BUSINESS ETHICS BBA YR 2

Supplements to Notes 1

The History of Business Ethics

Each of these in turn can be divided into at least two related branches:

- The first strand, which I shall call the ethics-in-business strand, is the long tradition of applying
ethical norms to business, just as it has been applied to other areas of social and personal life. This
strand can be divided further into the secular and the religious branches.

- The second strand is the development of an academic field, which has been called business ethics.
It also has two main branches, one being the philosophical business-ethics branch, which is
normative and critical, and the other the social-scientific branch, which is primarily descriptive
and empirical.

- The third strand is the adoption of ethics or at least the trappings of ethics in businesses. This
again subdivides into the integration of ethics into business and business practices on the one hand
and the commitment to corporate social responsibility on the other.

Business ethics was introduced into Europe and Japan in the 1980s although the term did not
translate easily, and the development in each country varied from that in the United States because
of socio-political-economic differences. It then spread in a variety of ways to other parts of the
world, each time with a different local emphasis and history. On the world-wide level it became
associated with the UN Global Compact, initiated by the then UN Secretary-General Kofi Annan
in an address to The World Economic Forum on January 31, 1999, and officially launched in July,
2000.

Of the three strands, the first, or the ethics-in-business strand, is the most amorphous and the most
widespread. This is the sense in which the general public, news reporters and commentators,
politicians and many business people tend to use the term. In this sense business ethics is nothing
new, although that term was not used to describe it before the 1970s. The strand represents the
widely-held belief that ethics applies in business just as it applies in all areas of life. The scandals
about bribery, insider trading, false advertising, and the like, the stories about Enron and Arthur
Andersen and Bernard Madoff’s Ponzi scheme, constitute what is generally regarded as
misconduct in business and what the general public associates with business ethics or more
precisely, with the failure of businesses to act ethically. The moral norms that are violated apply
to all sections of society. Mention business ethics and you are likely to provoke a story about the
misdeeds of some business or some business person.

Peter Drucker, a well-known business-management theoretician, was one of those who claimed
that there is no such thing as business ethics, only ethics in business. He viewed what he saw as
business ethics (Drucker 1981) as different attempts to justify business practices that were clearly
immoral by ordinary standards.2 He was correct in attacking such attempts, but he wrote before
the development of the academic field. Most of those in the current academic field agree that
ordinary moral rules apply in business just as they do in all other areas of life.

The history of ethics in business goes back as far as both ethics and business. We can imagine the
earliest bartering based on a principle of equal exchange. I mentioned two branches the secular
and the religious, and in both of them we find a parallel history of the development of ethics as it
applies to business. Aristotle in the Nicomachean Ethics (V, 5), wrote of justice being the exchange
of equals for equals and in the Politics (I, 8–10) he discusses “the art of acquisition,” trade, and
usury as part of the ethics of the household. If we jump to the modern era, John Locke (1690)
developed a defense of private property as a natural right based on the labor one applies to securing
the good in question. Adam Smith, who wrote A Theory of Moral Sentiments before he wrote The
Wealth of Nations, wrote about the ethics of business as well as the lack thereof that took place
among colluding businessmen. David Hume, John Stuart Mill, and many others wrote on the
morality or ethics of the developing free-enterprise economic system. Karl Marx developed the
most trenchant attack on what he termed capitalism, a period of history which he considered
necessary and in which he admitted human productivity had developed more than during any other
period. For him the problem with capitalism was that most of the benefits were reaped by the few,
when there was enough to better the lot of all. His critique still has followers today. All of these
writers have added to the history of ethics in business and their thoughts have filtered down in
various ways to the general populace. It is not that the ordinary person or members of the media
have read all of these works. Rather what these authors wrote in various ways has become part of
the accepted view of business and ethics. For example, very little thought or argument is given in
the press or media to the moral justification of private property. Rather it is taken as a given in
most developed countries that each person has a right to own property, and that such property
should be protected by law. Though the proper function of government is debated, the foundations
of property, the legitimacy of private enterprise, and the wage system of labor are widely taken for
granted as the accepted and acceptable economic structure of society. Karl Marx’s critique of
capitalism never took serious hold in the United States, and unlike in many European countries,
no democratic socialist political party ever developed there. Nonetheless, Marx’s critique of
exploitation, his condemnation of making commodities more important than people and of judging
people by what they have instead of what they are, resonates even in American culture.

The rise since the 1970s of what is called business ethics followed the tumultuous period of the
1960s. In that era the Civil Rights movement in the United States developed as did the beginnings
of the environmentalist and the consumerist movements. The Vietnam War resulted in protests
against the government’s involvement, and there was a reaction on the part of many activists
against what was known as the military-industrial complex. At the end of World War II the United
States was the only large power remaining that had not suffered serious devastation. As a result,
American business flourished and developed a world-wide reach. With large industry, especially
the enormous growth of chemical petroleum based industries, pollution on a large scale became a
problem.

