Why business ethical standards are often merely wishful thinking and depend heavily on the behavior of the entrepreneurial personality. Do the limits of business-ethical conduct lie within the personality of the entrepreneur? An interdisciplinary discussion of a not only economic theme, but also with hints on genetics, psychological paradigms, big five taxonomy, the psychological self-concept.
Why business-ethical maxims can fail on the entrepreneurial personality.
Dr. Wolfgang Schenk, Osnabrück, Germany
Abstract
It is the during the last decades growing field of questions about the relations between approaches of the society and the economic approaches. This in special with the gain maximising targets of the enterprises which demands a more growing space for solutions about business-ethical questions and problems. That are questions and solutions which perhaps could be solved easily by clear regularities if there would not be an annoying factor by which all theories and regularities get minimum in parts the ranking of theoretical wishes. This factor has as name only one word: the human – and concerned as a little cut-out of economic actors, the entrepreneur. In four short chapters, this article shows why business-ethical approaches are minimum in parts condemned to fail.
1. Business-ethics – a position-fixing
2. The (human) entrepreneur as the target address of corporate ethical requirements
3. Why not all entrepreneurs can act business-ethical in the same manor
4. The self-concept as correcting variable for business-ethical acting
1. Business-ethics – a position-fixing
„Business ethics is an essential area of study that links moral principles with organizational decision-making. It provides a foundation for responsible behavior and is equally important for both the success of organizations and the welfare of society“ (Iqra, Isphahan, A., Tahir, M.U. :2025:1)
In principle, ethics can be defined as the analysis of human acting under the perspective of ‘good’ an ‘bad’; more precise about ‘moral right’ and ‘moral wrong’ (Lütge and Uhl: 2017:6). Normative ethics demand about which actions are right or wrong. Descriptive ethics are not imperative an opposite pole to normative ethics. Descriptive ethics are about the description and explanation of systems of norms and deliver describing elements as basis of valuation for the normative ethics (Lütge and Uhl: 2017:6).
So, concerning economic processes, normative ethics request which economic activities must be seen as ‘good or bad’, as ‘moral right or moral wrong’. Moral and ethical conventions on the one side and economical actions on the other side have a two-way influence on another. That are procedures – occurrences - which can be summarised under the name ‘business-ethics’.
Very abstract, Lütge und Uhl (2017:8) define what ‘business-ethics’ means: “Business-ethics is a discipline of the practical philosophy analysing the facts, which norms are coming up under the conditions of a modern society and get importance there”. An economical a little bit more precise explanation about that is found by the definition of the term ‘economics’, Homann und Suchanek (2005:4) did: “The economics deal with possibilities and problems about social cooperation for mutual benefit”. This definition signs that socially by economic actions something must be done in a way which then is not only for the advantage of one person, but that social common acting serves to the social welfare of a community.
Crane, Matten, et al. (2019:9 -12) name generalised reasons why business-ethics and business-ethical acting are important, and so in the economics and with this for entrepreneurial acting should be a guideline:
1. The huge power of business inside the society
2. The potential of business giving contributions to a society
3. Business malpractice can bring enormous damages over individuals, communities, and environments
4. Because the demand to work ethical by the participants of the economies grows and brings always new entrepreneurial challenges
5. Ethical standards are increasingly more demanded by employees
6. Business ethics can help avoiding business trust deficits.
From this comes out the question how business-ethics concretely should ‘happen’ so that effectively a social common acting for the benefit of everyone involved can arise. Because: Entrepreneurial decisions sometimes also have social consequences and are thus in the focus of public interest. A growing public awareness of economical, entrepreneurial-ethical and leadership problems have a growing importance in entrepreneurial processes (Ulrich and Lunau 1979:49 f).
This importance can be shown by questions, as they are cited from Ulrich (1998:1):
“- Does the company management have the moral right or even the moral obligation to
strictly maximize the financial value of the company () or not?
- Do (other) stakeholders (besides the capital owners) have legitimate demands
entrepreneurial actions, or not?
- To what extent are companies (partly) responsible for maintaining or creating jobs?
- Do companies have a moral obligation to protect the environment, to show solidarity with
the socially disadvantaged, etc. beyond the legal provisions?
- In view of its numerous effects of high public relevance, does the "private economy sector"
have a regulatory responsibility for the fairness and public welfare of the framework
conditions of competition?"
Such business-ethical questions cannot be solved by themselves. They need a place where they can be processed and, if necessary, solved. Such places are the places and institutions where ‘economy’ and ‘economical action’ takes place - happens. In addition to many other places, this is primarily the multitude of companies - and thus ultimately each individual company.
