public forums. In fact,
self-assessment is something of a national obsession.
From the beginning, Americans held a unique view that change can be managed to
effect improvement in our lives. As a consequence, social progress, given the
right aims, is beneficial. Alexis de Toqueville observed this phenomenon in
1836 when he wrote:
'They [the Americans] all consider society as a body in a
state of improvement, in which nothing is, or ought to be,
permanent; they admit that what appears to them today to be
good, may be superseded by something better tomorrow.'
Experimentally bent, fixated on competence and achievement, and evangelical
about its democratic origins and traditions, our civilization and its adherents
exhibit a remarkable drive for technological mastery and a somewhat mystical
faith in the utility of economic growth. Increasingly we look to the
affiliative endeavors of government, business, science, and education in the
search for national well being. There is less and less reliance on family,
tribe, and church for solutions.
The Foundations of The American Way
This complex interpenetration of people, technologies, and nature -- The
American Way -- is grounded in a few simple, but profound, ideas:
- Social change is inevitable and desirable, for it can
improve human well being. In the long run, reason will
prevail, for it is the most critical human faculty.
- Private property is the cornerstone of a free and
productive society.
- Politically, the individual is sovereign rather than the
state. Government will be democratic and representative,
its powers specified by the Constitution. The rule of law
will prevail.
- Material and intellectual progress is paramount and will be
advanced through the promotion of free and open endeavors in
politics, commerce, and science.
Considering how these ideas have played out over time, it is not inappropriate
to say that the genius of American thought is its recognition that society is
best served by a free play of talents -- politically, commercially, and
scientifically.
The American Way was not cut from whole cloth. It is, in large part, a product
of the European and Scottish Enlightenments. America's development into a
commercial powerhouse was particularly influenced by the ideas brought to the
United States by Scottish colonists and, later, by Scottish immigrants. These
ideas focused on the goodness of man, the desirability of happiness as a life
goal, and politeness (civility) as the root origin of all higher civilized
qualities. The Scots believed further that society and government existed to
release and make conscious the individual's moral sense. To be civilized was to
live in harmony with man and with nature.
But the Scottish also brought energetic action to America along with their
ideas. Scottish emigrants critically influenced the nature and direction of
American education. Jonathan Witherspoon, an active participant in the Scottish
Enlightenment dialogues, emigrated to America and transformed a little-known New
Jersey college into Princeton University, which became the model for American
higher education over the next two centuries.
The Scottish also rallied around the idea of American independence, becoming
deeply immersed in the public dialogue framed by the Federalist Papers.
Witherspoon went on to sign the Declaration of Independence, as did six of his
students, including James Madison. James Wilson, credited with the idea of the
Supreme Court and an independent judiciary, was a Scot, as were 21 others of
the 56 signers of the Constitution. It is arguable that Scottish Enlightenment
thinking buttressed the natural predilections of the business practitioners
Samuel Adams, George Mason, Benjamin Franklin, and George Washington, and that
the end result was a Constitution and government particularly conducive to the
growth and development of the new nation's commercial sector.
Scotland's emigres put their business acumen and worldview to work inventing
the modern form of American business. Particularly involved in this exercise
were such 'captains of industry' as Andrew Carnegie ('America would have been a
very poor show had it not been for the Scots'); William Cargill (founder of the
country's currently largest privately held business corporation); James J. Hill
(builder of the Great Northern Railway who came to be called 'the Empire
Builder'); and Cyrus McCormick (whose invention of the reaper opened up the
western prairies to grain farming).
Perhaps the most energizing single idea brought by the Scottish to America was
the belief that a 'good society' requires a prominent and vigorous commercial
component. Whether by cultural inheritance or design or happenstance, or
perhaps all of the above, it is clear from the American experience that private
enterprise, grounded as it is in self-interest, is a remarkable way for a
society to create wealth.
The early American business practitioners were, if anything, enterprising.
