What is meant by the phrase “Business Ethical Values?” In general, business ethical values are guiding principles that define behavior and values of an organization. Business ethical values in an organization starts at the top of the corporate ladder with leadership. Management establishes the core values and beliefs of the organization (i.e. corporate vision and mission statement.) The information is then filtered down the corporate chain to the employees. Employees are then instructed on how behavior and actions affect the company’s overall mission. (McQuerrey, n.d.)
Explaining the company’s values is not enough though. Management needs to walk the walk and not just talk the talk. They need to lead by example, demonstrating the right and wrong behavior as it applies to the organization. This demonstration should cover, “What fair treatment of employees and customers,” looks like. It should also encompass doing what’s right for the business, without regard to personal outcomes and ulterior motives of individuals. (McQuerrey, n.d.)
In business, envision that the world is watching. Who are the people that are the stakeholders in the business? The stakeholders are: clients, customers, suppliers, investors, retailers, employees, the media, the government, competitors and anyone in the community. The stakeholders value a company that chooses to operate and conduct business in an ethical way (Byars and Stanberry, 2018.)
Let’s now look at one man’s ethical philosophy that has propelled him into the position of 3rd richest man in the world, Warren Buffett.
Who is Warren Buffett?
Warren Buffett is an American businessman, investor, speaker and philanthropist from Omaha, NE. He is the Chairman and CEO of Berkshire Hathaway, a holding and investment company. His net worth is $82 billion making him the 3rd richest person in the world.
Berkshire Hathaway is a multinational conglomerate. Some of the assets owned outright by Berkshire Hathaway include: Benjamin Moore Paints, Duracell, Dairy Queen, GEICO, Oriental Trading, Pilot-Flying J and many more. Some of the company’s holdings include: Amazon, American Airlines, American Express, Apple, Delta Air Lines, Costco, GM, J&J, Bank of America, UPS and more.
Warren Buffett has been working since the age of 7 and through the years has always invested in the stock market. He has always been an avid reader and as such he became well versed in how to buy and sell stocks and companies.
Warren Buffett’s Approach to Business
Warren Buffett has based his business strategy on 7 principles:
- Invest don’t speculate – Look at the asset to produce a return, if you buy stock with the hope that it will go up next week than that is speculation.
- You don’t have to diversify – If a person buys a variety of stocks, can they like and trust each share equally? If someone purchased 50 different shares, it’s unlikely that share #50 will have the same value as share #1.
- Don’t just buy shares, be a businessowner – Warren Buffett is a manager as well as an investor. He buys companies in all types of business markets. The management secret he applies, he has a light hand on running the businesses. The management of the businesses he purchased remain in place running the business. He does not micromanage them.
- Allocate Capital Efficiently – He takes the profits from one business and invests it into another business, while maintaining separate management.
- Don’t get into debt – Warren Buffett does not believe in borrowing money. He uses profits and company capital for all investments. Berkshire Hathaway has multiple holdings in the insurance industry. Insurance customers prepay services upfront (generating money called Float.) This money is used for investing.
- Break your own rules – Sometimes speculation does pay off. There are times when offers come along that are too good to pass on.
- Give It Away – Warren Buffett believes in spreading the wealth to the less fortunate. He says, “Those who have the least in this world should benefit from those who have the most.” In 2006, he gave $37 billion to the Bill and Melinda Gates Foundation and to several other charities.