Environmental groups sprang up to attack business. Those who saw the global reach (e.g. Barnet
1974) of American business as exploitative added their voices to the critics of big business. Many
of the criticisms were couched in moral terms, and when in the late 1970s the academic field of
business ethics arose, it provided a vocabulary and overarching framework that the critics seized
on and that soon spread to the media and to general culture.

The second branch of the ethics-in-business strand, i.e., the religious, also has a long history, and
similarly has filtered down and influenced general thinking about ethics in business. Many
businesspeople live their business lives guided by their religious moral beliefs, and many of those
affected by business practices evaluate them in the same light. The major religious influence on
American economic culture is the Judeo-Christian. Others, such as Islamist and Buddhist, Hindu
and Confucian are, of course, the primary religious influences on business ethics in the countries
in which they are dominant.3 The sources of ethics in business in the Judeo Christian tradition go
back at least to the Ten Commandments (Exodus, 20: 1–17; Deuteronomy, 5: 7–21), especially
the commandments not to steal and not to bear false witness or lie. In the Middle Ages the Church
had long prohibited usury and the practice of making money from money, although its position
eventually changed to prohibit only excessive interest, rather than all interest payments.4
Christianity has always been ambivalent towards business and riches. Christ’s reply to the rich
man that “it is easier for a camel to go through the eye of a needle than for a rich man to enter the
kingdom of God” (Matthew, 19: 23–24, Mark, 10:24–25, and Luke, 18: 24–25) captures that
ambivalence. The Church has a long history of concern for the poor, and the administering of
charity to those in need. But it did not raise its voice against slavery, for instance, and St. Paul
even cautions slaves to obey their masters (Colossians, 3: 22). It was not until the late 19th century
that the Catholic Church developed a program of social justice when Pope Leo XIII (1891) issued
an encyclical, Rerum Novarum, laying out precepts for a just wage. Later Popes have developed
Catholic social thought, embracing a defense of the worker. Pope John Paul II in the encyclicals
Laborem exercens (1981) and Centesimus annus (1991) morally evaluated and morally criticized
both socialism and capitalism and addressed the needs of developing nations.

He outlined what is known as a “preferential option for the poor.” Although the Catholic Bishops
of the United States also came out with a letter on the economy (Economic Justice for All), its
impact on the business community and the general public has not been significant. For a brief
summary of the major religions and their contributions to business ethics, see Mele (2006). There
is a good collection of religious and secular texts and essays in Stackhouse et al. (1995). For St.
Thomas Aquinas on usury (he followed Aristotle on this point), see his Summa Theological, II-II,
78, 1–4. Protestant tradition, Calvinism developed what is called the Protestant (or Puritan) work
ethic, namely, the doctrine that hard work was a calling and a means of achieving success, and that
economic success was a sign of one’s preordained salvation.5 That tradition melded well with the
American belief in hard work as the road to success.
The notion of business ethics as ethics-in-business continues to this day. It is part of the popular
culture and finds expression in the media coverage of ethical and legal abuses in business, and of
business scandals and their aftermaths. Invariably, after a scandal some columnist or politician will
point a finger at business schools and their failure to train their students in ethics, or at the failure
of the academics in business ethics. The prevalence of ethics in business in the popular culture is
exemplified by the popularity of such movies as All my Sons, Wall Street, Network, and Silkwood,
among dozens of others.6 Although what is included in the notion of ethics-in-business varies in
different countries, depending on the socio-economic-historic conditions, everywhere there is a
basic sense that ethics has a place in business as in other areas of life.

This becomes clear when we see, as we have, popular protests when a government’s rampant
corruption becomes public. The scandals about bribery, insider trading, false advertising, and the
like, constitute what is generally regarded as misconduct in business and what the general public
associates with business ethics or more precisely, with the failure of businesses to act ethically.
This formulation is generally attributed to Weber (1976). Leaders are exposed for taking bribes
from corporations on a large scale and enrich themselves at the expense of the people of a country.
This very general and somewhat amorphous sense of business ethics was not clearly articulated
and arose as an identifiable phenomenon only after business ethics in a stricter sense developed as
an academic field. It is to that history that we now turn.

The many movements in the United States in the 1960s and 1970s led to attacks on business and
responses from business. The 1960s saw the introduction in business schools of courses in social
issues in management and corporate social responsibility. But they were largely ad hoc and even
those in the forefront of the academic move in this direction admitted that the courses lacked a
cohesive basis or approach. That in turn led to what has become known as business ethics in the
second sense. The term, as currently used, arose with the entry of a group of philosophers into the
area, and it was patterned after the term “medical ethics” which had developed in the 1960s.
Business ethics rapidly emerged as an academic field.

As an academic field, ethics can be considered as the study of morality. Each society has a morality
a set of practices that it considers right or wrong, values that it champions, and rules that it enforces.
Ethics is the systematic study of the generally-held (or conventional) morality of a society aimed
at determining the rules which ought to govern human behavior, the rules that a society ought to
enforce, and the virtues worth developing in human life. As an academic discipline it seeks to
establish justification(s) for the existing portions of morality that can be defended Ethics in
medicine, of course, goes back at least as far as ancient Greece and the Hippocratic Oath. But
medical ethics in its current form started in the 1960s with the development of medical (especially
heart transplant) technology and the rise of interest in patients’ rights.

