How to Keep Business Ethics from Being an Oxymoron

As faith in capitalism wavers, business leaders need to reevaluate their responsibilities.

I always begin my Ethics of Business classes at Booth with a simple question: What is an oxymoron?

Students blink and look at each other uncomfortably, but eventually someone answers: An oxymoron is a combination of contradictory or incongruous words.

Good, I say, now what are some examples of an oxymoron?

Everyone chimes in—icy hot, man-child, humblebrag—until I conclude the list with a final addition: business ethics.

Laughter fills the room, an uneasy laughter, which is telling.

I elaborate.

If you were convinced that the pursuit of business and the practice of ethics were entirely consistent, the suggestion that “business ethics” is an oxymoron would be either confusing (what do you mean by that?) or highly offensive (whaddya mean by that!!!). In contrast, if you sincerely believed that business and ethics were inherently at odds with each other, someone announcing that business ethics is an oxymoron might elicit a snicker, but I suspect you wouldn’t spend nine weeks exploring the topic. That would be like registering for Intro to Alchemy or Astrology 101, the study of a ridiculous subject and a heck of a way to spend a quarter.

No, I tell them, the reason you laugh so uneasily is that you all understand why some people see business in such an unflattering light and yet you also fervently hope that immoral behavior isn’t necessary for business success. You have a personal stake in vindicating the idea that business isn’t entirely incompatible with ethics, for otherwise, by pursuing your MBA, you’d effectively be enrolled in a school for vice.

Renegade capitalism

The possibility of an inherent conflict between business and ethics is a fundamental challenge for courses like mine. I’ve said this to students for more than 20 years—and I still believe it—but the nature of that challenge has evolved.

When I began teaching in 2005, the business professionals in my classes were shaped by what I have called renegade capitalism, a sharp-elbowed commercial spirit that took shape in the United States in the closing decades of the 20th century. As the postwar enthusiasm for managerial capitalism began to wane, an ironclad faith in the efficacy of free markets, the expediency of self-interest, and the necessity of creative destruction served to inspire a fairly repugnant archetype of the ideal business practitioner.

In its crudest form, the convergence of these trends inspired a belief among business professionals that the best of all worlds would come about if they never considered the needs, feelings, or concerns of others but instead pursued their own private interests with a single-minded ruthlessness.

If the business of business is merely business, there just isn’t much to be said for the place and purpose of companies in a liberal democracy.

Morally speaking, this was the upshot of renegade capitalism, and in my first few years of teaching, it was something like the bogeyman of business ethics, less the ethos of an actual person than an anxiety among my students that business ethics was indeed a bunk science. They worried not only that being civic-minded and sensitive to the needs of others might undermine their professional advancement, but also that such tendencies would actually prove less conducive to the common good than if they spent their days thinking of nothing other than new and better ways to line their pockets.

No doubt, such ruminations always had the stale taste of something callow and barely considered, but they could prove seductive, both to those who were, in fact, sociopaths and, more alarmingly, to others intrigued by the idea that they might not need to choose between doing well and doing good.

Thankfully, it has never taken much work to disabuse my students, if not of the central tenets of renegade capitalism, then of their broader relevance to business ethics. Whether growth and development are indeed best served by blinkered self-advancement is something of a technical question better left to my friends in the economics department, but it is also irrelevant to the most common concerns students give voice to in my classes.

Should I look for meaning from my work?

What do I do about professional requests that challenge my moral convictions?

How important is moneymaking after all?

These are the types of questions that keep students awake at night, not whether Gordon Gekko should be the true north of their moral compasses.

To be clear, I don’t want to suggest that my students have never raised questions of sociopolitical import. (Concerns over inequality and climate change are mainstays of my classes.) But these debates have almost always taken for granted the same key assumption of renegade capitalism—that, rather than organs of the state, companies are independent satellites that are tethered to a country by law but are otherwise free to follow the orbit of their own internal logic, apart from any communal imperative.

Invisible-hand thinking

This assumption about the extrapolitical place of business in society might be regarded as the key ideological triumph of invisible-hand thinking. Although Adam Smith mentioned that phrase only once in his 1776 book, The Wealth of Nations, the invisible hand of the marketplace has come to encapsulate the ideological ambition of his work. It is best understood in juxtaposition with a far more familiar metaphor for Smith’s 18th-century readers: the visible hand of the king.

Today, we often hear that business is best run if left to its own devices. Now this may be true as a matter of “good” economics, but governments have a lot of other concerns beside the needs of business. Defense, cohesion, and comity are just a few of the political preoccupations that are almost inevitably affected by questions of efficiency or productivity. At the same time, such declarations strike at something far more fundamental than any policy consideration. Wealth is power, and power is something everyone wants, so why would a king relinquish his by allowing businesses to operate as if they were somehow in but not of the state?

MBAs will need to seek out a new set of skills, experience, and knowledge.

This is the revolutionary provocation of Smith’s work, that the visible hand of the king—or any governing body—should freely turn over its power to the invisible hand of the marketplace. Yes, commercial enterprises would still be shaped and restrained by law, but on the whole, only in ways that would highlight their independence. For what else are strong notions of property rights and contract law if not rules by which individuals and entities might freely pursue their own devices apart from state interference?

As a matter of political theory and practical politics, this is what’s at stake in invisible-hand thinking, and there is no greater tribute to its complete and utter triumph than the widespread assumption that the responsibilities of business and government are entirely distinct. Yes, we may hold that when businesses thrive so too does the state, and we may also believe that businesses ought to obey the law and pay taxes. But the notion that business should be an implement of the state similar to the army or a government agency seems alien altogether.