Warren Buffett is not motivated by money. He is good at making money but he values people more. He also values his integrity and reputation. He uses praise as a business tool, by highlighting the work that his employees do. This encourages them to do even better because they don’t want to disappoint him. He treats his employees as family. Shareholders are looked at as partners. Warren Buffett freely shares his experience and advice to many people, through lectures, seminars and annual corporate stockholder meetings (TradingCoach UK, 2014)
In 1991, Berkshire Hathaway acquired Salaman Bros. an investment firm in NY. Prior to his becoming the interim CEO the firm was caught in a scandal involving “illegal trading.” The U.S. Treasurer was preparing to shut down this firm and place substantial fines on the company. Warren Buffett was not aware of the actions of the company, but he went before the U.S. Treasurer to plead his case. Warren Buffett put is reputation on the line. He was known for his integrity as a businessman. Because of his reputation the U.S. Treasurer stopped all proceedings against the firm and continued to allow them to trade on the market. Buffett proceeded to clean house at the firm, starting with reducing the salaries of all the leaders and removing certain individuals from their positions. He was not very popular with the bankers, but his integrity was upheld. Buffett was quoted as saying, “Lose money for the firm and I will be understanding. Lose a shred of reputation for the firm and I will be ruthless.” (TradingCoach UK, 2014)
For Warren Buffett, maintaining both a professional and personal reputation is very important. He once advised a group of students he was addressing, “Maintain a sterling reputation for honesty, by never doing something you wouldn’t want reported on the front page of the local newspaper.” (Crippen, 2016)
Ethical Philosophies in This Lesson
There are several types of ethical philosophies pertaining to business discussed in this lesson. There is Utilitarianism, Deontology, Justice and Virtue. How do these types differ?
- Utilitarianism is based on the premise, “Good consequences are brought about by good actions.” One does something because the outcome is expected to be pleasant and rewarding. Utilitarians believe, “we should always act in a manner that produces the greatest good for the greatest number.” (Crash Course, 2016) An example in a business setting would be, employees work extra hard to get the job done in anticipation of the bonus promised for early completion.
- Deontology is defined by rules. No matter how good the consequences are, one cannot break the rules. An example would be “Lying,” if lying is wrong than lying is not permissible under any circumstance. (Carneades, 2017) From a business standpoint an example would be. An auto manufacturer becomes aware of a faulty switch that may cause a fire under a given circumstance. Recalling the vehicles would be very expensive to the company, so the manufacturer opts to remain silent about the potential hazard. It would be cheaper to address any problems that arise on an individual basis. Failure to disclose, is lying.
- Justice theory – deals with workplace discrimination. It evolves around the premise that individuals receive equal treatment in society without regard to race, creed, religion, sex, social status, etc. Title VII of the Civil Rights Act of 1964 was based on this (EEOC, n.d.).
- Virtue theory of Ethics emphasizes the character of individuals in lieu of following a set of rules. The virtue theory states, “If we can focus on being good people, the right action will follow effortlessly.” Virtue is described as the Golden Mean, the midpoint between excessive and deficient behaviors. Eudaimonia is a term relative to this theory (Crash Course, 2016.)
Warren Buffett’s approach to business falls in the realm of Virtue theory. Warren Buffett would be a person referred to as a Moral Exemplar, a person already possessing virtues, one to be emulated. Eudaimonia is loosely translated as – a life well-lived. It means living a life striving for new limits and finding success. A eudemonistic life is full of happiness that is derived by achieving something really difficult and not having things (life) handed to you. This person is never done improving themselves and is always pushing towards new goals. At age 86, Warren Buffett has no plans to slow down doing what he does. He will continue to make money and continue being a philanthropist.
Warren Buffett Said:
Warren Buffett would like to be remembered as a teacher; thus, he has many memorable quotes to help others on the road to success. Here are just a few:
- “People will always try to stop you from doing the right thing, if it is unconventional.” (BrainyQuote, n.d.) Doing what’s right, is not always the most popular approach. This was true in the incident pertaining to the Salaman scandal. He proceeded to clean up the mess behind the scandal and to save the firm. The leaders of the firm did not like what he did and tried to get him removed as the temporary CEO.
- “Look for 3 things in a person: Intelligence, Energy and Integrity. If they don’t have the last one, don’t even bother with the first two.” (BrainyQuote, n.d.) When looking for people to complete your team, be it employees or people in your personal life, if that person does not have integrity, you risk losing or overshadowing your own reputation.
Warren Buffett vs. Indra Nooyi
Warren Buffett is a businessman that cares about his workers and people less fortunate than himself and others of his caliber. His focus in business is not centered on making money but on reputation. Like Warren Buffett, the former CEO of PepsiCo, Indra Nooyi shares his point of views.
