The Social Significance of Business

THE SOCIAL SIGNIFICANCE OF BUSINESS

By WALLACE B. DON HAM

"The truly quaint materialism of our view of life disables us frompursuing any transaction to an end. You can make no one under-stand that his bargain is anything more than a bargain, whereas inpoint of fart it is a link in the policy of mankind, and either a goodor an evil to the world." STEVENSON

THE development, strengthening,and multiplication of sociallyminded business men is the cen-

tral problem of business. Moreover,it is one of the great problems of civili-zation, for such men can do more thanany other type to rehabilitate the ethi-cal and social forces of the communityand to create the background which isessential to a more idealistic workingphilosophy in the community. Unlessmore of our business leaders learn toexercise their powers and responsibili-ties with a definitely increased sense ofresponsibility toward other groups inthe community, unless without greatlapse of time there is through the in-itiative of such men an important so-cializing of business, our civilizationmay well head for one of its periods ofdecline. Certainly, unless such a de-velopment takes place, communityproblems arising out of business activi-ties will present great and increasingdifficulties.

The world is full of contrasts. Re-ligion is on the defensive and sadlybroken into new groupings. Sciencehas accomplished the seemingly im-possible, but notwithstanding its mar-velous results is now questioning itsmost fundamental hypotheses. Politi-cal leadership is on the wane while na-tional and international problems as-sume more vital significance. The stakeof the ordinary man in the material de-

velopments of the time is large, butthese material things have apparentlynot produced a higher degree of hap-piness. Discontent with the existingcondition of things is perhaps morewidespread than ever before in history.The nation is full of idealists, yet ourcivilization is essentially materialistic.On all sides, complicated social, politi-cal, and international questions pressfor solution, while the leaders who arecompetent to solve these problems arestrangely missing. These conditions aretransforming the world simultaneouslyfor better and for worse. They compela complete reappraisal of the signifi-cance of business in the scheme ofthings.

Every individual, unless he be an in-fant, an invalid, a moron, or a tramp,must work out a definite coordinationbetween his own economic status andhis social obligations and responsibili-ties. If he fails at either, he is a fail-ure as a member of society. He mustpay his bills; he must recognize his ob-ligations to those around him. Beforeproceeding to an analysis of the socialsignificance of business generally, let usunderstand some of the ways in whichmen attempt to correlate their individ-ual economic point of view and theirsocial responsibilities.

A constantly increasing number are

SOCIAL SIGNIFICANCE OF BUSINESS 407

harmonizing their economic and theirsocial obligations consecutively. Thelast man of this type prominently be-fore us was Mr. Munsey, who wentthrough life without much apparentsense of social responsibility until hegot ready to make his will and then didsomething of great social importance.Starting at an earlier period in life andemploying methods which are of greatsocial importance, Mr. Rockefeller andMr. Carnegie also made a consecutiveharmonization of their personal andtheir social responsibilities.

Then there is another group of men,constantly increasing in numbers, whowith their right hands practice theirbusiness in accordance with the stand-ards of the time, and with their lefthands turn themselves into constructivephilanthropists or community workers.A multitude of men of this type devotetheir energy and means after businesshours to constructive community activi-ties. The possibility of arousing them toa sense of social obligation is clearlyshown by the financial and personal sup-port given in this country to all formsof educational and philanthropic work.Both these types of individuals willcontinue to develop in numbers and willcontinue to serve community purposeswell.

Most important of all, because deal-ing with the core of our problem, is athird group, up to the present time toofew in numbers, and inclirding somemen from both the other groups. Themembers of this group are trying con-stantly, with sound appreciation of sig-nificant tendencies and far-sightedvision, to work out their own businessrelationships in ways which contributeto social progress. We need vastly moreof such men. It is this third groupvehich must develop and increase if thestresses to which the activities of scien-

tists subject our civilization are to berelieved and controlled. The socializ-ing of industry from within on ahigher ethical plane, not socialism norcommunism, not government operationnor the exercise of the police power,but rather the development from withinthe business group of effective socialcontrol of those mechanisms which havebeen placed in the hands of the racethrough all the recent extraordinaryrevolutionizing of material things, isgreatly needed. The business grouplargely controls these mechanisms andis therefore in a strategic position tosolve these problems. Our objective,therefore, should be the multiplicationof men who will handle their currentbusiness problems in socially construc-tive ways.

