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c "Ethics has to do with what my feelings tell me is right or wrong."


"Ethics has to do with my religious beliefs."
"Being ethical is doing what the law requires."
"Ethics consists of the standards of behavior our society accepts."
"I don't know what the word means."
c These replies might be typical of our own. The meaning of "ethics" is hard to pin
down, and the views many people have about ethics are shaky.
c Like Baumhart's first respondent, many people tend to equate ethics with their
feelings. But being ethical is clearly not a matter of following one's feelings. A person
following his or her feelings may recoil from doing what is right. In fact, feelings
frequently deviate from what is ethical.
c Nor should one identify ethics with religion. Most religions, of course, advocate high
ethical standards. Yet if ethics were confined to religion, then ethics would apply only
to religious people. But ethics applies as much to the behavior of the atheist as to that
of the saint. Religion can set high ethical standards and can provide intense
motivations for ethical behavior. Ethics, however, cannot be confined to religion nor
is it the same as religion.
c Being ethical is also not the same as following the law. The law often incorporates
ethical standards to which most citizens subscribe. But laws, like feelings, can deviate
from what is ethical. Our own pre-Civil War slavery laws and the old apartheid laws
of present-day South Africa are grotesquely obvious examples of laws that deviate
from what is ethical.
c Finally, being ethical is not the same as doing "whatever society accepts." In any
society, most people accept standards that are, in fact, ethical. But standards of
behavior in society can deviate from what is ethical. An entire society can become
ethically corrupt. Nazi Germany is a good example of a morally corrupt society.
c Moreover, if being ethical were doing "whatever society accepts," then to find out
what is ethical, one would have to find out what society accepts. To decide what I
should think about abortion, for example, I would have to take a survey of American
society and then conform my beliefs to whatever society accepts. But no one ever
tries to decide an ethical issue by doing a survey. Further, the lack of social consensus
on many issues makes it impossible to equate ethics with whatever society accepts.
Some people accept abortion but many others do not. If being ethical were doing
whatever society accepts, one would have to find an agreement on issues which does
not, in fact, exist.
c What, then, is ethics? Ethics is two things. First, ethics refers to well-founded
standards of right and wrong that prescribe what humans ought to do, usually in terms
of rights, obligations, benefits to society, fairness, or specific virtues. Ethics, for
example, refers to those standards that impose the reasonable obligations to refrain
from rape, stealing, murder, assault, slander, and fraud. Ethical standards also include
those that enjoin virtues of honesty, compassion, and loyalty. And, ethical standards
include standards relating to rights, such as the right to life, the right to freedom from

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injury, and the right to privacy. Such standards are adequate standards of ethics
because they are supported by consistent and well-founded reasons.
c Secondly, ethics refers to the study and development of one's ethical standards. As
mentioned above, feelings, laws, and social norms can deviate from what is ethical.
So it is necessary to constantly examine one's standards to ensure that they are
reasonable and well-founded. Ethics also means, then, the continuous effort of
studying our own moral beliefs and our moral conduct, and striving to ensure that we,
and the institutions we help to shape, live up to standards that are reasonable and
solidly-based

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c J  (also known as 



) is a form of applied ethics or
professional ethics that examines ethical principles and moral or ethical problems that
arise in a business environment. It applies to all aspects of business conduct and is
relevant to the conduct of individuals and business organizations as a whole. Applied
ethics is a field of ethics that deals with ethical questions in many fields such as
medical, technical, legal and business ethics.
c Business ethics can be both a normative and a descriptive discipline. As a corporate
practice and a career specialization, the field is primarily normative. In academia
descriptive approaches are also taken. The range and quantity of business ethical
issues reflects the degree to which business is perceived to be at odds with non-
economic social values. Historically, interest in business ethics accelerated
dramatically during the 1980s and 1990s, both within major corporations and within
academia. For example, today most major corporate websites lay emphasis on
commitment to promoting non-economic social values under a variety of headings
such as ethics codes and social responsibility charters. In some cases, corporations
have redefined their core values in the light of business ethical considerations, for
example, BP's "beyond petroleum" environmental tilt.

Ô 
 J 

By Richard T. De George

The term 'business ethics' is used in a lot of different ways, and the history of business ethics
will vary depending on how one conceives of the object under discussion. The history will
also vary somewhat on the historian²how he or she sees the subject, what facts he or she
seeks to discover or has at hand, and the relative importance the historian gives to those facts.
Hence the story I'm going to tell will be somewhat different from the story someone else

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might tell in various particulars, and I hope that instead of being a dull recitation of facts it
might in fact prompt some discussion at the end by those who would tell a somewhat
different story.

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 of à  goes back to the origin of à , 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.

