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Business ethics from a historical perspective

Business ethics seems to have no history. It is one of the stranger aspects of a discipline that
routinely invokes the names of long-dead philosophers that its history seems murky,
unresolved. Business ethics textbooks will sometimes include a brief survey of the (potted)
history of business ethics, but rarely do their accounts agree with each other -- in fact some
report narratives which seem to have very little to do with business at all. There appears to be
a consensus that in some way business ethics simply did not exist before the 1970s
(McMahon 2002). Others appear to think that philosophers such as Aristotle spent time
expounding on the ethics of business. There are even those who propose to find ethics in all
parts of business -- what might be considered a glib understanding from a historical and
conceptual perspective. Cultural theorists may rightly believe that everything is of semiotic
value and some moralists see ethical issues in all parts of daily life. Yet to describe business
ethics in terms of universal experience is surely to rob the discipline of focus, not to mention
to make it sui generis in terms of the broader history of ideas.
It seems to me that there are three broad periods which we might reasonably think of as
epochal in business ethics. A fortune honestly made was considered a virtue in ancient Greek
tradition, but there is no sense of a particularly nuanced or developed tradition of business
ethics in classical philosophy. Yes, the ancient Greeks were a mercantile race, but no, the
ethics of business practice does not seem to have been of much concern in the writings of
ancient philosophers which have come down to us today. The medieval censors through
whom we experience such ancient writers may simply have judged business ethics trivial. But
there is no sense from St Thomas Aquinas that he had any classical predecessors when he
considered the notion of what was a just price in his Summa Theologica (ed. O’Sullivan
1952). Aquinas would seem to be the founder of business ethics, at least in terms of a
continuous tradition of a considered ethics of fairness in business activity.
If you were angry with a customer, rival or supplier in the ancient world, you could usually
go to a court to seek redress -- but this, then, was a matter of law, not ethics. Similarly, you
could go to a magician and get them to compose a curse on those who you reckoned had
slighted you -- and it was typical that ancient curses would justify why their commissioners
had ordered them made (Gager 1992). But like the Confucian texts which warn of the
perfidious nature of merchants, it would seem perverse indeed to attempt to see a rudimentary
form of business ethics in such expressions. And although the Prophet Mohammed was a
businessman, a continuous Koranic tradition of business ethics seems an equally fraught
notion. Instead it seems that the beginnings of a considered tradition of business ethics must
be sought in late medieval Italy, the home of the artistic and scientific renaissance that
accompanied the rebirth of European trade.
Aquinas’s just price theory was followed by a series of further writings on how a good
Christian might undertake business honourably. Indeed medievalists could point to the
writings of a Christine de Pizan (trans. Lawson 2003) or one of the many medieval trade
manuals for signs of an ethical facet to business literature already in Aquinas’s era. But unlike
his early-modern continuator Johannes Nider (trans. Reeves 1966), Aquinas was the king of
Christian philosophers, aiming to reconcile as he did the Greek tradition (as articulated in
Aristotle) with the teachings of Scripture. Although Christian philosophers are often written
out of ethics texts today, Aquinas remains a towering figure in the history of Western
philosophy (Stump 2003).
Immanuel Kant is the figure who has most clearly usurped the position of Aquinas, but
despite the constant recourse to Kantian approaches in modern business courses, the German
idealist par excellence had little interest in business philosophy (cf. Bowie 1997). Indeed his
age could be said to be the one which swept away the Aquinan tradition, and it was in
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reaction to this new amorality that the first major development in Western business ethics
emerged. After all, the three “ethics” which have traditionally been seen as underlying the
emergence of capitalism could all be seen to undermine Aquinas’s notion of just price. The
market ethic of (moral philosopher) Adam Smith could be seen as an excuse to let market
forces decide what a just price was. The liberty ethic of John Locke similarly seemed to some
to be a tacit justification for self-centeredness. Even the more crucial focus on (or justification
of) acquisitiveness that Max Weber thought to see explained in Calvinist theology seemed to
grant the accumulation of capital a moral legitimacy that could outstrip other concerns of
ethicality (Wren and Bedeian 2009). If work was good for the soul, the sweatshop could
validly be seen as a moral reformatory. The moral value now attributed to work could justify
reform through hard labour. As the motto of the Nazi concentrations camps had it Arbeit
macht Frei, work makes you free.
