T H E SOCIAL SIGNIFICANCE OF BUSINESS

By WALLACE B. DON HAM

"The truly quaint materialism of our view of life disables us from
pursuing any transaction to an end. You can make no one understand that his bargain is anything more than a bargain, whereas in
point of fart it is a link in the policy of mankind, and either a good
or an evil to the world."
STEVENSON

HE development, strengthening,
and multiplication of socially
minded business men is the central problem of business. Moreover,
it is one of the great problems of civilization, for such men can do more than
any other type to rehabilitate the ethical and social forces of the community
and to create the background which is
essential to a more idealistic working
philosophy in the community. Unless
more of our business leaders learn to
exercise their powers and responsibilities with a definitely increased sense of
responsibility toward other groups in
the community, unless without great
lapse of time there is through the initiative of such men an important socializing of business, our civilization
may well head for one of its periods of
decline. Certainly, unless such a development takes place, community
problems arising out of business activities will present great and increasing
difficulties.
The world is full of contrasts. Religion is on the defensive and sadly
broken into new groupings. Science
has accomplished the seemingly impossible, but notwithstanding its marvelous results is now questioning its
most fundamental hypotheses. Political leadership is on the wane while national and international problems assume more vital significance. The stake
of the ordinary man in the material de-

velopments of the time is large, but

these material things have apparently
not produced a higher degree of happiness. Discontent with the existing
condition of things is perhaps more
widespread than ever before in history.
The nation is full of idealists, yet our
civilization is essentially materialistic.
On all sides, complicated social, political, and international questions press
for solution, while the leaders who are
competent to solve these problems are
strangely missing. These conditions are
transforming the world simultaneously
for better and for worse. They compel
a complete reappraisal of the significance of business in the scheme of
things.
Every individual, unless he be an infant, an invalid, a moron, or a tramp,
must work out a definite coordination
between his own economic status and
his social obligations and responsibilities. If he fails at either, he is a failure as a member of society. He must
pay his bills; he must recognize his obligations to those around him. Before
proceeding to an analysis of the social
significance of business generally, let us
understand some of the ways in which
men attempt to correlate their individual economic point of view and their
social responsibilities.
A constantly increasing number are

SOCIAL SIGNIFICANCE OF BUSINESS

harmonizing their economic and their
social obligations consecutively. The
last man of this type prominently before us was Mr. Munsey, who went
through life without much apparent
sense of social responsibility until he
got ready to make his will and then did
something of great social importance.
Starting at an earlier period in life and
employing methods which are of great
social importance, Mr. Rockefeller and
Mr. Carnegie also made a consecutive
harmonization of their personal and
their social responsibilities.
Then there is another group of men,
constantly increasing in numbers, who
with their right hands practice their
business in accordance with the standards of the time, and with their left
hands turn themselves into constructive
philanthropists or community workers.
A multitude of men of this type devote
their energy and means after business
hours to constructive community activities. The possibility of arousing them to
a sense of social obligation is clearly
shown by the financial and personal support given in this country to all forms
of educational and philanthropic work.
Both these types of individuals will
continue to develop in numbers and will
continue to serve community purposes
well.
Most important of all, because dealing with the core of our problem, is a
third group, up to the present time too
few in numbers, and inclirding some
men from both the other groups. The
members of this group are trying constantly, with sound appreciation of significant tendencies and far-sighted
vision, to work out their own business
relationships in ways which contribute
to social progress. We need vastly more
of such men. It is this third group
vehich must develop and increase if the
stresses to which the activities of scien2 7

407

tists subject our civilization are to be

relieved and controlled. The socializing of industry from within on a
higher ethical plane, not socialism nor
communism, not government operation
nor the exercise of the police power,
but rather the development from within
the business group of effective social
control of those mechanisms which have
been placed in the hands of the race
through all the recent extraordinary
revolutionizing of material things, is
greatly needed. The business group
largely controls these mechanisms and
is therefore in a strategic position to
solve these problems. Our objective,
therefore, should be the multiplication
of men who will handle their current
business problems in socially constructive ways.

The social responsibility imposed on

the business man of today is a logical
outgrowth of the developments of
science which so largely affect not only
the economic and material things in our
lives, but our whole attitude of mind.
The law of gravitation, the laws of
thermodynamics, the hypotheses of the
molecule, the atom, and later of the
electron, have solved so many practical material problems and, with
the developments of astronomy and
with the evidences of evolution, have
compelled such a revision in our
concepts of time and space that a
multitude of men, including many
even in the scientific group, have lost
their sense of social values. Notwithstanding the increasingly critical nature
of our human problems, one still sees
comments to the effect that these materialistic assumptions of science furnish
all that is needed not only to maintain
and develop civilization, but to assure
the race a glorious future.