Removed from the class politics and business aristocracy of England, they
prospered by following their own self-interest; with prosperity, they came to
value their individual and commercial freedoms. In retrospect, it is perhaps
inevitable that the American colonists would begin to have revolutionary
thoughts about self-governance. Out of sorts with Britain's efforts to direct
their trade, regulate their businesses, and circumscribe their private lives,
they revolted.
The outcome was, to say the least, exceptional. The nation's founders, intent
on securing domestic tranquility and national security, established a
representative, nascently democratic government. They agreed that a free and
productive society was their collective goal and that private property and
enterprise would be its cornerstone. A system of common law was instituted.
Public education was mandated. Science engaged. Technology advanced. Commerce
and trade flourished. Investors were rewarded (and reinvested). The nation
industrialized and urbanized and grew wealthy.
In the course of this development one social endeavor in particular, the
publicly owned business corporation, proved especially powerful as a social
innovator and transformer. Through the late 1880s and into the early 1900s,
America's corporate business firms capitalized on the country's vast store of
natural resources, such as coal, iron ore, timber, copper, agricultural land,
and water. Collaborating with government, these firms orchestrated the
remarkable flow of people, goods, and ideas attracted to The American Way.
The process was not glitch free. A particularly rocky patch came in the late
1800s. The instinct of business to monopolize culminated with a monumental
confrontation between 'big business' and the central government. The downside
of business stood revealed, thanks to Teddy Roosevelt and the US Congress and
the rule of law. The worst of the monopolies were defanged. A reasonable
regulatory regime was established. Reasonable enough that, in 1926, President
Calvin Coolidge's observations on the benign nature of business were generally
applauded by the public. He said:
'After all, the chief business of the American people is
business. They are profoundly concerned with producing,
buying, selling, investing and prospering in the world...
[T]he accumulation of wealth means the increase of
knowledge, the dissemination of intelligence, the
encouragement of science, the broadening of outlook, the
expansion of liberties, the widening of culture... So long
as wealth is made the means and not the end, we need not
greatly fear it.'
The Idea of Private Enterprise
Then, as now, the genius of the American social system lies with its
exceptional use of private enterprise to unleash human creativity and effect
material progress. The system's governance is largely responsible for this
phenomenon. The law and a government 'of, by, and for the people' enable the
free play of talents throughout by assuring individual sovereignty and
self-expression at all levels of social interaction.
The State's role thus limited, the individuals of society and their affiliative
endeavors are free to advance their own interests as they see fit (within the
bounds of law and custom, of course). In politics, science, and commerce,
private citizens are society's most compelling instruments of progress.
No wonder that, in our open society, there is universal regard for, and
encouragement of, wealth creation. But is our culture's obsession with
specialization and self-interest and wealth creation too much of a good thing?
We wonder. Regardless, we do know that the American business civilization's
example is hard at work on the human psyche. And that, as a result, the entire
world is undergoing a profound change in social consciousness. Right or wrong,
the result is certainly disrupting the diverse local and regional cultures that
presently define human existence.
Embedded in this process of globalization, American business reflects the
distinct character of its grand culture. It, too, is experimental, striving to
perfect itself in the light of its idealized ends, modifying its governance,
and reconstituting its operations in the light of new knowledge and the need to
achieve greater productivity. It, too, celebrates competence, achievement, and
self-determination. It, too, possesses an enormous zest for growth and change
and adventure.
American business exhibits a remarkable drive for technological mastery, along
with a willingness to experiment and take risks. Wealth-creating ideas are
advanced through industry, enterprise, and speculation within a regulatory
regime that includes free-market forces, industry association, the rule of law,
and government regulation.
A Model for Global Wealth?
The widespread application of the Enlightenment ideas articulated by Adam Smith
is now creating a world of national economies increasingly dependent on the free
exchange of goods, services, and people. Driven by the demands of individual
consumers, business already may be the cornerstone of an 'enlightened world
order.' In this new world, commerce, science, and representative governments
are preeminent, and the state of the world can be defined by reason, dialogue,
and peace, rather than prejudice, ideology, and war.