Duty free

In 1970, when Milton Friedman wrote his legendary essay for The New York Times Magazine, “The Social Responsibility of Business Is to Increase Its Profits,” the future Nobel Prize winner did not think he was celebrating the triumph of invisible-hand thinking. On the contrary, he wrote it to push back against those he perceived to be its enemies, the “businessmen [who] believe that they are defending free enterprise when they declaim that business is not concerned ‘merely’ with profit but also with promoting desirable ‘social’ ends.”

What’s amazing about this argument is the scope of the accusation. Friedman is not saying that businessmen are wrong for holding that private enterprise should be an appendage of the government but rather simply for maintaining that companies should consider the health and welfare of the general public. For him, businesses and the people who staff them should stand aloof from society. When you return home at the end of the day, you are free to reengage questions of the common good in your capacity as a private citizen. But while at the office, you occupy an extrapolitical island where nothing but the affairs of moneymaking should intrude.

It’s important to emphasize how radical this view was in 1970. As I often tell students, it was precisely because the notion that a company should have no other social responsibility than to increase its profits was so counterintuitive that The New York Times offered a little-known economics professor so many column inches. Moreover, the fact that the contention of the essay’s title eventually became something of a commonplace is not only a tribute to Friedman’s success as a public intellectual but also evidence of the eventual triumph of invisible-hand thinking.

By the beginning of this century, the victory was so complete that it circumscribed what qualified as business ethics, at least in the minds of my students. If business occupied an extrapolitical space, there wasn’t any pressing need to debate its place and purpose in society. Yes, there was still a great deal to be said about what took place on these islands of commerce and the experience of those who inhabited them, but such conversations mostly had the flavor of moody existential quandaries or a tense HR meeting.

I don’t mean to dismiss the importance of such concerns. Finding meaning in one’s work or dealing with troublesome colleagues are hardly matters to sniff at. But if you sincerely believe that businesses are doing the best for all stakeholders and the communities they are part of simply by maximizing profits, the scope of business ethics excludes most concerns of a sociopolitical nature. If the business of business is merely business, there just isn’t much to be said for the place and purpose of companies in a liberal democracy.

But things seem to be changing. Over the past decade, first on the left and now increasingly on the right, there have been calls for businesses to take actions that affirmatively promote the welfare of the general public, regardless of whether they maximize profits. Of course, insofar as such calls have come from both sides of the political aisle, the demands sometimes encompass contending visions of the common good. Especially in respect to matters under the umbrella of diversity, equity, and inclusion, public appeals for corporate action have been more of a riotous clamor than a clarion call, putting companies in the difficult position of having to choose sides in highly contentious political battles.

Stewardship and citizenship

I wrote about this conundrum in a 2020 essay for Chicago Booth Review, “Chick-fil-A and the Rise of Activist Capitalism.” Since then, the calls have only grown louder across the political divide. The second Trump administration has even shown a willingness to strong-arm companies into taking actions consistent with its policy agenda. These efforts initially involved demands that businesses alter their DEI policies and prioritize domestic investments. More recently, they have expanded to include deals under which the government claims a portion of a company’s sales in exchange for special treatment (such as Nvidia’s agreement to send the US government 15 percent of its AI chip sales revenue from China so that it can do business there) or even takes a substantial stake in a company (such as its 10 percent share of Intel).

Whatever you make of these efforts, we clearly have entered an era in which people across the ideological spectrum no longer trust market forces to administer business interests consistent with the public good. They want the visible hand of the king (or, today, the federal government) to ensure that companies act like good stewards of society, regardless of whether their every effort is consistent with the bottom line.

My friends of a Friedmanite persuasion have good reason for despair. In different ways, people have lost faith in the idea that business is best left to itself. True, few individuals have come around to the belief that companies should become an appendage of the state. (This would actually be textbook socialism.) But many people do believe that companies should be held to standards that go far beyond whatever maximizes shareholder value.

Such a shift will inevitably shape the way we approach business ethics. Rather than take the relationship between business and government for granted, MBAs will have to think seriously about the place of business in society and how the requirements of good citizenship—corporate and individual—should shape commercial activity.

If the perceived tension between business and ethics has been an occasion for uneasy laughter in my classes, it’s because students have typically believed that the advantages conferred by a growing economy more than make up for the naughty behavior that greases the gears of capitalism. Privately, they may continue to harbor that belief, but if the public loudly disagrees with them, they will need to acclimate themselves to the responsibilities of civic leadership. Rather than merely being captains of industry, they will have to think—and act—like leaders in a complex society.

This was a fate that Friedman tried to relieve them of. As he saw it, if a company benefited society beyond any wealth it generated for shareholders, it should be a coincidence rather than a conscious aim of those who managed it.

No more. Business leaders will need to take to heart the intuition of the late Peter Drucker that the “character of our society is determined” in no small part by “the degree to which our social beliefs and promises are realized in and by the large corporation.” Drucker made this claim in Concept of the Corporation, his 1946 case study of the nonpareil of American companies, General Motors. Eighty years later, I am inclined to agree with him, but I would go further. Today, I believe that no less than the fate of capitalism itself depends on the business elite embracing this conviction and putting it to work, concretely and undeniably, in the decisions they make.

To meet this challenge, MBAs will need to seek out a new set of skills, experience, and knowledge. Yes, they will still require the data-driven elements of basic business acumen, but such capabilities will need to be complemented by the political sophistication and moral perspicacity more familiar to law or public-policy schools than a traditional business education.

At a time when capitalism is being called into question by people across the political spectrum, the fate of the system may just depend on whether the commercial elite, and the MBAs who long to join them, have the collective wisdom and individual restraint to ensure that “business ethics” is more of a guiding ideal for their everyday practices than a deeply unflattering punchline.

John Paul Rollert is adjunct professor of behavioral science at Chicago Booth.