The social responsibility imposed onthe business man of today is a logicaloutgrowth of the developments ofscience which so largely affect not onlythe economic and material things in ourlives, but our whole attitude of mind.The law of gravitation, the laws ofthermodynamics, the hypotheses of themolecule, the atom, and later of theelectron, have solved so many prac-tical material problems and, withthe developments of astronomy andwith the evidences of evolution, havecompelled such a revision in ourconcepts of time and space that amultitude of men, including manyeven in the scientific group, have losttheir sense of social values. Notwith-standing the increasingly critical natureof our human problems, one still seescomments to the effect that these mate-rialistic assumptions of science furnishall that is needed not only to maintainand develop civilization, but to assurethe race a glorious future.

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HARVARD BUSINESS REVIEW

For many, the majesty of the con-cepts of law and order introduced intothe universe by scientists has been lostin materialism consequent upon newdefinitions of time and space, of the in-finitely great and almost infinitely small.Men have lost much of their fear, butwith it have gone hope and a sense ofresponsibility. It makes little differ-ence what may be the metaphysical orreligious background of the scientisthimself. He talks to the layman alwaysfrom the standpoint of his mechanisticworking hypotheses of invariable, nat-ural laws, and since these working hy-potheses produce such extraordinaryrevolutionary effects, the man on thestreet absorbs the whole thing as amechanistic, selfish working philosophy.

Important groups of scientists andphilosophers revolt against the implica-tion of these purely materialistic work-ing hypotheses, and recent develop-ments in scientific thought seem to de-mand a more idealistic philosophy evenin the interests of science itself. Unfor-tunately, however, the scientist's needfor a more idealistic point of view isfelt only in the more abstract ranges ofscientific thought. The men now usingthe ordinary working hypotheses, whencompared with the bulk of the commu-nity, constitute a group of extraordinaryidealism. Yet the immediate result oftheir activities has been an essentiallyselfish working philosophy. The crea-tive scientists have lost control of theconsequences of their thinking and haveplaced a heavy burden of responsibilityon other groups. This burden is theheavier because nothing in the hun-dreds of thousands of years that thehuman race has been developing pre-pares it for rapid changes in environ-ment; all the practical developments ofscientific thinking, including power, ma-chinery, and factories, railroads and

automobiles, the fast mail, the tele-graph, and wireless, have revolution-ized both our intellectual and materialenvironment within a few decades.

Our biological progress keeps itsmeasured tread while the new problemsof civilization force themselves upon uswith startling rapidity. It is not at allstrange, therefore, that the early ad-vances of the Industrial Revolutionbrought about shocking abuses of themechanism of production and distribu-tion. Fortunately for us, the abusesconnected with this development wereless serious here than in England, butcivilization one hundred years after theworst of these conditions has beenchanged is still suffering here as well asin England, and will still be sufferinga long time to come from the mistakeswhich arose from the failure of a natu-rally selfish race under the mechanisticdevelopment surrounding it, to acquireor subject itself to adequate social con-trol.

I do not wish to be understood asregretting these developments in pureand applied science nor the readjust-ments they compel; I am simply point-ing out that the marvelous accomplish-ments of the scientists have placed uponother groups heavy responsibilitieswhich must be faced immediately.These responsibilities are so seriousthat for an indefinite period in the fu-ture they call for the highest type ofleadership and, when coupled with theinternational relations to which theyare so closely related, they constitutecentral problems in the orderly evolu-tion of society.

The race must learn how to dealwith problems arising out of a rapidlychanging environment. Since thesechanges result mainly from the controlover nature through the developmentsof industry, the solution of the prob-


lems involved is to be sought in largemeasure in business phenomena. Infact, most of the new problems facingus, except the racial and non-economicproblems of international relationships,find their roots in business.

Among the many problems arisingout of the new scientific developmentsis the momentous labor problem, re-quiring for its solution far more knowl-edge and consideration for humannature and of the physiological and psy-chological bases for the actions of men.Involved in this problem is the removalof the fear of losing the job and ofunemployment, so deeply impregnatedin the mind of the laborer; the possi-bility of extending sound social pro-grams into the living conditions of menwithout either paternalism or pauperi-zation; and relief from the monotonyof routine and the restoration of prideto the workman.

We must decrease the costs of distri-bution and thereby reduce the discon-tent caused by the great difference be-tween producers' selling prices andconsumers' costs. Ways must be foundfor ironing out the business cycle, thuseliminating devastating periods of al-ternate speculation and depression, withtheir corollary contribution to unem-ployment. Certain problems of cor-porate control must be studied, to theend that the spirit of trusteeship onthe part of corporate managers may bein some cases brought about and inothers strengthened. Internationaltrade offers opportunity for study anddevelopment in ways which will reducethe possibilities of war and contributeto our ability to live with other peoples.A definite spreading of the social pointof view should serve as an incentive formen with wide business background totake an active interest in governmentalaffairs along broadly social lines, as

many lawyers formerly did, and notnarrowly because their influence uponlegislatures may result in the further-ance of their special interests.

