Can academia and corporate leaders work together to revitalize business ethics?

Academic institutions and corporations are headed towards a nasty break-up over the issue of business ethics? Can we use academia to inform corporate ethics practices and mend this unstable alliance?

Signs pointing to the rising popularity of business ethics are everywhere. Over 500 business ethics courses are currently taught on American campuses, 90% of the nation’s business schools provide training in this field, there are more than 25 textbooks and 3 academic journals dedicated to this topic, and there are at least 16 business-ethics research centers in place.

Despite this boom in business ethics, scholars suggest that a curious paradox has presented itself: the more this discipline is explored in academic spheres, the larger the disconnect between business ethics and this domain seems to become. In fact, ethical violations and misconduct have plagued the contemporary global landscape at unprecedented rates.

Recent scandals have brought the focus of corporate ethics to the intersection of academia and business practices. As I continue to explore the merits of corporate social responsibility and corporate ethics, I gained new insight over this past week at SAS, specifically about the way in which academia can influence corporate ethics practices. Upon attending a UN webinar discussing UN corporate sustainability initiatives, I was introduced to the unique role of business education and responsible management education in promoting sustainable, social development goals of corporations.

Considering the discourse at the UN webinar, I intend to highlight the way I grappled with the following questions:

  1. To what degree, if at all, should academic institutions be held responsible for ethical debacles committed by business leaders they educate?
  2. What capacity and functions do academia have in promoting ethical corporate practices?
  3. How can we align the interests and research of academia with the goals of corporations in the arena of corporate ethics?

Business or corporate ethics refers to the study and/or implementation of appropriate business policies and practices concerning conceivably controversial subjects. Discussions of business ethics include corporate governance, insider trading, bribery, discrimination, corporate social responsibility, and fiduciary responsibilities.

The UN webinar explored the complex gap between academic understandings and professional management/corporate execution of business ethics. Scholars and leaders in the webinar emphasized that companies are seeking assistance in resolving ethical dilemmas and navigating competitive and institutional pressures that might lead corporate leaders away from making the right and ethical decision. In fact, recent surveys suggest that over 3/4ths of corporations are actively building ethics into their organizations.

This startled me; I believed that corporations simply made conscious decisions to be “evil” and were consistently and intentionally choosing to circumvent policies and procedures and engage in unethical behavior to maximize profit. Rather, it seems that companies desire to maintain ethical practices, but require further guidance to do so. This drove me to look at academia’s engagement with business ethics.

In my research, I found that the discipline and study of business ethics has the potential to cultivate better corporate policies and practices. However, in its current state, the insight provided by academia is inadequate and needlessly theoretical. Business ethics, as taught and researched by academia right now, occupies an idealistic moral high ground, one that is removed from the real-world concerns and problems facing business leaders. During the webinar, various scholars proposed that academia’s notions of business ethics are often absolutist and oversimplified, leaving little room for the nuances and “shades of gray” that most business leaders encounter in ethical dilemmas.

At this point in my understanding, I was confused. My original approach and attitude about the nature of corporate ethics seems to be the prevalent mindset in business ethics discussions in academia. In creating binary, black-and-white labels of “right” and “wrong”, academia dichotomizes ethics and profit.

However, as I dove deeper into this area of study and the webinar progressed, I learned that business ethics as applied and presented by academia are not solely responsible for the woeful state of corporate ethical practices. Company leaders should also be held accountable for their inadequate application of the enterprise of business ethics. The webinar argues that corporations should adopt the expansive view of the law and market adopted by business ethics’ curricula and research in academia. This view would be able to help corporate leaders avoid viewing ethical behavior and profit as solely mutually exclusive, and provide guidance in situations where they might actually be mutually exclusive. It emphasizes the short-term vs long-term effects of ethical practices for businesses. Essentially, it acknowledges that ethical behavior may prove costly to a business’ bottom line in the short-run; however, in the long-run, the market will reward a corporation’s commitment to ethics.

In attempting to understand this concept, I was reminded of the recent growth of sustainable fashion brands. “Fast fashion” brands have recently come under scrutiny for engaging in destructive and unethical environmental and labor practices. At the same time, companies such as Everlane, Reformation, Rent the Runway, and Amour Vert have been lauded for instituting ethical practices in the full lifecycle of the product – from design, sourcing, and production, to purchase – and catalogs the effects of this process on the environment, workers, local and regional communities, and consumers.

In this example, the fast fashion companies were highly profitable in short run. Now, they are facing seemingly insurmountable challenges, including a decline in the volume of consumers, having to file for bankruptcy, and unsustainable and unadaptable models. Simultaneously, marking the decline of fast fashion, sustainable and ethical fashion companies have gained popularity, consumers, and are seeing increased financial success. Despite struggling to gain traction and maintain significant profit margins initially, due to the costly nature of maintaining a commitment to ethical practices, sustainable fashion has come out ahead. This demonstrates that ethical behavior can pay off! But, this also leads me to wonder: is that why it should be promoted and adopted? Is it ethical to comply with ethical standards with the intention of achieving success or gaining a reward?

The webinar ended with recommending a new perspective/mindset for corporate leaders and business ethics scholars, one that is aware of and accepts the chaotic world of mixed motives. The next task for academia and business leaders, the scholars explained, is to avoid abstract theorizing that pits ethical behavior against company goals, and to innovate, design, test, and scale new corporate structures, incentive systems, and decision-making processes that are more accommodating of conflicting interests and mixed motives. I understand that [if and] when academia engages in idealist moral critiques of corporations’ pragmatic strategies, they do little to encourage and help the adoption of genuine business ethics. So, if we can bring academia and corporate leaders together to reconcile profit motives and ethical imperatives (a lofty ambition in and of itself!), we might make headway on this issue.

For now, my takeaway is that business ethics as approached by academia would benefit from less demonization of corporate leaders and more practical analyses of where business ethics can fit into business structures. Concurrently, it seems that businesses would benefit from seeking partnerships with academic institutions and scholars and engaging in open-minded and straightforward discussions about the “gray-area” ethical dilemmas they must confront.

I feel oddly uncertain after this week. I understand a new problem and seem to have identified a few ways to address it. Nonetheless, overwhelmingly, I remain disoriented despite this newfound clarity. Specifically, I know that business leaders are human beings who display the normal range of ethical instincts. At the same time, I also recognize that business leaders wish to see great financial success for their company and have a responsibility to answer to their shareholders/investors/etc. At what point does this desire for constantly maximizing profit overtake the natural human instinct to not compromise ethical instincts? I am attempting to delineate between the following situations:

  1. A situation where you do not know what is “right” or what is “wrong”
  2. A situation where you do not know what is better (“right” vs “right”)
  3. A situation where you know what is “right” but fail to do it

My preconceived notions about corporate ethics postulate that company leaders know what is “right”, but deliberately choose to do otherwise (again, the idea of “evil” malicious actors). I now struggle to accept this as the reality of corporate ethics. Is there a way to separate the “evil” companies from the ones that struggle to assess risks in complex ethical dilemmas? Would this separation, if possible, give us the ability to see better business practices? I am left captivated by the potential in using academia to support and bolster companies that are ill-equipped or uncertain (like all of us are when deciding in an ethical dilemma/impasse) when tackling ethical predicaments. Furthermore, I notice myself becoming wary of the narrative that demonizes corporations for their decisions. At the same time, I find myself unwilling to let go of the critical, maybe overly critical, mindset I have toward corporate ethics. I hope to come to terms with a better way to classify the relationship between corporate behavior (ex. unethical behavior) and social progress.