Yousif Almoayyed: Good Business Ethics Are Simply Good Business

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Key Takeaways And Actionable Insights

Austrians maintain an active focus on business ethics. Why? It’s simple self-interest. As entrepreneurs, we want to succeed; individuals can’t do it alone, we need to co-operate with other people. In continuing transactions and exchanges between two parties, each side must benefit, otherwise one side will not be open to further transactions in the future, and will terminate the relationship.

Ethical entrepreneurs focus on the long term for their entire business ecosystem.

That’s why Henry Hazlitt (in The Foundations Of Morality) emphasized morality as simply a focus on the long term: what he called The Long-Run Principle. Entrepreneurship always maintains a focus on the long term (i.e., beyond individual one-time transactions), and good business ethics is simply good business sense in this perspective. Transactions that are mutually beneficial are ethical.

Yousif Almoayyed extends this perspective to the entire business ecosystem: customers, employees, vendors and suppliers, and the community in which a business operates.

Good ethics generate sound business relationships.

As we have emphasized many times, business and brands make a promise to their customers. Those customers must have faith that the promise will be kept. Otherwise there will be repercussions such as termination of contracts, and loss of faith in the future relationship. Customers place more trust in a company that demonstrates a higher level of ethics. They’ll pay more and seek to extend their relationship. Banks will extend better terms.

Unethical behavior destroys trust and co-operation and has a very high cost. As Stephen Phelan pointed out in Episode #56, relationships built on trust operate faster with less friction. Trusting partners co-operate better. Information flows unimpeded. Losing these advantages is highly damaging.

Your good business ethics are important to the individual development, personal commitment and productivity of your employees.

The company that is ethical will be able to develop the potential of its employees to a higher level. Ethical entrepreneurs give their employees freedom to take initiative, within the norms and cultural guidelines that emerge naturally from collaborative attitudes.

The tactics of implementation can vary by level and role. Front line workers are paid for their production; managers are paid to enhance the productivity of those they manage. Incentives are aligned via wages and salaries and profit sharing so that every employee is looking out for the best interests of the company. When they are, employees think beyond their immediate task; when they do so they are thinking at a higher level. An ethical firm develops employees’ sense of the bigger picture and finding their highest and best role; employees know they’ll be rewarded for doing so.

It’s not appropriate to try to incentivize employees by paying them above market rates. It’s the wrong incentive. They will become defensive and self-protecting; they’ll avoid hiring people to work in their department who might prove to be smarter and more productive, because they become fearful of protecting their over-compensation, knowing they can’t reproduce it elsewhere in the market. Ethics gets compensation right.

Does your firm prize clever, capable people? Does management keep their promises to help employees develop and flourish?

Ethics are fundamental to a business’s relationship with its community.

This comes up often in the context of environmentalism. But ethical business is not the powerless victim of activists. Ethical business is honest and truthful about the costs and benefits of specific business activities – and there are always both when viewed from a community perspective — and weighs them carefully in the balance of long term perspective. There is an ethical logic to the market — if business manages resources well and for the net benefit of all, it will be awarded with more resources to manage.

You don’t need to be a trained ethicist. Just ask yourself some simple questions about any firm. Whether you are an employee, a manager, an owner, a shareholder or a stakeholder, you can ask these questions to ascertain the ethical nature of any firm — including your own.

Additional Resources

“How to Evaluate the Ethical Norms of a Firm” (PDF): Mises.org/E4E_61_PDF

Join the discussion on the Mises for Business LinkedIn PageMises.org/M4BLinkedIn


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