IV

Science, the church, the law, are nottoday in a position to furnish the lead-ers for the solution of the social prob-lems arising out of these changes; suchleaders must come largely from businessitself. No one of the other groups Isin a position where its activities aredirectly related to those results ofscience which have caused discontent.The scientist, the teacher, and thechurchman may influence individualswho will be in positions of responsibil-ity, but they have no direct control overthe underlying forces. The huge eco-nomic structure which has been built upon the basis of scientific advances is inthe hands of business men, and theleadership required is the sociallyminded leadership of men who harmon-ize their selfish economic point of viewand their social objectives with strongemphasis on the side of social responsi-bility.

For the individual members of somegroups, the harmonizing of the twoelements, the one personal and eco-nomic, the other social, is a compara-tively simple matter. For example, thechurchman, the doctor, the teacher, andthe research man all make their livingout of the practice of their social obli-gations or the fulfillment of their socialopportunities. It is a relatively easymatter for a high-minded man goinginto any of these fields to sustain thebalance that on the one hand maintainshis economic standing, and on theother hand, makes his living a realsocial service. Moral issues in his ownconduct rise with comparative rareness.

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In these groups the social point of viewis well sustained, but none of these isin the position of power and responsi-bility in which the business man findshimself today. None deals directlywith the sources of our problems.

Perhaps more than most groups, thechurch has failed to keep pace withchanging conditions. Its unfortunateeffort to sustain the historic founda-tions of theological dogma against thepractically conclusive demonstration ofthe scientist has seriously limited itsreal capacity to influence the ethical,social, and idealistic sides of mankind.Competent constructive leaders in thereligious field for the most part havebeen and still are lacking. These prob-lems, therefore, have to be faced withless relative assistance from organizedreligious bodies than would have beentrue at any other period within the lastfew centuries. The church must redefinereligion itself in terms which cannot beshaken by the progress of science be-fore it can prepare others for a chang-ing environment. When this occurs, wemay hope to enlist the forces of re-ligion behind and with the constantlyincreasing group of men who withoutdefinite church affiliations have athorough, fundamental belief in thegeneral purpose of life, and are readyto cooperate for the advancement ofcivilization and the raising of ethical,social, and fundamental religious stand-ards. No such program can be workedout, however, without a thorough studyof conditions by men of real ability.

To my great personal regret as amember of the bar, it seems also clearthat we cannot expect to find theneeded leadership in the legal profes-sion. So long as the lawyer was thetrusted adviser of his community, theman to whom a large part of the com-munity turned in times of stress, the

man who at home and in the broadercommunity outlook represented histown or state; so long as such was thetypical condition of the practicinglawyer, he found it simple to correlatehis economic status and his social obli-gations. Without question, from some-where around the year 1775, when thelegal profession started in this country,the lawyer who was a real leader re-ceived his major satisfactions from hissocial function. To him, the earning ofhis livelihood was a comparatively in-cidental matter. When the lawyerceased to be advisory leader and soundcounsellor and, following the creationof large city business law firms, wentdefinitely to work as the servant of thebusiness man, mainly doing his will, helost something and the community losta great deal. We see the result in thelow state of our criminal law at thepresent time. It is inconceivable thatthe criminal law could be in its presentflabby condition if the best lawyers hadpaid attention to it. It is likewise in-conceivable that the serious delays inci-dent to the administration of justice,both civil and criminal, could continueso long if the best men were activelyworking to improve conditions. Indeed,one questions whether some of ourablest lawyers really desire to eliminatethe possibility of delay. Delays oftenform a very useful means for accom-plishing business ends.

These conditions exist in the law be-cause the men of real imagination andability in the legal profession have not,on the whole, retained their socialpoint of view or used their talents tosolve the increasingly complex problemsof our organized community. The earn-ings of individuals are in general nolonger subordinated to the opportunityfor service. The profession has be-come largely an auxiliary business


rather than a learned profession. Butin view of the close relationship nowexisting between the law and business,I am far from hopeful of any radicalcounter development unless a similar de-velopment takes place simultaneously inbusiness. As things stand today, the lawis in no position to assume leadershipin solving the problems imposed uponus by scientific developments, and evenits social consciousness is little morearoused than that of the business group.It is like business and unlike the otherprofessions mentioned, in that the har-monizing of selfish and social values ispresented in its most difficult forms.

