Philosophy of business Guide, Meaning , Facts, Information and Description
The Philosophy of Business considers the fundamental principles that underlie the formation and operation of a business enterprise; the nature and purpose of a business (e.g., is it primarily property or a social institution); its role in society; and the moral obligations that pertain to it. The subject is closely related to business, business ethics, and management.
We must draw an important distinction between the philosophy of business and business philosophy, which is an appellation one often hears in the business world. More often than not, the latter designation is intended to denote a way of doing business or a business outlook, instead of the concepts and methods that academic philosophers would employ to examine a topic, which is what we mean by the philosophy of business in this article. It is true that the phrase philosophy of business also might be used in the same way as business philosophy, for example, "Risk taking represents my philosophy of business." However, this is not the sense that philosophy is used in this article.
It is a somewhat curious truism that despite the fact that business touches nearly every aspect of our lives, few thinkers have shown an interest in it from a more philsophical perspective until relatively recently. Indeed, few philosphers can be said to have paid much attention to the business enterprise, itself, prior to the latter part of the 20th century. To the extent philosophers were concerned with business, they were primarily interested in it from an economic or political standpoint, not as a primary object of attention.
Many philosophers tended to look askance at commercial activity, believing, as Plato did, that only the worst sort of people are involved in such matters. Even the great theorist of capitalism and classical economics, Adam Smith, believed that business people meet only to conspire against the public, and that they will only benefit society unintentionally. In this regard, Plato and Smith are not unlike many academics throughout history, even today, who tend to think of business as a necessary evil in society, and not as something worthy of serious philosophical consideration. Instead, they see business as something best left ot those interested in applied and vocational disciplines of lesser weight.
It is fair to say that most philosophers of business are involved in other philosophical or scholarly pursuits, and that they come to the philosophy of business as a sub-specialty, or only indirectly because it relates to another area of interest. Thus, they are primarily philosphers dealing with other subjects, economists, or business management theorists. If one were to examine the philosophy departments in most universities, today, one would find precious few courses in the philosophy of business (as opposed to a growing number of business ethics or applied ethics courses). It is to be hoped that a growing number of philosophers with formal training in academic philosophy will come to specialize in the philosophy of business.
Perhaps the best known modern philosopher of business is Peter Drucker, whose publications have had a profound influence on management and organizational theory, generally, and on how we think of the business enterprise. More often than not, people who think about business issues are considering it from an applied perspective, which is to say, what is the best or most effective means of transacting commerece or managing the enterprise, with some goal in mind, usually profitability, improving employee relations, or marketing. While Drucker has dealt with these issues and many more in numerous publications over his long life, he also inquires into the principles and concepts that underlie commercial activity and organizational structure, and he asks what ought the mission of a business to be, and, in particular, how can we reconcile a business mission with conflicting interests in the marketplace and society.
One of the most frequently discussed topics is the matter of organizational change in a complex environment. Paul R. Lawrence has dealt primarily with organizational change, organization design, and the relationship between the structural charactertistics of complex organizations and the technical, market and other conditions of their immediate environment. His 1967 book, Organization and Environment (written with Professor Jay Lorsch), added "contingency theory" to the vocabulary of students of organizational behavior.
Other philosophers of business, for example, Geoffrey Klempner, are principally interested in examining how business is even possible, which is to say, how can an enterprise function in society as a whole. Klempner states that theories of ethics and business are often at odds, and that one might even have to suspend the normal ethical considerations that would apply outside of business in order for a business to be possible. This is reminiscent of Albert Z. Carr's famous Harvard Business Review article on bluffing, where he said business was similar to playing poker, and that deception is a necessary part of business.
Of course, there is a close relationship between the philosophy of business and business ethics. Philosophers specializing in business ethics are primarily interested in how businesss people ought to conduct themselves in the marketplace and in society. Michael E. Berumen, for example, emphasizes the importance of a business person's role as a moral fiduciary, and the special duties he acquires by virtue of his capacity. He rejects the idea that bluffing or deception are necessary aspects of business, or that moral rules would have to be suspended in order for business to be possible. Philosopher Norman E. Bowie adopts Kant's three versions of the categorical imperative for ensuring ethical business conduct, and he pays particular attention to the third variation, whereby the people within a business must be seen as a kingdom of ends, and not merely treated as means to an end.