Indra Nooyi became CEO of PepsiCO from 2006 – 2019. She has been on Fortune’s List of “Most Powerful Women.” She has been on Time’s list of “100 Most Influential People in the World,” twice. She is the highest-ranking woman of Indian heritage in Corporate America.
Indra Nooyi brought several new concepts to PepsiCo in her role as CEO. Like Warren Buffett, Indra Nooyi places value in the employees of PepsiCo. As CEO she once wrote personal letters to the parents of 29 members of the managerial team, thanking them for their contribution to PepsiCo, by raising their children to be assets to the company. She pushed for diversity and inclusion of all employees. She made sure employees felt valued and appreciated.
Indra Nooyi implemented a program at PepsiCo called, “Performance with Purpose.” It was a means of merging financial success with social responsibility. It dealt with 3 performance platforms of PepsiCo.
- Product consumption – She added more healthier products to the PepsiCo line. Products like Tropicana Orange Juice and Quaker Oats products. These products were introduced to address the changing consumer market, offering products with less calories, sugar and salt. Goal, promoting a healthier America.
- Environmental concerns – Goal to make PepsiCo a greener company. The goal is to reduce plastics, reduce water usage and reduce the carbon footprint on the Earth.
- Human sustainability – Goal to make PepsiCo a company that attracts and keeps talented employees. Implementing a support system for all employees. Recognizing that the workers have lives outside of PepsiCo (University of Delaware, 2019).
Today’s businesses in order to be successful, emphasis must be placed on values as well as economic growth. Employees must be valued. Companies must be honest with employees, customers, and stockholders. Warren Buffett and Indra Nooyi both recognized this.
More Business Ethics Content
- Ethics and Stakeholder Report of Nestle
- The Theory of Justice in Business Ethics
- Application of Aristotle’s Virtue Ethics to Business
- Ethics and Moral Obligations: Hiring Illegal Immigrants
- BrainyQuote, (n.d.), “Warren Buffett Quotes – BrainyQuote,” Retrieved on August 19, 2019 from https://www.brainyquote.com/authors/warren-buffett-quotes
- Byars, S. and Stanberry, K., (2018), “Why Ethics Matter, Chapter 1. Business Ethics,” Rice University, OpenStax. Retrieved on August 12, 2019 from http://cnx.org/content/col25722/1.3 pg. 15. CC BY 4.0
- Carneades.org (2017), “What is Deontology? (Normative Ethics,” Retrieved on August 12, 2019 from https://www.youtube.com/watch?v=qMCeaXyrl7k.
- Crash Course, (2016), “Aristotle and Virtue Theory: Crash Course Philosophy #38,” Retrieved on August 24, 2019 fromhttps://www.youtube.com/watch?v=PrvtOWEXDIQ
- Crash Course, (2016), “Utilitarianism: Crash Course Philosophy #36,” Retrieved on August 12, 2019 from https://www.youtube.com/watch?v=a739vjqdSl.
- Crippen, Alex (2016), “Leadership – Warren Buffett, 9 Essential rules for Running a Business,” Retrieved on August 18, 2019 from www.cnbc.com/2016/11/21/warren-buffett-9-essential-rules-for-running-a-business.html
- EEOC, (n.d.), “Employment Discrimination Based on Religion, Ethnicity or Country of Origin,” Retrieved on August 25, 2019 from https://www.eeoc.gov/laws/types/fs-relig_ethnic.cfm
- McQuerrey, Lisa. (n.d.). “Definition of Business Ethical Values. Small Business – Chron.com,”. Retrieved on August 24, 2019 frhttps://www.youtube.com/watch?v=h9NhVTLcqMoom http://smallbusiness.chron.com/definition-business-ethical-values-21096.html
- TradingCoach UK (2014), “YouTube: Warren Buffett – The World’s Greatest Money Maker, “ Retrieved on August 24, 2019 from https://www.youtube.com/watch?v=w-eX4sZi-
- University of Delaware, (2019), “John L. Weinberg Distinguished Speaker: Indra Nooyi Speaks at UD,” Retrieved on August 19, 2019 from https://www.youtube.com/watch?v=h9NhVTLcqMo
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