In contrast with the earlier groupswhich I discussed—the churchman, theteacher, and the doctor—the businessman and the lawyer are constantly deal-ing with moral issues. Problems ofright and wrong arise with such con-sistent frequency that the need for care-ful thinking and high standards is espe-cially great in these fields. The moralstrain to which the young man is sub-jected in entering the church, medicine,or teaching is far less than in law orbusiness. The temptation to subordinatethe social and ethical aspects of life tomaterial success is not nearly so greatas in law or business. On the otherhand, if one realizes that all types ofservice which are open to the men inany of the other professions are alsoopen to the young men entering busi-ness, there is a tremendous challenge tomaintain youthful idealism among sur-roundings where the major problems ofthe next few generations must largelyhe solved. The business group, by acci-dent of its position in control of themechanisms of production, distribution,and finance, is in control of those re-

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suits of science from which most of ourdiscontent arises.

The social responsibility of the busi-ness man, therefore, is inescapable. Yetin one respect the business group is lessfavorably situated to solve these prob-lems than the legal group. It lacks asufficient number of broadly equippedmen; it lacks the requisite intellectualbackground and the large groups ofrigorously trained men. Our usual train-ing in business, still carried on mainlywithin industry itself, is too narrow,too much specialized in the particularconcern; it gives too few points of viewon the social importance of business.No profession can really develop whichdoes not have an intellectual contentshaped broadly by many men, and thiscondition does not yet exist in business.There are professional men of business,but business as a profession is develop-ing rather than already in existence. Itis peculiarly difficult to make the in-dividual business man understand hisopportunities and his responsibilities inharmonizing his economic and socialobligations, because there has been in-adequate analysis and inadequate state-ment of the problem.

The individual rarely understandsthe social aspects of his business re-sponsibilities. He does not knowenough about what happens in otherpeople's business, what the precedentsare, what the theoretical aspects are,and what are its social implications andits international relationships. In otherwords, business men have not attaineda basis for working out their social re-sponsibilities. It is obvious to anyserious-minded observer that while alarge number of men during the last150 years have tried to work out theirsocial obligations through business, thissegment of the business group has neverbeen large enough to destroy the gen-


eralization that husiness as a whole hasdeveloped along essentially selfish andmaterialistic lines. The vast resourcesof the country have attracted men ofimagination Into industry, hut the sizeof the opportunity and the novelty ofthe conditions have slowed down thedevelopment of an adequate intellectualbackground or social consciousness.

One thing clearly needed, therefore,is a sharper definition of the place ofhusiness in relation to such problems,and of the duties, responsibilities, andopportunities of husiness leaders. Busi-ness men busy developing a continentand husiness educators in the midst ofthe rapid development compelled hy anoverwhelming influx of students havenot yet studied sufficiently the socialaspects of husiness. As a result, manyethical situations are developing whichpresent serious dangers, and short-sighted policies continue to pile up trou-ble for the future.

These social aspects of husiness canbe carried hack into religion, into ethics.Into metaphysics; but no matter whatthe starting point is, there are certainaspects of the subject which compel abroad consideration of our social organ-ization. The particular hasis for theinvestigation, whether it he religious,ethical, humanitarian, or philosophical,is for present purposes relatively unim-portant, hut if the analysis of businessstops short of a real effort to place theimportance of husiness socially, it willinevitably fail to give a correct perspec-tive on the situation which the businessman faces.

In the past, the greatest men haveprohahly made their contribution to reli-gion, to science, or to literature and thefine arts. Great men in these fieldshave exercised a type of long-termleadership which is often infinitesimalin its immediate effects, but which is

progressively of greater importance asthe centuries go hy. The military andpolitical leaders, while infinitely morepowerful at the moment, have for thelong period exercised far less influencethan the other type of men. Yet thereare in the whole field of husiness, so faras I know, no individuals who haveexerted an influence on human thoughtcomparable to that exerted by the bestmen in any of these other groups. Thebalance should now swing to the otherside. Science in the process of remak-ing the world has created new needsand placed new values on a type of lead-ership, both current and long-time,which shall fit the world to live in itsrapidly changing environment. Sinceso many of the problems are husinessproblems, we must develop husiness menwho can cope with them. Leadershipis the primary need in the solving ofevery great problem, for important re-sults are nearly always attained throughthe work of a few men of outstandingability. The necessary husiness leadersmust be developed in part from therapidly growing group of men in hus-iness who realize the lack of satisfactioninvolved in money making per se, and inpart from men who enter husiness withdefinite social objectives. From thebusiness group great educational andphilanthropic enterprises have arisen inthe past. We now need leadership inthe direction of sound social progressexercised within husiness itself. We mustuse every available influence to restorea sounder sense of relative values. Thepossession and control of materialthings must be subordinated to a reali-zation of more enduring types of sat-isfactions which arise out of one's broadconstructive relationship to the organ-ized society of which he is a part.

