When we consider the difference between ethical and unethical investments, the impact on others looms large in our minds—and rightly so. But it’s just as important to consider how our decisions impact ourselves and to think about our self-interest as well as the interests of others when deciding whether or not an investment is ethical.
A key distinction between these two competing models of ethics is that self-interest focuses on what’s good for an individual in any given situation, and bounded ethics are intended to be good for individuals in general but can still be applied differently by different people depending on their circumstances and desires.
What Is Ethicality?
So, what is ethicality, and how does it affect investment decisions? Ethicality is essentially how investors consider the consequences of their investments on the environment and society around them.
Ethicality can be broken down into two main categories: bounded ethics and self-interest ethics.
Bounded ethicality refers to a system where moral rules exist within limits determined by the person engaging with them.
For example, an investor might believe that buying into a company that manufactures tobacco is unethical because it negatively impacts productivity. However, they may decide to make the investment anyway because the company hires a lot of employees.
In this way, the same rule can have different effects based on the context in which it applies.
Benefits of Bounded Ethics
- It frees us from rigid thinking and the fear of making mistakes.
- It helps us realize that our actions always have some effect on someone else, even if those effects aren’t always obvious.
- Considering more factors often leads to better outcomes than a purely self-interested model would allow.
- Creating one’s ethical framework teaches us empathy and helps us better understand others’ points of view.
In contrast, self-interest ethicality argues that moral rules should always be maximized to ensure maximum impact on a person’s well-being. In our investor’s case, for example, they would choose to invest in a company that hires thousands of employees despite the company selling products that cause lung cancer. Still, she would gain profits from her investment in the company.
The idea here is that universal moral principles apply across contexts. Hence, morality isn’t dependent on individual contexts but is generally based on external factors such as what society deems right or wrong.
Benefits of Self-Interest Ethics
- This style of ethicality is popular in Western countries and gives our lives a sense of direction.
- It lets us know our place in the world and makes life simpler.
- With limited exceptions, it means that as long as we’re doing right by ourselves, everything is right as far as ethics are concerned.
- This approach requires that people accept that nobody knows everything and has all the answers, which can lead to greater humility on the part of everyone concerned.
These approaches to ethics offer advantages and disadvantages, and it’s up to us to figure out which one feels a better fit for us. It can be helpful to think about your professional and personal experiences, your past experiences with professional decision-making, and what you want out of life to determine which guidelines suit you best.