Business ethics and its use in the USA
The story I will tell has three strands, because I believe the term business ethics is used in at least three different, although related, senses. Which sense one chooses therefore gives priority to nature of the history of the topic. The primary sense of the term refers to recent developments and to the period, since roughly the early 1970s, when the term 'business ethics' came into common use in the United States. Its origin in this sense is found in the academy, in academic writings and meetings, and in the development of a field of academic teaching, research and publication. That is one strand of the story. As the term entered more general usage in the media and public discourse, it often became equated with either business scandals or more broadly with what can called "ethics in business." In this broader sense the history ofbusiness ethicsÂ goes back to the origin ofÂ business, again taken in a broad sense, meaning commercial exchanges and later meaning economic systems as well. That is another strand of the history. The third stand corresponds to a third sense of business ethics which refers to a movement within business or the movement to explicitly build ethics into the structures of corporations in the form of ethics codes, ethics officers, ethics committees and ethics training. The term, moreover, has been adopted world-wide, and its meaning in Europe, for instance, is somewhat different from its meaning in the United States.
The "ethics in business" sense of business ethics
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In this broad sense ethics in business is simply the application of everyday moral or ethical norms to business. Perhaps the example from the Bible that comes to mind most readily is the Ten Commandments, a guide that is still used by many today. In particular, the injunctions to truthfulness and honesty or the prohibition against theft and envy are directly applicable. A notion of stewardship can be found in the Bible as well as many other notions that can be and have been applied to business. Other traditions and religions have comparable sacred or ancient texts that have guided people's actions in all realms, including business, for centuries, and still do.
If we move from religion to philosophy we have a similar long tradition. Plato is known for his discussions of justice in theÂ Republic, and Aristotle explicitly discusses economic relations, commerce and trade under the heading of the household in hisÂ Politics. His discussion of trade, exchange, property, acquisition, money and wealth have an almost modern ring, and he makes moral judgments about greed, or the unnatural use of one's capacities in pursuit of wealth for its own sake, and similarly condemns usury because it involves a profit from currency itself rather than from the process of exchange in which money is simply a means.1Â He also gives the classic definition of justice as giving each his due, treating equals equally, and trading equals for equals or "having an equal amount both before and after the transaction."2
In the West, after the fall of Rome, Christianity held sway, and although there were various discussions of poverty and wealth, ownership and property, there is no systematic discussion of business except in the context of justice and honesty in buying and selling. We see this, for instance, in Thomas Aquinas's discussion of selling articles for more than they are worth and selling them at a higher price than was paid for them3Â and in his discussion of, and, following Aristotle's analysis, his condemnation of usury.4Â Nonetheless he justified borrowing for a good end from someone ready to lend at interest.
Luther, Calvin, and John Wesley, among other Reformation figures also discussed trade and business and led the way in the development of the Protestant work ethic.5Â R. H. Tawney'sÂ Religion and the Rise of Capitalism6Â argues persuasively that religion was an essential part in the rise of individualism and of commerce as it developed in the modern period. The modern period, however, sought the divorce of the religious from the secular and politics from religion. In the process, economics and economic activity were similarly divorced from religion and joined with politics to form what was known as political-economy.
John Locke developed the classic defense of property as a natural right. For him, one acquires property by mixing his labor with what he finds in nature.7Â Adam Smith is often thought of as the father of modern economics with hisÂ An Inquiry into the Nature and Causes of the Wealth of Nations. Smith develops Locke's notion of labor into a labor theory of value. In modern times commentators have interpreted him as a defender of laissez-faire economics, and put great emphasis on his notion of the invisible hand. Yet the commentators often forget that Smith was also a moral philosopher and the author ofÂ The Theory of Moral Sentiments. For him the two realms were not separate. John Stuart Mill, Immanuel Kant, G. W. F. Hegel all wrote on economic matters and just distribution. Karl Marx, however, stands out as the most trenchant critic of capitalism as it had developed up through the Nineteenth Century, and Marx's critique in one form or another continues up to today, even when not attributed to Marx.
