MER Model of integral management: Family
business ethics1
Jernej Belak, M.Sc.
MER Evrocenter
Family Business Institute
Koroška c. 113 b
2000 Maribor
Slovenia
e-mail: jernej.belak@mer-evrocenter.si
Abstract: Business ethics is an effort for ethically permitted in respect to business
activity. It is a try not only to achieve the goals but also to understand what these goals
mean for certain enterprise. Business ethics is a part of the applied ethics. As such gives
us ethic thoughts and concepts which point out the moral problems of an
entrepreneurship.
In MER model of integral management the main part has normative ethics which defines
what enterprises or participants of an enterprise ought or ought not to do. The normative
ethics divides to material and formal normative ethics. The first one bases on rules which
define the conduct in concrete circumstances. Therefore these rules of material
normative ethics also make the basis for judgment of “right and wrong” conduct and
actions of certain enterprise. The formal normative ethics gives the general guidelines
and demands which make the basis of ethically good actions of an enterprise.
Due to the specific family business owners’ conditions, the influence of a family on
enterprise’s management, the wish and demand for family business remaining in hands
of family (from owner and management point of view) we can say that family business
ethics differs from non-family business one. In paper we will handle with the problems of
ethics, family business ethics and its importance in a frame of MER model of integral
management.
Keywords: ethics, business ethics, family business ethics, MER model of integral
management
1
Ethics and the problem of business ethics
The ethics is philosophic discipline which deals with researching and
formation of human relationships. In the history of philosophy ethics was
thought as part of the applied philosophy and which made it feasible not
only in theory but also in practice. The subject of ethics is human
relationships [1]. It deals with the topic of the human volition or intention,
treatment or act from the good or bad, moral or no moral point of view. It
is theoretical philosophic reflection on morality, about the phenomena and
1
Published in: Proceedings of 2nd International Conference on Management, Enterprise
and Benchmarking. Budapest Tech, Budapest, June 25-26, 2004.
1
processes which are morally relevant. Regarding its two main duties ethics
is divided into two fields [2]: the theoretical and practical normative
ethics. The first one explains what the moral judgment is and exploits
what role the character, initiative, goal and motive have. The second one
makes the moral judgments and defines what character, initiative, goal,
motive and function is morally positive or negative. Philosophic ethical
reflection deals with all important categories: (the highest) good,
beatitude, happiness, inner peace, meaning of life and human being, life
moral virtues, personality, conscious, freedom of will, etc.
Ethics can be characterized as a skill which leads to good [3]. And as
Aristotle said “every art and every investigation as well as every act or
decision making leads – in general opinion – to something good” [4]. For
suitable ethics definition we can conclude that ethics deals with the
questions concerning good or bad human behaviour or in its actions [5].
The ethic problems and questions are relevant especially in modern world
where the science and technology progress with a lightning speed. People
know more and therefore we are also able to do more. Therefore the
consequences of our actions are less predictable. It would be meaningful
that clearer picture of our moral conscious would develop hand in hand
with the scientific and technological progress [6].
Business ethics is an effort for ethically allowed and virtuousness
regarding the business activity. It belongs to a branch of the applied
ethics. As such it develops ethical theories as well as concepts and
stresses out the business problems. Business ethics deals more with
behaviour forms which are decent and suitable to good taste than defining
what is ethically demanded or permitted [7]. Therefore business ethics is
needed for understanding of moral problems in different business
situations [8].
Thommen describes the following tasks of business ethics [9]:
− description of norms and rules which have to be followed by the
company management
− description of ethical problems faced by certain enterprise
− conduct judgment of an enterprise and the argumentation why
certain conduct is ethically good or bad
− in a field of applied economics ethics should point out the
consequence of certain business conduct. It should also offer the
suitable instruments to analyze and solve the ethical dilemmas
The business ethics is one which describes the norms and rules that have
to be followed especially by the company management. These guidelines
come as the result of norm, efficiency and responsibility analysis which
consequently makes the description of ethical problems faced by certain
enterprise. It is necessary for business ethics not only to analyze the
2
conduct of certain enterprise and the consequences of such conduct but
also to offer the concepts and tools which will help to solve the business
ethical problems. The business ethics judges the enterprise’s conduct as
well as arguments why certain conduct is good or bad.