HARVARD BUSINESS REVIEW

For many, the majesty of the concepts of law and order introduced into
the universe by scientists has been lost
in materialism consequent upon new
definitions of time and space, of the infinitely great and almost infinitely small.
Men have lost much of their fear, but
with it have gone hope and a sense of
responsibility. It makes little difference what may be the metaphysical or
religious background of the scientist
himself. He talks to the layman always
from the standpoint of his mechanistic
working hypotheses of invariable, natural laws, and since these working hypotheses produce such extraordinary
revolutionary effects, the man on the
street absorbs the whole thing as a
mechanistic, selfish working philosophy.
Important groups of scientists and
philosophers revolt against the implication of these purely materialistic working hypotheses, and recent developments in scientific thought seem to demand a more idealistic philosophy even
in the interests of science itself. Unfortunately, however, the scientist's need
for a more idealistic point of view is
felt only in the more abstract ranges of
scientific thought. The men now using
the ordinary working hypotheses, when
compared with the bulk of the community, constitute a group of extraordinary
idealism. Yet the immediate result of
their activities has been an essentially
selfish working philosophy. The creative scientists have lost control of the
consequences of their thinking and have
placed a heavy burden of responsibility
on other groups. This burden is the
heavier because nothing in the hundreds of thousands of years that the
human race has been developing prepares it for rapid changes in environment; all the practical developments of
scientific thinking, including power, machinery, and factories, railroads and

automobiles, the fast mail, the telegraph, and wireless, have revolutionized both our intellectual and material
environment within a few decades.
Our biological progress keeps its
measured tread while the new problems
of civilization force themselves upon us
with startling rapidity. It is not at all
strange, therefore, that the early advances of the Industrial Revolution
brought about shocking abuses of the
mechanism of production and distribution. Fortunately for us, the abuses
connected with this development were
less serious here than in England, but
civilization one hundred years after the
worst of these conditions has been
changed is still suffering here as well as
in England, and will still be suffering
a long time to come from the mistakes
which arose from the failure of a naturally selfish race under the mechanistic
development surrounding it, to acquire
or subject itself to adequate social control.
I do not wish to be understood as
regretting these developments in pure
and applied science nor the readjustments they compel; I am simply pointing out that the marvelous accomplishments of the scientists have placed upon
other groups heavy responsibilities
which must be faced immediately.
These responsibilities are so serious
that for an indefinite period in the future they call for the highest type of
leadership and, when coupled with the
international relations to which they
are so closely related, they constitute
central problems in the orderly evolution of society.
The race must learn how to deal
with problems arising out of a rapidly
changing environment. Since these
changes result mainly from the control
over nature through the developments
of industry, the solution of the prob-

SOCIAL SIGNIFICANCE OF BUSINESS

lems involved is to be sought in large
measure in business phenomena. In
fact, most of the new problems facing
us, except the racial and non-economic
problems of international relationships,
find their roots in business.
Among the many problems arising
out of the new scientific developments
is the momentous labor problem, requiring for its solution far more knowledge and consideration for human
nature and of the physiological and psychological bases for the actions of men.
Involved in this problem is the removal
of the fear of losing the job and of
unemployment, so deeply impregnated
in the mind of the laborer; the possibility of extending sound social programs into the living conditions of men
without either paternalism or pauperization; and relief from the monotony
of routine and the restoration of pride
to the workman.
We must decrease the costs of distribution and thereby reduce the discontent caused by the great difference between producers' selling prices and
consumers' costs. Ways must be found
for ironing out the business cycle, thus
eliminating devastating periods of alternate speculation and depression, with
their corollary contribution to unemployment. Certain problems of corporate control must be studied, to the
end that the spirit of trusteeship on
the part of corporate managers may be
in some cases brought about and in
others strengthened.
International
trade offers opportunity for study and
development in ways which will reduce
the possibilities of war and contribute
to our ability to live with other peoples.
A definite spreading of the social point
of view should serve as an incentive for
men with wide business background to
take an active interest in governmental
affairs along broadly social lines, as