In the United States in the 1860s, the American Civil War was in part a response to the moral
condemnation of the institution of slavery as existing in the Southern states of the Union. By
analogy, business ethics as an academic field is the systematic study of the morality existing in
business, the business practices, the values, the presuppositions and so on actually existing. It is
partially conservative and partially radical or critical. In general, for instance, the field has
defended private property but it has been critical of the exploitation by multinationals of workers
in less-developed countries and of bribery and corruption as practiced by business.

Prior to the development of business ethics as a field there were individual courses here and there
on moral issues in business, and lectures and articles about ethics in business. The term ‘business
ethics’ as found in the earlier literature referred to the ethics-in-business meaning of the term.
What, dating from the 1970s, differentiated business ethics as an academic field from ethics in
business was that it attempted to systematically study the entire range of ethical issues in business
as a comprehensive whole. The philosophers who began the endeavor typically started from a
comprehensive ethical framework supplied by ethical theory. This could be a version of
utilitarianism (which examines the consequences of actions), a Kantian approach to ethical issues
(which assumes that duty and rights are basic) or an Aristotelian approach (which places virtue in
the center and analyses the character of moral actors in this case, those in business) or a
combination of two or more of them. As with the ethics-in-business strand, the business-ethics
movement eventually came to consist of two branches: the philosophical, which was normative
and prescriptive, and the empirical, which was descriptive and the area of those trained in the social
sciences. The two branches have merged to some extent. The empirical stream typically built on
the already-existing social issues in management and the corporate social responsibility courses
and structures in the business schools and business education. The philosophical stream came from
philosophy departments and the applied-ethics area, of which medical ethics was the forbearer.
As it developed, business ethics came to include analysis of six different levels of ethical concern.
The first is the level of the individual. This deals not only with what individuals ought to do when
faced with ethical dilemmas or moral problems in business, but also with matters of character,
individual self-development on the job, the virtues appropriate to business life, and the integration
of ethics on the job with one’s ethics and ethical obligations as a family member, a member of a
community, and a member of the greater society at large. The emphasis on character development
is especially central to those who take an Aristotelian approach to business ethics. The second
level is that of the firm. It concerns issues of the internal structures of business that tend to reinforce
and promote ethical activity by employees or structures that tend to promote unethical activity
(characterized by the injunction: “Get this done by the deadline and I don’t care how you do it.”).
This is the level of corporate policy, of corporate culture, of responsibilities to the various
stakeholders of a company, and to corporate social responsibility to the extent that such
responsibility is ethical responsibility. The third level is that of a particular industry. The extractive
industries pose special ethical problems, as do the chemical industries, and many others. The
ethical issues in many cases cannot be solved on the level of any individual firm but only on the
industry level. The next level is the national level, and here there are issues of legislation, controls
on business activities, the protection of workers and consumers, limitations on pollution, the
prevention of child labor and exploitation, and so on. The fifth level is the international, and deals
with the many ethical issues raised by multinational corporations, especially the actions of
multinationals from the developed countries operating in less-developed countries in which the
local laws do not adequately protect the country or its members.

The sixth level is the global level and this deals with the ethical responsibility of corporations to
help in the solutions of global issues, such as depletion of the ozone level, global warming, and
similar topics that can only be adequately solved on the global level but for which businesses as
well as nations bear responsibility.

According to an account by Norman Bowie, the first conference on business ethics was held in
1974 (Bowie 1986) and the papers were published as Ethics, Free Enterprise and Public Policy
(De George and Pichler 1978). In the late 1970s Norman Bowie, under a grant from the National
Endowment for the Humanities, chaired a committee to develop a model curriculum for business-
ethics courses. About the same time Richard De George developed a course in business ethics and
circulated a ninety-page course curriculum to 900 interested professors in business schools and
philosophy departments. In l979 the first texts in business ethics appeared: three anthologies one
by Tom Beauchamp and Norman Bowie, another by Thomas Donaldson and Patricia Werhane,
and a third by Vincent Barry followed by two single authored texts in 1982 one by Richard De
George and the other by Manuel Velasquez. The books found a ready market and courses were
introduced in philosophy departments and business schools. Courses and competing texts
increased rapidly. Business ethics as an academic field is the systematic study of the morality
existing in business, the business practices, the values, the presuppositions and so on actually exist.

The texts came to cover the range of ethical issues in business, starting from meta-ethical questions
such as whether moral language which was typically used to refer to human moral agents could
appropriately be used to refer to corporations, whether corporations were moral agents, whether
one could one meaningfully speak of the conscience of a corporation, and whether the criteria for
moral responsibility (having knowledge and will) made sense when applied to corporations. The
questions were answered in different ways, some reducing the actions of corporations to the actions
of the individuals who made up a corporation, some making the necessary accommodations in the
use of moral terms to apply appropriately to corporate actions. The normative issues covered the
spectrum of business activities, starting with the moral justifiability (or unjustifiability) of
economic systems in particular capitalism and socialism and moving on to the areas of business:
manufacturing, management, marketing, finance, corporate governance, workers’ rights, business
and the environment, and later the international dimensions of business and the impact of
computers and the Internet on the conduct of business. The international dimension included the
actions of multinational or transnational corporations, child labor, exploitation of less-developed
countries both with respect to labor and with respect to the environment, bribery, and operating in
corrupt environments. With the demise of the Soviet Union in 1991, capitalism seemed to emerge
as the dominant economic system, and the role of ethics in countries in transition to incipient
capitalism grew in importance.