Much is needed to materialize such a vision on a global scale. The idea that
business, from a social perspective, is a benign force for social change,
arguably, now drives the modernization of societies throughout the world.
Countries that provide encouragement for business firms capable of innovating
and competing in the global marketplace will improve their national well being
as this modernization proceeds. Those that resist this trend will, sadly
enough, fall behind.
At a minimum, the vision of a global business civilization requires a growing
cadre of business firms that can create and execute not only winning business
strategies, but at the same time can work collaboratively with other
affiliative endeavors in crafting the broader social strategies needed to
advance human well being. In the emerging global marketplace, American business
is fully engaged in the creation of a 'super' or 'world' business culture of
great power.
In such a world, it is clear that American business firms that weave themselves
into the very fabric of their society and markets -- creating their own future
by staying in step with the purposes of the world, defining and redefining
their own bounds, and perfecting their inner workings -- significantly advance
human well being. Exhibiting staying power, and lasting for generations and
lifetimes, rather than for just a few years, superior American firms are valued
cultural assets.
Evangelical about its methods and about its culture, American business, with
250 years of wealth-creating experience behind it, is 'on a roll' as more and
more of the world's nations open themselves to the benefits of corporate
enterprise. Needless to say, The American Way of wealth creation is
revolutionary, a wide-ranging experiment to determine the effectiveness of
alternative wealth creation methods. In this context, industries and firms that
improve the productivity, functionality, and/or acceptance of the goods and
services provided go on to invest in further experiments. Those that fail to
meet their customers' needs or expectations quickly pass from the scene.
Regardless of how one interprets the story of American wealth creation and
business, it is clear that the compelling myths of American business (fortune
and fame) and its omnipresence are profoundly influencing the world's cultures,
as well as our own. And a global field of companies taking risks, pushing the
boundaries, and creating entire new fields of business may be what
distinguishes the next 100 years as a century of unprecedented peace and
prosperity.
Postscript for the Business Practitioner
The remarkable business practitioner Benjamin Franklin, often referred to by
historians as 'the first American,' tells us that individual initiative is the
way to health, wealth, and wisdom. But he also said, 'As Americans we must hang
together, or surely we will hang alone.' That was his way of saying that
individual enterprise matters, collaboration matters, and culture -- The
American Way -- matters a lot.
Because we (all Americans) are social beings in the act of becoming, three
questions dog our way:
1. What is reality?
2. What is its meaning?
3. What is the next best thing to do and when will I do it?
Responding to the last and most compelling of these questions, marshalling
whatever common sense (wisdom), reason, and passion we possess, we do act,
endeavoring to do the next best thing -- determined to survive and prosper.
Only when the rightness of our endeavor is challenged do we see fit to address
the first two questions. At those times, prompted to ponder the way, we probe
for the reality and meaning of our existence.
As now. The world's social order is disturbed. The American civilization has
outgrown its national bounds. Globalizing we come into conflict with
individuals and societies compelled (for whatever reason) to resist our
endeavors. Their questioning the rightness of our acts gives us pause, and
pausing we (business included) are compelled by our own sense of rightness to
confront the present reality:
America's National Security The terrorist enterprise, highlighted by al Qaeda's
savage 9/11 attack on our cultural icons, calls into question American
aspirations and the need to rightly order our national priorities.
Nature Global warming raises the question of how best to sustain a healthy
natural environment.
Wealth The world's social progress rests on its nations'and affiliatives'
capacities to create and fairly distribute wealth. Eight hundred million
poverty stricken, nutritionally deprived persons are mute testimony to the
failings of our present schemes for advancing human well being globally.
Cultural Diversity An open and increasingly accessible global marketplace
brings together a diverse array of visions and values. Conflicts are
inevitable. Resolving these conflicts requires a collaboration that has, so
far, frustrated the best intentions of our political, religious, and
affiliative leaders.
Governance The quality of governance directly affects the capacity of business
to function productively, whether here or abroad.