Some would argue that the main purpose of a business is to maximize profits for its owners, or in the case of a publicly-traded company, its stockholders. The economist Milton Friedman is a proponent of this view. Others would say that its principal purpose is to serve the intersts of a larger group of stakeholders, including employees, customers, and even society as a whole. Most philosophers would agree, however, that business activities ought to comport with legal and moral strictures.
Advocates of business contract theory believe that a business is a community of participants organized around a common purpose. These participants have legitimate interests in how the business is conducted and, therefore, they have legitimate rights over its affairs. Most contract theorists see the enterprise being run by employees and managers as a kind of representative democracy.
Stakeholder theorists believe that people who have legitimate interests in a business also ought to have voice in how it is run, notwithstanding the fact that they do not have ownership in the business. The obvious non-owner, stakeholders are the employees. However, stakeholder theorists take contract theory a step further, maintaining that people outside of the business enterprise ought to have a say in how the business operates. Thus, for example, consumers, even community members who could be affected by what the business does, for example, by the pollutants of a factory, ought to have some control over the business.
Some philosophers believe that a business is essentially someone's property, and, as such, that its owners have the right to dispose of it as they see fit, within the confines of the law and morality. They do not believe that workers or consumers have special rights over the property. Workers voluntarily exchange their labor on behalf of the business owner for wages; they have no more right to tell the owner how he will dispose of his property than the owner has to tell them how to spend their wages, property belonging to the workers. Similarly, assuming the business has purveyed its goods honestly and with full disclosure, consumers have no inherent rights to govern the business, which belongs to someone else.
Some philosophers who subscribe to this view point out that a property owner's rights are nevertheless not unlimited, and that they are constrained by morality. Thus, a home owner cannot burn down his home and thereby jeopardize the entire neighborhood. Similarly, a business does not have an unlimited right to pollute the air in the manufacturing process.
The mission of a business is basically what it does, its principal objective (e.g., to make cars, sell guns, provide insurance, sell hamburgers). One can gussy it up with adjectives, of course, for example, to make the best, largest, greatest, etc., but, for our purposes, we intend only to know the major objective or objectives of the enterprise without the fluff or superlatives. The philosophical question arises, are some missions immoral? For example, if a business intends to manufacture and sell a recreational drug that is known to be harmful to the users, is it immoral to do so? What if the business fully discloses the risks, and non-users are not put at any unnecessary risk as a result? One could easily ask such questions of guns, sex, motorcycle helmuts, dangerous amusement park rides, and so forth.
Some philosophers would suggest that a business ought to be allowed to sell virtually anything that does not harm unwilling, rational participants (i.e., innocent bystanders), provided the business fully discloses the dangers to those who purchase its products. Others, of course, would say that business and society have duties to protect people from exercising poor judgment. A libertarian might say that such proscriptions are laden with subjective valuations, and that people have a right to choose for themselves, that is, as long as they do not harm others.
Some philosophers see the business enterprise as a means of transmitting social justice, as a kind of mini-republic. This is especially true of contract and stakeholder theorists. Those who view a business as being primarily someone's property wouldreject this view. While they might well believe that the net effect of people disposing and exchanging their property freely will ultimately be beneficial to society as a whole, they would argue that even if this were not the case, one ought not to limit another's freedom to dispose of his property as he likes, that is, unless it is harmful to others.
Regardless of how one thinks about these matters, it is undeniable that that a business enterprise represents an increasingly important part of people's lives, especially the employees working there, for, in many ways, the business constitutes a person's principal social group, and it amounts to a replacement for the village or tribe that was the central social setting for our ancestors. In many ways, one's affilliation with a business is the most important social institution most of us have outside of the family.