409

many lawyers formerly did, and not

narrowly because their influence upon
legislatures may result in the furtherance of their special interests.
IV
Science, the church, the law, are not
today in a position to furnish the leaders for the solution of the social problems arising out of these changes; such
leaders must come largely from business
itself. No one of the other groups Is
in a position where its activities are
directly related to those results of
science which have caused discontent.
The scientist, the teacher, and the
churchman may influence individuals
who will be in positions of responsibility, but they have no direct control over
the underlying forces. The huge economic structure which has been built up
on the basis of scientific advances is in
the hands of business men, and the
leadership required is the socially
minded leadership of men who harmonize their selfish economic point of view
and their social objectives with strong
emphasis on the side of social responsibility.
For the individual members of some
groups, the harmonizing of the two
elements, the one personal and economic, the other social, is a comparatively simple matter. For example, the
churchman, the doctor, the teacher, and
the research man all make their living
out of the practice of their social obligations or the fulfillment of their social
opportunities. It is a relatively easy
matter for a high-minded man going
into any of these fields to sustain the
balance that on the one hand maintains
his economic standing, and on the
other hand, makes his living a real
social service. Moral issues in his own
conduct rise with comparative rareness.

410

HARVARD BUSINESS REVIEW

In these groups the social point of view

is well sustained, but none of these is
in the position of power and responsibility in which the business man finds
himself today. None deals directly
with the sources of our problems.
Perhaps more than most groups, the
church has failed to keep pace with
changing conditions. Its unfortunate
effort to sustain the historic foundations of theological dogma against the
practically conclusive demonstration of
the scientist has seriously limited its
real capacity to influence the ethical,
social, and idealistic sides of mankind.
Competent constructive leaders in the
religious field for the most part have
been and still are lacking. These problems, therefore, have to be faced with
less relative assistance from organized
religious bodies than would have been
true at any other period within the last
few centuries. The church must redefine
religion itself in terms which cannot be
shaken by the progress of science before it can prepare others for a changing environment. When this occurs, we
may hope to enlist the forces of religion behind and with the constantly
increasing group of men who without
definite church affiliations have a
thorough, fundamental belief in the
general purpose of life, and are ready
to cooperate for the advancement of
civilization and the raising of ethical,
social, and fundamental religious standards. No such program can be worked
out, however, without a thorough study
of conditions by men of real ability.

man who at home and in the broader

community outlook represented his
town or state; so long as such was the
typical condition of the practicing
lawyer, he found it simple to correlate
his economic status and his social obligations. Without question, from somewhere around the year 1775, when the
legal profession started in this country,
the lawyer who was a real leader received his major satisfactions from his
social function. To him, the earning of
his livelihood was a comparatively incidental matter. When the lawyer
ceased to be advisory leader and sound
counsellor and, following the creation
of large city business law firms, went
definitely to work as the servant of the
business man, mainly doing his will, he
lost something and the community lost
a great deal. We see the result in the
low state of our criminal law at the
present time. It is inconceivable that
the criminal law could be in its present
flabby condition if the best lawyers had
paid attention to it. It is likewise inconceivable that the serious delays incident to the administration of justice,
both civil and criminal, could continue
so long if the best men were actively
working to improve conditions. Indeed,
one questions whether some of our
ablest lawyers really desire to eliminate
the possibility of delay. Delays often
form a very useful means for accomplishing business ends.

These conditions exist in the law because the men of real imagination and
ability in the legal profession have not,
To my great personal regret as a on the whole, retained their social
member of the bar, it seems also clear point of view or used their talents to
that we cannot expect to find the solve the increasingly complex problems
needed leadership in the legal profes- of our organized community. The earnsion. So long as the lawyer was the ings of individuals are in general no
trusted adviser of his community, the longer subordinated to the opportunity
man to whom a large part of the com- for service. The profession has bemunity turned in times of stress, the come largely an auxiliary business

SOCIAL SIGNIFICANCE OF BUSINESS

rather than a learned profession. But
in view of the close relationship now
existing between the law and business,
I am far from hopeful of any radical
counter development unless a similar development takes place simultaneously in
business. As things stand today, the law
is in no position to assume leadership
in solving the problems imposed upon
us by scientific developments, and even
its social consciousness is little more
aroused than that of the business group.
It is like business and unlike the other
professions mentioned, in that the harmonizing of selfish and social values is
presented in its most difficult forms.