2. The person of the entrepreneur as the target address of corporate ethical requirements
This raises the question of how ‘the company’ and ‘in the company’ the entreprneur can fulfill business-ethical requirements such as those named above.
It turns out that ‘the company’ (as a subject) can only meet and exercise business-ethical requirements with difficulty or not at all: this is because ‘the firm’ is a term for the ‘production function’ that converts inputs into salable outputs over multi-period periods with the goal of maximizing profit and increasing the value of the firm (Schmidt 1998:2).
Rather, corporate ethical requirements can have their place in the company where the company defines itself through the exercise of company-related functions. Functions, how they are named and described by Freiling (2008:48 f.) with: coordination, arbitrage, innovation, risk-management.
From these four shown entrepreneurial functions, the innovation function serves to the system renewing, to make the enterprise infrastructural capable of competing at any time, best case also to bring new things cutting-edge on the market (Freiling 2008:48).
The coordination function and the arbitrage function are related to the system usage. The coordination function refers to the process inside the enterprise, including the cooperation partners. “The internal coordination refers to the processes of creating goods and services, and with this, secures the smoothly process. Above all, the coordination function serves to develop the motivational potentials of the enterprise” (Freiling 200:48).
The arbitrage function doesn’t look at the internal process of the enterprise, but this function is oriented to the installation und the maintenance of customer relations, the preparation and the completion of sales. “In summary, the generation, the cognition und the exploitation of opportunities of the market are allocated to the arbitrage function” (Freiling 2008:48).
By the two functions of system usage (coordination function and arbitrage function) are found out the urgently necessary perspectives of a business management in a common theoretical conception by the model of the entrepreneurial functions (Reckenfelderbäumer 2001:160).
The sector of system validation by Freiling (2008:48 f.) is signed by the entrepreneurial function of risk management. This function enables the possibility of realising und finding out dangers by insecurity and the evaluation of these dangers. So, a judgement concerning a risk assumption and a diversification of risks should be possible.
Of course, the entrepreneurial functions are not standing isolated each for itself. They are done in an interacting way amongst another. Accordingly, Freiling (2008:49) names the term of entrepreneurship a “doing the presented entrepreneurial functions”, this with a clear hint on the component of a proactive action. The entrepreneurial functions adumbrate the ‘playing ground’ on which the entrepreneurial person is acting.
This makes the areas visible in which business ethical action can ‘happen’. And business-ethical action in entrepreneurial functions does not just ‘happen’ for itself but is linked to the entrepreneurial work in the entrepreneurial functions.
Thus, Freiling points out that this ‘working in the entrepreneurial functions’ provides the framework in which a person becomes entrepreneurially active. Schneider (1997:106) makes this reference to a person when he writes: ‘Leading a company, means persons, ….’
Like this, are also the arguments of Hering and Vincenti (2008:32) by naming the entrepreneur as an economic involved person who is doing certain entrepreneurial functions.
The descriptive questions of business-ethics listed above are therefore to be related to the entrepreneurial person - a person, a group of people - when exercising the entrepreneurial functions uno actu.
"The need to combine the economic and the ethical view of human action and its coordination therefore results from the nature of human action and from the requirement of the social order to allow economic and ethical orientations to come into a common play" (Koslowski 1988:1).
Entrepreneurial, business-ethical action is thus demanded by people. That are entrepreneurial acting people whose business-ethical behavior was previously examined by the 'Values Commission and the Institute for Life-Long Learning of the Technical University of Munich' (Fladerer et al. 2021:7) with regard on: integrity, courage, sustainability, respect, responsibility, and trust.
The authors of the study (Fladerer et al. 2021:7) describe it as follows:
" Integrity
- Honesty towards yourself and others
- Consistent orientation towards applicable laws, standards, and rules
- Living according to values, principles, and commitments
Courage
- Willingness to allow and accept new things
- Error-friendliness (trial and error)
Sustainability
- Harmony of economic, ecological, and social parameters
- Opportunities for future generations to develop as an entrepreneurial
measure of action
- Balance between short-term quarterly earnings and long-term profitability
Respect
- Mutual recognition and appreciation of personality
- Respect for behavior and performance (e. g. colleagues and employees)
- Renunciation of the dominance of one's own ways of thinking
Responsibility
- Willingness or obligation to stand up for something and to bear the
consequences of it
- Willingness to put self-interest behind the general corporate interest
Trust
- Behavior that gives the other person security
- Subjective belief in the correctness or truth of actions and insights
- Ability to allow others scope
Even if an organization like a company develops an institutional life of its own and a company-specific culture over time, it will always be people (entrepreneurs) who bring their integrity, their value orientation, their moral attitudes, and their ethics of responsibility to their companies (Pfleiderer and Seele (HG) 2012: 38 f.)