Weiss [10] defines business ethics as the art and the discipline of the
applicable ethical principals for reviewing, investigating and solving of the
complex moral dilemmas. The business ethics asks what is right or wrong
in functioning of certain enterprise.
In Ulrich’s [11] opinion the business ethics gives the scientific and
methodologically disciplined critique as well as confirmation in a sense of
moral conduct of certain enterprise.
Nash [12] understands business ethics as one that explains how the moral
norms of an individual can be used in a sense of the activity and goals of a
profit oriented enterprise. In her opinion the business ethics is not some
separated standard but certain system which examines the functioning of
a moral individual as an agent in business environment that faces unique
moral dilemmas. She divides the functioning of business ethics to three
fundamental areas of decision making at the managerial level:
− decisions regarding what the law should be and decisions if that law
should be followed
− decisions regarding the economical and social dilemmas above the
law
− decisions regarding conflict of interests (the individual vs.
enterprise)
In Jaklič’s [13] opinion business ethics means use of the general ethical
principals in the frame of business behaviour. Furthermore the business
world is not competent for establishing the business conduct criteria.
Ethical problems and dilemmas are in the majority of cases the
consequence of the conflict of interests within the different interest groups
of certain enterprise. Ethical dilemmas can be observed in everyday
functioning of an enterprise: unsuitable business presents, invasion of the
employees privacy, questionable marketing, attitude towards the nature,
attitude towards the politics and government, presentation of the
accounting figures, conflicts in operations with foreign partners, etc... The
author also emphasizes that ethical conduct of certain enterprise can play
a role of a shelter. Thommen [14] on one side puts the credibility as the
ground of the business success where Jaklič [13] warns that ethical
business conduct can offer the security from unethical employees, buyers,
competition, suppliers, etc. Ethical business conduct can also be the
reason for saving the integrity of an individual since the level of pressure
on individual is much higher in unethical business environment. The fact
that an individual will not act contrary to its own virtues and norms
persuades the author that more than certain business environment is
3
ethical higher is the level of its productivity. Furthermore in a business
environment where employees feel psychological safety it is greater
possibility that they will defend the interests of the other interest groups
as well. Such an opinion confirmed Freeman and Gilbert [15] who said
that the strategic decisions based on moral values logically meet the goals
of interest groups as well as individuals with the key positions.
Consequently this also means defending of goals, interests and values of
other interest groups.
We can say that business ethics has to deal with social and economic
dilemmas as well as with relations of certain enterprise’s participants at all
organizational levels.
From ecological point of view are very interesting the conclusions of
Osterloh and Thiemann [16] who examined the conflict which occurred
because of the Brent Spar oil platform removal. In the frame of this case
they studied three leading concepts of economic and business ethics which
are best known in the German speaking environment. Considering those
they made the conclusions about the further needed development of the
economic and business ethics. This case was also the origin of the
conflicts between Shell UK and Greenpeace. Even though the British
government legally allowed the removal of the platform and the legal
opinion of the Shell UK was that the removal was the best economic and
ecological solution the Greenpeace as well as the civil public saw in this
case the violation of some fundamental ecological principals. Using the
well-founded arguments they achieved that Shell had to use more
expensive procedure for platform removal which meant the higher level of
eco- principal consideration. This case shows that without the ethical
legitimacy even the legal action can not always be enforced. The case
made also clear that nowadays enterprises function under the pressure of
ethical argument of their actions.
Considering the above Thommen [17] emphasizes the question whether
the business ethics is possible in profit oriented enterprises regarding the
fact that the profit is their only goal and motivation. Do not such
enterprises by considering ethics do the harm to themselves? As an
answer the author offers the thesis where business ethics overpasses from
the instrument into the condition for creating profit. Such thinking also
equalizes the need of ethical conduct in profit as well as in non-profit
oriented enterprises.