In contrast with the earlier groups

which I discussedthe churchman, the
teacher, and the doctorthe business
man and the lawyer are constantly dealing with moral issues. Problems of
right and wrong arise with such consistent frequency that the need for careful thinking and high standards is especially great in these fields. The moral
strain to which the young man is subjected in entering the church, medicine,
or teaching is far less than in law or
business. The temptation to subordinate
the social and ethical aspects of life to
material success is not nearly so great
as in law or business. On the other
hand, if one realizes that all types of
service which are open to the men in
any of the other professions are also
open to the young men entering business, there is a tremendous challenge to
maintain youthful idealism among surroundings where the major problems of
the next few generations must largely
he solved. The business group, by accident of its position in control of the
mechanisms of production, distribution,
and finance, is in control of those re2

7*

411

suits of science from which most of our

discontent arises.
The social responsibility of the business man, therefore, is inescapable. Yet
in one respect the business group is less
favorably situated to solve these problems than the legal group. It lacks a
sufficient number of broadly equipped
men; it lacks the requisite intellectual
background and the large groups of
rigorously trained men. Our usual training in business, still carried on mainly
within industry itself, is too narrow,
too much specialized in the particular
concern; it gives too few points of view
on the social importance of business.
No profession can really develop which
does not have an intellectual content
shaped broadly by many men, and this
condition does not yet exist in business.
There are professional men of business,
but business as a profession is developing rather than already in existence. It
is peculiarly difficult to make the individual business man understand his
opportunities and his responsibilities in
harmonizing his economic and social
obligations, because there has been inadequate analysis and inadequate statement of the problem.
The individual rarely understands
the social aspects of his business responsibilities.
He does not know
enough about what happens in other
people's business, what the precedents
are, what the theoretical aspects are,
and what are its social implications and
its international relationships. In other
words, business men have not attained
a basis for working out their social responsibilities. It is obvious to any
serious-minded observer that while a
large number of men during the last
150 years have tried to work out their
social obligations through business, this
segment of the business group has never
been large enough to destroy the gen-

412

HARVARD BUSINESS REVIEW

eralization that husiness as a whole has

developed along essentially selfish and
materialistic lines. The vast resources
of the country have attracted men of
imagination Into industry, hut the size
of the opportunity and the novelty of
the conditions have slowed down the
development of an adequate intellectual
background or social consciousness.
One thing clearly needed, therefore,
is a sharper definition of the place of
husiness in relation to such problems,
and of the duties, responsibilities, and
opportunities of husiness leaders. Business men busy developing a continent
and husiness educators in the midst of
the rapid development compelled hy an
overwhelming influx of students have
not yet studied sufficiently the social
aspects of husiness. As a result, many
ethical situations are developing which
present serious dangers, and shortsighted policies continue to pile up trouble for the future.
These social aspects of husiness can
be carried hack into religion, into ethics.
Into metaphysics; but no matter what
the starting point is, there are certain
aspects of the subject which compel a
broad consideration of our social organization. The particular hasis for the
investigation, whether it he religious,
ethical, humanitarian, or philosophical,
is for present purposes relatively unimportant, hut if the analysis of business
stops short of a real effort to place the
importance of husiness socially, it will
inevitably fail to give a correct perspective on the situation which the business
man faces.
In the past, the greatest men have
prohahly made their contribution to religion, to science, or to literature and the
fine arts. Great men in these fields
have exercised a type of long-term
leadership which is often infinitesimal
in its immediate effects, but which is

progressively of greater importance as

the centuries go hy. The military and
political leaders, while infinitely more
powerful at the moment, have for the
long period exercised far less influence
than the other type of men. Yet there
are in the whole field of husiness, so far
as I know, no individuals who have
exerted an influence on human thought
comparable to that exerted by the best
men in any of these other groups. The
balance should now swing to the other
side. Science in the process of remaking the world has created new needs
and placed new values on a type of leadership, both current and long-time,
which shall fit the world to live in its
rapidly changing environment. Since
so many of the problems are husiness
problems, we must develop husiness men
who can cope with them. Leadership
is the primary need in the solving of
every great problem, for important results are nearly always attained through
the work of a few men of outstanding
ability. The necessary husiness leaders
must be developed in part from the
rapidly growing group of men in husiness who realize the lack of satisfaction
involved in money making per se, and in
part from men who enter husiness with
definite social objectives. From the
business group great educational and
philanthropic enterprises have arisen in
the past. We now need leadership in
the direction of sound social progress
exercised within husiness itself. We must
use every available influence to restore
a sounder sense of relative values. The
possession and control of material
things must be subordinated to a realization of more enduring types of satisfactions which arise out of one's broad
constructive relationship to the organized society of which he is a part.
If we consider the period since 1900
as a unit, it must he apparent to every-