„   

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 the 0 à
, and Aristotle explicitly discusses economic
relations, commerce and trade under the heading of the household in his
. 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.1 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 them3 and in his discussion of, and, following
Aristotle's analysis, his condemnation of usury.4 Nonetheless he justified borrowing for a
good end from someone ready to lend at interest.

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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.5 R. H. Tawney's
0
  0  
´ 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.7 Adam Smith is often thought of as
the father of modern economics with his      

 . 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 of    
. 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.

Marx's notion of exploitation was developed by Lenin in  


   
 
, 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,
0   . 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

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well-behaved wage-earner," his wife and his children.8 Later popes followed Leo's example.
Pope Pius XI in 1931 wrote     , which morally attacked both Soviet
socialism and
 ! capitalism, a theme continued by Pope John Paul II in "à 
#$ (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 in  

 
 9 became the basis for courses in seminaries and schools of
theology. In 1993 the Parliament of the World's Religions adopted a %
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#10 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 term à . 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.

J   Ô 

Business ethics as an academic field, just as business ethics as a corporate movement, have a
more recent history.

The second strand of the story that I shall tell has to do with business ethics as an academic
field.

The 19´0s 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

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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 management²
courses which continue to thrive today. For the most part, in the 19´0s 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,11 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.12
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, #

 ' ; Thomas Donaldson and Patricia Werhane, #
 ' 

 
  ; and Vincent Barry,  
 ' . In 1982 the first
single-authored books in the field appeared: Richard De George, ' #; and

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Manuel G. Velasquez, ' #  . 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 19´0s, and the name paralleled that of the earlier field²although 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,   ( , 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 practices²much 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 threat²something 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 corporation²its 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.

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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 debate²the
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 argued²often 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,

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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 197´. 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 197´ 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 the ( 
 ' # appeared in February 1982;
the first issue of the ' # 
 in January 1991; and the first issue of ' 
##  0) 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's # ' # (New York: Oxford
University Press, 1989) was the first systematic treatment of international business ethics,
followed by Richard De George's    ) 
'  (New York:

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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.

J    

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-known  was written and published by General Robert Wood Johnson in 1943. But
most companies in the 19´0s 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 19´0s by turning to corporate social responsibility, and
the movement can be traced back to that period.

The U. S. Civil Rights Act of 19´4 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 externalities²such 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

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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 198´, 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 show à  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,

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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.

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c It starts at the top: Enron failed due to the lack of ethical management by the C.E.O.
Kenneth Lay. Enron Vice President Sherron Watkins asserted, in the presence of
congressional investigators, that Skilling and Fastow deceived Lay (Swartz and
Watkins, 2003). Watkins was the "whistleblower" in the Enron scandal (McLean and
Elkind, 2003). In August 2001, she wrote a letter to Mr. Lay, warning him of various
accounting irregularities that could pose a threat to the company in the future (Senate,
2002). In her testimony before congressional committees, she blamed chief financial
officer, Jeffrey Skilling, as the villain, but claimed that chairman Kenneth Lay was
duped (Senate, 2002). A key report from the Enron's independent directors found that
Kenneth Lay depended on Skilling to manage details of the company's partnerships,
but Skilling used to inflate profits and improperly hide debts. In Watkin's own words,
"Mr. Skilling was supposed to be an integral part of the controls and the review
process with the LJM transactions" (Swartz and Watkins, 2003). Watkins expressed
concerns with Enron's accounting practices in five memos that she sent to Kenneth
Lay. Mr. Lay then promised he would personally investigate Enron's problems (Lay,
2002). In response, Lay also said he would sack Vinson and Elkins and Andersen and
hire other accounting firms. Instead, Lay asked Vinson and Elkins to actually
investigate the matter. In her testimony, Watkins said that Andersen was guilty, since
the accounting firm had approved Enron's fraudulent partnerships.
c This was on of the main causes for the fall of Enron, because lack of ethical
supervision bred a corporate culture that harbored deception and lies. In contrast,
Texas Instruments is very strict about ethical management, and this case can rarely
take place at Texas Instruments - why? Because Texas Instruments bosses carefully
evaluate the actions of their subordinates (McLean and Elkind, 2003). Kenneth Lay
created the breeding ground of fraud at Enron, due to weak ethical management. It is
the leader's job to provide the vision for the group. A good executive must have a
dream and the ability to get the company to support that dream. But it is not enough to
merely have the dream. Kenneth Lay must have provided the framework by which the
people in the organization can help achieve the dream. Mr. Lay was too naïve, and
always believed that Enron was doing great in the business world (Lay, 2002). People
took advantage of a weak boss and a culture of corruption and deceit was born at
Enron. Management lacking the enforcement of ethics and oversight, can destroy a
company. Thus, there should be better ethical oversight and stronger management
from the C.E.O.
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