2
Business ethics levels
The actions of every enterprise effect other organizations as well as a lot
of people internally as well as externally. Therefore enterprises face
various ethical dilemmas. In the context of understanding the business
4
ethics it has to be stressed out that ethical relations show [18] at
individual, organizational and social level. Thommen [19] named them
micro, mezzo and macro level. In both authors’ opinion the business
ethics is carried out at the organizational (mezzo) level.
At the micro level the actions of an individual are in focus. The subject of
a research interest at this level is the functioning of an individual in his
specific living environment as well as at his work and the circumstances
that limits his functioning in such living environment (e.g. working
conditions). It is about the description of what the individual’s conduct
ought to be in a case of employer, manager, end user, etc. At this level
the possibilities of conduct are examined (e.g. conduct possibilities of coworker who is concerned with the safety of a certain product when his
superiors do not consider his arguments to the topic as relevant).
At the mezzo level the functioning of the business organizations is
examined (e.g. enterprise). The enterprise consists of individuals who
shape, form and focus certain entity or organization. However such an
organization represents an economic unit therefore it should be
considered as an independent functional subject. As such it is responsible
for its actions taken and its moral conduct and should carry the burden as
well as the consequences of its actions. Beside legal entity the enterprise
becomes a moral entity as well which means that in the case of e.g.
ecological catastrophe the particular co-workers should be called to take
over the responsibility for their incorrect actions or missed decisions.
Beside the legal responsibility the enterprise has the moral responsibility
towards the mistaken approaches therefore in a case of such conduct it
should not only take over the legally assigned penalty but other measures
as well.
At macro level the general economic conditions are shaped. At this level
the questions regarding the best economic system for the functioning of
different organizations as enterprises, legal entities, consumer
associations, etc. are set. Further this level sets questions as in what
amount the market economy can satisfy the ethical principals or what is
the righteous economic politic or how to set the effective ecological and
energy politics.
In Homann’s [20] opinion the most important is ethics of economy which
means the ethics at the macro level. He understands ethics at this level
having the regulative nature. This level should be designed ethically
normative where on the other hand at the enterprise level the guidance
should be market competitiveness. His belief is that in the conditions of
modern market economies the coordination of the conduct can not be
pointed through the common goals and values but through institutional
dependences.
5
On the other hand Ulrich emphasizes the importance of ethics at the
business level (mezzo) what gives the primacy to the ethics above the
economics. He adds the fourth – social level – to the three levels of
business ethics. In his opinion everything that concerns the functioning of
an enterprise should be a subject of the general discourse. This way the
highest ethic level is pushed to the critical public which means to all adult
citizens who are responsible for formation of fundamental consensus of
political rules. This thought is the origin of author’s further division of
business ethics. The republican business ethics establishes political coresponsibility of an enterprise. The major task of the business ethics is to
find the ethical strategic innovative synthesis and the success within the
frame of social ethic level. Business ethics divides to normative
management (development of business and political communication
potentials), strategic management (development of the strategic success
potentials), and operative management (development of the operative
production potentials). The profit principle is present at all levels. Anyhow
the author does not approve the dismissal of ethical conduct at the
business (mezzo) level.
In Steinmann [21] opinion the sufficient base of ethical functioning at the
enterprise level should be guarantied. The enterprise’s material goals as
the ground of achieving its formal goal (profit) should be founded
constantly. At the level of material goals an enterprise should have some
manoeuvre space since this is one of the conditions for the enterprise
strategic planning. Whenever the non-linguistic coordination markets or
legal order do not assure sufficient ethical solutions the business ethics
should be used. Such thinking guides to systematic use of moral and
ethics in market economy.
Questioning the (im) possibility of ethical conduct in profit oriented
enterprise Thommen [22] is convincing when proposing the ethics as the
key and fundament of the enterprise long-term success and development.
As the core of the business ethics he puts the enterprise’s credibility. If
the long-term survival is in the interest of an enterprise it has to earn,
save and develop the trust by its stakeholders. For achieving the
credibility of an enterprise the credibility strategy at three levels is
needed: in communicative, responsible and innovative functioning of an
enterprise.