The philosophical approach was normative and looked critically at the moral justification of
private property, the proper role of government and government regulation of business, and the
morality of business practices. While the ethics-in-business approach for the most part was
concerned with scandals and abuses that came to the public’s attention, those in business ethics
examined the structure of capitalism and the structures of business, sometimes articulating the
underlying moral justification of existing structures and practices and sometimes criticizing them
from a moral point of view and arguing for change.

The descriptive component of business ethics was developed by those trained in the social sciences
and working in business schools. This branch grew out of the social issues in business first
developed in the 1960s, and initially did not go under the title of business ethics. The relationship
of social issues in business or social issues in management and business ethics is a contentious
one, with social-issues advocates claiming business ethics as a part of their field and those in
philosophical business ethics claiming social issues as the empirical portion of their field. The
dispute has historical roots. The philosophers came in the 1970s and 1980s and intruded on
territory that those in social issues of business had in some sense staked out as their own. The
tension continues up to the present. Whether business ethics included corporate social
responsibility or whether corporate social responsibility included business ethics was an internal
debate. However, one comes out in that dispute, the philosophical branch of academic business
ethics emphasized the normative aspects of business ethics, and the social sciences branch
emphasized the descriptive aspects of business ethics, looking at and describing the practices
actually found in businesses. The latter studied different effects of different practices, as well as
differing attitudes toward given business practices in different societies.8 Social issues in
management include ethics as one component but business ethics includes much more than social
issues; not all social issues are ethical issues, even though many social issues can be viewed from
a moral perspective; and one can make a moral evaluation of economic, legal and social aspects
of business.

The descriptive approach has proved more congenial to business since it is less critical and, being
empirical, is more suited to business’s empirical approach. The philosophical approach was, and
to some extent is, considered with suspicion by many in business, and at first those in favor of the
philosophical approach to business ethics were not welcomed by business, by those concerned
with social issues, or by business schools in general. All of them questioned the credentials of
those in philosophy to evaluate complex issues in business, and often the philosophical approach
was assumed to be antithetical to business. At the same time, many philosophy departments felt
that those who engaged in the study of business ethics were not really doing philosophy as they
defined philosophy. Despite these initial reactions, by the 1990s business ethics was well
established as an accepted academic field.

The emphasis was initially on and still concerns primarily large corporations. But the investigation
of ethical issues with respect to small and medium-sized businesses is increasing. The Society for
Business Ethics (SBE) was founded in 1980,9 primarily by those in the philosophy stream. The
Social Issues in Management Division of the Academy of Management, which became the major
organization for The philosophical branch of academic business ethics emphasized the normative
aspects of business ethics, and the social sciences branch emphasized the descriptive aspects of
business ethics.

The first meeting was held on April 25, 1980, in Detroit, in conjunction with the meeting of the
American Philosophical Association, Western Division. Organizational meetings had taken place
during the previous two years. Thomas Donaldson was the Director of the Organizing Committee.
The first Executive Committee consisted of Richard De George, Thomas Donaldson and Patricia
Werhane.

Those on the descriptive side of business ethics, had existed since 1976. The SBE met initially in
conjunction with the American Philosophical Association. In 1989 it changed its annual meeting
to precede the Academy of Management annual meeting, although it still had sessions in
conjunction with the American Philosophical Association. The SBE continues to be the dominant
academic venue for business ethics. In 1991 it started the Business Ethics Quarterly with Patricia
Werhane as Editor. Conferences began to take place more and more often on various topics and
issues in business ethics. The Bentley Center for Business Ethics was established in 1976 and
continues to flourish. Other centers of business ethics started appearing at various universities, and
journals dedicated to the field emerged. At least a dozen other centers sprang up within a space of
ten years. The Journal of Business Ethics appeared in 1982. Other journals in business ethics
followed. In 1987 Henk van Luijk and Georges Enderle were instrumental in founding the
European Business Ethics Network (EBEN), which stimulated the growth of national societies in
Europe and the development of business ethics in many of the European countries.10 By 2011
EBEN had linked together 17 national networks.

The International Society for Business, Ethics and Society, which was founded in 1988, helped to
promote the growth of business ethics in countries around the world. Its first meeting was held in
1992 and the first World Congress of Business, Economics and Ethics was held in Japan in 1996.
Other World Congresses followed in São Paulo (2000), Melbourne (2004), Cape Town (2008),
and Warsaw (2012). The Japan Society for Business Ethics (JABES) was inaugurated in 1993, and
the 1996 World Congress led to the establishment of societies for business ethics in Latin America
and to the Latin-American Business Ethics Network (ALENE) in 1997; to the Business Ethics
Network of Africa in 2000, which includes members from 22 countries; to the Australian Business
Ethics Network, and to societies for business ethics in India, China and other parts of the world.11
The first issue of Business Ethics: A European Review was published in 1992. By the turn of the
century business ethics as an academic field was firmly entrenched internationally. It had proved
not to be a passing fad, as some had predicted.

