Historical Developments in Business Ethics

Business ethics have become more important over time in the corporate world. The Ethics and Compliance Initiative (ECI), a nonprofit organization working to be a catalyst in fostering ethical practices, has developed a timeline that highlights important developments in the field over the past 50 years.

1960sEthical Climate
Social unrest. Anti-war sentiment. Employees have an adversarial relationship with management. Values shift away from loyalty to an employer to loyalty to ideals. Old values are cast aside.
Major Ethical Dilemmas
– Environmental issues
– Increased employee-employer tension
– Civil rights issues dominate
– Honesty
– The work ethic changes
– Drug use escalates
Business Ethics Developments
– Companies begin establishing codes of conduct and values statements
– Birth of social responsibility movement
– Corporations address ethics issues through legal or personnel departments
1970sEthical Climate
Defense contractors and other major industries riddled by scandal. The economy suffers through a recession. Unemployment escalates. There are heightened environmental concerns. The public pushes to make businesses accountable for ethical shortcomings.
Major Ethical Dilemmas
– Employee militancy (employee vs. management mentality)
– Human rights issues surface (forced labor, substandard wages, unsafe practices)
– Some firms choose to cover up rather than correct dilemmas
Business Ethics Developments
– ERC founded (1977)
– Compliance with laws highlighted
– Foreign Corrupt Practices Act passed in 1977
– Values movement begins to move ethics from compliance orientation to being “values centered”
1980sEthical Climate
The social contract between employers and employees is redefined. Defense contractors are required to conform to stringent rules. Corporations downsize and employees’ attitudes about loyalty to the employer are eroded. Health care ethics emphasized.
Major Ethical Dilemmas
– Bribes and illegal contracting practices
– Influence peddling
– Deceptive advertising
– Financial fraud (savings and loan scandal)Transparency issues arise
Business Ethics Developments
– ERC develops the U.S. Code of Ethics for Government Service (1980)
– ERC forms first business ethics office at General Dynamics (1985)
– Defense Industry Initiative established (1986)
– Some companies create ombudsman positions in addition to ethics officer roles
– False Claims Act (government contracting)
1990sEthical Climate
Global expansion brings new ethical challenges. There are major concerns about child labor, facilitation payments (bribes), and environmental issues. The emergence of the internet challenges cultural borders. What was forbidden becomes common.
Major Ethical Dilemmas
– Unsafe work practices in developing countries
– Increased corporate liability for personal damage (cigarette companies, Dow Chemical, etc.)
– Financial mismanagement and fraud
Business Ethics Developments
– Federal Sentencing Guidelines for Organizations (1991)Class action lawsuits
– Global Sullivan Principles (1999)
In re Caremark (Delaware Chancery Court ruling on Board responsibility for ethics)
– IGs requiring voluntary disclosure
– ERC establishes international business ethics centers
– Royal Dutch Shell International begins issuing annual reports on their ethical performance
2000sEthical Climate
Unprecedented economic growth is followed by financial failures. Ethics issues destroy some high-profile firms. Personal data is collected and sold openly. Hackers and data thieves plague businesses and government agencies. Acts of terror and aggression occur internationally.
Major Ethical Dilemmas
– Cybercrime
– Privacy issues (data mining)
– Financial mismanagement
– International corruption
– Loss of privacy—employees vs. employers
– Intellectual property theft
– The role of business in promoting sustainable development
Business Ethics Developments
– Business regulations mandate stronger ethical safeguards (Federal Sentencing Guidelines for Organizations; Sarbanes-Oxley Act of 2002)
– Anticorruption efforts grow.
– Stronger emphasis on Corporate Social Responsibility (CSR) and Integrity Management
– OECD Convention on Bribery (1997-2000)
– UN Convention Against Corruption (2003); UN Global Compact adopts 10th principle against corruption (2004)
– Revised Federal Sentencing Guidelines for Organizations (2004)
– Increased emphasis on evaluating ethics program effectiveness
2010sEthical Climate
Increasing distrust and cynicism of corporate America. Occupy Wall Street and growing frustration over income inequality and pay gaps between C-suite and rank-and-file workers. Unprecedented level of workplace diversity. Higher expectations for transparency from companies and corporate leaders. Millennials, largest work cohort in history, are savvy about and connected to technology and social networks; less tied to a particular employee or career paths; more comfortable with diversity and with ethical ambiguities. High-profile revelations of sexual harassment and misconduct lead to downfall of several CEOs and celebrities.
Major Ethical Dilemmas
– Appropriate use of big data.
– Social media and networking as agents of positive change and new areas of vulnerability
– Tension between increasing transparency and loss of privacy
– Identifying common standards and values in an increasingly diverse workplaces
– Responsible use of technology and social media in the workplace
– Facilitating productive relationships in multigenerational workplaces
– Responsibility to shareholders and responsibility to larger society
– Best strategies for hiring and retaining talented employees in increasingly fluid labor market
– Extent to which business should be responsible for environmental sustainability
– Developing appropriate policies against sexual harassment in response to the #MeToo movement
Business Ethics Developments
– OECD issues Good Practices Guidance for anti-bribery compliance programs
– Passage of Dodd-Frank Wall Street Reform and Consumer Protection Act
– State laws limiting use of nondisclosure agreements in sexual harassment cases

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Review Checkpoint

To test your understanding of the content presented.

1. According to the Ethical Timeline, in which decade did child labor and unsafe working conditions in developing countries attract attention?Choose only one answer below.

a. 1970s

b. 1980s

c. 1990s

Correct. The answer is C. The global expansion of the 1990s resulted in new ethical challenges such as child labor and unsafe work practice in developing countries.

d. 2000s

2. Which of the following was first established in the 2000s?Choose only one answer below.

a. Foreign Corrupt Practices Act

b. Federal Sentencing Guidelines for Organizations

c. False Claims Act

d. Sarbanes-Oxley Act

Correct. The answer is D. The Sarbanes-Oxley Act passed in 2002.

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