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TheRealityandMoralityofBusiness

TheRealityandMoralityofBusiness
byEdwardW.Younkins
Businessisbasedontheideathatselfinterestandthedesireforprofit
aremoralandgoodandthatthereareappropriateandinappropriatewaysto
Art
profit.Onessurvivalandflourishingasahumanbeinginvolvesthecreation,
preservation,anduseofwealthinselffulfillingways.Businessisconcerned
Articles
ByRating
withwhatisimportanttopeopleslivesandisafundamentallymoralactivity.
ByAuthor
Wealthenhancementisthedominantgoalorendofbusinessactivity.Atroot
ByCategory
businessismorallylegitimatebecausethewealthitseeksisnecessaryforhuman
AynRand/ObjectivismSightings existenceandcanbeattainedthroughnonopposingvoluntaryactionsbetween
individuals.Businessprofessionalsdevotethemselvestosecuringprosperitya
BlogEntry
validendofhumanlife.
Books

Weshouldtakeapositiveviewofbusinessenterpriseandachievementand
CDs
shouldhonortheactofcreatingvalue.Aprincipledcommitmenttoproduction
FreeRadicalUpdates
shouldbevaluedasamoralaccomplishment.Unfortunately,thereisasenseof
suspicionof,andbiasagainst,businessinoursociety.Manyintellectualsare
Jokes
disdainfulregardingthemoralmeritsofbusinessanddeclarethefocusof
LocalClubMeetingPlans
businessonprofitsandprosperityasimmoral.Mosttextbooksinbusinessethics
andrelatedareasareprejudicedagainstbusinessandarenotrepresentativeofthe
Movies
realbusinessworld.Toomanymisconceptionsandmisstatementshavebeen
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disseminatedaboutbusinessandbusinessmen.Thereisadireneedforbooks
writtenbyauthorswhoareintouchwiththerealityandmoralityofbusiness.
Objectipedia
Fortunately,thereareseveralbooksthatcharacterizebusinessandthe
OpinionPolls
businessmeninamorefavorablelight.Forexample,thereareAynRandsAtlas
Products
Shrugged,WhyBusinessmenNeedPhilosophy(editedbyRichardE.Ralston),
andCapitalism:TheUnknownIdeal.Thenthereareeditedcollectionssuchas
Quotes
TiborR.MachansCommerceandMorality,andRobertW.McGeesBusiness
StaffAnnouncements
EthicsandCommonSense.Inaddition,therearetextbookssuchasJamesE.
ChesherandTiborR.MachansTheBusinessofCommerceandmyownbook,
VideoLink
CapitalismandCommerce.Also,thereisDonnaGreinerandTheodoreB.
WebDirectory
Kinnisbook,AynRandandBusiness.Finally,thereareAndrewBernsteins
forthcomingbookcalledTheCapitalistManifestoandStephenHicks'workin
processentitledTheVirtuousDollarChasers.Thisessaywilltakeabrieflookat
theperspectiveonbusinessthatistakenintheseaboveworks.

RealityIsNotOptional

Realityliesoutsidethehumanmindandiswhatthemindfocusesoninmans
effortstodiscernanddiscovertheprinciplesrelatedtotheoperationofthe
physicalworld.Peopleneedtounderstandthenatureofmanandtheworldand
thenatureofhumanactioninordertodeterminehowtoact.Theorderofnature
isnotinventedbyman.Rather,heuseshisuniqueattribute,reason,toapprehend
theorderbywhichheisbound.
ActivismReports