What makes a business a business? We take for granted that a business is a profit-making entity. How, then, are we to characterize a business that is run only for the benefit of the people who buy from it, for example, a so-called co-operative? Similarly, how might we characterize an insurance business that is owned by its clients, as in the case of a mutual insurance company? Do the owners of insurance policies buy them primarliy for a profit? What about charitable enterprises, such as Goodwill Industries, or religious organizations such as Trinity Broadcasting Network? Are all of these organizations businessesin the same sense as, say, General Motors is?
What is it that fundamentally distiguishes a business from other kinds of organizations, say, governmental organizations. For example, how could we characterize quasi-governmental organizations such as the U.S. Post Office and Amtrak, which are supposed to be self-sustaining, even profitable (for reinvestment, reducing or eliminating taxpayer subsidy, reserves)? Would we call such organizations businesses? One might suggest that these are run for the benefit of society, whereas a business is to satisfy the interests of its owners. However, is it not the case that society owns the governement? One also would have to ask, how is one entity's satisfying the various interests of some segment of society substantially different from another entity's making a profit that also satisfies various interests, sometimes even the same ones?
What about a person who trades his labor in return for a wage. Is he also in business? After all, he is putting up risk capital, in the sense that he's giving up his time...an opportunity cost...and even making an investment of himself, his labor. He is performing a service, just as a business does. His employer is, in a sense, a customer, someone whom he must satisfy. And the employee markets himself, his skills, either to get a job or to get ahead. He has either an explicit or implicit performance agreement, a contract. He even hopes that his revenues will exceed his expenses, which is to say, that his efforts will be profitable. Does this, therefore, make every laborer a business person?
In other words, a philosopher might reasonably ask, what constitute the essential and distinguishing characteristics of a business enterprise. Perhaps it ends up being something as simple as being one or more persons engaged in any number of possible exchanges that satisfies any number of possible interests in an intentional, organized, planned manner. In any case, these are at least some of the questions one might ask about the ontology of a business.
In the epistemology of business, we ask what are business facts and how do we come to know them? What constitutes business knowledge versus mere belief? As in other aspects of life, in business we acquire our knowledge through empirical study, from which we draw conclusions using inductive or deductive methods. We verify (or falsify) our hypotheses through testing, and thereby develop business theories, organized explanations of the facts. To what extent is what we purport to be business knowlege...other than that which is relatively trivial...reliable or veridical?
Business relies heavily on inductive reasoning, which assumes a uniformity of nature, such that the future is assumed to resemble the past. This, of course, is problematic, especially when considering the complexity involved in adequately factoring in the effects of customers, competitors, legislative and regulatory encumbrances, employees, environmental and climatic hazards, war, new technology, and so forth, into useful quantatative formulae. It is impossible to bind all of the variables for making probabilistic judgments on many of the most important business problems with a high degree of confidence. For this reason (among others)...because of the number of variables and the sheer unpredictability of outcomes...there is a rather considerable risk of failure in business; conversely, there would seem to be a rather high degree of luck in achieving success, or putting it in the venacular, being at the right place at the right time. This relates to the simple fact that business knowledge is highly tentative, and subject to error or obsolescence. One
The philosopher of business might also reasonably ask, to what extent does intuition play a role in our business knowledge. What does it mean to have "a gut feeling" about a business matter, and how is it useful. Is there even such a thing as business intuition, or is it simply a matter of internalizing knowledge through a variey of experiences, such that it seems intuitive. At the very least, a great many mangagers and marketers would say that they operate using their intuition a great deal, perhaps especially in dealing with people, which, of course, leads us to inquire into the role of psychology.
Business Pathways, edited by Geoffrey Klempner, [1]
Peter Drucker web site, [1] This is an Article on Philosophy of business. Page Contains Information, Facts Details or Explanation Guide About Philosophy of business Definition and scope
History
Philosophers of business
Some important philosophical topics and questions
The purpose of a business
Contract theory
Stakeholder theory
Business as property
The business mission
A mini-republic or modern village
The ontology of the business enterprise
The epistemology and logic of business
Sources
Publications
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