Business ethics has developed and expanded as business has developed and expanded. In 1989
Thomas Donaldson published the first book on international business ethics, followed by one by
Richard De George (1993). Both reflected the reality that business had become international and
that such a development raised new issues that had to be addressed and to which there were no
intuitive or easy solutions. The globalization of business was the next step, and the computer, the
digital revolution, and the rise of information technology further changed business and raised new
ethical issues of privacy and intellectual property, among others.12 In 1984 R. Edward Freeman
published a book which called for a reconceptualization of the corporation and which became
influential in both business ethics and in the vocabulary used by businesses in describing their
activities. In the United States, corporations have a legal obligation to manage for the benefit of
their shareholders. This has sometimes been interpreted by some corporations and commentators
to mean that shareholders always take priority over others, whose interest may legally be
considered secondary. This is the shareholder view of the corporation. Freeman argues that
corporations have obligations to all of its stakeholders its shareholders, its employees, its suppliers,
its customers, and all others who have a stake in the corporation. The reinterpretation does not
change the ethical obligations of corporations, but it does make it easier to argue that sometimes
other stakeholders take precedence over shareholder interests.

By the turn of the century business ethics as an academic field had begun to move into its mature
stage. But as it developed in the United States, the empirical branch slowly grew in size in
comparison with the philosophical branch. Many of the philosophers who were especially active
in starting the field moved into distinguished chairs in business schools, usually in departments of
management. The philosophers, who originally dominated the Society for Business Ethics, slowly
gave way to empiricists in the social sciences. The number of normatively-oriented articles
accordingly gave way to those of an empirical cast, and the range of articles in business ethics
narrowed, so that the great majority were in management ethics rather than marketing, finance,
human relations, or other areas of business. The Exxon, WorldCom and other scandals at the turn
of the century led to a spate of books and articles on corporate governance, and the financial crisis
of 2007–2008 led some to look into the ethics of the financial industry. Beyond the borders of the
United States some took the financial crisis to be a crisis of the legitimacy of capitalism, and at
least some analyzed the ethical justifiability of finance capitalism. The United States maintained
dominance in the field of business ethics, but centers appeared in many countries in Europe, Asia,
South America, Australia, and Africa. In the United States the rapidly developing field had some
impact on business. But the third strand of business ethics the incorporation of ethics, or at least
the trappings of ethics, into businesses in the United States on a large scale was given the greatest
impetus by government legislation. The two branches that became dominant were the corporate
ethics branch and the corporate social responsibility branch. The two are often divided within the
same company. Prior to government legislation, some individual companies, such as Johnson &
Johnson, had on their own adopted codes and incorporated ethics into their structures.

Similarly, individual corporations and industries had reacted to public pressure in a variety of
ways. For instance, in 1978 General Motors and other United States corporations operating in
South Africa adopted what were known as the Sullivan Principles. They agreed not to obey the
discriminatory and oppressive apartheid laws in South Africa and in other Ways including
lobbying the South African government to attempt to undermine or help end apartheid. In 1984,
after the Union Carbide disaster at its plant in Bhopal, India, which killed thousands and injured
several hundred thousand people, the chemical industry adopted a voluntary code called
Responsible Care. The first governmental impetus came in 1977 with the passage of the United
States Foreign Corrupt Practices Act. This prohibited United States firms from making payments
to high-level government officials of foreign countries in order to obtain contracts or special
favors. It was not until 20 years later that the OECD countries adopted similar legislation. The
second impetus was the Defense Industry Initiative (DII) on Business Ethics and Conduct (1986).
This was an initiative by defense contractors in response to a series of irregularities in contracts
with the United States government. The signatories (initially 30, and eventually 50) agreed to have
a code of conduct, to establish ethics-training programs for employees and to develop monitoring
mechanisms to detect improper behavior. This became the model for the United States Federal
Sentencing Guidelines for Corporations (1991), which added a carrot to the stick of federal
legislation. It gave corporations a large financial incentive to appoint a corporate ethics officer, to
institute an ethics-training program for all employees, and to develop, adopt and enforce a code of
conduct. If they did so, and the firm or one of its employees was found guilty of defrauding the
government in any way, the fine imposed could be reduced by up to 96% of the maximum fine of
US$290 million. Integrating ethics into the corporation became cost effective and no longer an
expensive add-on of perhaps dubious value. The fourth government impetus came with the United
States Sarbanes-Oxley Act (2002), enacted in the wake of the Enron and associated scandals
involving corporate governance.