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Workisbuiltintothehumancondition.Menmusttransformpartsoftheirnatural
environmentintoconsumableformsinordertosurviveandprosper.Wealthhas
tobeproducedbymen.Natureprovidestherawmaterials,butmanmustusehis
mindtouncovertheknowledgeofhowtousethemandmustusehisphysical
abilitiestoconvertthemintousableform.
Productionisthemeanstothefulfillmentofmensmaterialneeds.The
productionofgoods,services,andwealthmetaphysicallyprecedestheir
distributionandexchange.Whenamanactsrationallyandinhisownself
interesthemakeswealthcreation,economicactivity,andthescientificstudyof
economicspossible.Tosurviveandflourish,menhavetoproducewhatis
necessaryfortheirexistence.Therequirementsoflifemustbeobjectively
identifiedandproduced.Thefactsregardingwhatenhancesorrestrainslifeare
objective,establishedbythefactsofreality,andbasedonpropercognition.
Therearerequirementsandrulesbuiltintothenatureofthingswhichmustbe
metifwearetosurviveandprosper.
Productivenessisthevirtueofusingonesmindtocreatethevaluesrequiredto
sustainhislife.Peopletendtobeproductiveandsuccessfulwhentheyare
rationalandselfinterested.Productionrequirespeoplewhopracticethevirtues
ofrationalityandselfinterest.Rationality,acommonstandardinhumannature,
isadiscerningapproachtotheselectionofbothendsandmeans.Selfinterestis
alsoavirtuebecauselivingforhumanbeingsisultimatelyanindividualtask.
Becausethemaintenanceofeachpersonslifeisconditional,itisnecessaryfor
eachindividualtochoosetothink,plan,andproduceifhewantstosurviveand
flourish.Becauseliferequirestheproductionandconsumptionofvalues,itis
imperativetodeterminetheprinciplesthatenableindividualstoproduceandto
tradewithoneanother.
Amanmustobtainwhatherequires,ifheistomaintainhislife.Eitherheor
someoneelsemustproducethethingsthatherequires.Thereisaninnate
inequalityofmenwithrespecttotheircapacitiestoperformdifferentkindsof
work.Humanbeingsarebornunequalwithregardtotheirintellectualand
physicalabilities.Divisionoflaborisalogicaloutcomeofmansrational
reactiontocountlessnaturalconditions.
Afreesocietyrecognizesindividualrightsandleaveseachindividualfreeto
think,toactonhisthoughts,andtoenjoytherewardsofhisactions.Businessin
afreesocietypermitsonetoperformaspecializedtask,atwhichoneexcels,
whilegainingthebenefitsofothersperformingtasksatwhichtheyexcel.
Becausetalentsvaryfromonepersontoanother,theycancreateandenjoymore
iftheyspecializeinproductionandthenexchangewithothers.Producerscreate
valuesandthengainadditionalvaluesfromothersthroughvoluntarytrade.
Scientistsdiscovernatureslaws.Engineersusetheselawstodevelopnew
productideas.Inturn,thebusinessmantakesthetheoreticalachievementsofthe
scientistsandengineersandturnsthemintoreality.Thebusinessmantakes
scientificdiscoveriesintohisfactoriesandtransformsthemintoproductsthat
meetmensneedsandincreasethepleasureoftheirexistence.
TheNatureandRoleofBusiness