Business Conduct The cultural assumptions underlying business are everywhere
different. We are in the early stages of codifying globally the principles
underlying business superiority.
National wealth creation and management is paramount in the efforts being made
to improve global well being. This issue awaits the full engagement of business
practitioners. The question is: how to persuade those business practitioners who
know what really matters in business (and in life) to take the lead?
(c) Tom Veblen 2008
E-mail: SuperBizRT@aol.com
-=-
II. 'COMPETITION, PROFIT AND RESPONSIBILITY' BY GEOFFREY KLEMPNER
Competing for profit
The idea that conducting business is, or can be an ethical activity faces two
serious obstacles which, if not overcome, would ruin any chance for a
meaningful business ethics. These challenges arise naturally through our social
conscience, and indeed seem to come from ethics itself.
The first obstacle is the thought that there is something intrinsically wrong
with human beings selfishly competing for gain -- when ethics teaches that we
should rather be helping one another and co-operating to make the world a
better place.
Critics who voice this objection do not usually have problems with the idea of
competing for athletic or sports trophies, or indeed for literary or scientific
prizes. When you lose a game, or fail to win a prize that may be a blow to your
self-esteem but that is (usually) the full extent of the damage. Whereas
companies which lose out in the competition for customers go bankrupt, and
their workforce face the spectre of redundancy. Our social conscience tells us
that we ought to offer succour and support to those in need, and avoid actions
which might lead to others being worse off as the result of our gains.
I have argued that there is only way to face up to this challenge: that is to
accept fully and without any reservation the implication that in order for
there to be a business arena there have to be losers as well as winners.[1] We
can seek to ameliorate the damage, provide economic or moral support for
workers who have lost their jobs or directors who have lost their companies.
But risk is the essence of business. If you don't have an appetite for risk,
there are many other professions to choose from, where the right qualifications
are a virtual guarantee of a secure income.
However, it has long been a bone of contention that the many -- indeed the
majority -- who are not in business or the professions do not have this
choice. They face the consequences, while business magnates take the risks.
The admission of a dimension of social responsibility not accounted for by the
strict rules of fair play complicates our view of the business arena but does
not alter its basic structure.
There is a saying, 'All is fair in love and war.' Some critics would cynically
add 'business' to this list. Yet even war is governed by agreed conventions. If
we could miraculously succeed in making wars a thing of the past, so long as
human beings survive there will still be competition in the search for a mate.
This recalcitrant fact so appalled some nineteenth century socialists that they
advocated the abolition of marriage and the establishment of communes where men
and women would exchange partners freely, casting aside the bourgeois
constraints of jealousy and possessiveness.
The more acute Marx saw this as nothing more than a feckless attempt to
overcome the marriage market under capitalism -- a form of 'prostitution' in
Marx's eyes -- by replacing it with 'universal prostitution'. Even in a Marxist
utopia, there will always be winners and losers in the competition for love.
How much profit does a person need?
What about the desire for profit? Is any amount of profit 'too much'? It is by
no means clear that the term 'fair' is being used in the same sense when we
talk of 'fair competition' or 'fair profit'. Competition is fair when the
participants observe the agreed ground rules, don't lie or cheat, and keep
their promises. Whereas, the assumption is that in pursuing profit we are
seeking maximum return on our investment -- the maximum profit obtainable --
whether that investment take the form of our money, our time, or our creativity.
Skill in playing the business game, the conditions of the market and luck
determine how much profit one makes. The traditional view is that provided that
you have competed fairly, there is no limit on what counts as 'fair profit' --
unless it is a limit imported from outside the business arena, imposed on the
participants as a result of government policy.
What limits, if any, should be placed on business activity is a matter for
political debate. There are fundamental issues in political philosophy at
stake: such as the question whether the government has a duty or even the right
to use taxation to redistribute wealth. However, it is generally accepted by all
but hardline libertarians that market forces are not a magic guarantee of the
optimal outcome. Governments have a duty to ensure that allowing free
competition in the business arena serves the national interest and does not
just benefit the winners. Once this point is accepted, the extent to which one
relies on government intervention or the 'invisible hand' of the market are
matters best approached with a pragmatic attitude.
