Ethics/Economics Integrated
Program
Damian Grace
Friedman on business ethics
 Business is amoral.
 An instrument like a hammer.
 Can be used for good or evil
 Business the means to non-moral goods.
 Ethical business is the pursuit of the ends for
which the business was originated.
 The standard reason for business is wealth
generation - profit.
Moral goods
They are about serious personal
commitments, adhering to principle and
treating others with respect. Businesses,
argues Friedman, can’t do these things. The
terms on which they deal are defined by
law, not morality. Hence, it is mistaken to
expect an airline business or a retailer or a
financial services firm to express moral
values in their operations.
Friedman’s view was not new
 He articulated an old view of business: why?
 By 1970, this view had begun to be challenged by
the view that business should be socially
responsible.
 Friedman’s response was his famous article (“The
social responsibility of business is to increase its
profits”) reasserting the traditional doctrine of
business.
Business served one human
purpose
 Government served others.
 Charitable organisations served another.
 Churches served yet another.
 The mistake was to confuse business with these
other purposes.
 Business was fundamental to wealth generation
and if this were compromised, then other purposes
would suffer, not prosper.
Dame Anita Roddick
 Did not separate the Business Purpose from
other purposes - notably, social causes.
 The difficulty in dismissing Roddick’s
views is that she was a successful business
woman who proposed a model of business
very different from Friedman’s traditional
model.
Dame Anita Roddick
1942 - 2007
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In 1970, Gordon Roddick took his
girlfriend, Anita Lucia Perelli, to San
Francisco. There, Anita was introduced to a
hippy establishment that sold shampoo and
body cream. It was in a converted garage,
so its owners, Peggy Short and Jane
Saunders, called it The Body Shop. Anita
was an enthusiastic customer, buying lots of
soaps, loofahs, cosmetics and potions.
Six years later,
 Anita borrowed a small amount of money and
opened a cosmetics shop in Brighton that she
called The Body Shop.
 Like its American counterpart, it was painted
green and sold its wares in plastic bottles with
hand written labels. Similarly, it offered discounts
to customers who refilled their containers.
According to Jon Entine,
Anita’s borrowings included the signature
green paint, and similar product lines, such
as Four O’Clock Astringent rebranded as
Five O’Clock Astringent, and Korean
Washing Grains rebranded as Japanese
Washing Grains.
In 1987,
 The Roddicks paid Jane and Peggy $M3.5
for the name of their shop, which then
became Body Time.
 Entine claims this payment also bought
their silence on the origins of The Body
Shop.
The official story differs from
Entine’s
 In the 60s, Anita quit her job as a teacher to travel.
These travels became the inspiration later for the
plan to market natural cosmetics through The
Body Shop.
 Roddick said:
 When you’ve lived for six months with a group that is
rubbing their bodies with cocoa butter, and those bodies
are magnificent, or if you wash your hair with mud, and
it works, you go on to break all sorts of conventions,
from personal ethics to body care.
But, according to public relations
director, Janis Raven
stories such as Roddick being inspired by her
travels in Polynesia are fiction.
I think Anita Roddick is a very brilliant
woman… (who has) gone over the top. … If
you start believing all this stuff that is written
about you, you have got to go dotty, haven’t
you? She started to believe her own publicity
and this is always the death knell to anybody.
It’s not just doubts about
Roddick, but also The Body Shop
 Body Shop products have always been based on petro



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chemical ingredients. It uses plastic packaging.
Body Shop cosmetics have used ingredients that have
been animal tested.
The Body Shop began contributing to charities 11
years after start up, and only after Jon Entine’s 1994
exposé.
The Body Shop has discharged pollutants into the
environment.
The fair trade basis of Body Shop has contributed
little to Third World development.
The critical story continued
 Bacterial contamination of product is common and its
control through synthetic additives undermines the
‘natural’ claim of BS.
 Its products are low end with high prices - a premium
for conscience.
 Much of the firm’s income has come from
questionable franchising practices.
 The Roddick’s have amassed large personal fortunes
from Body Shop.
 The Roddicks sold out to Loréal in 2006, despite that
corporation’s use of animal testing.
The business
A Canadian court last year found BS
franchising practices an “egregious breach
of widely accepted commercial morality …
not consonant with our system of justice
and general moral outlook”.
The business
• Share price went from 372 pence to around
70 in 2002 and back up to 299.25 under
new management just before the sale to
Loréal.
• In 2002, BS earned just £26.7 million on
turnover of £400.7 million.
• With the sale to Loréal, the business seems to
have picked up.
So, was Friedman right?
• Does the Body Shop illustrate that mixing social
causes with business fails?
• Does the story show that in the hands of social
activists, businesses underperform?
• Does it show that when businesses are run by
those experienced in management and marketing,
they do better?
• Does it show that ethical claims in business can
poison the wells, and disappoint expectations
falsely raised?
Actually, it might show the
opposite
 When Friedman wrote in 1970, it was
simply inconceivable that the business
system could accept social responsibility as
a legitimate concern.
 When Anita Roddick died on 10 September
2007, it was inconceivable that business
could neglect social responsibility and
succeed.
Let’s look at a menu of moral
issues confronting business
 NOTE: these issues are strategic and technical, but
are viewed as ethical by the public and
increasingly by governments.
 Climate change, CO2 discharge, pollution.
 Elimination of poverty, Third World debt
 Fair trade
 Collaboration with authoritarian political regimes
 Human rights issues
Where did Anita Roddick go
right?
 Entine and a few others are fundamentally
critical of Body Shop and the Roddicks.
 Their critical views and cynicism are not
widely shared.
 Roddick’s commitment to human rights, to
breaking the mould of traditional business,
to charities, to
Hence, The Body Shop
• Despite the criticisms of Entine and others
– Has managed to carry an idea into the market place that
its operations have not damaged.
– Has elevated the profile of social responsibility in
business.
• This is Kidder’s point. Michael McCarthy in The
Independent wrote:
there seems no doubt that Anita Roddick, the founder of The
Body Shop, did change profoundly the way that we think
about things, in a way that flowed on to change the world
itself.
Roddick’s message
“I think you can trade ethically, be
committed to social responsibility, empower
your employees. I think you can rewrite the
book on business.”
Roddick called other business people - her
bankers for example - “robber barons” and
“blood sucking dinosaurs”.
Roddick adopted a moral
business persona
• Entine has criticised this as politically correct and as
cynical exploitation of ethical concerns.
• But Roddick gave the public an opportunity to choose
and they chose her products because of the values she
proclaimed.
• Where Friedman eschewed public morality and sought
to maximise preferences and wealth - Utilitarian
maximisation - Roddick stood for deontological
values, such as justice and human rights.
Allegations of smoke and mirrors
• Roddick did get animal testing banned in
the UK and Europe, even if the idea wasn’t
hers and the leg work was done by others.
• Fair trade was her idea even if she wasn’t
exemplary in implementing it.
• Many charities continue to regard Roddick
as making a significant difference to them.
Enough to make a change
• In short, despite Entine’s recycled criticisms, Anita
Roddick did have enough credibility to make a
large difference, even if she was not perfect.
• Pace Kidder, there is NO ‘balance’ between ethics
and creativity, but one doesn’t have to be ‘pure’ to
do good.
• Are we to hold those who don’t care about ethics
to a lower standard than those who do?
Friedman today?
 Business works best when it is least fettered.
 People work best when they are free to make their
own decisions.
 Combining these two points, one can conclude
that a pro-active business response to the menu of
moral issues will head off government regulation;
and attract market support. The example of The
Body Shop supports such a belief - even if
Entine’s criticisms are well-founded.