As a result of legislation, corporations were faced with the new task of establishing a corporate-
ethics officer position and introducing codes and mechanisms for monitoring and enforcing the
codes. For many Corporations although not for all this was new and unfamiliar territory. One result
was the creation of the Ethics Officer Association in 1992, which became the Ethics and
Compliance Officer Association (ECOA) in 2005. The association provided a network and a forum
for members to exchange ideas and strategies on ethics and on legal compliance. Although it
started with 19 United States corporations and is headquartered in the United States, by 2011 it
had 1,200 members in over 30 countries.15 The overall result was the incorporation of ethics in
some form as part of the structure of many companies. At the same time, in various ways and
venues companies came under increasing pressure from NGOs and the general public to become
good “corporate citizens” or to engage in Triple Bottom Line (economic, environmental and
social) accounting and in other ways to turn their attention to Corporate Social Responsibility
(CSR) with respect to the communities within which they operated. This became the second branch
of the ethics-in-business strand of business ethics.

CSR has become something that corporations can no longer ignore and still maintain a positive
public image. The emphasis on CSR, however, in some instances has become equated with
business ethics, even though only some of a corporation’s social obligations are ethical. (Others
are legal or simply a response to the desires of vocal lobbing or other groups, and corporations
also have many ethical obligations not included under CSR.) Many corporations have two officers
and two offices: one the CSR which handles external obligations and one internal a corporate
ethics office which handles internal ethical training and issues. Corporations can have exemplary
CSR programs and be ethically deficient in other areas of their operations, as the case of Enron
demonstrated. Many multinational companies have adopted codes that cover their practices
throughout the world and/or have signed on to abiding by sets of principles such as the Caux
Principles16 or the principles contained in the UN Global Compact. The Global Compact contains
ten principles dealing with human rights, labor standards, the environment and corruption. By
signing on, corporations commit themselves to abiding by the principles and determining how best
to implement them. The initiative has grown to more than 8,000 participants, including over 5,300
businesses in 130 countries around the world, and embraces six UN agencies. In 2011 the UN
Human Rights Council endorsed a set of Guiding Principles for Business and Human Rights which
sets a global standard with respect to human rights and business activity.17 The Global Compact
encourages the creation of local networks on national and regional levels to share information,
develop appropriate means of implementing the principles, and encourage other companies to join.
The Compact is compatible with other codes and is ultimately based on self-regulation. The Caux
Principles were formulated in 1995 by a group of Japanese, European and American firms that met
in Caux, Switzerland. Self-regulation, moreover, is not necessarily antithetical to governmental
regulation, and the two are most effective when they work together, e.g., to abolish oppressive
child labor.

Although the UN Global Compact identifies itself with corporate citizenship, it encompasses
aspects of both CSR and business ethics, insofar as it places great emphasis on respecting human
rights. The way CSR plays out in most European countries, in which the government has a larger
role than in the United States, varies as do the issues that business ethics addresses. Labor typically
has a larger say in European corporations than it does in the United States, and many labor rights
that are negotiated in the United States are legislated in Europe. The safety nets in place are also
different. In other parts of the world the same is true, and issues in developing countries are
different from those in developed countries. Although widely accepted, CSR is a somewhat
nebulous concept and is often adopted by companies in response to external criticism, without any
overarching framework or set of values. In the case of multinational or transnational corporations
there is also ambiguity about whether the social responsibilities of a corporation reflect the
demands of the society in which it has its home office or of the societies in which it operates. The
ethical component of CSR is determined in all cases by ethical norms and not simply by the
demands of vested interest groups.

The globalization of business has brought with it the globalization of business ethics in all three
of its strands. Although the emphasis is still primarily on business ethics in each nation or region,
with some of the CSR has become something that corporations can no longer ignore and still
maintain a positive public image literature devoted to cross-cultural or cross-national comparisons,
the true globalization of business ethics is still in its infancy. There is some attention to global
issues, such as global warming. But the battles are fought in national and regional political venues.
What has become clear over the past 40 years is that all three strands of business ethics are
interrelated. Sometimes the progression is from the academic business-ethics literature to a rising
public consciousness as publicists and activists seize the idea to exert public pressure that spurs
corporate activity. At other times academic business ethics follows public sentiment or reacts to
business practices. What has also become clear, however, is that business ethics by itself is
insufficient to level the business playing field for the benefit of all. Academic criticism, public
protests, self-policing and corporate or industry codes can go only so far. At some point,
governmental legislation is required. Legislation, however, is national or local. There is no
effective international legislation that matches the globalization of business, and corruption on the
governmental level impedes the growth of business ethics on the local level in many countries.
Even some of the OECD countries have been lax, for example, in implementing and enforcing
national legislation prohibiting bribery of foreign governments. Nonetheless, by 2011 business
ethics was no longer considered an oxymoron. The public in many countries is more conscious of
ethical issues in business than it was 40 years earlier; the academic field of business ethics,
although continuing to develop, has matured and is no longer struggling to establish itself; and the
business community has at least started seeing ethics and ethical demands as part of the package
it has to manage and internalize shareholder theory; corporate social responsibility (CSR);
stakeholder theory.
Summary:

1. He viewed what he saw as business ethics (Drucker 1981) as different attempts to justify business
practices that were clearly immoral by ordinary standards.2 He was correct in attacking such
attempts, but he wrote before the development of the academic field.
2. The scandals about bribery, insider trading, false advertising, and the like, the stories about Enron
and Arthur Andersen and Bernard Madoff’s Ponzi scheme, constitute what is generally regarded
as misconduct in business and what the general public associates with business ethics or more
precisely, with the failure of businesses to act ethically.
3. Business ethics was introduced into Europe and Japan in the 1980s although the term did not
translate easily, and the development in each country varied from that in the United States
because of socio-political-economic differences.
4. I mentioned two branches the secular and the religious, and in both of them we find a parallel
history of the development of ethics as it applies to business.
5. Adam Smith, who wrote A Theory of Moral Sentiments before he wrote The Wealth of Nations,
wrote about the ethics of business as well as the lack thereof that took place among colluding
businessmen.
6. The history of business ethics in the United States can be viewed as the intersection of three
intertwined strands.
7. - The second strand is the development of an academic field, which has been called business
ethics.
8. The strand represents the widely-held belief that ethics applies in business just as it applies in all
areas of life.
9. All of these writers have added to the history of ethics in business and their thoughts have filtered
down in various ways to the general populace.
10. Rather what these authors wrote in various ways has become part of the accepted view of
business and ethics.
11. Each of these in turn can be divided into at least two related branches: - The first strand, which I
shall call the ethics-in-business strand, is the long tradition of applying ethical norms to business,
just as it has been applied to other areas of social and personal life.
12. This again subdivides into the integration of ethics into business and business practices on the
one hand and the commitment to corporate social responsibility on the other.
13. Most of those in the current academic field agree that ordinary moral rules apply in business just
as they do in all other areas of life.
14. In this sense business ethics is nothing new, although that term was not used to describe it before
the 1970s.
15. The history of ethics in business goes back as far as both ethics and business.
16. Mention business ethics and you are likely to provoke a story about the misdeeds of some
business or some business person.
17. Peter Drucker, a well-known business-management theoretician, was one of those who claimed
that there is no such thing as business ethics, only ethics in business.
18. Aristotle in the Nicomachean Ethics (V, 5), wrote of justice being the exchange of equals for equals
and in the Politics (I, 8–10) he discusses “the art of acquisition,” trade, and usury as part of the
ethics of the household.
19. David Hume, John Stuart Mill, and many others wrote on the morality or ethics of the developing
free-enterprise economic system.
20. This is the sense in which the general public, news reporters and commentators, politicians and
many business people tend to use the term.
21. Karl Marx’s critique of capitalism never took serious hold in the United States, and unlike in many
European countries, no democratic socialist political party ever developed there.
22. - The third strand is the adoption of ethics or at least the trappings of ethics in businesses.
23. Karl Marx developed the most trenchant attack on what he termed capitalism, a period of history
which he considered necessary and in which he admitted human productivity had developed more
than during any other period.
24. If we jump to the modern era, John Locke (1690) developed a defense of private property as a
natural right based on the labor one applies to securing the good in question.
25. Though the proper function of government is debated, the foundations of property, the legitimacy
of private enterprise, and the wage system of labor are widely taken for granted as the accepted
and acceptable economic structure of society.
26. The prevalence of ethics in business in the popular culture is exemplified by the popularity of such
movies as All my Sons, Wall Street, Network, and Silkwood, among dozens of others.6 Although
what is included in the notion of ethics-in-business varies in different countries, depending on the
socio-economic-historic conditions, everywhere there is a basic sense that ethics has a place in
business as in other areas of life.
27. Many of the criticisms were couched in moral terms, and when in the late 1970s the academic field
of business ethics arose, it provided a vocabulary and overarching framework that the critics
seized on and that soon spread to the media and to general culture.
28. Others, such as Islamist and Buddhist, Hindu and Confucian are, of course, the primary religious
influences on business ethics in the countries in which they are dominant.3 The sources of ethics
in business in the Judeo Christian tradition go back at least to the Ten Commandments (Exodus,
20: 1–17; Deuteronomy, 5: 7–21), especially the commandments not to steal and not to bear false
witness or lie.
29. This very general and somewhat amorphous sense of business ethics was not clearly articulated
and arose as an identifiable phenomenon only after business ethics in a stricter sense developed
as an academic field.
30. The scandals about bribery, insider trading, false advertising, and the like, constitute what is
generally regarded as misconduct in business and what the general public associates with
business ethics or more precisely, with the failure of businesses to act ethically.
31. The second branch of the ethics-in-business strand, i.e., the religious, also has a long history, and
similarly has filtered down and influenced general thinking about ethics in business.
32. He outlined what is known as a “preferential option for the poor.” Although the Catholic Bishops of
the United States also came out with a letter on the economy (Economic Justice for All), its impact
on the business community and the general public has not been significant.
33. The rise since the 1970s of what is called business ethics followed the tumultuous period of the
1960s.
34. Invariably, after a scandal some columnist or politician will point a finger at business schools and
their failure to train their students in ethics, or at the failure of the academics in business ethics.
35. That in turn led to what has become known as business ethics in the second sense.
