The History of Business Ethics and Stakeholder Theory in America

TheHistory of Business Ethics and Stakeholder Theory in America

TheHistory of Business Ethics and Stakeholder Theory in America

Theresponsibility of top leadership with respect to reaching a balancebetween profits and stakeholder concerns

Thetop leadership is entrusted with a greater responsibility in ensuringthat the organization attains a balance between stakeholder concernsand profits. In particular, scholars contend that an organization hasa social responsibility in addition to its economic mission.According to Kancaid (2012), executives often find themselves in adilemma due to the mounting pressure from the investors to optimizeshort-term profitability and activists demanding that organizationsshould embrace corporate (CSR) social responsibility. In order tosatisfy both the investors and other stakeholders’ concerns, theleaders need to align both efforts of CSR and profits achievementthrough actions like philanthropy. In light of this Kancaid (2012)argues that philanthropy refers to a form of CSR involving makingfinancial contributions to certain causes. The top leadership shouldensure that it employs a strategic philanthropy rather than using itas a public relations exploit. Harrison and Wicks (2013) suggest thatthe leadership should capture the business’ value creation throughgood treatment of its key stakeholders.

Anumber of organizations have aligned their CSR efforts with theirfinancial ways. For instance, Cisco Systems established a trainingprogram called Cisco Networking Academy for training computer networkadministrators (Kancaid, 2012). Such program creates jobopportunities for high schools graduates as well as trains thegraduates to fill its possible vacancies. The company prevents thepossible bottlenecks in its growth as a result of shortages ofqualified personnel. Lockheed Martin is another company that hasaligned its short-term profit with CSR. According to Terris (2005),“ethics awareness is a mandatory exercise for every Lockheed Martinemployee” (p. 2-3). The firm has enhanced its CSR towards thecommunities by conducting charity work through individual companiesor plants. It makes monetary contributions to various programsincluding the United Way. Although its main focus is the productionof weapons, it employs business ethics by not downsizing itsemployees as often as other companies.

Developmentof business ethics in America since the late 1800s

Althoughunfair business practices have been inherent in America’s businessethics, it is widely believed that things would be better in today’sbusinesses in general. In particular, the relevant rules andregulations have been put in place to curb unfair business practices.As such, businesses are increasingly being held responsible for theiractions that violate business ethics. In addition, companies arerequired to follow the necessary rules and regulations concerning theacceptable business ethics. The various trade agreements between andamong countries can also reduce anticompetitive practices. Thesetrade agreements include the North American Free Trade Agreements(NAFTA) (Miller, 2016). Failure to adhere to such rules andregulations often attract lawsuits against the businesses in questionending up in the payment of heavy fines. As a result, companies arebecoming keener on their business ethics such that it has become aroutine for them to develop positive corporate culture. A number ofbodies including the Federal Trade Commission have been establishedto protect consumers against unfair trading practices. Furthermore,businesses are often audited by independent auditors in order toensure transparency in their public disclosures. The latestadvancement in technologies and the social media have helped inreducing business malpractices in companies. For example, anybusiness malpractice involving any public corporation can behighlighted in the media in order to demand the relevant actionsagainst the parties concerned. The social media facilitates real-timeinformation sharing among the global citizens.

Welfarecapitalism and its role as a forerunner of the contemporary businessethics movement

Welfarecapitalism is a concept that emphasizes on balancing between thecompany’s economic development and the rights of its employees. Inother words, welfare capitalism is among the probable solutions toeconomic development and employee’s rights. Basically, it refers toa business-favored policy based on the assumption that the privatesector is capable of more effectively providing social welfareprograms compared to the federal government. Unlike welfarecapitalism, the welfare state is characterized by labor unions andheavy government regulation in providing the relevant social welfarepolicies. In the United States, welfare capitalism refers to thepractice that involves companies providing welfare-like programs totheir workers. Lasen and Siegel (2007) define welfare capitalism asthe practice of combining two contrasting and disparate componentstogether to develop a new entity characterized by the combinationrather than the fusion of the two elements. It is believed thatwelfare capitalism played a key role in the establishment of thecontemporary business ethics movement. For instance, it sought forthe worker’s rights in terms of better working conditions and fairremunerations. These two aspects and deeply ingrained in thecontemporary business ethics movement. It also advocated for otherbenefits and privileges for the employees including exemption fromlayoffs and night work, pensions, and paid vacations. Welfarecapitalism acts as both a cautionary rule and an admirable model forbusiness ethics.

HowardBowen and the evolution of social responsibility of businesses

Traditionally,the issue of corporate social responsibility (CSR) was largelyfocused on the effect of the corporations’ operations on theenvironment. In this regard, the theme of environmentalism wasdominant at the start of the so-called industrial era (Terris, 2005).The environmental activists focused their attention more on theenvironment due to the negative impact of corporations on theenvironment. In addition, the traditional form of CSR was morefocused on the larger industry that on the individual corporations’actions (Terris, 2005). however, in the aftermath of World War II,CSR was more focused on individual corporations rather than on theindustrial capitalism. Accordingly, Howard R. Bowen established adetailed conception regarding the businessmen’s socialresponsibilities (Terris, 2005). Bowen’s predictions were that thesuccess of any business would not only be based on its profitabilitybut also on its contributions to the society. He further predictedthat “the acceptance of obligations to the general public,consumers, and workers is a condition for the free-enterprisesystem’s survival” (Terris, 2005, p. 41). Such predictions haveheld true since 1953 in various ways. First, we have witnessed anumber of lawsuits against companies that have violated CSR throughtheir operations. Additionally, a number of organizations have alsofocused on business ethics as a way of facilitating their employeesto embrace CSR. With regard to employees, organizations have beendeveloping and reviewing their reward management systems in order toattract and retain competent employees. In addition, organizationswith high levels of CSR are more successful that those that do notembrace CSR. In other words, CSR as becomes an instrument ofenhancing corporate image and hence organizational performance.


Harrison,J. S. &amp Wicks, A. C. (2013). Stakeholder theory, value and firmperformance. BusinessEthics Quarterly, 23(1),97-124.

Kancaid,M. (2012). Building corporate social responsibility through servantleadership. InternationalJournal of Leadership Studies, 7(2),151-171.

Lasen,J. &amp Siegel, N. A. (2007). InvestigatingWelfare State Change: The ‘dependent Variable Problem’ inComparative Analysis. NewYork: Edward Elgar Publishing.

Miller,R. L. (2016). Businesslaw Today, Standard: texts &amp Summarized Cases. NewYork: Cengage Learning.

Terris,D. (2005). Ethicsat Work: Creating Virtue at an American Corporation.Brandeis University Press. Waltham, MA.