Philosophy of Economics

The Individual as a Subject of Economic Activity: Business Ethics

The economic individual is the primary creative subject of a market economy, endowed with the freedom to choose and make optimal decisions considering all available opportunities and conditions, in accordance with personal interests, goals, and priorities. Within the economic system, the individual functions as a worker, a participant in economic relations, a consumer, and the bearer of the ultimate aim of social production. A significant issue arises concerning the individual's (particularly that of the entrepreneur and manager) attitude towards others, which leads us to the realm of ethical considerations.

Business ethics represents a system of norms and rules grounded in universal ethical standards, functioning effectively within the market in accordance with existing legislation, established rules, and traditions. The system of norms and rules currently adopted in global business did not emerge fully formed; rather, it has evolved over a long historical period, paralleling the development of civilization. The foundational principles of professional ethics were established during the flourishing of ancient civilizations. For instance, the Hippocratic oath, trading rules, and the crucial concept of upholding contracts trace their origins to this era.

In the United States and Western Europe, business ethics has long existed as a scientific discipline, investigating management, economics, strategic planning, finance, accounting, and marketing from a relevant perspective. The field encompasses the interplay between corporate and universal ethics, the issue of social responsibility in business, the application of general ethical principles to specific situations, and the influence of religious and cultural values on human economic behavior.

Business ethics (or business ethics in a broader sense) constitutes a core element of entrepreneurial culture. With the formation and establishment of a class of entrepreneurs in our country, the discourse on business ethics as a body of knowledge regarding labor and professional morality has gained particular relevance. It is noteworthy that in countries with developed market relations, discussions surrounding business ethics and social responsibility are considered as important as production efficiency.

Several factors contribute to the heightened interest in business ethics: the increasing level of corporate behavior, the globalization of economic relations, the cybernetization of production processes, and the growing volume and speed of information flows. However, the primary driver remains the overarching harm caused by unethical business practices, outweighing individual and collective benefits. Indeed, a logical and predictable response to dishonest business behavior is the decline in the prestige of corporations and the reputation of entrepreneurs, which consequently calls into question the quality of their products and services and, as a result, their profits. It is hard to disagree with the assertion of Russian scholar A. M. Kocherhin that "any power requires the 'bridle' of moral norms, especially in the modern world."

Entrepreneurship, as a social phenomenon, also necessitates the existence of a specific "assembly" of norms, rules, and principles to enhance the efficiency of its operations—essentially, a code of business ethics that each entrepreneur ought to follow in their conduct, actions, and decisions.

The connection between business and ethics arises from the very nature of entrepreneurship. Business entails continuous contacts, relationships, negotiations, agreements, and so forth. A multitude of individuals enters the orbit of the entrepreneur's actions: partners, employees, suppliers, clients, and consumers, all of whom are engaged in interpersonal relations. Within the intrinsic motivation for business communication exists a sharp moral contradiction: on one hand, the entrepreneur seeks to act ethically, while on the other, there is a necessity to fulfill personal needs, often linked to the transgression of moral norms.

It is important to note that moral questions have occupied a significant place in the philosophical inquiries of thinkers from the ancient world. The study of morality (ethics) began to form and develop during this period, later becoming the foundation for various forms of professional ethics. With the division of labor into physical and intellectual realms, the emergence of diverse professions, and the differentiation of labor spheres from one another, specific norms of economic behavior began to emerge from general ethical principles.

This development was facilitated by professional groups, often bound for life (and frequently across generations) to a specific production function. During the period of craft labor distribution in the establishment of medieval guilds in the 11th and 12th centuries, the first professional-ethical codes began to take shape. It was at this time that guild statutes first articulated several moral requirements regarding profession, the nature of work, and relationships with other participants in the labor process. Thus, professional ethics was born, embodying not only rationally expressed demands of social morality but also professional ethical principles and norms.

Business ethics comprises a system of general principles and rules governing the conduct of subjects of entrepreneurial activity, their communication, and their working styles, manifested at both micro and macro levels of market relations. It emerges as a body of knowledge regarding how relationships develop among individuals during work, the meanings they ascribe to their labor, the role that labor occupies in their lives, and the inclinations and ideals that facilitate effective work, as opposed to those that hinder it. In this way, business ethics regulates, inspires, and simultaneously restricts the actions of entrepreneurial subjects, aiming to minimize conflicts among them and subordinating individual interests to collective ones.

The fundamental tenets of modern business ethics that constitute its foundation include the following: First, economics, in contrast to religion, is not oriented toward moral regulation but rather toward the distribution of material goods; however, wherever dictated by societal interests, it must comply with existing moral norms. Second, the goods created through labor should be distributed in such a way as to exclude the emergence of marginalized strata of society. Third, the highest productivity and profit should not be achieved at the expense of environmental degradation. Fourth, technology should serve humanity, not the other way around. Fifth, rational forms of employee participation in business affairs not only enhance the desire to work better but also cultivate a sense of responsibility. Sixth, competition should occur under fair rules.