Businessmenmustbecommittedtoreality.Afterscientistsandengineers
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uncovernewknowledge,itisthetaskofthebusinessmantodeterminehowto
usethatknowledge.Rationalthinkingisthecauseofwealthproduction.The
businessmansearchesforopportunitiesandcombinesland,labor,andcapitalto
createwealth.Themarketcreatesbenefitsintheformofnewandbetterproducts
andlowerprices.Abusinessmanbenefitsonlybyofferinggoodsandservices
thatothersarewillingtobuy.Ifhedoesnotcatertothedesiresofothers,hewill
notprosper.Heenablesotherstoattainwhattheywantandtopursuetheir
visionsofhappiness.Thebusinessmanisanappropriatesymbolofafreesociety.
Capitalisminspiresbusinessbehaviorthatisprudent,diligent,prescient,
innovative,imaginative,andvirtuous.Thesuccessfulbusinessmanmustbea
risktakingmanofideasandmoralaction.
Tobesuccessful,abusinessmanmustobjectivelyperceiverealityandrationally
processandevaluateinformation.Hemustdetectinformationgapsbetween
consumerwantsandneedsandthepotentialofanewbutasyetundeveloped
productorservicetomeetthosewantsandneeds.Thebusinessmanmust
anticipatenewmarketsandconsumersfuturewantsandneeds,learnfrom
competitorssuccessesandfailures,accumulatecapitalforhisprojects,acquire
theneededresources,coordinatenumerousactivitiesandemployeeskills,and
takerisksbytradingpresentandknownvaluesforresourcesthatonlypromisea
potentialfuturevalueforhim.Profitispaymentforthebusinessmansthought,
vision,initiative,determination,andefficiency.
Businessmenaimtoproduceaprofitbysellingatthehighestpricethemarket
willpermitwhilebuyingatthelowestpricesthemarketwillyield.Theyprofit
bydoingthebesttheycanincreatinggoodsandservicesthatconsumersdesire.
Theroleofbusinessistoproducethebestpossiblegoods,services,andideasat
thelowestpossiblecostsoastomaximizethefirmsprofits.Thebusinessman
earnsprofitsbyusingaslittleaspossibletoprovidecustomerswithasmuchas
possible.Profitismadebycreatingwealthandtradingwithothers.
Thecoreofbusinessiswealthcreation.Itsessentialnatureinvolvesthe
productionofvaluefortrade.Professionalbusinessmenarespecialistsin
voluntaryexchange.Inafirm,managersareemployedtoaddtothenetworthof
thecompany.Theyarenottypicallyhiredtocarryonprogramsofsocialreform.
Thebusinessmanprovidesbusinesscompetenceforaprice.Peoplenormally
investtoincreasetheirwealthandthebusinessmanfurnishestheskillstomeet
thisgoal.
Businessquabusinessservesthosewhowishtotradeanddoesnotmakeuseof
coercion.Itistheentryofthestateintothebusinessrealmthatleadstocoercive
monopoliesandunfairadvantages.Unlikebusiness,thestatereliesoncoercive
powerratherthanonvoluntaryagreement.Whenafailedorfalteringbusinessis
rescuedbyagovernmenthandout,itisnolongerabusiness.Likewise,whena
businessmanobtainshisresultsoutsidethemarketframeworkbyreceiving
specialprivileges(e.g.,subsidiesormonopolisticadvantages)grantedbythe
government,heforfeitshisstatusasabusinessman.
Sometimesbusinesseslobbygovernmentforspecialprivilegessuchasbailouts,
pricesupports,subsidizedloans,tradeprotection,resourceprivileges,grantsof
monopoly,etc.Amoralbusinesswouldsucceedorfailonitsownwithoutany
governmentassistance.Ifamoralbusinessmanmakesamistake,heisprepared
tosuffertheconsequences.Ifhefails,hetakestheloss.Amoralbusinessman
profitsonlyifhesatisfiestheneedsofpeoplebyofferingbetterproductsor
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servicesoratalowerpricethandoothers.Whenpracticedproperly,businessisa
nobleandvirtuouspursuit.
Abusinessmanshouldbehonestandjustinhisdealingswithothersthey
shouldbeidentifiedandtreatedaccordingtowhattheyare,do,andfreelyagree
to.Forexample,themostdeservingemployeesshouldbepromotedandthebest
biddersshouldbeawardedcontracts.Inaddition,amanagershouldnotsupport
governmentactionssuchaspricesupports,tariffs,quotas,andsubsidieseven
thoughsuchpoliciesmayresultinhigherprofitsforhisowncompany.Todoso
wouldinvolvecoercion,onestepremoved.Tosupportsuchnaturalrights
violatingactionswouldbetounderminetheprinciplesofthefreesocietyupon
whichbusinessdepends.Whencorporateleadersusethepoliticalprocessto
protectthemselvesfromcompetitionandtoreceivetaxpayersubsidies,they
ceasetobeengagedincommercialactivity.
TheMoralResponsibilityofBusinessmen