The perverse moralities preached by the first noveau capitalists of the Britain of the
industrial revolution alarmed many contemporary observers. A new form of business ethics
arose as a critique of the Dickensian norms which had emerged in the land of Manchesterism.
Socialism arose as a moral critique of the perversities which had arisen in the new society. It
should not be forgotten that Engels’s first work (1845) was penned after a visit to Manchester.
It was also Manchester, the first capital of industrialism, that proved the intellectual trying
ground of Welshman Robert Owen. Owen was the first management thinker to outline a
comprehensive ethical vision for his workforce. A utopian visionary, his famous communalist
experiment at New Lanark brought him fame throughout Europe and was based around his
vision of a new moral order. And it was clearly a moral order based on an experience of
factory life that Owen took as his main point of departure (Owen 1857-58, Donnachie 2000).
Owen was a confident of Jeremy Bentham, and although neither as utilitarian nor atheistic
as his more famous fellow, Owen outlined a clear moral vision for capitalists and managers
during his time at New Lanark. His New Moral World of 1836 could well be considered the
first major contribution to business ethics, except that Owen was not satisfied with rethinking
the ethical bases of business, but extended his critique to the whole of British society. Owen
founded the British Co-operative movement, established a system of labour exchanges,
lobbied for the introduction of the first Factory Act and for paying labourers just wages
(Harrison 1969). But a sustained historiography of business ethics did not continue on after
his death. If anything the reverse might be said to have been true -- socialism instead became
increasingly seen as a movement in opposition to business, particularly so as a decidedly
American twang began to emerge in reckonings of capitalist values.
Much as Britain’s much earlier industrialisation lead to the emergence of all sorts of social
and governmental failures, American businessmen of the nineteenth century seemed more
than intent on revisiting the mistakes of their Transatlantic cousins than learning from them.
Visions of children labouring in sweatshops are part-and-parcel of American industrialisation
well after such moral blemishes had been outlawed in Britain. Indeed the era of the US robber
barons still proves welcome fodder for revisionist historians, as the American equivalents of
the Cadburys and Leverhulmes are re-excavated and the perfidious influence of Spencerism
and Fordism are downplayed (Josephson 1934, Folsom 1987). The rise of American
philanthropists such as Andrew Carnegie and John D. Rockerfeller Sr. are rarely seen by
modern apologists of American business frailty as examples of what Marx and Engels derided
as self-serving philanthropy (e.g. Wren and Bediean 2009). But the remarkable bequests of
such men (not to mention the emergence of the Community Chest movement) are often seen
as the roots of an American business ethics that was more prominent, more organised and
mainstream than any lesson Great Britain had to offer.
Railroad journalist Henry Poor (of Standard and Poor’s) served as some kind of business
conscience in the ante-bellum era (Chandler 1956). Yet it was not until the days of Frederick
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W. Taylor that a true historiography of business ethics might be said to have emerged in US
experience (Schwartz 2007). And oddly enough, it was the father of the cash bonus, Henry
Gantt, who might be claimed to be the first American business ethicist. Among the reams of
papers he produced on factory management, Gantt was one of the first to articulate a clear
argument for business to assume social responsibilities. More than just appealing to the notion
of entrepreneurial philanthropy, Gantt argued that businesses had to adopt a broader social
role -- anything to see off the rising threat of Communism (Gantt 1919, Wren and Bedeian
2009:165).
Marx had finally re-entered the discourse of business ethics as a new age of American
ethical understandings of management and business emerged. But the father of US business
ethics was clearly not (at least in a continuous discursive manner) the exceptionally
productive Mr Gantt. It was Chester Barnard, the first American theorist of organisations,
who is most strongly to be connected with the emergence of a continuous discourse of
business ethics. Barnard’s 1938 classic, The Functions of the Executive, features two of the
most important contributions ever to be made to the field of business morality (Schwarz
2007).