The eminent German philosopher G. W. F. Hegel proposed a clear imperative for ethics: "Be a person and respect other persons." In other words, one must be human, prepared to act and bear responsibility for one’s actions, while simultaneously understanding the actions of others. From this principle, the foundations of business ethics can be discerned.

Integrity and honesty in business relations are paramount. The reputation of a businessman encompasses not only a monetary dimension but also a socio-psychological one. A serious dilemma frequently faced by modern entrepreneurs is a moral one: to cross or not to cross the moral barrier, to deceive or not to deceive. It is essential to recognize that any deception in business, as practice has shown, yields only temporary rewards and proves disadvantageous in the long run, as dishonesty in agreements ultimately returns against the dishonest, who find themselves sidelined over time. Therefore, from both a moral and utilitarian perspective, deception is unacceptable within the sphere of entrepreneurship.

Non-conflictual Communication

This principle entails, first and foremost, a tolerant attitude toward the weaknesses and shortcomings of partners, subordinates, and clients. Tolerance fosters mutual trust, understanding, and openness, and it also aids in "extinguishing" conflict situations in their infancy. An entrepreneur should cultivate the ability for self-control, the habit of restraint, and the preservation of composure. Horace astutely observed that "anger is temporary madness." Secondly, tact is essential; it primarily involves a focus on humanity and nobility, and an attentive regard for the other. To be tactful means to recognize one's partner, subordinate, or client as a valuable human individual in every situation, taking into account their biosocial characteristics such as gender, age, nationality, temperament, and so forth. As Leo Tolstoy noted, "You may be wise or foolish, but you must be tactful." Thirdly, delicacy denotes a sensitive and somewhat refined attitude toward colleagues, subordinates, and partners, as well as toward their feelings. Delicacy is a unique trait inherent only to highly professional managers and entrepreneurs; it manifests as correctness and sincerity in communication. This quality helps to address serious business challenges with minimal moral and psychological losses. For instance, in certain cases, depending on the specific action and the character of the employee who erred, it may be more beneficial to offer a private admonition rather than a public reprimand. This sensitivity is especially vital in interactions with foreign partners or employees whose customs, perceptions, and behavioral manners may seem peculiar.

Respect for Freedom

A businessman must respect not only his own commercial freedom but also that of his competitors (or partners), which entails refraining from interference in their affairs, even in trivial matters. The principle of freedom is foundational in relations with subordinates. It is widely recognized that competent employees are generally free and independent in addressing ongoing work issues, taking pride in their activities. The norm—"Those who are more valued and trusted are granted more initiative and freedom"—allows for the delegation of autonomy to subordinates, freeing leadership from the burdens of petty oversight. However, it is crucial to remember that "complete freedom to do whatever you want, however you want, is essentially the freedom to do nothing at all."

Justice

This principle of business ethics calls for an objective assessment of the personal and business qualities of partners (clients, subordinates), acknowledgment of their individuality, openness to criticism, and self-criticism. Injustice toward subordinates and colleagues who possess greater abilities leads to a loss of respect and transforms the leader's power from actual to nominal. The principle of justice cannot be applied unilaterally by a businessman, solely toward others; one must learn to seek the rational kernel in critical remarks aimed at oneself and to embrace self-criticism. Leonardo da Vinci remarked, "An adversary who points out your mistakes is more useful than a friend who wishes to conceal them."

Thus, in the process of emotional interaction among individuals, negative relationships and emotions often arise: jealousy, bias, alienation, hostility, and so forth. One of the most prevalent causes of this is the low level of moral culture among individuals. A civilized entrepreneur must exemplify morally impeccable behavior and foster similar qualities in their subordinates. The path to this lies in the practical application of business ethics principles, which carry significant positive implications, as they promote the harmonization and humanization of interpersonal relations within the business sphere, contributing to the elevation of spirituality in society at large.

Consequently, there emerges a necessity for the moral education of business actors, cultivating their awareness of the relevance of adhering to the prescriptions and norms of business ethics. An entrepreneur (or entrepreneurial organization) is a component of society; by establishing ethical norms within, it simultaneously facilitates their dissemination in the macro environment (the social realm). The more favorable the ethical atmosphere within society, the more conducive the conditions for business development. Unethical behavior will inevitably result, sooner or later, in direct economic losses or social and moral detriment for both the enterprise and the broader social environment.

Rich experience in adhering to ethical norms illustrates that contemporary entrepreneurs do not shy away from such principles. The inherent honesty of business is evidenced by the undeniable fact that millions of tons of oil and petroleum products, along with tens of millions of shares and other securities, are traded daily on the commodity and stock exchanges of Europe and America based solely on oral agreements, without witnesses; the principle of "guaranteeing a refund if the customer is dissatisfied" is widely embraced among many reputable trading firms and manufacturing corporations.

