The Rise of Business Ethics

Bernard Mees

• Publisher: Routledge
• Year: 2019
• Print ISBN: 9781138614079
• eBook ISBN: 9780429874987
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

In 1973, Daniel Bell argued that corporations in post-industrial societies increasingly needed to behave in accord with widely accepted social norms, particularly in terms of ethical behavior and social responsibility. Yet widespread criticism of business behavior was not an invention of the 1960s and 70s or a product of changing commercial norms. The key feature historically has been business scandal. Understandings of how the field of business ethics has emerged are undeveloped, however.

This book is the first attempt to explain the conditions which saw a focus develop on business ethics especially in the 1960s and 70s, and how the broader field developed to encompass related notions such as corporate governance, corporate social responsibility, ethical leadership, sustainable business and responsible management education.

The Rise of Business Ethics provides an introduction and analysis of the key developments in contemporary business ethics by examining them in terms of their diachronic development – the key thinkers, the key issues, the key institutions and how they each contributed to contemporary understandings of business ethics, governance and practice. Addressing the topic from a European as well as North American perspective, The Rise of Business Ethics will be of interest to researchers, academics, and students in the fields of business ethics, business and society, business history, organization studies and political economy.

1
Introduction

Business ethics, like business regulation, has largely evolved as a corrective reaction to perceived wrongdoing by businesses. It principally represents a form of self-regulation, but business ethics is not a concept restricted merely to commercial actors. More broadly taken, business ethics also reflects a significant tradition of external criticism (or moralising) by members of society not directly involved in commerce—including journalists, clerics, social theorists, public officials and other commentators. Whether it is described as La morale des affaires (as in French), Wirtschaftsethik (in German) or ética degli affari (in Italian), the concept has a recognisable genealogy that dates back to the nineteenth century. What constitutes business ethics exactly has long been a matter of dispute, with little agreement arising over where business ethics sits in relation to applied philosophy, political economy, industrial relations, economics or other related disciplinary concerns. Historically, business ethics has been influenced by intrusions from all of these intellectual traditions, but it is generally recognised to be a separate matter from each of these related fields of inquiry, each of which has a different and discrete origin, focus and historical identity.

Business ethics has also long been seen to be a part of business education, particularly at university level. But the emergence of business ethics as a field of research and study is a product of more widespread concern at insufficient focus on moral standards in commercial life. Business practice has always had to change as social norms develop, but the great expansion in size and scope of commercial enterprises since the beginning of the twentieth century has seen business ethics and a broader concern with the ethical behaviour of commercial actors develop remarkably, first in Europe and the United States, and then more broadly internationally. Previous studies of the history of business ethics have not typically been contextualised within the broader notion of a history of ideas, however, or in terms of the development of the Western intellectual tradition more generally. Secularisation has also been a key feature of the development of ethics in the West, and particularly so in business as specialists in a secular form of business ethics emerged first in American universities.Over the course of the twentieth century, business ethics became increasingly divorced from its basis in religious tradition, not just in Western countries, but also internationally.

Yet the intellectual history of ethics is part of the broader history of ideas and has had a particularly important influence on it, especially in terms of the reception of the approach of the nineteenth-century German philosopher Friedrich Nietzsche. Nietzsche’s On the Genealogy of Morals (1887) is subtitled “a polemic”; it is an attack on Christianity. Its main argument was that Christianity was created by a cabal of priests in order to imprison the powerless in a system of self-defeating resentment, a conspiracy theory of the worst kind. A superb stylist with a talent for coining aphorisms, Nietzsche had always proved profoundly good at causing offense. His claims that “all moral philosophy hitherto has been tedious” and “God is dead … who will wipe this blood off us?” did not win him many friends (Nietzsche 1882, 181; 1886, 173). By the time of his death in 1900, Nietzsche had alienated most of his previous supporters. Unable to find a position in the university system, his works barely sold out their lowly initial print runs.