This is precisely the reason why different business ethics can be found from entrepreneur to entrepreneur: people behave differently and act differently.
3. Why not all entrepreneurs can act business-ethical in the same manor
Entrepreneurial action and ethical corporate behavior are closely intertwined. The reason for this is that both entrepreneurial action and ethical behavior refer to the same object: the acting people (Koslowski 1988:1). It's all about the entrepreneurial personality, and this can be extremely different in its characteristics and thus lead to very different entrepreneurial and thus also corporate ethical behavior. Tokarski (2008:4) describes this circumstance: “Every individual and thus also entrepreneurs are characterized by a specific set of values as well as moral and ethical principles. The values so have a significant influence on attitudes, evaluations, decisions, and actions”.
The question of normative ethics as to which actions are “right” or “wrong”, “morally good” or “morally bad” (Lütge and Uhl: 2017:6) cannot therefore be answered unequivocally, generally, and comprehensively. Because concerning the human personality, and thus also the entrepreneurial personality - independent of elements of a descriptive ethics - due to their individual diversity and the different patterns of action associated with it, no general statement about "the one corporate ethics" can be made.
The content and scope of this statement can only really be understood by taking a closer look at the human and thus also the entrepreneurial personality - a personality in which their very own behavioral patterns and thus their very own ethical feelings are equally, and coequal connected with each other.
Asendorpf and Neyer (2012:2) give a ‘handy ‘definition of the term ‘personality’: “With personality of a human is ment the entirety of his/her personality traits: the individual characteristics in his/her bodily appearance and in regularities of behavior and experience”. Roth (2013:15) speaks about time outlasting patterns, concerning a combination “of characteristics meaning the temperament, the affectivity, the intellect, and the way how to act, to communicate and to move”. Explicitly, the behaviour a person has, he includes as habits into the personality. Borghans et al. (2011:4) complete: “Personality is the system of relationships that map traits and other determinants of behavior, thoughts and feelings into measured actions”.
By Eagleman (2012:243) the consequence out of these definitions is summarised: “ Our reality depends on our biology ”. It remains to request and to have a nearer research about if the exclusiveness of this sentence has substance. But Eagleman (2012:252) bases on this sentence the difference between personalities and the difference between decisions, which must be done. For this reason, that are psychologic-biological processes, cognitive procedures, creating a person – also the entrepreneur (Mummendey 2006:258). And by this, individual different entrepreneurial actions and ethical (business-ethical) meanings and behaviour patterns are created.
In special the neuroscientific paradigm of psychology gives one answer why entrepreneurs must have different entrepreneurial actions and behaviours, and with this, probably different ethical measures of value too.
On this Schilke and Reimann refer by writing: “The neurosciences give answer about the anatomy of the human brain, respectively its functionality. With their methods, the neurosciences support the localisation, description and differentiation of states and processes inside the human brain, and by this, give exploration about the neuronal basis of human behaviour in economic decision situations”. Thereby, the neuroscientific paradigm of psychology contains the trial, giving a neuroscientific explanation for human behaviour (Asendorpf and Neyer 2012:49). This approach bases on the fact that human information processing is done by the nervous system (brain and nerves), as the smallest units of the nervous system (neurons) are serving as information carrier. Thereby, it is a biologic approach, explaining the human personality by looking on the information transfer in the nervous system (Asendorpf and Neyer 2012:49).
But besides the neuroscientific paradigm of psychology, another paradigm of psychology must be looked on too explaining differences in the entrepreneurial personality and the entrepreneurial action as well as business ethical behaviour: The molecular-genetic paradigm has the molecular behavioural genetics as subject. That means an explanation, “referring personality on the individual-typical patterns of alleles” (Asendorpf and Neyer 2012:16). ‘Allele’ is the denomination for different forms of a gene (Graw 2010:3). “Genes are sectors on the chromosomes, which can be defined by their function concerning the metabolism; they can vary from person to person in their structure” (Asendorpf and Neyer 2012:62). One refers to different alleles of the same gene. The human genome until now was deciphered with about 25.000 genes, which by themselves can appear in different alleles. Humans do not differ in their genes, but - no doubt - in their patterns of alleles. As these patterns of alleles in a human are unchangeable, as Asendorpf and Neyer (2012:62) say, the conclusion is nearby, “ […] that specialities in the personality relate to the individual-typical alleles-patterns in the genes”.
