BA 310 Module 2 Historical Perspective on Business Ethics Objectives 1 2 3 4 describe salient business ethics issues in pre capitalist America understand the ethical foundation of capitalism as argued by Adam Smith in the 1700s appreciate the delicate balance between economic growth and stakeholder rights particularly labor issues throughout U S history benchmark an organization to the Ethics Compliance Program best practices outlines by the Federal Sentencing Guidelines 5 Conceptualize how to maximize ethical behaviors in organizations based on an Optimal Ethics System Model History of Business Ethics in America American history has been defined toward the creation of a wealthy and just society Vast numbers of Americans have been left out of economic prosperity at different periods racial minorities women disabled Progress has been achieved by extending rights to an increasing number of stakeholders 3 Major Economic systems founds around the world Mercantilism economic system where foreign trade is government controlled and is paramount to the security of the country Capitalism economic system where capital assets are privately owned and goods and services are brought to market in order to make a profit Communism economic system where property and assets are commonly owned and not privately held Production of goods and services are determined by a central government 1 Economic Growth and Business Ethics in Precapitalist America i ii iii King Ferdinand of Spain to Christopher Columbus Get gold humanely if possible but at all hazards get gold In 1492 Columbus sailed west in order to get to India originally landed on the Caribbean islands enslaved thousands of indigenous people Roanoke and Jamestown Settlements other European powers competed with Spain to find riches in the new world of America In the 1580s Walter Raleigh and his business associates were granted a charter to establish a colony in the area of modern day Virginia and North Carolina to trade search for minerals and plunder Spanish merchant ships Plymouth Settlement In 1620 the Pilgrims settled a trading colony in modern day Massachusetts Pilgrims left England for religious and economic reasons In exchange for trip to America the Pilgrims had to export goods back to England Build up to the Revolutionary War By 1774 more than 2 3 million European colonists participated in highly regulated business activities Business and tax policies exacerbated anti England sentiments Currency Act restricted power of colonies to issue money Sugar Act tax on sugar Boston Tea Party protest of the Tea Act which allowed the East India Company to sell tea to only a few colonial merchants We hold these truths to be self evident that all men are created equal that they are endowed by their Creator with certain unalienable rights that among these are life liberty and the pursuit of happiness Approximately 25 000 colonists dies for these rights during the victorious Revolutionary War Declaration of Independence Freedom Rights and the Ethics of Capitalism The Bill of Rights 1791 included Freedom of speech of the press of religion to petition the government to keep and bear arms from unreasonable search and seizure No cruel or unusual punishment 1 2 Adam Smith s Capitalism Adam Smith 1723 90 a prominent member of the Scottish enlightenment applied the concepts reason and liberty to a wide range of endeavors including philosophy politics economics and law These are fundamental to modern day capitalism Two famous books read extensively by the founding fathers Theory of Moral Sentiments 1759 Individuals typically exercise free will within confines of morality Difference between self interest and selfishness A judicial system will step in when self regulating moral mechanisms fail Wealth of Nations 1776 Formed today s understanding of capitalism capitalism is morally and ethically superior to other types of economic systems Invisible hand Smith and Labor Issues Freedom and self interest play central roles in Smith s conception of capitalism Laborers benefit from capitalism because economic growth generates more jobs and they are free to choose an occupation 2 3 Economic Growth Under Capitalism Economic growth is critical to the advancement of society Over the past 200 years in the United States Life expectancy has doubled Famine has been eliminated Incredible list of technological advances that have enhanced quality of life Examples telephones trains automobiles computers internet Purchasing power increased tenfold in the 20th century The Industrial Revolution The economy boomed when the Industrial Revolution spread from Britain to the United States in the early 1800s Use of machines instead of hands more efficient Use of power allowed goods and services to moved across great distances Transportation needed for geographically large country Due to massive amounts of new products being developed there was a growth of entities and the spinning mule cotton gin sewing machines water steam coal trains cars need to regulate them corporations banks financial services industry professional managers Morgan Rockefeller Vanderbilt Carnegia Astor Late 1800s Large corporations became incredibly successful Created monopolies and incredibly wealthy families 1900s Labor Issues The federal government began to fear that such immense wealth held by such a few families Passed important laws that no one person or just a few people could have such a huge concentration of wealth Interstate Commerce Commission 1887 set reasonable railway rates Sherman Antitrust Act of 1890 outlawed monopolies growth beyond a certain extent was illegal eventually led to more competition between companies Beginning in 1900s corporations could be held legally liable for its actions which allowed those hurt by a corporation s actions to be compensated Limited Liability shareholders only responsible for the amount they invested and not the corporation s debt encouraged more people to invest in companies around the country Capitalism in the US has not been an ethical or smooth one Contrary to Adam SMith s argument many people who benefited from capitalism abused their power along the way The most significant ethical problems included slavery The worst ethical violation and worst form of labor exploitation Can be found in almost every ancient civilization Slavery in the US dates back to Columbus enslaving indigenous people during his first trip to the New World Beginning in the 1600s slaves were