Deriving principles cover

Deriving Entrepreneurial Principles from Ethical Frameworks


One of the best things about creating your own business is that you get to make the rules. You decide (within the law) what is fair wage. You get to decide where you purchase your raw materials. You can refuse partnerships or investments that involve people you find morally questionable. As the entrepreneur, you choose.

Many entrepreneurs get started specifically because they don’t like the way their competitors treat customers, partners, or employees. Even if there’s not a “bad guy” to go up against, many dream that their business will be an agent of positive change in the world—creating meaningful work for employees and making customers’ lives better, while stewarding resources responsibly.

Yet, it’s easy to underestimate the sheer number of decisions you have to make as the owner of a business. No matter how much you prepare for the difficult choices you will have to make, there will always be decisions that take you by surprise. To what extent do you try to hide a mistake from your board or investors? How do you handle a bill that you can’t pay? If you accidentally overhear some information that could hurt your competitors, what do you do with it?

Whether or not you’ve consciously thought about it, you operate according to an ethical framework. Recognizing these framework(s) you’re using prior to a pivotal decision or unexpected obstacle will empower you to gracefully confront the challenges of running a business. When you’re faced with decisions where a larger right seems to overshadow a smaller wrong, a framework helps you weigh the tradeoffs. Frameworks not only ground you in the ideals that galvanized you to start your business, but they also provide important markers that help you attract the right employees for your culture.

Exploring Ethical Frameworks

This has been modified from Acton School of Business, Ethical Frameworks. Copyright ©2016 Acton School of Business

Here are five ethical frameworks that are nearly as old as humanity itself. They’ve lasted for a reason -- they continue to provide a valuable starting place when no alternative seems truly right.

Utilitarian Ethics

Utilitarian ethics focus exclusively on the consequences of actions. People who follow this ethical doctrine judge decisions based on which course of action is likely to result in the greatest happiness for the largest number of people possible. In short, they are believers in the “greater good.”

From a national security perspective, they would argue that a small amount of casualties are acceptable to preserve the safety of millions more back home. In a business, utilitarianism can help the entrepreneur balance her own needs with that of a large number of employees.

Justice Ethics

Our legal system is based on the ethics of justice and fairness. Rules distribute benefits and burdens equally, and as long as these rules are followed, morality is then upheld. Unlike utilitarian ethics, justice ethics are more concerned with the ethics of process rather than the ethics of consequences.

An example of justice ethics is pressing criminal charges against an employee who stole a small amount of money from your business. A utilitarian might argue that the effort and emotional toll of pressing charges, and the negative publicity or gossip that could result, make quietly firing the employee the best course of action. Someone following justice ethics would press charges, even at great personal inconvenience, in order to make sure the perpetrator was fairly punished.

Virtue Ethics

Virtue Ethics emphasizes one’s character over consequences (Utilitarianism) or legal rules (Justice). Aristotle believed that on a continuum of behavior, there was always excess, deficiency, and a “golden mean” of virtue. For example, the excess of courage is rashness and the deficiency is cowardice; the task is to form your character so as to become a virtuous (i.e. courageous) person.

Examples of virtues include generosity, patience, truthfulness, ambition, and friendliness. World-class companies like Netflix hold certain virtues like ‘courage,’ ‘honesty’ and ‘selflessness’ as company values to signal their distinctiveness to their employees.

If an entrepreneur has chosen certain virtues to hold dear, they can help him examine alternatives on a continuum. If one of the company’s biggest customers was verbally abusive to an employee, how could it be handled courageously? Which choice feels the most rash? The most cowardly? What choice offers the best balance between the two?

Religious Ethics

Religious ethics are a belief system that is centered around a deity or deities. Besides a general philosophy on life, they also commonly teach a moral code that dictates how an individual should act in particular situations.

Within the tradition of Christianity, there are of course many interpretations on what behaviors follow the Bible’s teachings most closely (and different interpretations of how literally the Bible should be understood). An entrepreneur taking Christ as model could attempt to love competitors or “enemies.” One could also believe that they have a responsibility to evangelize. Religious Ethics often coincide in practice with Virtue Ethics.

Relativism

Relativism is the explicit rejection of an ethical framework. Relativism maintains that absolute right and wrong do not exist. Instead, right and wrong are contextual, and vary depending on individual preference, context, and culture.

A relativist would rely on himself to intuit what is right and wrong in a difficult situation with no way of rationally resolving disagreement. While confidence in one’s own judgement is a valuable quality for an entrepreneur, relativism doesn’t provide a moral check against decisions based more on self-interest than ethics.

Principles Development

Recognizing a framework is no small task; it involves personal introspection into your own life and history along with much practice.

The framework[s] that capture what seems right to you should signal where you belong and how to interact with others. Similarly, recognizing that you’ve been operating according to a framework that is not aligned with the vision for your company can create a critical moment to make a significant change.

Deliberately applying ethical frameworks can help you build a self and a business with strong moral character—a company others are attracted to work for and a service that customers feel good about choosing. Ethics guide companies to pursue more than superficial or strictly financial goals. They sustain companies through crises, and they nurture the purpose that drives you to change the world.


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