3
Family business ethics
Despite to all changes of the form and the role in the society the family
remains the smallest social cell and the fundamental entity of every living
society. Due to these changes we can witness the several societal,
political, economic, cultural and other crisis of the modern society [23].
Dilapidation of family as the life entity, its traditional values which were
6
not replaced is often the reasons of different catastrophes (e.g. Paris
2003: 10 – 12 thousand people dead because of the heat).
Family and enterprise are two different systems which differ in their goals
as well as in the motivation of their functioning [24, 25]. The business
thinking should be more disciplined and controlling as e.g. satisfying the
children’s needs, organization of family or choosing a partner.
On one side the system of family creates the environment for community
living where also the upbringing and education is present. In this system
the emotions and affections prevail which are the main orientation of the
individual’s subconscious functioning. The family system is internally
oriented [26] which decreases the possibility of change.
On the other hand the system of enterprise bases on the economic
motives and efficiency. Its behaviour and conduct is conscious and
externally oriented therefore it strives for changes and uses them for its
own development.
The family business gathers two systems with different goals and
functional motives which may be the origin of many conflicts that can be
found in a system of family business only. Several authors [27, 28, 29,
30, 31] say that a lot of family businesses step into crisis or even go
bankrupt because of the role conflicts that people face as the family
members and those which they should have as the participants of an
enterprise. Despite the differences between these systems several
entrepreneurs think of “family ownership” as a business instrument and
symbol of quality.
Considering the fact that the family is an intimate room where the culture
of the family as well as of the broader environment is shaped, where the
first social relationships are formed which differ from relationships with
the people outside the family circle, that the family education and
upbringing makes the foundation for the focused expectations from every
single family member, that the trust and the firmness of the family
relations are built, that the working motivation of the family members is
different, etc. we can say that the nature of the family business is focused
to the functional independence of such a system. All these characteristics
make possible for family business to remain its economic power,
development, respect, contentment of its all participants, etc. [32]. The
motive of the functioning is what distinguishes a family business from non
family one. The family business can achieve all goals named above but
only in a frame of its need and interest which is the consequence of
certain phenomenon valuation. Any system (whether it is political or
religious) uses the individual and the family to socialize its values and
principals. This is the best way to anchor the appropriate behaviour as
well as ethical conduct in the society. Because of the importance of (in the
family system formed fundamental principals, values and norms) the
7
family influence to the culture and ethics of family business system it is
possible to observe and value the level of family influence to the ethics of
family business. The ethical conduct of certain family business can be
defined through its behaviour towards the internal and external business
environment. In an enterprise where the ownership and management is in
certain family hands the ethics of such enterprise can be derivate through
the family ethics. We should look for the origin of family business
credibility by observing the family. The functioning of certain family
business follows the credibility of communicative, innovative and
responsible functioning of certain family. This way family credibility is not
only the origin of business credibility but also the fundament of such
enterprise existence.
4
Conclusion
The business ethics is a broad topic. As such it does concern the broader
public then just enterprises and entrepreneurs. Family businesses are part
of our lives end economies therefore they co-create the circumstances in
economical, political, personal, etc. life. The authors who focus to the
problems of business ethics mostly distinguish themselves in
comprehension of the fundamental instrument (and level) which would
guide the enterprises to their credible functioning and to awareness of
such functioning as the fundamental and only possible way for their
success.
In MER model of integral management the main part has the normative
ethics which defines what enterprises or participants of an enterprise
ought or ought not to do. The normative ethics divides to material and
formal normative ethics. The first one bases on rules which define the
conduct in concrete circumstances. Therefore these rules of material
normative ethics also make the basis for judgment of “right and wrong”
conduct and actions of certain enterprise. The formal normative ethics
gives the general guidelines and demands which make the basis of
ethically good actions of an enterprise. The development of the MER
model of integral management made the basis for the family business
ethics discussion [33]. The ethical conduct of certain family business can
be defined through its behaviour towards the internal and external
business environment. In an enterprise where the ownership and
management is in certain family hands its ethics can be derivate through
the family ethics therefore the credibility of the family is the most
important.
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