Marx claimed that capitalism was built on the exploitation of labor. Whether this was for him a factual claim or a moral condemnation is open to debate; but it has been taken as a moral condemnation since 'exploitation' is a morally charged term and for him seems clearly to involve a charge of injustice. Marx's claim is based on his analysis of the labor theory of value, according to which all economic value comes from human labor. The only commodity not sold at its real value, according to Marx, is human labor. Workers are paid less than the value they produce. The difference between the value the workers produce and what they are paid is the source of profit for the employer or the owner of the means of production. If workers were paid the value they produced, there would be no profit and so capitalism would disappear. In its place would be socialism and eventually communism, in which all property is socially (as opposed to privately) owned, and in which all members of society would contribute according to their ability and receive according to their needs. The result would be a society (and eventually a world) without exploitation and also without the alienation that workers experience in capitalist societies.
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Marx's notion of exploitation was developed by Lenin inÂ Imperialism: The Highest Stage of Capitalism, in which he claims that the exploitation of workers in the developed countries has been lessened and the workers' conditions have improved because the worst exploitation has been exported to the colonies. His criticism has been adapted by many contemporary critics who claim that multinational corporations derive their profits from the exploitation of workers in less developed countries.
Marx appealed to the workers of his time and helped start the labor movement, which improved the situation of the workingman. Marx's collaborator, Frederich Engels, saw the world as divided between those who follow Marx and those who follow religion, and the Marxists sought the hearts and minds of the workers. Refusing to yield the moral high ground, Pope Leo XIII in 1891 issued the first of the papal encyclicals on social justice,Â Rerum Novarum. As opposed to Marx, it justified private property, while seeking the answer to exploitation in the notion of a just wage, which was one sufficient "to support a frugal and well-behaved wage-earner," his wife and his children.8Â Later popes followed Leo's example. Pope Pius XI in 1931 wroteÂ Quadragesimo Anno, which morally attacked both Soviet socialism andÂ laissez-faireÂ capitalism, a theme continued by Pope John Paul II inÂ Laborem ExercensÂ (1981) and Centesimus Annus (1991). The U. S. Catholic Bishops in 1984 issued a Pastoral Letter on the U.S. Economy along the same lines, although more open to the U. S. free enterprise system. The aim of the encyclicals was not to propose any particular economic system but to insist that any system should not be contrary to Christian moral principles and should improve the conditions of the masses of humanity, especially of the poor and the least advantaged. Hence although the popes were critical of existing economic structures, the emphasis in the pulpits was still primarily on individuals living up to the demands of morality, including the giving of charity to those in need.
The same is true of the Protestant tradition as of the Catholic, even though there is no central authority to issue documents such as the encyclicals. Perhaps the most influential protestant figure in this regard was Reinhold Niebuhr whose trenchant critique of capitalism inÂ Moral Man and Immoral Society9Â became the basis for courses in seminaries and schools of theology. In 1993 the Parliament of the World's Religions adopted aÂ Declaration of a Global Ethic10Â that condemned "the abuses of the Earth's ecosystems," poverty, hunger, and the economic disparities that threaten many families with ruin.
The idea of ethics in business continues until the present day. In general, in the United States this focuses on the moral or ethical actions of individuals. It is in this sense also that many people, in discussing business ethics, immediately raise examples of immoral or unethical activity by individuals. Included with this notion, however, is also the criticism of multinational corporations that use child labor or pay pitifully low wages to employees in less developed countries or who utilize suppliers that run sweat shops. Many business persons are strongly influenced by their religious beliefs and the ethical norms that they have been taught as part of their religion, and apply these norms in their business activities. Aaron Feuerstein is a prime example of someone whose actions after fire destroyed almost all of his Malden Mills factory complex kept his workers on the payroll until he could rebuild. He has stated often and publicly that he just did what his Jewish faith told him was the right thing to do.
This strand of the story is perhaps the most prominent in the thinking of the ordinary person when they hear the termÂ business ethics. The media carries stories about Enron officials acting unethically and about the unethical activities of Arthur Andersen or WorldCom, and so on, and the general public takes this as representative of business ethics or of the need for it. What they mean is the need for ethics in business.
Business Ethics as an Academic Field
Business ethics as an academic field, just as business ethics as a corporate movement, have a more recent history.
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The second strand of the story that I shall tell has to do with business ethics as an academic field.