If we consider the period since 1900as a unit, it must he apparent to every-


one that the forces of discontent aregrowing with a rapidity which shouldchallenge every business leader whorealizes this responsibility to build uphis intellectual background and his socialpoint of view so that he may help re-move the causes which bring this dis-content and use his control over themechanism of production and distribu-tion in such ways as to make the racehappier. It is not enough, however, toplace the responsibility of social prog-ress upon hoped-for leaders. Left atthat point, the statement of the problemdoes not define how the man on thestreet is to help and how his function isof critical importance.

If our civilization is to continue anorderly evolution toward better things,we must interest in social progressthrough industry a much greater num-ber of men with capacity for outstand-ing leadership. It is in interesting suchleaders that the job of the ordinary manlies. The type of leadership we developis mainly a question of environment,and this is largely dependent on the tri-bal point of view—on the ordinary man.In other words, if the community getsthis social point of view, if it ratherquestions mere money-making, if money-making without social standards isfrowned upon and if real social accomp-lishment is right royally esteemed, weshall get the requisite leaders. Theapproval of the tribe largely determinesthe type of leadership exercised by itsleaders. All of us have a definite chanceto use our own abilities socially, not onlyby doing things that are immediatelyabout us in socially sound ways, but byinfluencing the development of sociallysound leadership through expectingsomething more than mere money-mak-ing and through honoring sound socialaccomplishment.

The development of the needed lead-

ership within business will contributetoward the professionalization of busi-ness. With this development we mustconstantly watch out for the dangerwhich faces any profession, the tendencyto defend existing conditions by buildingdams to preserve them.

Such an attitude in the profession ofbusiness would be for the long pull defin-itely anti-social, for it would inevitablyhelp to accumulate a flood of discontentfraught with increasing dangers. Theprofession of business, to be successfulin solving its share of the social prob-lems of the next few generations, mustavoid the kind of reactionary attitudewhich strengthens the forces of discon-tent and revolution, and must seek con-stantly new ways in which it may con-tribute to a socially sound evolution.Professor Whitehead says, with ref-erence to the scientific professions, thatprofessionalism has been linked withprogress. The linking of the scientificprofessions with progress in their fieldshas brought dangers into the worldwhich require the creation of a profes-sion of business which shall link itselfwith sound social progress.

How is social control of these forcesto be attained? To secure it is not ashort job. It took the English speakingportions of the race at least two cen-turies under favorable conditions towork out effective social controls forsuch a relatively simple idea as credits,with notes, mortgages, checks, and ex-changes of one sort or another. Duringa large part of the time, that simpleidea was abused to an extent surpassedin the recent history of western civiliza-tion only by the early abuses in Englandconnected with the Industrial Revolu-tion and the development of factoriesand factory management. At the end oftwo centuries, by a process that had in-cluded almost the creation and certainly


a large part of the development of awhole system of jurisprudence, namely,our equity law and courts, society suc-ceeded in getting a high degree of work-ing control over the mechanism ofcredits. The equity courts carried outwell the major objectives of the com-munity, fixing the bounds of control ofcredits at a high level. But the legaldevelopment was not the final stage;socialization still continues to developin various ways which are beyond thescope of this body of law.

To cite one example of this trend ofthought within the field of credits, theactivities of our stock exchanges, withthe passing of millions upon millionsof values on the nod of the head, haveprogressed beyond any possible devel-opment of legal compulsion in the wayof social control. The highest socialvalues and ethical standards are at-tained after the law has done its work;through the further development thatcomes as men in particular groups learnto live under the most comfortableconditions together and with the com-munity.

The whole illustration, the fact thata simple idea could upset the daily deal-ings and almost the foundations ofjurisprudence in a community as simpleas England at that time, shows howvery difficult it is for the race to copewith radical and rapid changes in en-vironment. Yet the changes which havecome about through the work of thescientists are of far wider scope andimportance than those brought about bythe idea of credits.

For various reasons, less help canbe expected from new law created bythe courts than was obtained in solvingproblems connected with the control ofcredits.

