This paper is intended to review the history of business ethics, look at what it means, review some current ethics issues and what the future holds for business ethics.
The phrase “business ethics” has been used in a number of different ways. And therefore, the history can differ depending on what information you are looking for. The most modern concept dates back to the rise of anti-big business protest groups in the United States in the 1970’s. A lot of business professionals cite the 1960s as the turning point for formal business ethics.
This decade marked the rise of the Civil Rights Movement, with the US Civil Rights Act being signed into law in 1964. The Second World War was still fresh in everyone’s minds, while the Cold War and the Vietnam War was happening. Big businesses were thriving, replacing small and medium-sized businesses. The 70s saw the further development of business ethics. This decade was when it came into its own as an academic field.
This decade also brought to the forefront human rights issues, like forced labor, substandard wages and unsafe practices, leading to the creation of the US Occupational Safety and Health Act of 1970, a law that sought to protect workers’ rights. Today, companies exercising business ethics is not the exception; it is the standard. Self-monitoring and social responsibility are philosophies that companies now abide by. It has become an integral part of businesses.
The system of moral principles or ethical standards by which the actions of organizations can be judged and by which corporate governance is guided.
Ethical standards or behavioural expectations may or may not be congruent with legal (statutory) obligations. While what is acceptable ethical practice in business varies across countries, in 2011 the United Nations Human Rights Council endorsed a range of guiding principles relating business practices to human rights, among which was ‘Corporate responsibility to respect Human Rights’.
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. The scandals about corruption, insider trading, false advertising are what the general public associates with ethics in business.
Last year in the news was a pretty popular bank, Wells Fargo. They had released a report of the sales practices investigation that led to employees opening counterfeit accounts to meet aggressive sales goals. Under pressure to meet steep sales goals and incentives, Wells Fargo employees created over a million fraudulent accounts in their customers’ names. Between 2011 and 2015, company employees opened more than 1.5 million bank accounts and applied for over 565,000 credit cards in customers’ names that may not have been authorized. Wells Fargo has an ethical duty to treat its customers fairly. Employees made-up millions of fraudulent accounts in order to keep their bosses happy and keep their employment. Wells Fargo announced in September 2016 that some 5,300 employees were fired. The Wells Fargo is a fundamentally classic case of “Goals Gone Wild”. For an illustrative example, Wells Fargo was asking its sales force to sale 8 products (“Going for gr-eight.”) to customers that needed fewer products.
Ethical concerns over business practices are not going away. Alison Taylor claims that moving forward company leaders need to consider ethical issues from a strategic perspective, making special effort to behave in a way that is consistent with their statements of purpose. Codes of conduct and values statements should be backed with meaningful commitments, resources, and processes. Particular attention needs to be paid to potential contradictions between what a company says and what it does. For example, an avowed commitment to human rights should amount to more than a policy statement; it should be accompanied by efforts to understand and address impacts, engage with the supply chain, and (most importantly) disclose and address ongoing challenges. No company is free of such conflicts. The future is going to have to include social responsibility that falls on the business and not on lawyers and legal teams.
Ethics are not only important in business but in all aspects of life because it is a critical part of the foundation on which of a civilized society is built. As the building blocks of our society, ethics should be the building blocks of business. A business or society that lacks ethical principles is destined to fail sooner or later. Henry Kravis states, “If you build that foundation, both the moral and the ethical foundation, as well as the business foundation…then the building won’t crumble.”