Today is acted on the assumption that the genetic determination of the personality is at about 50% (Asendorpf and Neyer 2012:62). Corresponding to this, Roth argues the strong genetic conditionality of several personality characteristics, and here for example names the intelligence (Roth 2013:30).
There is the supposition that different patterns of alleles influence the efficiency of neurotransmitter absorption, and with this influence the biochemical information transfer. Asendorpf and Neyer (2012:63) give the hint about the fact that particularly alleles-constellations on a defined gene can bring out a deficit of the neurotransmitter dopamine, by what comes out a human behaviour striving for news, excitement and changes, for the purpose of increasing the dopamine level.
It is this a hint that the human ‘biology’ minimum in parts determines the human behavior, and that with this also the entrepreneurial behaviour in parts is steered by the genes. The different mixture of genetic factors (gene-polymorphisms) is correspondent to the actual standard of psychological and neurobiological personality research an influencing value of the human personality (Roth 2013:103).
Different entrepreneurial behaviors (and thus probably also different value-based - ethical - behavior) can be traced back to personality differences. Beside personality differences in the sector of a) abilities and competences, there is to differ in b) the emotional cognitive sector and c) the sector of social behaviour (Weber and Rammsayer 2005:321 ff.).
Without further specifying it becomes apparent that the number of possibilities of how different the human personality and thus also the entrepreneurial personality combined with the respective behaviors - not least based on different (ethical) values - can be infinitely large.
And that's not the end of what biology/psychology has to offer when it comes to finding out why entrepreneurs must behave differently. Why they may have different values, shaped by their behavior – business ethical values, which may then not be correspondent with positive answers in the patterns presented by Fladerer et al. (2021:7) (integrity, courage, sustainability, etc.). And concerning the (business-ethically descriptive) questions from Ulrich (1998:1) mentioned at the beginning of this article, it becomes visible why highly different results probably will be produced.
It is the sector of personality traits - by which human (entrepreneurial) behaviour and action, and on the person biological or by experience bonded ethical action too - which must be seen as one pilar more influencing entrepreneurial action and the living together in a (economic) society. Borghans et al. (2011:3) bring in citation with Roberts (2009:140) personality traits abstractly and comprehensive into discussion: “Personality traits are the relatively enduring patterns of thoughts, feelings, and behaviours that reflect the tendency to respond in certain ways under certain circumstances”. In this process, there is a focus on the stability of behavior patterns including stabile thoughts and feeling patterns as well as action and reaction (Borghans et al. 2011:3f).
Thus, the description of the personality is done in the sum of its characteristics (traits) by the analysis of the interaction of longer lasting allurement-constellations and behavior patterns: “The behavior or rather the reaction of the individuum on certain situations are depending on individuum’s traits, building at the same moment his/her behavior-dispositions” (Brauckmann et al. 2008:6 f.).
That’s why, it’s about capturing the human behavior-traits. A today trait-theoretical allowed and often used approach, describing the personality, is the 5-factor-model ‘Big Five’. This is an approach which by means of many experts best characterises a personality.
The approach contains the factors (description-dimensions of personality): neuroticism, extraversion, agreeableness, conscientiousness and openness (for experiences) (Roth 2013:17 f.). These are personality-traits, “[…] being in parts caused genetical or by the development of the brain, in other parts patterned early infantile, and being stabilised in their individual specificity early” (Roth 2013:32).
For entrepreneurial action – and with this entrepreneurial business-ethical action too -, the following results can be assumed as output (translated from a German version):
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Source (German version): Schenk 2017:196
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Source (German version): Schenk 2017:213
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Source (German version): Schenk 2017:225
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Source (German version): Schenk 2017:235
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Source (German version): Schenk 2017:254
By the multiplicity of traits, it is not difficult to assume that business-ethic actions as well as the complete entrepreneurial actions as this are influenced by a) the personal status of the moment and b) by the general tendency of the entrepreneur in the sense of the Big Five taxonomy. But however, the multiplicity of traits lets adumbrate why business ethical principles will be as numerous as entrepreneurial personalities are existing. That is why in the heading of this article is spoken about that business-ethical principles can fail on the personality of the entrepreneur.
Of course, it is not a real “failure” but a sign for the fact that formulated descriptive business-ethical principles are only a very small part of that truth, the reality brings out.