Our community has acquired theunfortunate habit of relying upon

piecemeal legislation as a cure-all forthe problems which were formerly metby orderly evolution of common lawand equity jurisprudence. This, ofcourse, results in part from the failureof our multifarious courts to respondto community neevis and to meet ourrapidly changing conditions with suffi-cient rapidity, but it has very unfor-tunate effects. It places on our legisla-tive bodies the burden, which they areill equipped to bear, of meeting newlegal problems in ways which shall tendtoward long-time solutions instead ofimmediate expediency. More seriousstill, it furnishes on the one hand aconstant temptation to all kinds ofspecial interests to secure selfish results,and on the other, lends itself to seriousdemagogic attacks on essentially soundconditions. Broad, constructive legisla-tive treatment oi important socialproblems which arise out of the in-dustrial developments of our times ispeculiarly rare. Furthermore, the free-dom with which legislative bodies en-act laws to cover anything under thesun tends to keep the courts from ap-proaching new problems with the sameoriginality, daring, and wisdom thatcharacterized the English courts of thatearlier period. The tendency always isto leave really constructive advances tolegislatures, and the results are farfrom happy.

More reliance in the solution of ourproblems must therefore be placed onthe creation of sound intellectual, social,and ethical standards and on the devel-opment of leadership outside the courtsand the law than was formerly thecase. Both the further development ofthe common law and the specific aid oflegislation will be needed to determinethe minimum bounds of social controlunder these changing conditions, but theincreasing complexity of our commu-


nity in itself makes the legislative ap-proach at its best less effective thanformerly, and we are far from beingable to use the best legislative methods.

VII

Within business itself there are manyforces at work which tend to bringabout the desired results. One of theimportant aids, without which the taskwould probably be insuperable, is thefact that in many business problemsintelligent and far-sighted self-interestbrings socially sound conclusions. Littlein history warrants an assumption thatthe mass of men can be developed tothe point of altruism, and therefore wemust use the motive of self-interest toits maximum of sound social service.Nevertheless, the viewpoint of in-telligent self-interest will not aloneserve our purposes. Legal control ofindustry must fix from outside certainminimum standards. Intelligent self-interest can be used to justify the thug,the fly-by-night, the bank officer whouses his position to maneuver his cus-tomer into a position where he mayprofit individually from the customer'sdistress, or the creed of Shylock. Allthese must be controlled by law. Mostof the higher developments, however,must be from within. Fortunately, manyessential social objectives may be accom-plished by creating a real intellectualbackground for business, and through itan adequate appreciation of the dis-tasteful long-time results which followaction determined solely from short-timepoints of view. In the largest numberof business situations, sufficiently trainedand far-sighted self-interest will dictatethat the established business or the in-dividual who desires long-time resultsshould act in socially sound ways. Thescope of this motive is far wider in its

sound relationship to the problem of thebusiness man than in its relation to thework of the lawyer. This in itself isone of the important reasons for build-ing up the intellectual side of business,for the keener the understanding of thebusiness consequences which followupon socially unsound practices, thelarger the number of business men whowill determine their policies in sociallysound ways. We must build up the in-tellectual basis for enlightened self-interest.

In dealing with these problems, how-ever, one distinction must be kept inmind. The individual, in handling hisaffairs, can emphasize as strongly as hewill the social side of his activities, pro-vided always he maintains the respectof the community and his own self-re-spect on the economic side. When oneis dealing, however, with managers anddirectors of corporations, whose securi-ties are widely distributed, the problemis somewhat different. While no manin such position has an obligation tomake ethically and socially unsound de-cisions, neither has he the right to useother people's property in ways whichthey might or might not approve, sim-ply because he feels that quite apartfrom his business the results would besocially desirable. It is on this basisthat corporations customarily and justi-fiably refuse most charitable contribu-tions. The corporation manager, how-ever, is entirely entitled to conduct hisbusiness affairs with reference not onlyto the present but to the future, justas the trustee is always charged withconsidering both the life tenant and theremainderman. He is entitled, there-fore, to consider not only the per-manency and good standing of his insti-tution but the sound stability and devel-opment of his community. There is agrowing recognition of these facts.

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Another aspect of the situation ofcorporations is also of great importance.The big national corporation in itsnatural development inevitably tends tohigher ethical standards, to more of afeeling of trusteeship, for the commu-nity and for the employee, as well as forthe security holder. It tends in thatdirection because over a period of yearsa large organization must become rea-sonably trustworthy in its internaloperations in order to continue to dobusiness and to serve the essential pur-poses of the organization. It inevitablytends, therefore, to choose trustworthymen for its organization, and a groupof men who so conduct themselves thattheir associates can trust them will inthe long run be the type of men who aretrustworthy in dealing with their public.You do not find the Steel Corporationwatering its milk, and you never will.Moreover, the big corporation gen-erally emphasizes stability and per-manence, rather than immediate profits,with the result that its policies are con-sidered with reference to longer timeelements, thus bringing in more factorsof social significance.