The 1960s marked a changing attitude towards society in the United States and towards business. The Second World War was over, the Cold War was ever present, and the War in Viet Nam fostered a good deal of opposition to official public policy and to the so-called military-industrial complex, which came in for increasing scrutiny and criticism. The Civil Rights movement had caught the public imagination. The United States was becoming more and more of a dominant economic force. American-based multinational corporations were growing in size and importance. Big business was coming into its own, replacing small and medium-sized businesses in the societal image of business. The chemical industry was booming with innovation, and in its wake came environmental damage on a scale that had not previously been possible. The spirit of protest led to the environmental movement, to the rise of consumerism, and to criticism of multinational corporations.
Corporations, finding themselves under public attack and criticism, responded by developing the notion of social responsibility. They started social responsibility programs and spent a good deal of money advertising their programs and how they were promoting the social good. Exactly what "social responsibility" meant varied according to the industry and company. But whether it was reforestation or cutting down on pollution or increasing diversity in the workforce, social responsibility was the term used to capture those activities of a corporation that were beneficial to society and usually, by implication, that made up for some unethical or anti-social activity with which the company had been charged. The business schools responded by developing courses in social responsibility or social issues in management-courses which continue to thrive today. For the most part, in the 1960s such courses put an emphasis on law, and the point of view of managers prevailed, although soon that of employees, consumers and the general public were added. The textbooks paid no systematic attention to ethical theory, and tended to be more concerned with empirical studies than with the development or defense of norms against which to measure corporate activity. The history of the social responsibility movement is a story in itself and one that different people are writing somewhat differently. One version, by Archie Carroll, describes social responsibility as a pyramid that encompasses the four types of responsibility that businesses have: At the bottom is economic, then legal, then ethical and then philanthropic. And although some representatives of corporate social responsibility claim that they did business ethics before business ethics became popular and although some claim that what they do is business ethics, that is not the story of business ethics I am going to tell today.
Business ethics as an academic field emerged in the 1970s. Prior to this time there had been a handful of courses called by that name; and a few figures, such as Raymond Baumhart,11Â who dealt with ethics and business. For the most part ethical issues, if they were discussed, were handled in social issues courses. Theologians and religious thinkers, as well as media pundits continued writing and teaching on ethics in business; professors of management continued to write and do research on corporate social responsibility. The new ingredient and the catalyst that led to the field of business ethics as such was the entry of a significant number of philosophers, who brought ethical theory and philosophical analysis to bear on a variety of issues in business. Business ethics emerged as a result of the intersection of ethical theory with empirical studies and the analysis of cases and issues.
Norman Bowie dates the birth of business ethics as November 1974, with the first conference in business ethics, which was held at the University of Kansas, and which resulted in the first anthology used in the new courses that started popping up thereafter in business ethics.12Â Whether one chooses that date or some other event, it is difficult to identify any previous period with the sort of concerted activity that developed in a short period thereafter. In 1979 three anthologies in business ethics appeared: Tom Beauchamp and Norman Bowie,Â Ethical Theory and Business; Thomas Donaldson and Patricia Werhane,Â Ethical Issues in Business: A Philosophical Approach; and Vincent Barry,Â Moral Issues in Business. In 1982 the first single-authored books in the field appeared: Richard De George,Â Business Ethics; and Manuel G. Velasquez,Â Business Ethics: Concepts and Cases. The books found a ready market, and courses in business ethics both in philosophy departments and in schools of business developed rapidly. As they did, the number of textbooks increased exponentially.
The field developed very similarly to the field of medical ethics, which had emerged ten years earlier in the 1960s, and the name paralleled that of the earlier field-although even whether the term "business ethics" should be adopted was discussed among the relatively small group that was engaged in starting what has become a field. The seminal work of John Rawls in 1971,Â A Theory of Justice, had helped make the application of ethics to economic and business issues more acceptable to academic philosophers than had previously been the case. Whereas most of those who wrote on social issues were professors of business, most of those who wrote initially on business ethics were professors of philosophy, some of whom taught in business schools. What differentiated business ethics as a field from social issues in management was 1) the fact that business ethics sought to provide an explicit ethical framework within which to evaluate business, and especially corporate activities. Business ethics as an academic discipline had ethics as its basis. While social responsibility could be and was defined by corporations to cover whatever they did that they could present in a positive light as helping society, ethics had implicit in it standards that were independent of the wishes of corporations. To that extent, 2) the field was at least potentially critical of business practices-much more so than the social responsibility approach had been. If we take Archie Carroll's pyramid, those in business ethics did not see ethics as coming after economics and law but as restraints on economic activity and as a source for justifying law and for proposing additional legal restraints on business when appropriate. As a result business ethics and business ethicists were not warmly received by the business community, who often perceived them as a threat-something they could not manage, preaching by the uninformed who never had to face a payroll.