The personality as this is not changeable. Roth (2013:104 f.) suggests, that it is the biologic determination (genes and differences in the brain-development), by which in a great extent, 50%, the differences in the personality are determined, and exemplifies on this biological determination in special the temperament of a person, as well as specific abilities including the level of intelligence. But he also points out that more than only this, prenatal and early after the birth made experience of the first years of one’s life constitute about 30% of the human personality. Then, in the later childhood and the youth socialising processes (familial, social, environmental) are added, influencing the development of the personality, the last about 20%.
For the entrepreneur, that means that for him/her by the own personality at bottom, it is determined how he/she will act in the entrepreneurial functions – and so business-ethical too.
But as a society is living from ethical norms – descriptive norms with its daily normative aberrances, for the business-ethical descriptive norms as they for example very wide are formulated in a form of questions by Ulrich (1998:1) at the end of the first chapter of this article, the psychology in form of the entrepreneurial self-concept perhaps gives a little help doing the entrepreneurial functions in a business-ethical descriptive way – getting so too a normative way for lots of entrepreneurs.
4. The self-concept as correcting variable for business-ethical acting
The self-concept means “[…] the entirety of evaluation concerning the own person” (Mummendey 2006:25). The entirety of these evaluations is created by the sum of perceptions about oneself (Laskowski 2000:15). “The self-concept is a dynamic inner structure and authority of regulation, by which many intra-personal processes like somehow motivation or emotion as well as inter-personal processes like social perception and decisions are interpreted and communicated between” (Daig 2006:29). For entrepreneurial action, the self-concept better should be more positive than negative.
So, the self-concept perhaps as “observer of oneself” can also be this authority by which business-ethical coloured actions can be leaded back on to the traces of the contents the descriptive business-ethics offer, if necessary.
That are made experiences under the consideration of body-related, emotional and social aspects, determining the self-concept of a person (Daig 2006:29). By the self-concept, a person is drawing a picture about him/herself. By this self-perception is indicated person’s appearance with his/her action in his/her environment (Laskowski 2000:15). It depends to the self-concept of a person, how the person interprets his/her perceptions and then is acting with them (Laskowski 2000:15).
And so perhaps these made experiences may have the chance calibrating business-ethical positions of a person if the self-concept reports back differences to common business-ethical standards.
The self-concept comes out on the ground of perceptions and so enables for a feeling which occurrences paired with other occurrences can appear caused by entrepreneurial actions; and which expectations - with positive as well as negative consequences - can so be deduced for the future.
So, the self-concept has a selective impact on the perception: about oneself made evaluations are seen for the present as evidence and anchor-point as facts. This, being able at all, to range new experiences; and to evaluate by perception upcoming follow-up-expectations (Laskowski 2000:22 f.). It is this ability to range new experiences in such a form that from the entirety as bad felt activities can be reconfigured for the future into ethical common action-patterns.
Mummendey (2006:55) constitutes that not directly positioned on the business-ethical behaviour, but on the behaviour of a person in general: By this comparing process of perception persons are able to, they can learn which occurrences are linked to the upcoming of other occurrences, and which consequences result from which behavioural patterns. So, they can construct a horizon of expectations about that what could happen in the future, controlling and steering their behavior by that. And so (in parts) their ethical behaviour too.
But meaning that by the human (entrepreneurial) self-concept there is the core-element to change the entrepreneurial personality and so perhaps a business-ethical behaviour too, underlies to an error.
Mummendey (2006:88) states that changes of human action are possible by changes of the self-concept; this by biological caused variations, by variation of the environmental conditions, and by variations which are done by the person him/herself. These self-done variations are induced for example by made experiences, by conscious decisions, etc. (Mummendey 2006:88). But in the age of an adult, a ‘new construction’ of the self-concept will happen more seldom. The reason is, that during a lifecycle, there are increasingly less new themes which must be experienced newly – themes, to which an idea in the existing self-concept doesn’t exist (Laskowski 2000:150).
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Source (German version): Schenk 2017:254
So, business-ethical standards may exist in a form of descriptive standards. But in how far these standards will also be normative standards in the entrepreneurial business-life is anchored in the personality of the entrepreneur. But that does not mean that a flourishing rank growth of arbitrary thinkable business-ethical appearances is possible. Frames are set by the laws and the regularities of a society. And getting conflicted with this, minimum the self-perceptions and controlling mechanisms of the self-concept like somehow a regulatory body can give a help.
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- Dr. Wolfgang Schenk (Auteur), 2026, Business-ethical maxims, Munich, GRIN Verlag, https://www.grin.com/document/1719815