In the twentieth century, however, Nietzsche was lionised, first by the Nazis (Whyte 2008) and later by left-wing university professors—most notably among the latter Michel Foucault (Foucault 1977). Foucault’s Archaeology of Knowledge (1969) is the most important methodological work in intellectual history in living memory, and for Foucault, the key contribution of Nietzsche was his conception of genealogy. Morality, as Nietzsche claimed, was an ever-changing phenomenon, influenced by key historical developments—of ruptures as well as continuities. It was certainly not a product of uniform human advancement. Where traditional Christian morality was argued by the medieval philosopher St Thomas Aquinas to be the product of a universal ethical rationality (Aquinas 1952, I 79), Nietzsche argued that Christianity promoted a “slave morality” in opposition to the “masterly morality” that had typified earlier European society.

While Enlightenment thinkers generally acceded to the argument of Nicholas de Condorcet (1795) that morality, like science, was cumulatively progressing, Nietzsche did not accept this myth of moral progress. According to Nietzsche, ideas such as compassion had their origin in the resentment held by slaves of their masters. His ugly analysis of the history of morality was founded on the truism that ethical standards had changed (and, according to Nietzsche, not necessarily always for the better) since the times of Homer and the highest points reached by ancient Greek civilisation. Nietzsche criticised the rise of Christian ethics as well as the scientism of atheists, seeing the ultimate goal of human flourishing in the “supermen” of the arts—the Rembrandts, the Goethes and the Wagners. His vision of morality was a heroic cultural concern, not an ethics of altruism or social justice. Both fascinating and at the same time repulsive, Nietzsche’s Genealogy of Morals remains a foundational contribution to the history of ideas.

More recent attempts to prove that moral standards have improved as advancements in science have continued are similarly dismissed by many modern critics. The British philosopher John Gray (2012) argues that history is not amenable to explanations founded in scientism any more than it is considered proper (any longer) to invoke the will of God as determining the course of history. Does modern Islamic terrorism really constitute an ethical improvement on the wave of political murders perpetrated by nineteenth-century anarchists? Does mass, on-demand abortion truly represent a moral advance on previous attempts to focus more profoundly on the rights of the unborn child? These remain matters of contest and debate, no matter one’s political opinion. How would we judge objectively whether the current practice regarding issues of this nature truly represent moral progress?

Business ethics entails a concern similar to that promoted over a century ago by Nietzsche. Unlike in Nietzsche’s approach, however, business ethics attempts to be practical, restrained and respectable—it does not yell at business, nor does it seek to act as an apology for it. Business ethics as a field of research and study is a product of more widespread concern with the moral standards of contemporary business life. The sound and light of business studies remains entrepreneurship, leadership and strategy—all themes that seem more Nietzschean than most contemporary business ethics discourse does. Business ethics has clearer links to sophisticated intellectual traditions than many other aspects of business scholarship, but it emphasises a kind of morality that was dismissed by Nietzsche as being inspired by the ethical deliberations of the resentful.

Business ethics is described by the editors of the Routledge Companion to Business Ethics as a discipline focused on “the morals of commercial and corporate conduct” (Heath et al. 2018, 1). But business ethics is mostly dismissed by critics of contemporary commercial life. Commercial practice has always had to change as social norms develop—the outlawing of slavery in the British Empire at the beginning of the nineteenth century was perhaps the most important break with long-standing norms of commercial practice ever witnessed in the West. It is the great expansion in size and scope of corporations since the beginning of the twentieth century, however, that has seen business ethics and a broader concern with the moral behaviour of large commercial enterprises develop so remarkably, first influentially in the United States, and then more broadly internationally. It might be thought, therefore, that a comprehensive survey of American corporate responsibility, such as that of Archie Carroll and colleagues (2012), might be able to serve as a handbook of the history of business ethics. Business ethics could be seen as a reflection of globalisation or its earlier reflection Fordism—a development of the spread of American business norms internationally via the medium of multinational corporations.

Yet the rise of business ethics is not just a reflection of criticism of corporate behaviour in the United States, but also, somewhat perversely, of the rise of the modern business school. Business schools were initially founded to meet the labour needs of managerial capitalism, and business ethics has largely developed most recently as a discourse institutionalised in business schools. Very few philosophers gave much consideration to questions of business morality before the later decades of the twentieth century—and what sustained ethical thought as has been excavated by historians of the ethics of business before Nietzsche’s day has tended to be described as belonging to a tradition of “commercial ethics”, separating it from the more recent concerns typical of business school education (Mees 2018). From this perspective, business ethics is typically seen as a distinctly American development that spread across the Atlantic to Europe during the late twentieth century and, under the influence of business schools, has become a key part of global business education.