Themoralresponsibilityofthecorporationsdirectors,managers,andother
employees,issimplytorespectthenaturalrightsofindividuals.Individualsina
corporationhavethelegallyenforceableresponsibilityordutytorespectthe
moralagency,space,orautonomyofpersons.Thisinvolvesthebasicprincipleof
thenoninitiationofphysicalforceandincludes:theobligationtohonora
corporationscontractswithitsmanagers,employees,customers,suppliers,and
othersdutiesnottoengageindeception,fraud,force,threats,theft,orcoercion
againstothersandtheresponsibilitytohonorrepresentationsmadetothelocal
community.
Customers,employers,suppliers,andothersautonomouslynegotiateforand
agreetocontractwiththecorporation.Ifmanagersweretobreakanagreement
withtheshareholderstomaximizeprofitsinordertogiveoneormoregroups
morebenefitsthantheyfreelyagreedupon,theywouldbeviolatingtherightsof
theowners.Corporationsandtheirmanagersareobligatedtorespecttherightsof
individualswithineachgroup,buttherightsarelimitedtotherightsofpartiesin
markettransactions.
Sociallyresponsibleactionsmaybeacceptablewhenthemanagerundertakes
theminanticipationofeffectsthat,inthelongrun,willbebeneficialtobusiness.
Asociallyresponsibleinvestmentshouldhaveadirectbusinesspurpose,involve
costbenefitanalysis,andbeexpectedtogeneratesufficientfuturenettangible
benefitsforthefirmanditsshareholders.Thequestionisnotwhetheranactivity
isintheinterestofafirm,butwhetheritisenoughinitsinteresttojustifythe
expenditure.
Managersareemployeesoftheshareholdersandhaveacontractualandhence
moralresponsibilitytofulfillthewishesoftheshareholders.Asacorporate
executive,themanagerisanagentoftheownersofthecorporationandhasa
voluntarilyassumedfiduciaryresponsibilitytothem.Corporatesocial
responsibilitymaybepermittedwithinthelimitsofpriorcontractualagreements
withtheshareholders.Thisoccurswhenindividualsorganizecorporationsfor
reasonsotherthan,orinadditionto,profit.Also,sociallyresponsibleactions
suchascharitablecontributionsmaybeacceptablewhenthemanagermakes
theseinanticipationofeffectsthat,inthelongrun,willbebeneficialtobusiness.
APrincipledApproachtoBusinessEthics
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Amanneedsasystemofrationalethicalprinciplestoprovideknowledgeand
guidanceinrealbusinesssituations.Thepurposeofbusinessethicsistodiscern
theevaluativeprinciplesthatareappropriateforthecomplexworldofbusiness.
Explicitprinciplesprovidethoseengagedinbusinesswithamoralframework
withinwhichtothink,evaluate,andact.Businessethicsisconcernedwithhowa
businessmanshouldactsothatthegoalsofhiscompanyareattainedinamanner
consistentwithapplicableethicalprinciples.
Inbusiness,justasinallaspectsofhislife,amanneedsasystemofproper
rationalprinciplestotellrightfromwrongandtoaccuratelymakedecisionsin
complexsituations.Apersonrequiresmoralprinciplestoguidehischoicesand
actions.Moralprinciplesinvolvetheapplicationofconceptualthinkingtothe
realmofaction.Amanmustabstractprinciplesandthenactonprinciplesinany
particularsetofcircumstances.Becauseprinciplesareinescapable,itisessential
toconsciouslyidentifyandcriticallyassessonesprinciplesandtodecidewhich
principleistheproperprincipleinthecontextofthesituationathand.Aperson
needstodelineatethecontextofasituationinordertodecidewhatprincipleis
applicable.Hemustdetermineunderwhatknownprincipletheconcretefactsof
situationscanbesubsumed.Ofcourse,applyinganethicalprincipletocomplex
concretesituationscanbedifficultandchallenging.
Moralprinciplesaretrueincontext.Itfollowsthatapersonsrecognitionofthe
moralcontextofasituationmustprecedehiseffortstodealwithit.Amancan
actonappropriatemoralprincipleswhenherationallyapprehendsthefactsofa
situation.Whendecidinghowtoactapersonshouldnotdropcontextnorevade
relevantknowledge.Moralprinciplesareuniversallyapplicableinthecontextin
whichtheyaredefinedandappropriate.Itfollowsthatcertaincasesdonotfall
withinthecontextinwhichtheprincipleistobeapplied.Eachofusmust
endeavortolearnthecontextsthatvalidatevariousprinciples.
Businessisaboutthecooperativeproductionandtradeofvalues.Inabusiness
contexttheproductionorpursuitofwealthisparamount.Thebusinessworldis
comprisedofindividualseachholdinghisownlifeasthestandardofvalue.
Becausehumanlifedependsupontheproductionandconsumptionofvalues,
individualsinbusinessneedtoactindefinedways.Tobeproductivemeansto
createvaluesthatcanbetradedforgoodsandservicesneededforoneslife.
Productiondependsononesknowledgeandthoughtwithrespecttowhatvalues
aretobeproducedandconsumedandtheactionsrequiredtoproducethem.As
moreandmorepeopleproduce,thesupplyofgoodsandservicesincreases
therebymakingitmoreandmorepossibletotradetomutualadvantage.
Businessinafreesocietyrequireshonesty,prudence,integrity,justice,respect
forcontractsandpropertyrights,andsoon.Manybusinessethicsissuesrevolve
aroundtheprincipleorvirtueofhonesty.Anhonestmanattemptstogainvalues
throughproductiveactionandvoluntaryexchangeratherthanbyforceor
deception.Honestyasaprincipleisapplicableinanauthenticbusinesscontext
becauseitisnecessarytoallowmentolivewellonearth.Honestymeans
adheringtoreality.Anhonestpersondoesnotgainatanothersexpense.Honesty
meansthatitiswrongtogainvaluebyfakingrealityorbymisrepresentingthe
truth.Honestyisanappropriateprincipleinthecontextofdealingwithothers
throughvoluntarycooperation.Inotherwords,whenforcehasbeeninitiatedby
anotherthenhonestyisnottheappropriateprincipleforthatgivencontext.A
threatoractofphysicalforcemakesitimpossibleorimprudenttopractice
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honesty.Whenoneencountersforceorfraud,orhashisfreedomtakenaway,
honestyisnolongerameanstoattainingvalues.Instead,somemethodofself
defensesuchaslyingiscalledfor.Honestyassumesacontextinwhichaperson
isfreetoproducevaluesandtovoluntarilytradethemwithothers.

