Rethinking Business Ethics in an Age of Crisis
Studies in TransAtlantic Business Ethics series
Edited by Knut J. Ims and Lars J.T. Pedersen
Chapter 3: The profit maximization mantra and the challenge of regaining trust, humanity and purpose in an age of crisis
In a recently written book, Roger Martin, the Dean of a leading Canadian business school and a highly regarded commentator, argues that, in examining the cause of the 2008 stock market meltdown and the ethical misconduct that accompanied it, we have failed to explore in sufficient depth “the broader theories that underpin our economy”. The theories that define the “fundamental goal of corporations and the optimal structure of executive compensation” he goes on to say, “are fatally flawed” (Martin 2011, p._10). The problem with the theories that dominate management and management education, he argues, is the thesis that the purpose of the firm is to maximize profits for owners and shareholders. Roger Martin is one of many business theorists and commentators who have come to this conclusion. They include luminaries like Peter Drucker and Harry Mintzberg. What these theorists do not explore is the impact of the logic of profit maximization on the logic of ethics. The purpose of this discussion is to examine the role of ethics in management where the goal of management is the maximization of profits. What will emerge from this analysis is the conclusion that the role assigned to ethics by profit maximizing theories is incompatible with the role required of ethics for the building of justified trust.
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