A closer study of business history reveals that this Americanising narrative is unduly occlusive, however—it shuts out other traditions and influences. In 1973, the American sociologist Daniel Bell argued that businesses in post-industrial societies would face increasingly widespread calls to behave in accord with broadly accepted social norms (Bell 1973). Yet widespread criticism of business behaviour was not an invention of American society in the 1960s and 1970s or a product of increasing educational norms. The key feature historically has been business scandal and the reactions to it that emerged in Western countries since the late nineteenth century. As Aquinas adumbrated in the Middle Ages, all of the world’s major religious and philosophical traditions include general prohibitions on thievery, dishonesty, exploitation and cruelty (Aquinas 1952, I, 79). It is also wrong to suppose that business ethics was originally a product of American business schools. But while morality is a universal human notion, the idea that university students should undertake studies in business ethics is not. It has been most strongly influenced by American developments, but business ethics is not merely a reflection of business pedagogy or economic globalisation. It has its own genealogy (in the Nietzschean sense), and it has clearly describable characteristics and developments that are not all to be accorded products of Americanisation.

The first considerations of business ethics date to the late nineteenth century and were often quite broadly focused. The Columbia University economist John B. Clark’s article “Business Ethics, Past and Present” which appeared in The New Englander in 1879 was a study of competition, but a more specific focus on the morals of proper business practice is already evident in works such as the Philadelphian real estate convey-ancer Charles Rhoads’s 1882 pamphlet Business Ethics in Relation to the Profession of the Religious Society of Friends (Abend 2014, 120–1). The first publications with similar titles in Continental European languages ranged from Paul Gaultier’s article “La morale des affaires”, a criticism of American business in the Revue bleue from 1904, to the use of the German description Wirtschaftsethik by the Austrian theologian Ignaz Seipel which appeared in the name of his professional doctorate (Habilitationsschrift) on early Christian moral thinking on economic matters (Seipel 1907). The German term Wirtschaftsethik literally means “economic ethics” and sometimes seems closer in meaning to political economy than to business ethics. But a recent handbook on Wirtschaftsethik, edited by the Technical University of Dresden business ethicist Michael S. Aßländer (2011), features entries on topics such as corporate social responsibility, ethics codes, whistleblowing and sustainability reporting, and the German Jesuit philosopher Oswald von Nell-Breuning’s 1928 doctoral dissertation on the ethics of stock-market speculation first appeared in a monographic series of Studien zur Katholischen Sozial- und Wirtschaftsethik (Studies on Catholic Social and Business Ethics). Banned from publishing by the Nazis from 1936 to 1945, Nell-Breuning was one of the leading figures in the Continental European tradition of attempting to reconcile modern business practice with the moral teachings of the Catholic Church (Nell-Breuning 1928; Hagedorn 2018).

Another of the drawbacks in contemporary accounts of business ethics has been the failure of most treatments to explain ethical understandings that are widely present (as opposed to lacking) today in the business world. For example, the earliest recorded instance of an ethical judgement that might still be characterised as an essential part of business morality appears in Samuel Noah Kramer’s bestselling History Begins at Sumer (Kramer 1956). The ancient Sumerian text that Kramer labels “The Pickaxe and the Plow: Labor’s first victory” preserves a disputation from the third millennium bc. It begins with a pickaxe challenging a plough to see which implement is superior. The plough states that it is “the faithful farmer of mankind … the great nobles walk by my side, All the lands are full of admiration”. The pickaxe, retorts in turn, that it is used in many more industries than the plough is, and furthermore:

You, whose accomplishments are meager

(but) whose ways are proud,

My working time is twelve months,

(But) the time you are present (for work) is four months, (While) the time you disappear is eight months,

You are absent twice the time you are present.

The response of the plough (if any) is not recorded. The pickaxe won its case not just by arguing its broader utility, but particularly by asserting that a pickaxe is morally better because it works much longer hours.

