Adam Smith's Vision of the Ethical Manager

Abstract

In the field of business ethics, Adam Smith has generally been viewed with a measure of suspicion. Smith's famous invocation of the invisible hand - according to which self-interest promotes the greater good - has generally been seen as a fundamental challenge to a discipline committed to the opposite premise that the public interest cannot be advanced unless the egoism of economic actors is restrained by a more socially conscious mindset. To the extent that Adam Smith has been brought into the fold of the discipline, it has involved showing that his authority cannot be summoned to fully support the free market sceptics of business ethics. Little has thus far been done, however, to illustrate that Smith's moral writings actually contain the fundamentals of a business ethics teaching.

This paper analyzes his moral thought with a view to inferring a Smithean framework of business ethics to guide managers. In sympathy with the field, Smith holds that self-interest ought to be subordinated to moral imperatives, even in the business world. Against the grain of the field, though, Smith rejects the principles of corporate social responsibility on the argument that benevolent impulses cannot be expected to prevail in the commercial arena. Instead of consciously trying to advance the social good, Smith's ideal manager will endeavor to personally live up to the standards enforced by an impartial spectator of his conduct. This internalized onlooker expects a limited degree of benevolence, a constant exercise of moderation, along with the occasional exhibition of magnanimity whenever challenging situations arise. Still, the overriding demand is for the manager to abide by the dictums of justice and prudence. While the Smithean inspired manager will never reach the pinnacle of virtue, they can do better than merely adopt enlightened self-interest as their lodestar.

Keywords: Smith, business ethics, self-interest, virtue, corporate social responsibility

JEL Classification: A12, A13, B00, B12, B31, K10, M14