SOCIAL SIGNIFICANCE OF BUSINESS

one that the forces of discontent are
growing with a rapidity which should
challenge every business leader who
realizes this responsibility to build up
his intellectual background and his social
point of view so that he may help remove the causes which bring this discontent and use his control over the
mechanism of production and distribution in such ways as to make the race
happier. It is not enough, however, to
place the responsibility of social progress upon hoped-for leaders. Left at
that point, the statement of the problem
does not define how the man on the
street is to help and how his function is
of critical importance.
If our civilization is to continue an
orderly evolution toward better things,
we must interest in social progress
through industry a much greater number of men with capacity for outstanding leadership. It is in interesting such
leaders that the job of the ordinary man
lies. The type of leadership we develop
is mainly a question of environment,
and this is largely dependent on the tribal point of viewon the ordinary man.
In other words, if the community gets
this social point of view, if it rather
questions mere money-making, if moneymaking without social standards is
frowned upon and if real social accomplishment is right royally esteemed, we
shall get the requisite leaders. The
approval of the tribe largely determines
the type of leadership exercised by its
leaders. All of us have a definite chance
to use our own abilities socially, not only
by doing things that are immediately
about us in socially sound ways, but by
influencing the development of socially
sound leadership through expecting
something more than mere money-making and through honoring sound social
accomplishment.
The development of the needed lead-

413

ership within business will contribute

toward the professionalization of business. With this development we must
constantly watch out for the danger
which faces any profession, the tendency
to defend existing conditions by building
dams to preserve them.
Such an attitude in the profession of
business would be for the long pull definitely anti-social, for it would inevitably
help to accumulate a flood of discontent
fraught with increasing dangers. The
profession of business, to be successful
in solving its share of the social problems of the next few generations, must
avoid the kind of reactionary attitude
which strengthens the forces of discontent and revolution, and must seek constantly new ways in which it may contribute to a socially sound evolution.
Professor Whitehead says, with reference to the scientific professions, that
professionalism has been linked with
progress. The linking of the scientific
professions with progress in their fields
has brought dangers into the world
which require the creation of a profession of business which shall link itself
with sound social progress.
How is social control of these forces
to be attained? To secure it is not a
short job. It took the English speaking
portions of the race at least two centuries under favorable conditions to
work out effective social controls for
such a relatively simple idea as credits,
with notes, mortgages, checks, and exchanges of one sort or another. During
a large part of the time, that simple
idea was abused to an extent surpassed
in the recent history of western civilization only by the early abuses in England
connected with the Industrial Revolution and the development of factories
and factory management. At the end of
two centuries, by a process that had included almost the creation and certainly

414

HARVARD BUSINESS REVIEW

a large part of the development of a

whole system of jurisprudence, namely,
our equity law and courts, society succeeded in getting a high degree of working control over the mechanism of
credits. The equity courts carried out
well the major objectives of the community, fixing the bounds of control of
credits at a high level. But the legal
development was not the final stage;
socialization still continues to develop
in various ways which are beyond the
scope of this body of law.
To cite one example of this trend of
thought within the field of credits, the
activities of our stock exchanges, with
the passing of millions upon millions
of values on the nod of the head, have
progressed beyond any possible development of legal compulsion in the way
of social control. The highest social
values and ethical standards are attained after the law has done its work;
through the further development that
comes as men in particular groups learn
to live under the most comfortable
conditions together and with the community.
The whole illustration, the fact that
a simple idea could upset the daily dealings and almost the foundations of
jurisprudence in a community as simple
as England at that time, shows how
very difficult it is for the race to cope
with radical and rapid changes in environment. Yet the changes which have
come about through the work of the
scientists are of far wider scope and
importance than those brought about by
the idea of credits.
For various reasons, less help can
be expected from new law created by
the courts than was obtained in solving
problems connected with the control of
credits.
Our community has acquired the
unfortunate habit of relying upon