This tendency is sometimes counter-acted by a certain ponderous qualitypossessed by the large units. As a col-league phrases it, one does not choosea Mogul locomotive to chase jackrab-bits. Some of the smaller companiesare always more immediately respon-sive to social changes, but the generaltendency indicated clearly exists. Thebig corporations, while slow-moving,are one of the strongest forces forsteady ethical advancement in business.They have certain dangers of dry rotand bureaucracy which at times disturbone, but we may expect that the large,well-seasoned, sound corporations willon the whole be ethically in advance oftheir times, and will lend their influ-

ence in favor of higher standards ofbusiness integrity and sounder points ofview about business.

Another internal force operating inbusiness is the development of groupethics as men in particular lines of busi-ness learn how to get along with eachother and come slowly to appreciate thebasis upon which the whole group maysuccessfully deal with the rest of thecommunity. The illustration givenabove of the stock exchanges is an ex-ample of the operation of such ethicalforces, and other examples may befound in the constantly increasing num-ber of efforts made by particular indus-tries to define codes of ethics or grouppractices.' There has been a remarkabledevelopment along this line in the past25 years, largely brought aboutthrough trade associations. Some ofthese efforts have naturally taken theform of efforts to get together at theexpense of the community and have re-sulted later in restrictive legislationoften unwise from everyone's point ofview, but notwithstanding this qualifica-tion, much is being accomplished toraise ethical standards. In a later ar-ticle I expect to discuss the basis uponwhich the ethical progress of businessmust take place.

Fill

After full allowance for these inter-nal forces, it is still unlikely in thenature of things that our great develop-ments in applied science can in any rea-sonable time be adequately balanced hyethical' forces and that social controlcan be brought to bear through the un-aided efforts of industry. External aidis essential. Strongest of the externalforces is public opinion—the pressure

' See Heermance's Codes of Ethics.


of community thought. This forceworks itself out in part through thelaw, hut for reasons stated hefore thiscannot be the sole medium. Undercurrent conditions, the law in its effortto stop objectionable practices oftencompels changes or brings about resultswhich are themselves unwise. In part,public opinion accomplishes its objec-tive through a direct response resultingfrom the widespread desire to securecommunity approval. Since the com-munity gets to a large extent whatstandards it expects from indiyidualsand groups, sound and general publicopinion may hring about a real con-tagion of health. Most of our socialstandards are made effective hy theforce of neighborhood opinion.

Unfortunately, however, while acommunity expecting much from agroup gets much, it is just as true thata community expecting little gets little.The low ethical standards of largegroups of the Jews and the Armenians,for instance, are the definite results ofcenturies of oppression. The continuedinferiority of the "poor white trash"of the South has undoubtedly resultedin large measure from the force of pub-lic opinion in making them an outcastclass. The same was true until recentlyof the merchant class in Japan, wherecontemptuous and brutal treatment hythe Samurai group inevitably resultedin shockingly low standards—a condi-tion which, I am told, is being changedwith astounding rapidity in the lastfew years through relief of this pres-sure and the simultaneous influence ofeducation in the higher commercialschools of Japan.

This country has suffered less, per-haps, than England from an attitudewhich looks down on business as a call-ing, but even here young men enterbusiness too frequently because they do

not feel competent or inclined to enterany of the so-called learned professions,rather than from a positive desire toenter upon a husiness career. Businesshas thus hecome in part a catch-all anda dumping ground into which in thecase of many families inferior sons areadvised to go. This point of viewignores wholly the intellectual, ethical,and social opportunities and responsi-bilities in this field. If puhlic opinionis to be an effective force in socializingindustry, it is important that such atti-tudes of mind be changed, hut it isequally necessary that the changeshould he discriminating, and thatapprobation should he limited to menwho secure their business success insocially sound ways.

IX

One of the most promising ap-proaches to securing a more rapid hal-ance hetween scientific developmentsand social control is through educationin our collegiate schools of husiness.Such educational work is still in theformative period, and its objectivesneed definition in ways which have abearing on this problem. Uniformly,collegiate schools of business are at-tempting to give training which will fitmen for executive work when they haveestablished themselves—they are tryingto train for leadership. They have notyet analyzed or emphasized, however,the social responsibilities of husinesssufficiently to assure that the leadershipso evolved will expend its efforts in so-cially sound ways. Three things becomethe task of such schools if they are totrain leaders who will contribute to thesolution of these problems, namely,thorough intellectual training whichwill enable the student to think hroadlyand soundly about the problems he

4l8 HARVARD BUSINESS REVIEW

must face in business; depth and per-spective on vital social problems whichwill enable him as he practices his pro-fession to think of both present andfuture with a clear conception of theirsignificance; and preparation for themoral issues which will constantly pre-sent themselves to him in practice.