The development of the field was far from easy, and those academics working in it initially also found a cool reception both from their colleagues in philosophy departments and from those in business and in business schools. The former typically did not see business as a philosophically interesting endeavor, and many of them had an anti-business mind-set. The latter questioned whether philosophers had anything of interest to bring to business. The initial efforts were tenuous, and more and more people entered the field who were often ill-informed, or who, in fact, adopted polemical attacks against or positions in defense of business. Many observers dismissed business ethics as a fad that would pass. Many misunderstood its aims and envisioned it as providing justification or a rationale for whatever business wanted to do. It took a number of years for the field to define itself, incorporate standards of scholarship and rigor, and become accepted.
As a field, business ethics covered the ethical foundations of business, of private property, and of various economic systems. 3) Although the field was concerned with managers and workers as moral persons with responsibilities as well as rights, most attention was focused on the corporation-its structure and activities, including all the functional areas of business, including marketing, finance, management, and production. Related issues, such as the environmental impact of business actions, were included in most courses and texts, as were, with increasing attention, the activities of multinational corporations. As a field, business ethics included a good deal, but not all, of what was covered in social issues courses and texts, as well as giving structure to discussions of ethics in business. As it emerged by the middle of the 1980s it was clearly interdisciplinary, with the lines between philosophy and business research often blurred.
Initial discussions of business ethics introduced students to two of the basic techniques of moral argumentation, that used by utilitarians (who hold that an action is right if it produces the greatest amount of good for the greatest number of people), and that used by deontologists (who claim that duty, justice and rights are not reducible to considerations of utility). Other approaches were soon introduced including natural law, virtue ethics (based on Aristotle), and the ethics of caring (often associated with a feminist approach to ethics). An initial philosophical discussion that arose concerned the moral status of corporations and whether one could appropriately use moral language with respect to them, or whether the only proper objects of moral evaluation were human beings and their actions. That controversy has not completely subsided, but most authors take into account the fact that most people do attribute actions and policies to corporations as well as to the individuals within them.
What did the development of business ethics as an academic field add that common sense morality couldn't handle; and who was the target audience?
Those in philosophy added a theoretical framework to the area that had been previously lacking. Within that framework they integrated both the personal responsibility approach that ethics in business emphasized and the social responsibility of business approach, which they pushed explicitly into the ethical realm by applying ethics to economic systems, to the institution of business, and especially to corporations.
Common sense morality and the ethics in business approach that I described are fine for the ordinary, everyday aspect of ethics in business. Employees shouldn't steal from their employers, and companies should cheat their customers. No one needs an academic business ethicist to tell them that. And if that is all business ethics had to contribute, it would indeed be superfluous. But what the business ethicists could add is not only arguments that show why most common sense judgments are indeed correct, but also the tools by which the morality of new issues could be intelligently debated. They could and did also join that debate-the debate for instance on whether affirmative action is justifiable, and even more basically, what affirmative action means. Ethicists analyzed and defended workers' rights, the right to strike, the ethical status of comparable worth in the marketplace, what constitutes bribery and whistle blowing, and so on. One need only look at the journals for the wide variety of issues that have been clarified, discussed, and argued-often to a conclusion. The moral status of leveraged buyouts, of greenmail, of outsourcing, of restructuring, of corporate governance raise complex issues to which ordinary common sense morality has no ready answers or obvious intuitive judgments. It is odd that no company would think of making a serious financial commitment without extensive study, but some people think that moral judgments should be made instantaneously and require no thought, study, debate or time. Levi-Strauss, long noted for governing by values, knew enough that it had a high level committee study whether it was appropriate to operate in China for three months before coming to a decision.