piecemeal legislation as a cure-all for

the problems which were formerly met
by orderly evolution of common law
and equity jurisprudence. This, of
course, results in part from the failure
of our multifarious courts to respond
to community neevis and to meet our
rapidly changing conditions with sufficient rapidity, but it has very unfortunate effects. It places on our legislative bodies the burden, which they are
ill equipped to bear, of meeting new
legal problems in ways which shall tend
toward long-time solutions instead of
immediate expediency. More serious
still, it furnishes on the one hand a
constant temptation to all kinds of
special interests to secure selfish results,
and on the other, lends itself to serious
demagogic attacks on essentially sound
conditions. Broad, constructive legislative treatment oi important social
problems which arise out of the industrial developments of our times is
peculiarly rare. Furthermore, the freedom with which legislative bodies enact laws to cover anything under the
sun tends to keep the courts from approaching new problems with the same
originality, daring, and wisdom that
characterized the English courts of that
earlier period. The tendency always is
to leave really constructive advances to
legislatures, and the results are far
from happy.
More reliance in the solution of our
problems must therefore be placed on
the creation of sound intellectual, social,
and ethical standards and on the development of leadership outside the courts
and the law than was formerly the
case. Both the further development of
the common law and the specific aid of
legislation will be needed to determine
the minimum bounds of social control
under these changing conditions, but the
increasing complexity of our commu-

SOCIAL SIGNIFICANCE OF BUSINESS

415

nity in itself makes the legislative ap- sound relationship to the problem of the
proach at its best less effective than business man than in its relation to the
formerly, and we are far from being work of the lawyer. This in itself is
able to use the best legislative methods. one of the important reasons for building up the intellectual side of business,
for the keener the understanding of the
VII
business consequences which follow
Within business itself there are many upon socially unsound practices, the
forces at work which tend to bring larger the number of business men who
about the desired results. One of the will determine their policies in socially
important aids, without which the task sound ways. We must build up the inwould probably be insuperable, is the tellectual basis for enlightened selffact that in many business problems interest.
intelligent and far-sighted self-interest
In dealing with these problems, howbrings socially sound conclusions. Little ever, one distinction must be kept in
in history warrants an assumption that mind. The individual, in handling his
the mass of men can be developed to affairs, can emphasize as strongly as he
the point of altruism, and therefore we will the social side of his activities, promust use the motive of self-interest to vided always he maintains the respect
its maximum of sound social service. of the community and his own self-reNevertheless, the viewpoint of in- spect on the economic side. When one
telligent self-interest will not alone is dealing, however, with managers and
serve our purposes. Legal control of directors of corporations, whose securiindustry must fix from outside certain ties are widely distributed, the problem
minimum standards. Intelligent self- is somewhat different. While no man
interest can be used to justify the thug, in such position has an obligation to
the fly-by-night, the bank officer who make ethically and socially unsound deuses his position to maneuver his cus- cisions, neither has he the right to use
tomer into a position where he may other people's property in ways which
profit individually from the customer's they might or might not approve, simdistress, or the creed of Shylock. All ply because he feels that quite apart
these must be controlled by law. Most from his business the results would be
of the higher developments, however, socially desirable. It is on this basis
must be from within. Fortunately, many that corporations customarily and justiessential social objectives may be accom- fiably refuse most charitable contribuplished by creating a real intellectual tions. The corporation manager, howbackground for business, and through it ever, is entirely entitled to conduct his
an adequate appreciation of the dis- business affairs with reference not only
tasteful long-time results which follow to the present but to the future, just
action determined solely from short-time as the trustee is always charged with
points of view. In the largest number considering both the life tenant and the
of business situations, sufficiently trained remainderman. He is entitled, thereand far-sighted self-interest will dictate fore, to consider not only the perthat the established business or the in- manency and good standing of his instidividual who desires long-time results tution but the sound stability and develshould act in socially sound ways. The opment of his community. There is a
scope of this motive is far wider in its growing recognition of these facts.