All who are participating in therapid development of business educa-tion are keenly alive to the necessity ofthe first of these three—the intellectualtraining needed to handle current prob-lems with a wider knowledge of busi-ness than is now typically possessed bymen who have secured their trainingwithin industry. Much research is be-ing carried on to secure the necessarybackground for such instruction, andbusiness men are aiding this researchgenerously. While the objective is no-where attained, real progress can be re-ported. Broad study is being given tocontemporary problems.

One speaks with less assurance of thedepth and perspective with which ourproblems are considered, and conse-quently of the quality of instruction nowbeing given, on the social significance ofbusiness problems. Research into thepast has less appeal to the businessman than the study of contemporaryproblems, and funds are not so readilyavailable. Yet for the long pull the im-portance of such studies is paramount,and resources must be found to makeintensive studies of the genesis and de-velopment of business problems andthe social currents which create them orwhich they create. I am not discount-ing the work of the economic historians,but just as I believe that much economictheory will he developed hy schools ofbusiness because of the opportunitieswhich the close contacts with industryand the facts of industry afford thefaculties of these schools, so I am con-

vinced that we need economic or busi-ness historians working in the environ-ment of business faculties and writingto the business man with an intimateappreciation of his viewpoint and prob-lems. Until this is done, the instructiongiven in business schools will in this es-sential phase of the work be inadequate.

The third problem of the schools—their problem of preparing men for theethical dilemmas they must face—is oneof great difficulty. We can hardly hopeto create moral fiber. We can andshould present to the student, while hehas time for consideration free fromthe pressure of circumstances, the morecommon ethical dilemmas of business.The sound ethical standards of theyoung man are far more likely to bepreserved in later periods of stress ifthis is done.

Because of the peculiar nature of theproblem, however, reliance should notbe placed entirely upon classroom work.Personal human contacts between in-structors and students are particularlyessential, because the situation is in onerespect different from that in trainingfor any other profession. The church-man, the doctor, and the lawyer, in theirprofessional training are surrounded bythe traditions of centuries. When thestudent talks with the practitioner, hehears the accepted ethical standards ofthe profession. It is a curious illustra-tion of the lower esteem of businesscompared with the older professionsthat, when the business student talkswith the business man, the latter, insteadof putting his own ethical best foot for-ward, often becomes cynical and ratherscoffing. The young man hears theexact reverse of what a student trainingfor the other profession hears; not thebest point of view of the profession,but too frequently a more mercenary'point of view than exists in the actual


practice of the husiness man. Toooften, also, the higher point of viewwhen expressed has ahout it a certainair of smugness which proceeds fromcomplete failure to understand the sig-nificance of social movements.

In order to overcome this handicapand to hring home to the students thesocial importance of the formative pro-fession he is entering and of his ownattitude toward it, we must deal withhim first as a human being, and it willhelp greatly if we can surround himwith influences that will hring out thepermanent satisfactions in life whichthis social point of view gives. Withoutsuch a social point of view, husinesseducation misses its maximum signifi-cance. To give this requires close per-sonal contacts hetween teacher andstudent.

X

It is important that our long-timejudgment of conditions should not hetoo much affected hy the present appar-ent decline in the forces of radicalism.The shocking conditions resulting fromthe revolution in Russia, the upset con-ditions in Europe generally, a certainelement of emotional fatigue followingthe War, have combined with good

times here to ohscure, I helieve tem-porarily, fundamental conditions of realseriousness. These various forces, to-gether with the conservative influenceof widespread ownership of propertythrough the distribution of securities tolarge numbers of people, and perhapsmost important of all, the ethical andreligious revolt of the fundamentalistsagainst the sheer, cold materialismwhich to them means science, will allwork for greater or less periods of timeto hold in abeyance the forces of dis-content. But as time goes on, all theseelements may and nearly all must he-come less and less effective. The periodaf time thus offered should he used bythinking men interested in the orderlyevolution of civilization in the effort toreconstruct a working philosophy whichhas an idealistic hasis far away fromwhat Stevenson called "the truly quaintmaterialism of our view of life"; andthis time should particularly he used hythe husiness group and those interestedin husiness education in working towardmethods of doing husiness which aresound socially, as steps in the progressof civilization. Such a hasis for husi-ness must he sought through the con-stant discovery of hetter and betterways in which men may live together.

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The Social Significance of Business