In 1970, Nobel Prize-winning economist Milton Friedman wrote in the New York Times Magazine that a businessperson has no "social obligation" other than to maximize profits on behalf of his company's shareholders, a theme that was consistent in Friedman's work and often quoted. Friedman maintained that when a businessperson pursues a social rather than a private firm objective, he is imposing a tax on the shareholders' capital. Further, a businessperson's lack of training in social causes would mean such pursuits would be wasteful of company resources.

I agree with some of Friedman's points in the article, appreciate the nuances of the argument -- such as his distinction between for-profit and charitable-type businesses -- and believe it serves as a somewhat useful tool for a businessperson's decisions at the margin. However, I don't believe that it provides a complete ethical framework on how to conduct business. Friedman's framework seems anachronistic and limiting in its applicability since it requires a person to, at times, divest his ethical considerations from his interests as a prudent businessperson.

In my opinion, a more comprehensive ethical framework for businesses would include aspects of a philosophy known as "virtue theory," which was perhaps best articulated by former philosophy professor John Morse. In his writing, Morse posited that "businesses cannot be thought of as an entity whose practices, goals and purposes are separate and different from the goals, purposes and practices of the communities within which they find themselves." Morse contended that businesspersons not only shape the way their companies interact with their stakeholders -- communities, shareholders, employees and customers -- but are also a product of these interactions.

And this makes intuitive sense: When each of us enters the workforce, we bring with us an ethical framework to help guide our decisions. As we progress in our careers and take on additional responsibilities (e.g., family, volunteering, late nights assisting the auditors), our ethical framework develops in complex ways, and our "private self" and "work self" become more intertwined.

As most individuals cannot compartmentalize their work selves from their private selves, it makes little sense to view a person as two distinct individuals -- one who focuses solely on profits while at work and the other who is motivated by responsibilities to himself and his other stakeholders. Rather, the ethical private self, who promotes values of honesty, diligence, temperance and judiciousness, succeeds in business when he uses these personality traits to make prudent work-related decisions.

Ultimately, businesses operate as a means to provide a better life experience for their customers and employees. Profit generated while forsaking ethics should not be an end objective in and of itself. After all, even when the means to pursue profits are lawful, they might not be socially optimal. Take, for example, toy ads directed at a child's less formed sensibilities or agribusiness lobbying for protectionist policies of corn (which, in part, decreases the price of corn syrup, a byproduct in many junk foods). When we think of the ultimate goal of business solely as maximizing profits, we fail to see the forest for the trees.

Friedman's idea of the businessperson subordinating his ethical framework for the greater good of the corporation is limiting in its scope. His notion of business ethics fails because it lacks an appreciation of the underlying motives and responsibilities that individuals bring to the workplace. It regards an individual as an automaton rather than a person who pursues a richer life experience through his occupation, which may provide an important sense of purpose and a feeling of contentment as well.

Taken to the extreme, Friedman's lack of guidance encourages a myopic view and leads to a cynical caricature of the normal businessperson. Profits are a signal to the broader community that the company's goods and services are valuable. But that measure is only useful if the employees behave ethically and promote sustainable practices that contribute to the moral fabric of society.

W. Patrick Lovely, CMA, CPA, is an assistant controller at a government contractor and a graduate student in the Applied Economics program at Johns Hopkins University. He serves as a member of IMA's (Institute of Management Accountants) Committee on Ethics.