For the wise judge of business ethics, 'enough profit is enough'. We compete
because we have to, not for the sheer sake of competing. We seek to make a
profit because we want to earn a living from the work that we do. The prime
imperative of any company is to survive.
Periodically in the British press there have been controversial reports over
so-called 'fat cats', CEOs hired to turn round the fortunes of large public
companies, attracted by lucrative compensation packages. If you deserve a seven
figure salary -- if you are that good -- then you have every right to demand it.
But why keep the money? Give your children a chance to make their way in the
world through their own efforts rather than leading a spoiled and pampered
life, is a commendable philosophy.
The rules of competition
Before we consider the rules of competition from an ethical perspective, it
would be useful to remind ourselves how rules for war and the Geneva Convention
came about. One would have thought that of all human activities, all-out war is
the one activity where there can be no agreed rules. Yet, the historical facts
show otherwise. A convention that benefits both parties -- for example, the ban
on the use of nerve gas or biological weapons -- is supported by mutual fear of
reprisal.
One obvious difference between waging war and conducting business is that in
the business arena there are laws enforced by the state. Untangling the strands
of the legal and ethical from the merely conventional is by no means an easy
matter, however. If you break a convention, even if it is not an ethically
grounded convention, is that not in itself an unethical thing to do? Consider,
for example, the gentlemen's agreement, 'We will not poach your customers
provided that you don't poach ours.' It could be argued that there is nothing
ethical or unethical here, but merely the question of whether upholding the
convention continues to be to the parties' mutual advantage.
On the face of it, it seems that the only question which one needs to consider
is, are you prepared for tit-for-tat reprisal if you break the agreement? If a
customer is sufficiently worth poaching, the answer to that question might well
be 'yes'.
On the other hand, consider the following scenario. A company aggressively
headhunting for executive talent hatches the novel idea of offering to defray
the full legal costs of executives who break their employment contracts in
order to join them. One would have thought that there ought to be a law against
this. But let us assume that you are acting on the best legal advice, and that
you have taken great care to ensure that you do not contravene the law of the
land. Is your idea unethical? or just sharp game play?
One response to this challenge is to up the stakes: make the penalties of
breaking a contract increasingly severe. But this has limits too. A contract to
the effect that you forfeit your house and all your possessions if you break the
terms of your employment would not be upheld in any court of law -- or, at
least, one hopes that it would not be. Why indeed stop there? Suppose the rival
company offered to pay for the house and everything else. Then the next logical
step is to demand limb amputation as a penalty for contract breaking.
In the world of professional sport, for example the British Football League,
recognition that individual star players have immense value for the sporting
and financial fortunes of a club -- measured in many millions -- would have
quickly got out of hand were it not for the rules enforced by the Football
League which has the power to ban players from appearing for a set number of
league games, or seasons -- or in the most severe cases, for life. No business
association or league has that power to remove an individual completely from
the arena in that way. In business, the most that can happen is that you get
expelled from your professional or trade association -- or the stock exchange
-- and are forced to move into a different line of work.
In the absence of sufficient legal sanctions, or a body with the draconian
powers of the Football League, there has to be an ethical dimension, a basis
for deciding the limits of acceptable behaviour. But what possible basis can
this have? The point of arguing over hard cases in business ethics is to
provide a rational justification for our ethical intuitions; for saying,
'such-and-such, but no more, is the limit of what we are prepared to accept.'
Otherwise our intuitions are nothing more than our own fallible subjective view.
Deals and contracts
A business ethics which consisted merely of conventions adopted for prudential
motives -- like the conventions of war -- would not be worthy of the name. But
how can we show that there is more to the rules which govern the business arena
than the merely conventional?
