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HISTORY OF THE DEVELOPMENT OF BUSINESS ETHICS

The development of business ethics has grown with the development of society.
The following are the five distinct stages of development of business ethics.

Before 1960: Ethics introduced in business:


The business houses were encouraged to promote "living wage" so that the workers
would have sufficient income. There were efforts to reduce the unwanted price increase.
The New Deal measures promoted the welfare measures for the population. The civil
rights were emphasized so that people could restore normal standards of living.
Until 1960 ethical issues were discussed only in philosophy and theology. The religious
leaders raised questions related to fair wages, labour practices, and the moral basis of
capitalism. The human values were given prominence at a time when material values
were given full prominence. Social ethics was taught in educational institutions. The
Protestants encouraged the individuals to work
hard, frugal and achieve success. The moral principles were extended to business and life
related issues.

1960-1970: Social issues in business:


During this period, consumers' rights were given by the then American President John F.
Kennedy.
The following are the rights of the consumers:
(a) Right for safe products.
(b) Right to be informed about products.
(c) Right to be heard.
(d) Right to choose.
(e) Right to be educated about purchase.
(f) Right to a courteous service.

The modern consumer movement was started by Ralph Nader. He wrote "Unsafe At Any
Speed" and pointed out some unethical practices of the automobile industry. He reminded
that General Motors was giving more importance to profit and style than lives and safety
of people. He fought successfully for the legislation of provision of equipments in cars
like safety belts, padded dash boards, stronger door latches and more efficient steering
columns. During this period consumer protection laws were introduced. The governments
promoted measures for economic stability, equality and social justice.

1970-1980: Business ethics an emerging area of concern:


During this period, the concept of social responsibility had become popular. Paul
Samuelson, a famous American economist advocated for the effective implementation of
social responsibility in business. He suggested that the idea of giving back to society was
based on sound moral principles. Detailed discussions were conducted throughout the
world on the importance of social responsibility. Details schemes were worked out on the
extension of social responsibility to the various stakeholders.
Political scandals across the world opened the eyes of the public on the importance of
ethics in government. The companies were interested in building public images. Many
business ethics centres were started.
A lot of research was undertaken on issues related to business ethics.

1980-90: Period of consolidation:


Business ethics had become a field of study. Business ethics organisations increased in
large numbers. Many courses were offered in many colleges and universities on business
ethics. Ethics committees were constituted in many corporations.
Many developing countries like India also initiated a number of steps for the promotion
of ethical activities. Ethics committees were constituted and the roles of CEOswere
redefined. Customers were given top priority. Honest handling of crises was advocated.
Ethical programmes were implemented to establish, communicate and monitor ethical
values. Ethics had become the common concern of all employees.

1990 - modern times: Globalisation of ethics:


Since 1990s the concept of globalisation has become very popular. Social concerns like
child labour, teenage smoking, health hazards and unfair practices in trade are given a lot
of importance. The concept of corporate culture is defined as a set of values, beliefs,
goals, norms and ways of solving the problems of people. Ethical dimensions are being
discussed with all the stakeholders. The American Express has shown some innovative
methods of helping the customers while traveling overseas. The employees learn that
they can take some risks in helping customers is a new dimension.
The failure and collapse of big corporations like Enron, World Com and Global Crossing
has created a warning to many corporations.
As a result of public outrage over the accounting scandals, the Sarbanes - Oxley Act was
passed in the U.S.A.

The major provisions of the Sarbanes - Oxley Act are:


I. The establishment of a Public Accounting oversight Board in charge of regulations
administered by the Securities and Exchange Commission.
II. CEOsand CFOsto certify their companies' financial statements.
III. Effective audit committee.
IV. Code of ethics for all.
V. Auditing and consulting should be done by separate bodies.
VI. Wrong doing of top managers should be reported to the Board of Directors.
VII. Whistle blowers should be protected.
VIII. Ten year penalty for mail or wire fraud.

This act has given greater accountability to top managers and board of directors. It has
renewed investor confidence. It has protected the employees.

Questions Sections 'B'


1) Discussthe growth of business ethics. 2) Examine the provisions of the Sarbanes -
Oxley Act.
Section 'c'
1) Analyse the development of business ethics and point out the importance of business
ethics in modern times.