Barnard developed the ideas which came together as the Functions from a variety of
mostly unacknowledged sources. It is hard today, then, to pin down precisely what was his
inspiration for his theory of moral leadership. Barnard’s account of the connection between
ethics and the role of executives is the foundational articulation of ethical leadership in
business. Although he does not use expressions such as “tone at the top”, Barnard’s theory of
moral leadership encapsulates the basic notion of this crucial theory of business ethics in a
manner that few would find much fault with today.
Barnard’s theory did not stop with the modelling of ethical behaviours by those at the top,
however, but extended to expectations of employees in all aspects of business behaviour. For
Barnard this clearly extended also to what we now routinely describe as stakeholders -- a
word that Barnard would not have recognised in his day. But Barnard’s theory of moral
leadership extended to all parties involved in his formal model of organization -- internal,
external, top to bottom. Barnard can be said, without too much rewriting of history, to have
also invented the stakeholder model of the firm.
Barnard did not stop, however, with the Functions of the Executive. In a largely forgotten
paper from 1958, he also articulated what he considered to be the ‘Elementary principles of
business morals’. This contribution was published long before business ethics was apparently
founded in the 1970s (as many textbooks would have us believe) -- and long before applied
ethical philosophy began to appear in business courses. Indeed Barnard was not the only
leading proponent of business ethics of his generation. Courses in business ethics were
already being taught at some Ivy League universities by the 1950s and works like Howard
Bowen’s Social Responsibilities of the Businessman (1953) also left their mark (cf. Wren and
Bedeian 2009). Although many members of the generation born after the Second World War
like to reinvent history to suit a particular generational narrative, business ethics is a discourse
of American management thought that well predates the passing of US environmental
legislation and the Foreign Corrupt Practices Act in 1977.
These new efforts of legislators to reign in unethical business practice emerged in light of a
wholesale assault on traditional American business practice. Although Milton Friedman’s
famous 1970 article in the New York Times Magazine is sometimes cited as articulating a
‘classical’ theory of business ethics, it might better be described as a ‘reactionary’
understanding. Friedman was (with Peter Drucker) one of the foremost public critics of the
call of leftwing thinkers for US business to behave more responsibly. From consumer activist
Ralph Nader (cf. Nader 1965) to economist J.K Galbraith (1958, 1967), a chorus of critics of
American business had emerged. Friedman and Drucker (see, esp., Drucker 1981) served as
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apologists for business practice at a time when reform was becoming a siren call (Hoffmann
and Moore 1982, Schwartz 1998, Carroll 1999). Keith Davis summarised the two sides of the
debate in a 1973 article as the many voices calling for a reassessment of business education
from the 1960s (Davis 1960, Baumhart 1961, 1968, Walton 1967, Carr 1968) found much
more acceptance as US universities (in general) became less reactive to the criticisms of a
new generation (cf. also the dissertation of McGraw 1969). No longer would the call for
business ethics seem ‘subversive’ as the first business ethics textbooks emerged, and names
like Bowie, Carroll and Freeman emerged to take up Barnard’s by now long-forgotten call.
The third period of business ethics can be more readily be tracked through the pages of
business journals such as the Journal of Business Ethics (founded in 1982) and Ethikos
(founded in 1987). The first editions of textbooks such as those by Beauchamp and Bowie
(1979) and De George (1982) also now appeared as did the first applications of formal ethical
argument to business practice. Continuing debates concerning whether business ethics should
be taught in electives or throughout the curriculum seem to show a discipline asserting its
presence in an evermore confident manner. As Peter Singer writes in his Practical Ethics
(1979), when he was an undergraduate in philosophy, ethics seemed more a concern of
intellectual aesthetes than it was something that could be seem as practical. It is perhaps this
development that can be seen so clearly in business ethics today with its studies of ethical
decision-making, ethics codes and what precisely may constitute an ethical organisation.

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