One eminent example would be the idea of the contract. In the case of two or
more parties entering into a contract, what is at stake is more than any
convention, however such a convention might be enforced. A contract is a
promise. And it is wrong to break a promise, in the same sense that it is wrong
to tell a lie. Not wrong just because it has bad consequences, but simply by
virtue of the fact that it is unethical.
'I thought we had a deal!' is the eternal complaint of the disappointed
business person who took their associate's statement of intention for a
promise. A statement of intention can be truthful or untruthful. If I say that
I intend to do such-and-such, when I have no intention of doing such-and-such,
then I have lied to you, no less than if I make a factual statement which I
know to be untrue. It is wrong to lie. But I haven't 'broken my promise'
because I didn't make one. Nor, if at the time I did honestly intend to do
such-and-such, can you accuse me of 'breaking my promise' or 'going against the
deal' if I later change my mind.
Of course, we don't like to have dealings with people who are unreliable.
Leaving aside sexist jokes about a 'woman's prerogative', it is a defect in
character -- a ground for personal criticism -- that an individual repeatedly
forms all sorts of plans with the best of intentions which he or she does not
carry through.
It is not for nothing that when business people make a deal, even if nothing is
put in writing, they perform a ritual action such as shaking hands to signify
that they have indeed promised, and not just stated their sincere intentions.
When a deal is done, it's done. You had the chance to change your mind right up
to the moment when you shook hands, but at that precise moment you voluntarily
surrendered that option.
Yet, despite the importance of the distinction between a promise and a
statement of intention, there are still grounds for saying that a declaration
of intention, in circumstances where you know that other persons will commit
themselves to a particular course of action on the assumption that you intend
to carry out what you intended, does leave you potentially open to ethical
criticism, and not just criticism of your unreliability or lack of
decisiveness. There are circumstances where it is wrong to mislead, even if you
did not deliberately intend this at the time. You should have taken more care to
qualify your statement. The law has nothing to say about this. You haven't
broken any promise or contract, but you still bear a portion of ethical
responsibility for the consequences, and at the very least you owe the other
party a sincere apology.
Taking fair advantage
Breaking contracts and agreements is one of many ways in which competitors seek
to gain unfair advantage. Yet there are many ways of gaining a fair advantage.
Gaining and keeping an edge over your opponent is what competition is all about.
It goes without saying that there are many situations where it is not necessary
to compete, where the outcome is a 'win-win' situation. Not every business deal
is a zero sum game. Co-operation is no less important in business than
competition. We understandably place great value on a kind of deal where both
parties feel that they have benefited to the maximum extent possible, where
both 'come out on top'. But this is a case where what happens sometimes could
not happen always, so long as human beings are allowed the freedom to pursue
their own interests and aims. Human beings don't all want the same things, we
don't all see things the same way. Or, alternatively, we do want the same thing
but one party's gaining that thing -- that prize or objective -- is necessarily
the other's loss, their failure to gain it.
In my article, 'Taking Fair Advantage', I consider the various ways in which a
buyer can gain an advantage through exploiting a seller's lack of knowledge, as
a result of which the buyer pays less than they would have done otherwise, or
less than the going market rate:
I have heard it said that the ideal outcome of any sale is
one where no-one 'loses' and buyer and seller are equally
happy. That may well be so. But the point is that such an
outcome cannot be guaranteed or enforced. The price of
making 'equal gain' a necessary condition for taking part
in the game of buying and selling would make the game
impossible to play.[2]
Of course, a seller can be 'happy' in their ignorance. But we are not talking
about this. We are considering whether, in fact, the buyer and seller have
benefited equally from the deal regardless of whether the seller is aware of
this or not. In the case where the canny buyer takes fair advantage over a less
canny seller, the seller would be less happy on discovering this fact than they
were before. However, for players in the business arena this should not be a
cause for resentment, any more than in the case of the sports person who
recognizes that they have been beaten fair and square.
(In the article I make an exception for the case where a professional buyer
takes advantage of an amateur seller's trust -- the world of antique dealing is
one notorious example.)