4i6

HARVARD BUSINESS REVIEW

ence in favor of higher standards of

business integrity and sounder points of
view about business.
Another internal force operating in
business is the development of group
ethics as men in particular lines of business learn how to get along with each
other and come slowly to appreciate the
basis upon which the whole group may
successfully deal with the rest of the
community. The illustration given
above of the stock exchanges is an example of the operation of such ethical
forces, and other examples may be
found in the constantly increasing number of efforts made by particular industries to define codes of ethics or group
practices.' There has been a remarkable
development along this line in the past
25 years, largely brought about
through trade associations. Some of
these efforts have naturally taken the
form of efforts to get together at the
expense of the community and have resulted later in restrictive legislation
often unwise from everyone's point of
view, but notwithstanding this qualification, much is being accomplished to
raise ethical standards. In a later arThis tendency is sometimes counter- ticle I expect to discuss the basis upon
acted by a certain ponderous quality which the ethical progress of business
possessed by the large units. As a col- must take place.
league phrases it, one does not choose
a Mogul locomotive to chase jackrabFill
bits. Some of the smaller companies
are always more immediately responAfter full allowance for these intersive to social changes, but the general nal forces, it is still unlikely in the
tendency indicated clearly exists. The nature of things that our great developbig corporations, while slow-moving, ments in applied science can in any reaare one of the strongest forces for sonable time be adequately balanced hy
steady ethical advancement in business. ethical' forces and that social control
They have certain dangers of dry rot can be brought to bear through the unand bureaucracy which at times disturb aided efforts of industry. External aid
one, but we may expect that the large, is essential. Strongest of the external
well-seasoned, sound corporations will forces is public opinionthe pressure
on the whole be ethically in advance of
their times, and will lend their influ' See Heermance's Codes of Ethics.
Another aspect of the situation of
corporations is also of great importance.
The big national corporation in its
natural development inevitably tends to
higher ethical standards, to more of a
feeling of trusteeship, for the community and for the employee, as well as for
the security holder. It tends in that
direction because over a period of years
a large organization must become reasonably trustworthy in its internal
operations in order to continue to do
business and to serve the essential purposes of the organization. It inevitably
tends, therefore, to choose trustworthy
men for its organization, and a group
of men who so conduct themselves that
their associates can trust them will in
the long run be the type of men who are
trustworthy in dealing with their public.
You do not find the Steel Corporation
watering its milk, and you never will.
Moreover, the big corporation generally emphasizes stability and permanence, rather than immediate profits,
with the result that its policies are considered with reference to longer time
elements, thus bringing in more factors
of social significance.

SOCIAL SIGNIFICANCE OF BUSINESS

of community thought. This force
works itself out in part through the
law, hut for reasons stated hefore this
cannot be the sole medium. Under
current conditions, the law in its effort
to stop objectionable practices often
compels changes or brings about results
which are themselves unwise. In part,
public opinion accomplishes its objective through a direct response resulting
from the widespread desire to secure
community approval. Since the community gets to a large extent what
standards it expects from indiyiduals
and groups, sound and general public
opinion may hring about a real contagion of health. Most of our social
standards are made effective hy the
force of neighborhood opinion.
Unfortunately, however, while a
community expecting much from a
group gets much, it is just as true that
a community expecting little gets little.
The low ethical standards of large
groups of the Jews and the Armenians,
for instance, are the definite results of
centuries of oppression. The continued
inferiority of the "poor white trash"
of the South has undoubtedly resulted
in large measure from the force of public opinion in making them an outcast
class. The same was true until recently
of the merchant class in Japan, where
contemptuous and brutal treatment hy
the Samurai group inevitably resulted
in shockingly low standardsa condition which, I am told, is being changed
with astounding rapidity in the last
few years through relief of this pressure and the simultaneous influence of
education in the higher commercial
schools of Japan.
This country has suffered less, perhaps, than England from an attitude
which looks down on business as a calling, but even here young men enter
business too frequently because they do

417

not feel competent or inclined to enter

any of the so-called learned professions,
rather than from a positive desire to
enter upon a husiness career. Business
has thus hecome in part a catch-all and
a dumping ground into which in the
case of many families inferior sons are
advised to go. This point of view
ignores wholly the intellectual, ethical,
and social opportunities and responsibilities in this field. If puhlic opinion
is to be an effective force in socializing
industry, it is important that such attitudes of mind be changed, hut it is
equally necessary that the change
should he discriminating, and that
approbation should he limited to men
who secure their business success in
socially sound ways.
IX
One of the most promising approaches to securing a more rapid halance hetween scientific developments
and social control is through education
in our collegiate schools of husiness.
Such educational work is still in the
formative period, and its objectives
need definition in ways which have a
bearing on this problem. Uniformly,
collegiate schools of business are attempting to give training which will fit
men for executive work when they have
established themselvesthey are trying
to train for leadership. They have not
yet analyzed or emphasized, however,
the social responsibilities of husiness
sufficiently to assure that the leadership
so evolved will expend its efforts in socially sound ways. Three things become
the task of such schools if they are to
train leaders who will contribute to the
solution of these problems, namely,
thorough intellectual training which
will enable the student to think hroadly
and soundly about the problems he

