Business Ethics Theories – Which Theory of Ethics do You Follow? Stockholder, Stakeholder, and Social Contract Theories – Part One

Not long ago I was the dinner keynote speaker at an ethics conference in Canada and considering my entrance it was kept low key who the featured speaker was – in other words my physical identity was a mystery.  But, as there was dinner I was invited, just not acknowledged for my role.  So…I’m standing in the buffet line with several of the professors (them not knowing I was their featured business ethics speaker) and small talk began.

“What theory of ethics do you follow,” one of the professors uttered to me as we partook of the salad offering of the evening?

Now I must admit it caused me to pause…as I had not anticipated having an intellectual discussion on the theories of business ethics.  Quickly my mind responded.

“I subscribe to the theory that keeps you out of prison!”

Needless to say that seemed to stop the advance of the conversation.  Of course, later that evening as I was introduced – walking in decked in my orange jump suit with handcuffs he understood more clearly why I answered as I did.

With all that being said – perhaps now is the appropriate time to discuss several of the theories of business ethics as knowing more about the intellectual side of ethics may pave a way for those in Compliance – HR – and Chief Ethics Officers to create the fundamentals to guide employees in helping make ethical decisions naturally!

The problem with discussing this topic is that far to much has been written that is “heady” and far from an easy read.  To that end, I am sure that my lack of scholarly writing will be disliked by some, but hopefully in the end – this will be easy to understand and therefore practical to apply.  Fair enough?

A STARTING POINT – One of the most challenging issues in talking about ethics theories is the disconnect between the academic ethics theorist and the person running the business.  Business owners and manages are less concerned about academic theory than they are practical application of tools that get the job done.  If your firm is featured on the front page of the Wall Street Journal for an ethics lapse, the business owner could care less which academic theory failed, they are more concerned about the practical impact to their business.

ETHICS – HOW DO I APPLY THEM IN MY BUSINESS?  That is the question that my clients ask.  In fact, the reason that I am sought after as a business ethics speaker is my practical approach to why we do what we do and how we can provide leadership to guide our employees or members to ethical behavior.

The question arises, “What am I applying?  I just know the difference between right and wrong.  Isn’t that enough?”

I hear these questions or comments over and over again and it becomes necessary at times to step back and consider that ethics are not set in stone, rather ethical decisions are based on what is best at the time based on all the facts and circumstances.  The real question is through whose eyes are the ethical decisions being made?

There several normative theories that have been designed to fit the business environment.  These business ethics theories are designed as an attempt to focus exclusively on choices involving business relationships.

The three leading normative theories of business ethics are the stockholder, stakeholder, and social contract theories. Because these theories are different and apply as seen through different sets of eyes – most would say only one can be correct.

Over the course of this series of articles we will explore the Stockholder, Stakeholder and Social Contract theories.

FOLLOW THIS SERIES AND FEEL FREE TO COMMENT!