If those in business ethics wrote only for themselves, however, one could well question the relevance of what they wrote to business. What they wrote helped inform a large number of teachers who teach business ethics, and in turn has influenced a large number of students who have gone on to be practitioners. Moreover, many of those in business have also turned to the writings of those in business ethics, or have asked them for guidance as consultants on issues or for help in writing corporate codes or designing training programs. The media as well frequently turns to those in the field for guidance, help, or sound bites. Many of the academics in business ethics have made an effort to open a dialogue with those in business, and have frequently been successful in doing so. The audience, therefore, has been not only colleagues and students, but also corporate managers and the general public. Mediating between the academic in his or her office and the corporate executive have also been a host of non-academic consultants, many of whom use the scholarly material to become informed about the state of the art and the arguments for or against various positions. Some of these act not only as intermediaries but, in a sense, as translators, translating technical jargon into business-speak.
The development of the field, moreover, was not restricted to textbooks and courses. What differentiates earlier sporadic and isolated writings and conferences on ethics in business from the development of business ethics after the mid-70s is that only in the latter period did business ethics become institutionalized on many levels. By the mid-1980s there were at least 500 courses in business ethics taught across the country to 40,000 students. Not only were there at least twenty textbooks in the area and at least ten casebooks, but there were also societies, centers and journals of business ethics.
The Society for Business Ethics was started in 1980. The first meeting of the Society for Business Ethics was held in conjunction with the meeting of the American Philosophical Association in December in Boston. Other societies turned increasing attention to business ethics, including the Social Issues in Management Division of the Academy of Management, which had been established in 1976. Other societies emerged, such as the International Association for Business and Society. Still other societies, some specialized, and some general were formed as well. A number of European scholars became interested in the American developments and organized the European Business Ethics Network (EBEN), which held its first meeting in 1987. Many individual European nations in turn established their own ethics network or business ethics society. In general, the European approach to business ethics has placed more emphasis on economics and on social structures, with less emphasis on the activities of corporations as such, than the U. S. approach does. Both approaches were captured in the International Society for Business, Economics and Ethics, which was founded in 1989. That society in turn helped national groups throughout the world to develop local or regional societies of business ethics, so that now there are societies in a large number of both developed and less developed countries.
Simultaneous with these developments were the founding of centers for business ethics at a variety of academic institutions, and the establishment of a number of journals dedicated to business ethics, in addition to those journals that carry articles in business ethics among others. The Bentley College Center for Business Ethics was founded in 1976 and continues as one of the leading business ethics centers. Over a dozen more appeared within the next ten years, and many others have been established since then around the United States and in countries around the world. The Markkula Center includes business ethics as one of its areas, as we well know. The first issue of theÂ Journal of Business EthicsÂ appeared in February 1982; the first issue of theÂ Business Ethics QuarterlyÂ in January 1991; and the first issue ofÂ Business Ethics: A European ReviewÂ in January 1992. A number of other journals in the field have appeared since then.
The field has continued to develop as business has developed. By the mid 1980s business had clearly become international in scope, and the topics covered by business ethics expanded accordingly. Thomas Donaldson'sÂ The Ethics of Business EthicsÂ (New York: Oxford University Press, 1989) was the first systematic treatment of international business ethics, followed by Richard De George'sÂ Competing with Integrity in Internal BusinessÂ (New York: Oxford University Press, 1993). The focus on multinational corporations has been broadened in the light of the globalization of business to include ethical issues relating to international organizations, such as the World Trade Organization. Similarly, just as business has moved more and more into the Information Age, business ethics has turned its attention to emerging issues that come from the shift.
By 1990 business ethics was well established as an academic field. Although the academicians from the start had sought to develop contacts with the business community, the history of the development of business ethics as a movement in business, though related to the academic developments, can be seen to have a history of its own.
Business Ethics as a Movement
Business ethics as a movement refers to the development of structures internal to the corporation that help it and its employees act ethically, as opposed to structures that provide incentives to act unethically. The structures may include clear lines of responsibility, a corporate ethics code, an ethics training program, an ombudsman or a corporate ethics officer, a hot or help line, a means of transmitting values within the firm and maintaining a certain corporate culture, and so on. Some companies have always been ethical and have structured themselves and their culture to reinforce ethical behavior. Johnson & Johnson's well-knownCredoÂ was written and published by General Robert Wood Johnson in 1943. But most companies in the 1960s had paid little attention to developing such structures. That slowly began to change, and the change became a movement when more and more companies started responding to growing public pressure, media scrutiny, their own corporate consciences, and, perhaps most importantly, to legislation. We have already seen that big business responded to criticism in the 1960s by turning to corporate social responsibility, and the movement can be traced back to that period.
