- The evolution of business ethics
- Business ethics prior to 1960
- The 1960s through the 1990s
- The 21st century of business ethics


[SLIDE 1]

The study of business ethics has gone through five distinct stages including the period prior to 1960, the 1960s, the 1970s, the 1980s, and the 1990s.

The study of business ethics continues to evolve. As new technologies emerge, new ethical issues are sure to arise that will need to be addressed with legislation and self-regulation. 


[SLIDE 2]

Prior to 1960, the U.S. went through several phases where capitalism was questioned. In the 1920s, a political movement attempted to ensure that all Americans earned a living wage. Businesses were also strongly encouraged not to raise prices or do anything that might hurt the poor and working class.

In the 1930s, the government of the era blamed businesses for the poor economy and asked them to work with the government to improve people's financial situations. Under the Franklin D. Roosevelt administration, the New Deal was passed between 1933 and 1936, which was a series of programs, regulations, financial reforms, and public work projects intended to help the country recover from the Great Depression.

The first book on business ethics was published in 1937. It was authored by Frank Chapman Sharp and Philip G. Fox and was titled "Business Ethics." The book discusses business ethics from the perspective of economic theory and moral philosophy. It is divided into four sections including fair service, fair treatment of competitors, fair price, and moral progress in the business world.


[SLIDE 3]

The Fair Deal was proposed by President Truman in 1949 and included universal healthcare, adjustments to welfare, minimum wage increases, and other economic development and social welfare programs. The Fair Deal defined economic, civil rights, and environmental matters as ethical issues that businesses needed to address.

Prior to 1960, business ethics was rarely discussed. Ethical issues in business were primarily debated by religious leaders who advocated for improvements in living wages, working conditions, and other economic issues.


[SLIDE 4]

During the 1960s, there was a general anti-business sentiment and social issues became a concern. Many believed that the economy and politics were controlled by vested interests and that the system was rigged against the poor and working class.

Pollution was another major concern. Smog in large metro areas was a growing health concern, and many were concerned about how to properly dispose of nuclear waste.

Consumerism is the advocacy of consumer rights. The consumerism movement started in 1965 when Ralph Nader published "Unsafe at Any Speed," which criticized the automobile industry for lapses on safety issues.


[SLIDE 5]

The Consumers' Bill of Rights, which was proposed by President Kennedy in 1962, included the right to safety, the right to be informed, the right to choose, and the right to be heard. The Consumers' Bill of Rights was later expanded to become the United Nations Guidelines for Consumer Protection.

President Johnson's Great Society, a series of domestic programs intended to completely eliminate poverty and racial injustice, was launched in 1964 to 1965. The message to the business community of the era was that it was up to the government to provide social justice, equality, and economic stability for all citizens.


[SLIDE 6]

During the 1970s, business ethics began to develop into a new field of study. Using the foundation laid by philosophers and theologians, academics began to teach and conduct research into corporate social responsibility. This was an emerging field of study that focused on how organizations could make decisions that had a positive impact on stakeholders and minimized anything negative.

Many companies started to become more concerned about their public image. They realized that they had a responsibility to address ethical issues and that any negative publicity could hurt sales. If a company's image became tarnished, it could take many years for it to recover.

Between the years of 1972 to 1974, Watergate became a major political scandal. The scandal involved a break-in at the Democratic National Headquarters in Washington, D.C. and President Nixon's attempt to cover up his involvement. The importance of ethics in government became a public concern because of this scandal.


[SLIDE 7]

As public concern for ethics in business and government rose, conferences were held for the first time where business ethics issues were discussed and debated.

During President Carter's administration, the Foreign Corrupt Practices Act was passed in 1977, which made it illegal for any U.S. business to bribe government officials in other countries. The Foreign Corrupt Practices Act is currently one of the highest priorities of the U.S. Department of Justice.

Several important ethical issues emerged during the 1970s including product safety, ecology, bribery, price collusion, and deceptive advertising. Business ethics was no longer a subject that was only discussed by religious leaders and philosophers. Society now realized that businesses had a responsibility to address ethical issues. As a result, the term "business ethics" became common. Ethical issues became a priority to businesses and their stakeholders and great efforts were made to address issues before they could negatively impact public image.