It is interesting to investigate why our intuitions see the reverse situation
-- where a seller takes advantage of a buyer -- somewhat differently. While
getting a bargain is regarded as something to be proud of, we are generally
critical of sellers who overcharge for an item. Companies who take advantage of
scarcity to put excessive markups on their products are accused of
'profiteering', or even 'racketeering'. But how exactly is this unethical? Why
the disparity?
One of the main reasons arises through the perceived inequality of power
between companies -- especially large companies -- and individual consumers.
Consumer associations exist partly to reduce this inequality but they cannot
remove it completely.
There is a world of difference between the high profit margins of companies
marketing prestige brands, such as Apple Macintosh computers, and the profits
made by the slum landlord, or food suppliers who take advantage of scarcity to
hike their prices. But, once again, is this really a question of business
ethics? We have said that 'enough profit is enough'. But what is enough? and
how are we going to enforce our view of what is 'enough' against competing
views?
If you are an individual or a company, you have the ethical right to sell an
item at greater than the market rate just as you have the right to purchase an
item at less than the market rate. From the point of view of logic, there is no
difference here between the two cases. However, what we do with 'right' is not
always commendable or praiseworthy. There are plenty of cases where very bad
things are done within the letter of the law.
The problem for business ethics here is that we are not dealing -- as in the
case of truthfulness or promising -- with a case of principle but rather with a
matter of judgement. There is no precise point where greediness for profit
shades into racketeering, or whether excessive zeal in pursuit of profit shades
into greed. Yet we all know a case of racketeering when we encounter one.
What these considerations show is that in laying the foundations for business
ethics we need to reckon with a broader notion of responsibility, based on an
evaluation of the consequences of one's actions. It is an area which
governments have a duty to take the lead for the very reason that where there
is no identifiable point of principle, we need an authority to set acceptable
standards and, if necessary, enforce them.
FOOTNOTES
1. Geoffrey Klempner 'The Business Arena' Philosophy for Business Issue 5
http://klempner.freeshell.org/businesspathways/issue5.html
2. Geoffrey Klempner 'Taking Fair Advantage' Philosophy for Business Issue 39
http://klempner.freeshell.org/businesspathways/issue39.html
(c) Geoffrey Klempner 2008
E-mail: klempner@fastmail.net
-=-
III. INTERNATIONAL SOCIETY FOR PHILOSOPHERS AT FACEBOOK
Trinidadian Roger Moore (no relation to the actor) has an Advanced Diploma in
Business Administration and is a keen supporter of the ISFP and Pathways.
Yesterday, Roger sent me an email with an intriguing idea: to start a group of
ISFP members on Facebook, one of the leading internet social networking sites.
Roger has taken the initiative and set up a Facebook page for the ISFP which
you can find at the following URL:
http://www.facebook.com/group.php?gid=25401096290
Currently, there are two ways for ISFP members to contact one another:
ISFP members who opt for open membership are listed on the Open Members page of
the ISFP web site at http://isfp.sdf.org/members.html
ISFP members also have the opportunity to participate in the Pathways online
conferences hosted at http://www.nicenet.org. The current conference topics
are, 'Living Philosophy', 'Writing Philosophy' and 'Reading Philosophy'.
However, with more and more people joining Facebook, this seems a perfect way
to encourage dialogue and indeed to promote the International Society for
Philosophers, which currently has over 1400 members in over 70 countries around
the world.
As Roger writes:
'It may be a nice way to have encourage members to engage in
discussions and to know each other better... it might catch
the eye of Internet browsers who were in search of
something they didn't realise existed.'
I am asking Roger to administrate the ISFP Facebook page. If you are an ISFP
member, please consider joining us. If you are not yet a member of the ISFP
then this would be a great opportunity to join. Life membership is just 15 GBP,
or 10 GBP if you are a student or retired. All Pathways students have free ISFP
membership.
-- Keep up the dialogue!
(c) Geoffrey Klempner 2008
E-mail: klempner@fastmail.net
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