Why Do Businesses Make Unethical Decisions?

It is a well-known fact that businesses, in pursuit of financial gain, sometimes engage in unethical decisions. One prominent example is the practice of medical companies bribing others to sell expired medicines to unsuspecting individuals. This unethical behavior can be rooted in various factors, such as the significant financial stakes involved, the calculated risk of being caught, and the overarching notion that taking the path of least resistance often leads to unethical actions.

The Power of Milgram's Experiments

Stanley Milgram's famous experiments shed light on how individuals, when placed in a specific psychological state, are willing to perform morally reprehensible actions. In these experiments, participants were instructed to deliver what they believed were painful electric shocks to another person. This study highlighted how a person can be manipulated into carrying out unethical actions if they are placed in the right frame of mind or under the correct psychological conditions.

Limited Liability Corporation: A Legal Shield

A common legal framework that facilitates unethical behavior by businesses is the Limited Liability Corporation (LLC). In a world where the distribution of risks is crucial, LLCs serve as a protective barrier against personal responsibility for business failures. By spreading the investment risk among a wide range of stakeholders, these corporations reduce the likelihood of stakeholders being held accountable for their unethical actions. The British East India Company (EIC) is a historical example of such a framework in action.

The EIC engaged in activities such as the opium trade and was responsible for the famine in Bengal due to imposed taxes. Powerful investors from both within and outside England participated in these activities knowing that they would avoid personal legal repercussions. This illustrates how limited liability creates a shield that allows unethical practices to occur without fear of individual legal consequences.

The Survival of the Fittest in the Market

Another reason for unethical behavior in businesses is the fierce competition in the marketplace. In order to maximize profits in the shortest possible time, corporations may resort to unethical practices. These actions, if successful, can lead to rapid growth and power, making it more difficult for other smaller or more ethical companies to compete. Over time, the market can become dominated by unethical corporations, leading to a homogenization of business ethics.

The Philosophy Behind Ethics and Commerce

Some philosophers, like Andrew J. Andrews, have posited that ethical behavior in business may not always be beneficial. For instance, they argue that violence and unethical behavior can be beneficial in specific contexts. Andrews suggests that concepts such as war and insurance companies could be rendered unnecessary if there were no need for them, implying that being 'good' may sometimes be seen as being 'bad' from a business perspective.

The underlying message here is that ethical behavior in business is often a balancing act. While it is important to maintain high ethical standards, it is equally crucial to recognize that such standards may not always align with the ruthless realities of commerce. Understanding this dynamic can help businesses navigate the complex world of ethics and decision-making.

Ultimately, the decisions made by businesses in pursuit of profit often reflect the broader ethical landscape of society. By considering the factors that influence these decisions and the broader implications of their actions, we can work towards creating a more ethical business environment.