[SLIDE 8]

Business ethics became a recognized field of study in the 1980s. Businesses now acknowledged business ethics as a corporate responsibility, and academics now acknowledged it as a legitimate field of study. Centers for business ethics were established to educate the public on ethics, hold conferences, and promote it.

R. Edward Freeman was one of the first to propose the involvement of stakeholders in business ethics decisions. Freeman's definition of stakeholders included "any group or individual who can affect or is affected by the achievement of the organization's objectives." His theory greatly impacted how businesses viewed their ethical responsibilities.


[SLIDE 9]

The Defense Industry Initiative on Business Ethics and Conduct was established in 1986 to guide corporate support for ethical conduct. The organization started with 18 defense contractors and has since grown to nearly 50 members.

During the Reagan administration, many trade barriers and tariffs were lifted and many regulations were eliminated. Self-regulation was deemed preferable to government regulation. This resulted in many companies merging to become more competitive in the global market. Due to the deregulation, the rules of business were changing very quickly.


[SLIDE 10]

During the 1990s, the Clinton administration continued the previous administration's policies of free trade and self-regulation with the exception of some public health issues. With the goal of addressing the issue of teenage smoking, the Clinton administration placed restrictions on cigarette advertising, ended the use of cigarette manufacturer logos in sports events, and banned cigarette vending machines.

Congress passed the Federal Sentencing Guidelines for Organizations in 1991. These guidelines were based on the principles of the Defense Industry Initiative on Business Ethics and Conduct, which rewarded organizations for taking preventive action against misconduct.


[SLIDE 11]

In the early 2000s, new corporate scandals involving ethical misconduct emerged. Several corporate giants, including WorldCom, Enron, Arthur Andersen, and Halliburton, were affected. The new scandals resulted in renewed efforts to address ethical issues.

Congress passed the Sarbanes-Oxley Act in 2002 in response to the public's loss of confidence in financial reporting and to improve ethical standards in business. The Sarbanes-Oxley Act was a major change in accounting regulations. It was the most far-reaching change since the Securities and Exchange Act of 1934. Sarbanes-Oxley criminalized securities fraud and also increased penalties for corporate fraud. The law also established an accounting oversight board for corporations. The board now requires corporations to establish and use codes of ethics for their financial reporting and to increase financial transparency. Sarbanes-Oxley also requires corporate executives to personally sign off on their organization's financial reports. Signing off on fraudulent reports could result in lengthy prison sentences. Sarbanes-Oxley also prohibits the practice of companies loaning money to management. Finally, it also requires company executives to immediately disclose stock sales.

The Federal Sentencing Guidelines for Organizations was amended to require that a company's board of directors be fully informed of all aspects of its ethics program including its content, implementation, and effectiveness.


[SLIDE 12]

The world economy was plunged into the Great Recession in 2008. The Great Recession was caused by the systemic use of risky financial instruments like credit default swaps, subprime lending, and corporate corruption by financial institutions. Consequently, many large firms collapsed including Lehman Brothers, AIG, Countrywide Financial, and Merrill Lynch.

The Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in direct response to the economic meltdown that caused the Great Recession. Like Sarbanes-Oxley that preceded it, Dodd-Frank was also a major piece of financial legislation. The purpose of the law was to increase ethics and responsibility in the financial services industry. The Dodd-Frank Act resulted in the creation of hundreds of new rules to improve accountability and transparency, promote financial stability, and to protect consumers from certain financial practices.

New issues in business ethics continue to emerge. One of those issues is the collection and sale of personal information. Many companies now collect data on people who use their websites. That data is then used to target consumers with ads the company believes will be of interest to them. The data is also being sold to other companies. Information is collected when you use social media platforms, smartphones tell companies where you are located at any given time, and some companies are now asking for passwords to social media accounts before making hiring decisions. All of these are new ethical issues that must be addressed.