The U. S. Civil Rights Act of 1964 was the first piece of legislation to help jump start the business ethics movement. The Act prohibited discrimination of the basis of race, color, religion or national origin in public establishments connected to interstate commerce, as well as places of public accommodation and entertainment. Many corporations added equal opportunity offices to their human resources department to ensure compliance, and in general the consciousness of business about discrimination, equal opportunity, and equal pay for equal work came to the fore. This in turn led to more consciousness of workers' rights in general, and of corporate America's need to respect them. The U. S. Occupational Safety and Health Act of 1970 enforced the mandate to take those aspects of workers' rights seriously. In the same year the Environmental Protection Act forced business to start internalizing the costs of what had previously been considered externalities-such as the discharge of toxic effluents from factory smokestacks.
In 1977, following a series of scandals involving bribery by U. S. firms abroad including the Lockheed $12 million bribery case that led to the fall of the Japanese government at the time, the U. S. government passed the Foreign Corrupt Practices Act. The Act was historic because it was the first piece of legislation that attempted to control the actions of U.S. corporations in foreign countries. The Act prohibited U. S. companies from paying large sums of money (or their equivalent) to high level government officials of other countries to obtain special treatment. A number of companies prior to the Act had already adopted the policy of refusing to pay bribes as a matter of ethical principle. IBM, among others, was known for adherence to this policy, as was Motorola. The Act forced all companies to live up to the already existing ethical norm. Its critics complained, however, that it put U. S. companies at an unfair disadvantage vis-à-vis companies from other countries that were permitted to pay bribes. The U. S. government applied what pressure it could to encourage other countries to follow its lead, and finally twenty years later the OECD countries agreed to adopt similar legislation.
In 1978 General Motors and a group of other U. S. companies adopted what are known as the Sullivan Principles, which governed their actions in South Africa. The signatories agreed that they would not follow the discriminatory and repressive apartheid legislation in South Africa and would take affirmative action to try to undermine apartheid not only by not following the existing South African apartheid statutes, but also by lobbying the South African government for change. Adherence to the Principles was seen as a way by which American companies could ethically justify doing business in South Africa. They were adopted in part as a response to public pressure on the companies to leave South Africa. The Principles have become a model for other voluntary codes of ethical conduct by companies in a variety of other ethically questionable circumstances.
By the 1980s many companies had started reacting to calls for ethical structures, and more and more started adopting ethical codes and instituting ethics training for their employees. Each wave of scandals, which seemed to occur every ten years or so, resulted in more pressure for companies to incorporate ethics into their structures. In 1984 the Union Carbide disaster at its plant in Bhopal, India, which killed thousands of people and injured several hundred thousand, focused world attention on the chemical industry. This led to the chemical industry's adopting a voluntary code of ethical conduct known as Responsible Care, which became a model for other industries. In 1986, in response to a series of reported irregularities in defense contracts, a special Commission Report on the situation led to the establishment of the Defense Industry Initiative (DII) on Business Ethics and Conduct, signed by thirty-two (it soon increased to fifty) major defense contractors. Each signatory agreed to have a written code of ethics, establish appropriate ethics training programs for their employees, establish monitoring mechanisms to detect improper activity, share their best practices, and be accountable to the public.
The DII became the model for what has been the most significant governmental impetus to the business ethics movement, namely, the 1991 U. S. Federal Sentencing Guidelines for Corporations. That law took the approach of providing an incentive for corporations to incorporate ethical structures within their organizations. If a company could show that it had taken appropriate measures to prevent and detect illegal and unethical behavior, its sentence, if found guilty of illegal behavior, would be reduced considerably. Appropriate measures included having a code of ethics or of conduct, a high-placed officer in charge of oversight, an ethics training program, a monitoring and reporting system (such as a "hotline"), and an enforcement and response system. Fines that could reach up to $290 million could be reduced by up to 95 percent if a company could showÂ bona fideÂ institutional structures that were in place to help prevent unethical and illegal conduct.
