|by Barry A. Liebling
How much importance do you attach to the ethics of a company when you decide to buy a product? Would you spend more if you believed a company adhered to high ethical standards? Exactly what do you mean by “ethical?” In May 2008 The Wall Street Journal published an article by Remi Trudel and June Cotte – both of the University of Ontario’s Ivey School of Business – that describes their work on the topic.
Trudel and Cotte conducted several experiments to assess whether buyers will “reward good corporate behavior by paying more for products.” In one study they showed consumers a pound of coffee and asked them how much they would be willing to pay for it. Some consumers were given information that the company adhered to “high ethical standards” while others were told that it had “unethical standards.” The authors report that the mean price consumers will pay for coffee from an “ethical company” is higher than what they would spend if the company is “unethical.”
In a second study Trudel and Cotte assessed how much consumers would pay for a T-shirt that contains at least 25% organic cotton compared to what they would pay for a similar T-shirt with no organic cotton. Study participants were exposed to an assertion that non-organic cotton damages the environment. The authors report that consumers with this information are willing to pay more for the organic product.
What do the authors mean when they say that products are “ethically produced?” Trudel and Cotte, who are squarely in the “social responsibility” camp, explain that three conditions have to be met. First, the company should have “progressive stakeholder relations.” Second, it “must follow progressive environmental practices.” And third, it must “demonstrate respect for human rights.” The first two conditions are sure signs that Trudel and Cotte are committed to leftist, collectivist, interventionist politics. While “human rights” properly conceptualized is a good thing, you can bet that these authors include coercing some people to support others as a “right.”
The interpretation of the Trudel and Cotte article is straightforward. Consumers who embrace, or tacitly accept, the left-wing corporate social responsibility view of the business world will – to some extent – reward companies that meet their standards. This is what you would expect from anyone who attempts to make his actions consistent with his beliefs.
But the significance of the study goes beyond describing what consumers decide to do in a university laboratory setting. In microcosm, it demonstrates how leftist cheerleaders have cornered the market on the topic of business ethics. It is telling that The Wall Street Journal – which has a reputation for advocating free markets and opposing interventionism – published the article without challenging its premises.
The authors’ intention is to assure their readers that the leftist view of business ethics is the only game in town. They do not explain that the assumptions behind their “ethical judgments” are communitarian-based – and directly opposed to capitalism. They are asserting that the corporate conduct they advocate is unquestionably ethical. And their insinuation is that the only alternative to complying with their standards is to act unethically.
Note well that it is precisely this message that grates on many business professionals. They know that they are not in sync with the leftist spirit, they are turned off by yammering for “social responsibility,” but they cannot articulate an effective rejoinder and conclude that the subject of business ethics is aversive. Better to stay away from the topic altogether than to wade through the socialist-inspired muck.
Of course, Trudel and Cotte as well as the irritated business professionals are mistaken. Even as a flawed “ethical system” can be inspired by leftist assumptions, valid ethical standards can be derived from a proper understanding of rationality and individualism.
For example, a company is on the right ethical path if its policies respect individual rights, strive to create value, insist on acting honestly, and require that all dealings are by mutual consent. Fallacious notions such as collective action, public-private partnerships, social justice, stakeholder theory, sustainability, and sacrificing for the common good never come into the picture. This is a world where productive achievement is recognized as a virtue and meddling fanatics are viewed unsympathetically.
When you are asked if you prefer to do business with ethical companies be sure to clarify exactly what you mean by “ethical,” and do not cave in to collectivist rhetoric. The time for ceding ethics to the leftists is past.
*** See other entries at AlertMindPublishing.com in “Monthly Columns.” ***