“But I don’t want to be moral!” That’s what a CEO spontaneously exclaimed when he was given my book, How to Be Profitable and Moral. Why did he say that, and did he really mean it? I wasn’t there to ask, but I can guess what prompted his response.
As most people, the CEO likely associated morality with altruism, the moral code that dominates today’s culture. Altruism prescribes self-sacrifice for others’ benefit and therefore condemns profit maximization as selfish – and immoral. When prescribed altruism for moral guidance, CEOs and other executives who are legally obligated to maximize profits in return to their shareholders’ investment, are faced with an impossible choice: profit maximization or ethics.
What do business executives, like this CEO, choose when they conclude that ethics, or morality, is anti-profit and anti-business? They put morality aside because they think it hurts business and opt for pragmatism: maximize profits in whichever way works the best. Yet, many executives pay lip service to altruism (and some may even be true believers although money-losing companies cannot be sustained for long). They invest some resources in initiatives such as ESG (environment, social, governance) and DEI (diversity, equity, inclusion) programs to signal corporate social responsibility to their companies’ stakeholders and to avoid being labeled “greedy capitalists.”
Such approaches to long-term profit maximization are bound to fail. Just look at Sam Bankman-Fried (SBF), former CEO of FTX, and Elizabeth Holmes, former CEO of Theranos. Both tried to maximize profits in whichever way “worked” and were convicted of defrauding their investors. Virtue signaling may not lead to jail sentences, but it does detract from profits. Observe asset managers such as BlackRock that are now quietly closing their underperforming ESG funds that they had touted as “ethical investments.”
Such approaches are bound to fail because long-term profit maximization requires guidance from ethics, albeit not from altruism. Business executives need guidance from moral principles because they (and the rest of us) don’t have automatic knowledge about how to maximize profits and are prone to making errors, including the really bad decisions that SBF, Holmes, and others have made. As fallible beings (we must think to obtain accurate knowledge), we don’t have a choice about the necessity of ethical guidance to achieve long-term goals. The question is not: Should we apply ethical principles in business? But: Which ethics should we adopt?.
Altruism is not the right ethics for business. Fortunately, there is another moral code that provides guidance for long-term profit maximization: rational egoism (egoism for short). Instead of self-sacrifice, egoism advocates pursuing rational self-interest, which business firms do by creating and trading material values.
Material values are goods and services that are beneficial to human life, such as investment products that increase wealth (instead of diluting or destroying wealth like the ESG funds or FTX’s cryptocurrency exchange), blood tests that detect illnesses (unlike Theranos’ tests) – and countless other life-enhancing products besides, from energy to food to pharmaceuticals. Egoism guides the creation of material values with the principle of rationality: the commitment to reality in one’s thinking and action (against any kind of pretense or evasion).
Rational self-interest is also guided by the principle of justice. In business, this means mutually beneficial, voluntary trade with various partners (customers, employees, and suppliers), as opposed to exploiting others through fraud or coercion, or sacrificing to any claimant that seeks unearned benefits from the company. Creating and trading material values leads to win-win outcomes, instead of the unsustainable lose-lose outcomes of companies diluting profits in altruistic equity-seeking initiatives such as ESG and DEI programs or fraudulent exploiting of others.
Voluntary trade of material values leads to win-win outcomes to all parties. Customers get products and services they value more than the price they pay; in exchange for their productive input, employees get jobs and salaries that they value more than the next best alternative; suppliers get the best possible price for their products that the client values more than the price it pays, and shareholders get the best possible return on their investment. Each trading partner gets what they deserve, or they go and trade elsewhere.
Once business executives, like the CEO who didn’t want anything to do with morality, learn that there is an egoist alternative to altruism and amoral pragmatism, they may want to reconsider their view of ethics as at best irrelevant or at worst, harmful, to business.
If they study the principles of egoism (self-interest, rationality, productiveness (value creation), justice, and others) and want to maximize profits, they will benefit from revising their conclusion to: “I want to be moral – because I want to be profitable” and then seek guidance from the egoist principles.
Photo credit: Jhon Jim on Unsplash
Jaana Woiceshyn teaches business ethics and competitive strategy at the 
6 Responses
Great post Jaana. I am interested in your perspective on some of the corporate scandals such as VW emissions, Boeing safety issues. For me they are moral failures resulting in the destruction of shareholder value. Is this how you view them? Interested in your perspective thanks Chris
Thank you for the question, Chris. I agree with you about those corporate scandals (VW emissions, Boeing safety issues, and others). I think they were moral failures in a sense I was describing in the post: opting for pragmatism instead of following rational moral principles. While we don’t know what those making the bad decisions were thinking, I doubt they were deliberately planning to cause harm and destroy value. They likely rejected ethics as “impractical” and chose to act “pragmatically.” (An additional problem in large corporations is that in the absence of moral principles embedded in the corporate culture, lower-level employees interpret and implement decisions from the top differently than what was intended.)
Perhaps deeper than simple self-sacrifice (the plain language term for ‘altruism’).
Definitely a failure to integrate – business is a part of life.
But the mind-body dichotomy of Plato, seeped into our society via the Kant-Marx and St. Augustine forks, facilitates the student’s dis-association of business from life.
I hope you turned the fool around before he got a sheepskin – don’t need more people with ‘professional’ degrees who are not honest.
The emissions sleight of hand by Volkswagen and others were deliberate, clear violation of ethics.
Boeing’s MCAS fiasco that enabled two crashes was incompetence – it failed to think through changes to design as it was made more aggressive which IMO it didn’t truly need to be, failed to update its safety analysis despite procedures, ….. Boeing and FAA failed to grasp magnitude of risk, especially of a second accident (they calculated low probability, incorrectly). A rational approach is to think and dig at least one level deeper than you first think you need to,
Boeing’s exit plug mess resulted from a deficiency in how it tracked what it did in production. Adding inexperienced staff after earlier departures during the panicdemic was part of its problem – need to have experienced lead hands watching and coaching newbies. A predictable need.
Pressure to save money and speed work are prevalent, short-sighted, takes extra rigor to do that accurately. Some blame a financial mentality, you make the excellent case that failures decrease shareholder value – apparently executives failed to integrate that. (Even before the latest many customers were unhappy.) Boeing’s military division tried to teach the whole company how it is easy to fool yourself on progress of a project, commercial division did not grasp that on the 787 program.
Apparently Boeing has smartened up to stop deferring work to later stages in production. Whether or not they truly learn is to be discovered as time passes. I suggested executives camp on the factory floor as Elon Musk did. 😉
Thanks, Keith, for your comments. I’m glad to hear that Boeing might have smartened up …
Thank you, Keith. It’s hard to turn people around later in life, but I hope to have given lots of food thought to the many business students I have had the pleasure to teach.