4l8

HARVARD BUSINESS REVIEW

must face in business; depth and perspective on vital social problems which
will enable him as he practices his profession to think of both present and
future with a clear conception of their
significance; and preparation for the
moral issues which will constantly present themselves to him in practice.
All who are participating in the
rapid development of business education are keenly alive to the necessity of
the first of these threethe intellectual
training needed to handle current problems with a wider knowledge of business than is now typically possessed by
men who have secured their training
within industry. Much research is being carried on to secure the necessary
background for such instruction, and
business men are aiding this research
generously. While the objective is nowhere attained, real progress can be reported. Broad study is being given to
contemporary problems.
One speaks with less assurance of the
depth and perspective with which our
problems are considered, and consequently of the quality of instruction now
being given, on the social significance of
business problems. Research into the
past has less appeal to the business
man than the study of contemporary
problems, and funds are not so readily
available. Yet for the long pull the importance of such studies is paramount,
and resources must be found to make
intensive studies of the genesis and development of business problems and
the social currents which create them or
which they create. I am not discounting the work of the economic historians,
but just as I believe that much economic
theory will he developed hy schools of
business because of the opportunities
which the close contacts with industry
and the facts of industry afford the
faculties of these schools, so I am con-

vinced that we need economic or business historians working in the environment of business faculties and writing
to the business man with an intimate
appreciation of his viewpoint and problems. Until this is done, the instruction
given in business schools will in this essential phase of the work be inadequate.
The third problem of the schools
their problem of preparing men for the
ethical dilemmas they must faceis one
of great difficulty. We can hardly hope
to create moral fiber. We can and
should present to the student, while he
has time for consideration free from
the pressure of circumstances, the more
common ethical dilemmas of business.
The sound ethical standards of the
young man are far more likely to be
preserved in later periods of stress if
this is done.
Because of the peculiar nature of the
problem, however, reliance should not
be placed entirely upon classroom work.
Personal human contacts between instructors and students are particularly
essential, because the situation is in one
respect different from that in training
for any other profession. The churchman, the doctor, and the lawyer, in their
professional training are surrounded by
the traditions of centuries. When the
student talks with the practitioner, he
hears the accepted ethical standards of
the profession. It is a curious illustration of the lower esteem of business
compared with the older professions
that, when the business student talks
with the business man, the latter, instead
of putting his own ethical best foot forward, often becomes cynical and rather
scoffing. The young man hears the
exact reverse of what a student training
for the other profession hears; not the
best point of view of the profession,
but too frequently a more mercenary'
point of view than exists in the actual

SOCIAL SIGNIFICANCE OF BUSINESS

practice of the husiness man. Too
often, also, the higher point of view
when expressed has ahout it a certain
air of smugness which proceeds from
complete failure to understand the significance of social movements.
In order to overcome this handicap
and to hring home to the students the
social importance of the formative profession he is entering and of his own
attitude toward it, we must deal with
him first as a human being, and it will
help greatly if we can surround him
with influences that will hring out the
permanent satisfactions in life which
this social point of view gives. Without
such a social point of view, husiness
education misses its maximum significance. To give this requires close personal contacts hetween teacher and
student.
X
It is important that our long-time
judgment of conditions should not he
too much affected hy the present apparent decline in the forces of radicalism.
The shocking conditions resulting from
the revolution in Russia, the upset conditions in Europe generally, a certain
element of emotional fatigue following
the War, have combined with good

419

times here to ohscure, I helieve temporarily, fundamental conditions of real

seriousness. These various forces, together with the conservative influence
of widespread ownership of property
through the distribution of securities to
large numbers of people, and perhaps
most important of all, the ethical and
religious revolt of the fundamentalists
against the sheer, cold materialism
which to them means science, will all
work for greater or less periods of time
to hold in abeyance the forces of discontent. But as time goes on, all these
elements may and nearly all must hecome less and less effective. The period
af time thus offered should he used by
thinking men interested in the orderly
evolution of civilization in the effort to
reconstruct a working philosophy which
has an idealistic hasis far away from
what Stevenson called "the truly quaint
materialism of our view of life"; and
this time should particularly he used hy
the husiness group and those interested
in husiness education in working toward
methods of doing husiness which are
sound socially, as steps in the progress
of civilization. Such a hasis for husiness must he sought through the constant discovery of hetter and better
ways in which men may live together.

Harvard Business Review Notice of Use Restrictions, May 2009

Harvard Business Review and Harvard Business Publishing Newsletter content on EBSCOhost is licensed for
the private individual use of authorized EBSCOhost users. It is not intended for use as assigned course material
in academic institutions nor as corporate learning or training materials in businesses. Academic licensees may
not use this content in electronic reserves, electronic course packs, persistent linking from syllabi or by any
other means of incorporating the content into course resources. Business licensees may not host this content on
learning management systems or use persistent linking or other means to incorporate the content into learning
management systems. Harvard Business Publishing will be pleased to grant permission to make this content
available through such means. For rates and permission, contact [email protected].