BusinessRewardsandPromotesVirtuousBehavior

Whencommerceisconductedwithinacapitalisticsociety,virtuesarepromoted.
Thepursuitofprofitreflectsthepresenceofmanyofthevirtues.Thefreemarket
rewardspolite,accommodating,tolerant,open,honest,realistic,trustworthy,
discerning,creative,fairdealingbusinessmen.Inthelongrun,profitable
businessestendtobepopulatedbypeoplewhoconductthebusinessin
accordancewithbasicethicalprinciplescallingforhonesty,respectforpersons
andproperty,fidelitytocommitments,andjustice.
Business,asacallingandaprofession,isrelatedtotheflourishingofthe
individual.Innumerablepersonshavesatisfiedtheirneeds,developedtheir
characters,actualizedtheirpotentialities,andattainedtheirgoalsintherealmof
business.Whenabusinessmanhasthetalenttodoajobthatisrightforhimand
hedoesitwellandaccordingtoappropriatemoralprinciples,heislikelyto
experienceenjoyment,asenseofaccomplishment,satisfaction,andrenewed
energies.Itfollowsthatthebusinessmansactivitiesaremorallyproperand
worthygoals.
Themoralvirtueofprudenceisconcernedwiththeintelligentlivingofones
life.Ifapersonistobeprudentabouthislife,hemustattendtohistotalwell
being.Prudencethusinvolvestheintelligentpursuitofprofit,prosperity,and
commercialsuccess.Businesscanbeviewedasthesocialproductofhuman
concernwithprudence.Commerceisaproper,morallyjustifiedareaofhuman
actioninwhichbusinessmenareconcernedwithobtainingeconomicwellbeing.
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