A more developed sense of the valuing of industriousness can be recognised in the Parable of the Talents, a passage recorded in the Gospel of Matthew as one of the key lessons told by Jesus (Matthew 25:14–30). The parables of the New Testament are often set in commercial environments, and the Parable of the Talents (along with the Parable of the Good Samaritan) is one of the two best-known teachings of Jesus. A talent in Biblical times was a large sum of money—the modern metaphorical meaning of the term in English (used in expressions such as “talent management”) derives from this passage:

a man going on a journey … called his servants and entrusted to them his property. To one he gave five talents, to another two, to another one, to each according to his ability …

after a long time the master of those servants came [back] and settled accounts with them. He who had received the five talents came forward, bringing five talents more. … And he who had the two talents came forward, saying, “Master, you delivered to me two talents; here, I have made two talents more”. …

He who had received the one talent also came forward, saying, “Master, I knew you to be a hard man, reaping where you did not sow, and gathering where you scattered no seed, so I was afraid, and I went and hid your talent in the ground. Here, you have what is yours.” But his master answered him, “You wicked and slothful servant! … cast the worthless servant into the outer darkness.”

(Matthew 25:14–30)

In the traditional Christian valuation, not only should industriousness be rewarded, individuals who waste the gifts God has bestowed on them are condemned to be cast out into a place where “there will be weeping and gnashing of teeth” (Matthew 25:30).

Other global religious traditions feature their own particular teachings about business and morality. Buddhism, for example, includes sammā-ājīva, “right livelihood”, as one of the principles of sīla, or “ethical conduct”, in its ariyo aṭṭhaṅgiko maggo, or “noble eightfold path”. “Right livelihood” is defined negatively as that which does not include “Business in weapons, business in human beings, business in meat, business in intoxicants and business in poison” in the Pali tradition (Aṅguttara Nikāya 5.177, Brown 2008). There is a great amount of traditional religious teaching concerning proper business practice internationally. But with the contemporary commercial system having such obvious Western foundations, it has usually been supposed that any genealogy of contemporary business ethics should be primarily sought in the Western tradition. In fact, it has long been accepted that it was a particularly Western and Christian focus on the moral valuing of hard work that led to the development of capitalism.

By the eighteenth century, the Biblical notion that hard work should be rewarded had developed to such a stage in many Western countries that any idleness could be seen as wasteful. Max Weber summed up this development in his Protestant Ethic and the Spirit of Capitalism (Weber 1904/5) by citing the American revolutionary and statesman Benjamin Franklin. Weber stressed the importance of Martin Luther’s teaching that any business occupation could be seen as a vocation (or calling from God), based on Luther’s (1518) interpretation of 1 Corinthians 7:17: “Only let each person lead the life that the Lord has assigned to him, and to which God has called him”. But by the eighteenth century, the connection between work and Christian religious teaching had developed into a focus on industriousness and thrift. In a short essay addressed to “those that Would be Rich”, Franklin summed up his understanding of hard work and saving in terms of small and substantial sums of money: of groats (i.e. fourpence), shillings and pounds (Franklin 1736, 56):

He that spends a groat a day idly, spends idly above six pounds a year, which is the price [in interest] for the use of one hundred pounds [of credit]. …

He that idly loses five shilling’s worth of time, loses five shillings, and might as prudently throw five shillings into the sea.

He that loses five shillings, not only loses that sum, but all the advantage that might be made by turning it in dealing, which by the time that a young man becomes old, will amount to a considerable amount of money.

Laziness and waste were not just immoral, they went against good business sense.

But the moral imagination of the Western businessman did not end with the extol...

Table of contents

• Cover
• Half Title
• Series Page
• Title
• Copyright
• Contents
• Acknowledgments
• Preface
• 1 Introduction
• 2 The Corporate Revolution
• 3 Religion and Philanthropy
• 4 The Social Responsibilities of Business
• 5 Business Philosophy
• 6 Corporate Governance
• 7 Ethical Leadership
• 8 Sustainability
• 9 Responsible Management
• 10 Conclusion
• References
• Index