Therefore, Adam Smith’s image of the ‘‘invisible
hand,’’ by which all benefit from the self-interest of
entrepreneurs make the business market incompati-
ble with moral interference, or Bernard Mandeville’s
credo that the self-related behavior of stakeholders is
the condition sine qua non of economic prosperity
and the driving force of the civilization process, shall
be critically reflected. While private property and
the accumulation of wealth foster economic pros-
perity and general welfare, they should not go
unconstrained. A striving for profit that is driven by
avarice and greed violates the notion of justice and is
inconsistent with a humanistic and universal concept
of righteousness.
In this article, we assert that any ethical reinvigo-
ration of the business world can only be accomplished
when the business realm imposes upon itself some
effective measures of self-regulation that go beyond
the increasing number of laws and rules passed by
governing bodies and requirements mandated by the
regulatory authorities. We also suggest that ethical
custom is not enough. Since business has individual-
istic foundations and is real in its individual agents
only, a sense of personal morality needs to be devel-
oped that takes into account deontological principles1
of ethical conduct. While we acknowledge that the
room for pursuing non-commercial forms of social
responsibility is limited in economic enterprise, we
argue that this room, however limited, has to be en-
tirely filled by personal ethical responsibility. Ethical
responsibility in the business world is not all-encom-
passing, but whatever it offers for ethical behavior to
take place, should be exploited to its fullest.
Framing the challenge
If humans have a choice to act, being ethical, to state
the obvious, is about how human beings ‘‘ought’’ to
act; and consequently, business ethics is about how
business agents ‘‘ought’’ to act. For both, the acting
takes place in a social and political human environ-
ment in which mutual constraint, based on custom
and law, guides human interrelations.
Quite naturally, the successful outcome of applied
business policies and strategies depends on achieving
targets and goals. That the business world is profit-
oriented and thus focused on results and outcomes is
a fact – and rightly so. However, when the spotlight
is on the result, there can be an increased potential
that an inappropriate course of action is taken, as can
be observed relating to earnings targets. On the one
hand, earnings targets should motivate management
to conduct business affairs so that earnings goals can
be achieved. On the other hand, reaching earnings
targets at all costs can result in behavior where the
use of any means anticipated to help in achieving this
goal is considered to be justified. Indeed, a review of
Securities and Exchange Commission (SEC)
enforcement releases for accounting irregularities
shows that often earnings are overstated or expenses
understated in order to meet analysts’ or Wall
Street’s targets for revenue or net income.2 Since
Enron, the public has become ever more aware of
instances where corporate executives used dishonest
means in order to meet earnings or growth objec-
tives. One can question whether the focus of
investors as well as management on the end-result
may have justified, at least in the minds of the
corporate executives involved, the ‘‘need’’ to use
whatever means available to meet profitability goals
and hence acquire the rewards so ‘‘earned.’’ Ratio-
nalization of this type considers the outcome,
without an adequate consideration of the means to
achieving the outcome.
Utilitarian ethics, also designated as teleological3 or
consequentialist ethics, focuses on what is considered a
good outcome of an action related to the acting
individual’s (or group of individuals) notion of good
and bad. A thing is done for some personal and/or
collective benefit, and not necessarily because it is
the right thing to do. The standards of right and
wrong, of virtue and vice, are often measured and
decided based on what is in one’s best interest,
without sufficient consideration of the rights and
interests of others. The basic tenet of utilitarianism
defines the ‘‘good’’ (individual or collective happi-
ness) independent of the ‘‘right’’, and introduces
then the right as that thing that maximizes the good.4
Often, and not just in business, self-indulgence, self-
promotion, in short, material selfishness can be
found at the root of human behavior. When the
spotlight is on the result, egotism – be it in its
individual or collective form – is not far away.5
Applying Bentham’s principle of the ‘‘greatest
18 Edwin R. Micewski and Carmelita Troy
happiness of the greatest number of people’’ (1996,
p. IViii) to the level of the business enterprise, the
general result regarding the collective happiness of all
stakeholders,6 would lie both in profit and in effi-
cient business conduct.
According to utilitarian ethics states that the
outcome determines the ethical appropriateness of
any activity. Agency theory (Eisenhardt, 1989; Stroh
et al., 1996) addresses how influence agents (i.e.,
managers or executives) towards those outcome-
based activities that result in what the principal/
owner desires. ‘‘The job of agency theory is to help
devise techniques for describing the conflict inherent
in the principal-agent relationship and controlling
the situations so that the agent, acting from self-
interest, does as little harm as possible to the prin-
cipal’s interest (DeGeorge, 1992). This is often
accomplished by paying the agent based upon the
degree to which he or she achieves the outcomes
desired by the principals. However, it is when the
outcome, such as profit-making, becomes the sole
focus of business behavior that a utilitarian approach
can become problematic and impair the rights of
others.