Of course, in industrially developed nations, business is not without disruptions, abuses, and elementary human dishonesty, as well as the scandals that arise from them. Such unethical conduct and negligence in business are most characteristic of the early stages of entrepreneurial development, reflecting primarily its immaturity and imperfection. However, over time, the notion of the necessity of cultivating the image of an honest and decent individual guided by moral principles takes root within the business sphere.

Simultaneously, there exists an alternative perspective on the practicality of applying business ethics principles—the position of business pragmatism ("business Machiavellianism"). This viewpoint is marked by the belief that ethics is unnecessary in business, with the role of business being solely economic. Pragmatists argue that discussions about moral values, ethical ideals, and social obligations are inappropriate as they lead to unnecessary complications. For entrepreneurs who adopt a pragmatic stance, the primary goal is the maximization of profits by any means possible. The extreme of unethical behavior for a businessman is, of course, breaking the law.

In terms of moral-psychological dispositions, "economic utilitarianism" emerges as closely aligned with the position of business pragmatism—a principle of behavior that denies the significance of spiritual and moral values and manifests in the subordination of all actions to the pursuit of material gain and selfish calculation. "Economic utilitarianism" is equivalent to narrow pragmatism, rejecting elevated motives and diminishing the role of spiritual interests in human existence.

Against this backdrop, a one-sided moral vector gains prevalence: those who do not amass wealth and live by the profits earned through honest labor are deemed "worthless," "uncommercial," and "unsophisticated." Adherents of this view regard individuals solely from the standpoint of their own benefit, seeing them merely as means to achieve personal goals. In a "wild," uncivilized market, the principle of "every man for himself; one God for all" takes hold. In competitive relations, its practical application leads to feelings of envy and a desire not merely to achieve business success through fair competition but to subjugate or even suppress rivals. This is often accomplished through mafia-style competition and the exploitation of corrupt officials.

A peculiar "compromise" between adherence to ethical norms and the stance of business pragmatism can be found in the views of J. M. Keynes, J. Moore, B. Russell, and L. Wittgenstein. Reflecting on the causes of the social, political, cultural, and intellectual crisis that the world experienced on the eve of the First World War, they expressed the opinion that the primary obstacle to the construction of a new society was the "materialism of Victorian England," "commercial individualism," and the unrestrained freedom of entrepreneurship that characterized social life at the turn of the 19th to the 20th century.

It is noteworthy that the shifts in perceptions regarding the value system, which emerged within the consciousness of a certain segment of society at that time, spurred the search for new approaches in the realm of business ethics. For instance, the issue of values and human behavior is concretized by J. M. Keynes in the form of the problem of social objectives, means, and methods of socio-economic policy.

Keynes argued that one cannot progress towards the ideal of social justice "without paying attention to our path in the economic sphere." The task is to direct people's aspirations towards social justice in a manner that does not contradict the principle of efficiency.

It is important to recall that Keynes also engaged with the dilemma of compromise between the individual's right to freedom—not only in the economic realm but also in the moral one—and the common good. In this context, Keynes advocated for a "soft" principle of reconciling individual and societal welfare, believing that what is good for the individual is likely to be good for society as a whole.

In general, three primary approaches to business ethics have emerged, grounded in three ethical directions: utilitarianism, deontological ethics (ethics of duty), and the ethics of justice, as represented in the works of American scholars M. Velasquez, J. Rawls, and L. Nash.

The concept of utilitarianism stands as one of the most influential in business ethics. According to this view, an action is deemed morally justified if it leads to a beneficial effect for the greatest number of people. Critics of this theory emphasize the incompatibility of moral categories of rights and justice within its framework. From the perspective of utilitarianism, certain actions may be morally justified even while being fundamentally unjust, resulting in violations of human rights. In other words, the utilitarian theory considers the utility of the outcome for society at large but does not link this outcome to the distribution of benefits among individual persons.

Deontological ethics, or the ethics of duty, which is grounded in the philosophy of Immanuel Kant, offers a different perspective on the challenges of business life. According to this view, an action is morally justified only if the individual agrees that all others in similar circumstances should act in the same manner. This approach is based on the internal motivations behind actions. If all individuals were to violate moral laws, trust among them would erode, social bonds would be distorted, and society would ultimately perish.

The third approach to business ethics—the ethics of justice—is associated with the American scholar J. Rawls, who, while analyzing relationships within the business sector, emphasized the category of justice. The ethics of justice is based on the notion that individuals are socially mature, responsible beings capable of constructing complex social structures and maintaining their functionality. The primary value cultivated by all members of society is universal equality, with justice as its outcome. The foremost moral duty in such a society is adherence to a law that is uniform for all.