The result was a concerted effort on the part of most large companies to incorporate into their organizations the structures required. This led to the development of a corporate position known as the Corporate Ethics Officer, and in 1992 to the establishment of the Corporate Ethics Officer Association.
The most recent legislative incentive to incorporate ethics in the corporation came in the Sarbanes-Oxley Act of 2002, passed as a result of a rash of scandals involving Enron, WorldCom, Arthur Andersen and other prominent corporations. The Act requires, among other things, that the CEO and CFO certify the fairness and accuracy of corporate financial statements (with criminal penalties for knowing violations) and a code of ethics for the corporation's senior financial officers, as well as requiring a great deal more public disclosure.
Corporations have responded to legislative and popular pressure in a variety of ways. The language of social responsibility rather than explicitly ethical language is still probably the most commonly used. Self-monitoring of adherence to a corporation's stated principles and self-adopted standards is becoming more common, and some companies have voluntarily adopted monitoring of their practices, policies and plants by independent auditors. The notion of a Triple Bottom Line, which involves financial, social and environmental corporate reporting, has been adopted by a number of companies. Other popular reporting mechanisms include corporate environmental sustainability reports and social audits, which vary considerably in what is reported and how it is reported. Ethical investing is another aspect of the movement, and mangers of ethical investment funds have begun proposing stockholder proposals as a means of encouraging more ethical behavior on the part of corporations in which they own stock.
Nor is the business ethics movement confined to the Unites States. Other countries have adopted legislation similar to that of the United States, and the UN has developed a voluntary Global Compact for Corporations. The Compact, which was endorsed by all governments, contains nine guiding principles, which focus on human rights, labor standards, and the protection of the environment. Over 1,500 companies world wide have joined the compact, and it seems likely that more and more will feel the pressure to become signatories and to abide by the required standards.
The business ethics movement, like business ethics itself, has become firmly entrenched. The concern for ethics in business continues. Business ethics as an academic field contributes discussion forums, research and teaching that inform both ethics in business and the business ethics movement. The business ethics movement is responsive to the other two and in turn has interacted with them. All three together make up the history of business ethics in its broadest sense.
From an academic perspective, looking back over the past thirty or so years, a lot has been accomplished. A historian deals with the past and not the future. But looking to the future, it is easy to see that there is still a lot to do. Both globalization and the march into the Information Age are changing the way business is done and the ethical issues businesses face. If business ethics is to remain relevant, it must change its focus accordingly.
If there is anything that the story I've told can teach us, it is that business ethics is neither a fad as some claimed early on, nor an oxymoron, as so many lamely joked. It is a vibrant, complex enterprise developing on many levels, with the three strands I've mentioned intertwining in complex, dynamic and fascinating ways. We can expect all three to remain vibrant and interacting for the foreseeable future.
Aristotle, Politics, Book I, especially Ch. 8-10.
Aristotle, Nicomachean Ethics, ed. Roger Crisp (Cambridge: Cambridge University Press, 2000), p. 88.
Â Summa Theologiae, II-II, Question 77.
(See Max L. Stackhouse, Dennis P. McCann and Shirley J. Roels, with Preston N. Williams, eds.,Â On Moral Business: Classical and Contemporary Resources for Ethics in Economic LifeÂ (Grand Rapids, Mich.: William B. Eerdmans Publishing Company, 1995).
New York: Harcourt, Brace and Co., 1926.
Â (John Locke, "Of Property,"Â Second Treatise: An Essay Concerning the True Original, Extent and End of Civil Government).
Â Rerum Novarum, nos. 45-46.
New York: Scribner's, 1932.
Available at http://www.earthspirit.org/Parliament/parliamentstat.html.Â
"How Ethics Are Businessmen?,"Â Harvard Business Review, 39 (4) (1961) and Clarence WaltonÂ Corporate Social Responsibilities(Belmont, CA: Wadsworth Publishing Co., 1967).
Norman E. Bowie, "Business Ethics," inÂ New Directions in Ethics, ed. Joseph P. DeMarco and Richard M. Fox, New York: Routledge & Kegan Paul, 1986.
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