36. The texts came to cover the range of ethical issues in business, starting from meta-ethical
questions such as whether moral language which was typically used to refer to human moral
agents could appropriately be used to refer to corporations, whether corporations were moral
agents, whether one could one meaningfully speak of the conscience of a corporation, and
whether the criteria for moral responsibility (having knowledge and will) made sense when applied
to corporations.
37. It concerns issues of the internal structures of business that tend to reinforce and promote ethical
activity by employees or structures that tend to promote unethical activity (characterized by the
injunction: “Get this done by the deadline and I don’t care how you do it.”). This is the level of
corporate policy, of corporate culture, of responsibilities to the various stakeholders of a company,
and to corporate social responsibility to the extent that such responsibility is ethical responsibility.
38. This deals not only with what individuals ought to do when faced with ethical dilemmas or moral
problems in business, but also with matters of character, individual self-development on the job,
the virtues appropriate to business life, and the integration of ethics on the job with one’s ethics
and ethical obligations as a family member, a member of a community, and a member of the
greater society at large.
39. The normative issues covered the spectrum of business activities, starting with the moral
justifiability (or unjustifiability) of economic systems in particular capitalism and socialism and
moving on to the areas of business: manufacturing, management, marketing, finance, corporate
governance, workers’ rights, business and the environment, and later the international dimensions
of business and the impact of computers and the Internet on the conduct of business.
40. What, dating from the 1970s, differentiated business ethics as an academic field from ethics in
business was that it attempted to systematically study the entire range of ethical issues in business
as a comprehensive whole.
41. The Social Issues in Management Division of the Academy of Management, which became the
major organization for The philosophical branch of academic business ethics emphasized the
normative aspects of business ethics, and the social sciences branch emphasized the descriptive
aspects of business ethics.
42. The latter studied different effects of different practices, as well as differing attitudes toward given
business practices in different societies.8 Social issues in management include ethics as one
component but business ethics includes much more than social issues; not all social issues are
ethical issues, even though many social issues can be viewed from a moral perspective; and one
can make a moral evaluation of economic, legal and social aspects of business.
43. However, one comes out in that dispute, the philosophical branch of academic business ethics
emphasized the normative aspects of business ethics, and the social sciences branch emphasized
the descriptive aspects of business ethics, looking at and describing the practices actually found
in businesses.
44. The philosophical approach was, and to some extent is, considered with suspicion by many in
business, and at first those in favor of the philosophical approach to business ethics were not
welcomed by business, by those concerned with social issues, or by business schools in general.
45. The Japan Society for Business Ethics (JABES) was inaugurated in 1993, and the 1996 World
Congress led to the establishment of societies for business ethics in Latin America and to the
Latin-American Business Ethics Network (ALENE) in 1997; to the Business Ethics Network of
Africa in 2000, which includes members from 22 countries; to the Australian Business Ethics
Network, and to societies for business ethics in India, China and other parts of the world.11 The
first issue of Business Ethics: A European Review was published in 1992.
46. But the third strand of business ethics the incorporation of ethics, or at least the trappings of ethics,
into businesses in the United States on a large scale was given the greatest impetus by
government legislation.
47. The United States maintained dominance in the field of business ethics, but centers appeared in
many countries in Europe, Asia, South America, Australia, and Africa.
48. Although it started with 19 United States corporations and is headquartered in the United States,
by 2011 it had 1,200 members in over 30 countries.15 The overall result was the incorporation of
ethics in some form as part of the structure of many companies.
49. It gave corporations a large financial incentive to appoint a corporate ethics officer, to institute an
ethics-training program for all employees, and to develop, adopt and enforce a code of conduct.
50. For instance, in 1978 General Motors and other United States corporations operating in South
Africa adopted what were known as the Sullivan Principles.
51. The public in many countries is more conscious of ethical issues in business than it was 40 years
earlier; the academic field of business ethics, although continuing to develop, has matured and is
no longer struggling to establish itself; and the business community has at least started seeing
ethics and ethical demands as part of the package it has to manage and internalize shareholder
theory; corporate social responsibility (CSR); stakeholder theory.
52. In 2011 the UN Human Rights Council endorsed a set of Guiding Principles for Business and
Human Rights which sets a global standard with respect to human rights and business activity.17
The Global Compact encourages the creation of local networks on national and regional levels to
share information, develop appropriate means of implementing the principles, and encourage
other companies to join.
53. Although the emphasis is still primarily on business ethics in each nation or region, with some of
the CSR has become something that corporations can no longer ignore and still maintain a positive
public image literature devoted to cross-cultural or cross-national comparisons, the true
globalization of business ethics is still in its infancy.
54. Although the UN Global Compact identifies itself with corporate citizenship, it encompasses
aspects of both CSR and business ethics, insofar as it places great emphasis on respecting human
rights.
55. (Others are legal or simply a response to the desires of vocal lobbing or other groups, and
corporations also have many ethical obligations not included under CSR.) Many corporations have
two officers and two offices: one the CSR which handles external obligations and one internal a
corporate ethics office which handles internal ethical training and issues.