Business and society

The financial crisis of 2008 has led to a new round of debate about ethics in business, the need for more regulation to prevent unscrupulous and dishonest behaviour, and the responsibility of business to society. Beyond high-profile cases like that of Bernard Madoff, or of Enron earlier in the decade, there has emerged a more general concern that a few people in high places in business have the ability, through their actions, to affect the lives of millions of others. Should they have that power, and if they do, should they be required to use that power in a more responsible manner? This is in fact just the latest chapter in an ongoing debate which has stret-

ched back quite literally to the dawn of recorded history. There has been first of all the recognition that some people – in any walk of life, not just business – will behave selfishly and dishonestly, and these must be dealt with. But prevention is better than cure, and philosophers and others have spent a great deal of time puzzling over the problem of how to make people more ethical. But there is also a much larger issue. Is business itself ethical? Are practices

such as the trading of goods or the lending of money for profit harmful to society, or good for it? On the whole, opinion has come down on the side of the latter, but with a caveat: the purpose of business is not solely to make a profit. Views like those of the economist Milton Friedman in the twentieth century, who said that the sole purpose of a business was to make money and return profits to shareholders, are in a distinct minority. The general view, including that of many businesspeople, is that businesses are part of society and have a responsibility to society. Of course, there is a divergence between theory and practice, and it is quite

possible to find examples such as Henry Ford who preached the doctrine of responsible business while treating his own workers in an autocratic and overbearing manner. Or there is John D. Rockefeller who made a large fortune in business using unethical, illegal and even violent methods, and then gave away much of that fortune to charities. One response to this is that business leaders are merely being cynical, and donations to charity are merely

a way of distracting attention from earlier offences. But that is too simple. For every Ford or Rockefeller, there are others like the American department store owners Edward Filene and John Wanamaker, or the British entrepreneur-philanthropists George Cadbury and Titus Salt who put into practice the views they espoused. We know that businesses can be socially responsible, and we know that the

majority view over time is that they should be. But a stronger argument still comes from John Davis, the American lawyer and historian who, at the turn of the nineteenth and twentieth centuries, produced a major book on the role of corporations in society (Davis 1905). We quoted from him at the head of the chapter. Business corporations, argued Davis, are products of an evolution that has occurred in society. As countries and economies grew, their needs became more complex and diverse. America had also begun to expand geographically. The small and largely localised businesses which had comprised most of the American business community before the Civil War (1861-65) were no longer capable of meeting society’s needs. America therefore had to imitate the European model and evolve its own large corporations which had sufficient scale and geographical scope to serve society. Davis had earlier written a history of the Union Pacific Railway, and had studied the practical effects this evolution. The railway system enabled the transfer of goods quickly over long distances. It provided a means of transporting food from the farms and cattle ranches of the Midwest and West to the populous cities of the East. It was therefore not just a means of making profits; it was also vitally important to American society. Davis’s argument was that forms of business are created by society. That

is, they do not simply come out of nowhere: they are responses to social needs. When a society feels a need for education, it creates schools and universities. When it feels a need for better health care, it creates hospitals and sanatoriums. And when it feels a need for more material goods and services to feed people and enhance the quality of life, it creates business corporations. But, says Davis, the reverse is also true. When society feels those corporations are not meeting its needs, it turns against them. Society destroys businesses as well as creates them. Davis was anticipating events in Russia, and later China, where revolu-

tionary governments abolished virtually all private businesses and took them under state control. But he might also have been anticipating modern examples such as the tobacco industry. Fifty years ago, despite concerns from doctors and a growing weight of medical evidence suggesting that smoking was harmful, society as a whole was supportive of the tobacco industry. Cigarettes were given out with rations to soldiers in the Second World War, and one Canadian political leader described them as ‘one of the working man’s few affordable luxuries’. Today the situation has changed, and governments in many countries, with broad popular support, are turning against the tobacco industry. Society no longer wants it.