CHESTER I.

BARNARD

Elementary Conditions
of Business Morals
The confusion surrounding the concept of business
morality and the general failure to recognize how
much of business behavior is motivated by moral
considerations have prompted our author to describe
classes of business morality, the kinds of conflicts
they involve, and ways of resolving these coniiicts.

This subject has been selected as consonant in conferences and in books. I should therefore
with the purpose of the founder of the Barbara like the privilege of being quite informal and
Weinstock Endowment.' Although "Business at times quite personal.
Morals" is somewhat broader than "The Mor- It ma.yhelp to understand the significance of
als of Trade," the phrase he used includes the our subject and my purpose if I summarize
latter. Please note also that I am not talking briefly my experience in reaching my present
about "Principles of Business Morals" but views of it. Apropos is a letter I received reo
"Elementary Conditions" and that the empha- cently from a student in a technical school in
sis is empirical rather than theoretical or philo- Sydney, Australia. Evidently he had been re-
sophical. What follows is not an essay in soci- quired to read at least one of my books and had
ology, social psychology, or the philosophy of been assigned as a topic for a paper "Barnard's
ethics, nor is it a theological discussion of vir- Biography." He said he could find nothing
tue and sin in or of business organizations. about me in Sydney except in Who's Who,
What follows is the result of reflection upon which told him little. Therefore, would I :{indly
long personal experience in a wide variety of write an autobiographical sketch that would
organizations-business, governmental, and tell him "how you got that way." I shall now
philanthropic-with extensive opportunity for state "how I got this way."
observation, although of course I have bene- In 1937 I delivered eight lectures at the
fited from the views of many others expressed Lowell Institute in Boston under the title "The
1 This paper was first given as a Barbara Wein-
Functions of the Executive." On the initiative
stock Lecture on Morals of Trade at the University of
California, Berkeley. of the Harvard University Press I agreed to

MR. BARNARD, whose distinguished career as businessman, foundation executive, and public
servant is well known, is also the author of two classics on management, The Functions of the
Executive and Organization and Management.
1
2 CALIFORNIA MANAGEMENT REVIEW

convert these lectures, which were orally ex- Recognition of the fact that cooperation
temporaneous, into a book. This was published among men, through formal organizations of
in the fall of 1938 under the same title. Perhaps their activities, creates moralities was to me,
a more nearly appropriate title would have in 1938, a startling conception. One of its im-
been "The Sociology of Formal Organiza- plications was that modern Western civilization
tions," but such an effort was far from my is morally complex, far beyond other civiliza-
mind, and such a title would have seemed bom- tions. This view seemed to me to be confirmed
bastic to me and to others as well. I was merely by the marvelous orderliness and stability of
trying to describe or state the nature of the our society. Another implication was that con-
essential tool or apparatus with, through, or flicts and misunderstanding of moral positions,
by which executives have to work, as an indis- as contrasted with conflicts of economic or
pensable introduction to the discussion of the power interests, must have greatly increased
practice of management and the problems of and that frustrations, confusions, and uncer-
leadership. tainties with respect to right and wrong surely
From this study emerged two leading ideas were magnified. However, all this increased
pertinent to this lecture, although I was not my perplexity concerning the reasons why
aware of this until after publication. The first Judeo-Christian ethics, the Ten Command-
is that every formal organization is a social ments, the Sermon on the Mount, the Golden
system, something much broader than a bare Rule, seemed to have so little application or
economic or political instrumentality or the fie- relevance to the moral problems of the world
tionallegal entity implicit in corporation law. of affairs. I did not know then that others
As social systems, organizations give expres- recognized this, as I subsequently discovered.
sion to or reflect mores, patterns of culture, For example, Professor Frank H. Knight in his
implicit assumptions as to the world, deep con- essay "Conflict of Values: Freedom and Jus·
victions, unconscious beliefs that make them tice" says:
largely autonomous moral institutions on All will agree that literal individual liberty must be
which instrumental political, economic, reli- limited by law, by enforced law. We need not here
debate against anarchism; nor, we should hope,
gious, or other functions are superimposed or against the view (though held for many centuries by
from which they evolve. official Christianity) that laws and governments
The second idea is that to a large extent man- "would be" superfluous if men were not sinful. A pure
personal-relations ethic, of whatever form, can hardly
agement decisions are concerned with moral furnish rules for such activities as international trade,
issues. Undoubtedly long before recognizing or any dealings with people too numerous and remote
to have reality for us :IS individuals, with the unborn,
this I had had numerous experiences exempli- or for the future of cultural values; in fact, any rules
fying it; but I had never distinguished between for organizing work or play!
decisions of a technical or technological char-
And Mrs. Alfred North Whitehead is reo
acter, subject to factual and reasoned conclu-
ported to have remarked: "They may finally
sions, and those involving a less tangible sens-
succumb and learn to like the poison after they
ing of values. But this idea of moralities in or- have been sufficiently tainted. _.."
ganizations was one of issues arising within
"On the credit side," said Whitehead, "I notice that
organizations, with little or no reference to a large part of what is written for the serious columns
prevalent moral conceptions in the great socie- of your newspaper is to set before the readers their
responsibility for maintaining the social system. The
ties within which these formal organizations
aspects of this are various, but that in the end is what
exist, nor did it take into account the obliga- it all comes to: the readers are being reminded that
tions of incorporated organizations as legal • In Goals 0/ Economic Life, ed. A. Dudley Ward
entities. (New York: Harper & Brothers, 1953), pp. 203-230.
 ELEMENTARY CONDITIONS OF BUSINESS MORALS 3
the preservation of a social system depends on them. ever the discussion related to public or husi-
Now responsibility for a social system is the ground- ness affairs, the assumptions as to the nature
work of civilization. Without a society in which life
and property are to some extent secure, existence can of such affairs seemed to me quite unrealistic.
continue only at the lowest levels-you cannot have a Whenever an attempt was made to apply a
good life for those you love, nor can you devote your
energies to activity on the higher level. Consequently, moral precept, it seemed to me substantially
a sense of responsibility for the continuance of a social irrelevant; and what seemed to me the essen-
system is basic to any morality. Now this form of re-
sponsibility is almost entirely absent from Christianity. tial moral dilemmas of business and public af-
Jesus hardly mentions it, except for one or two re- fairs were evidently not contemplated at all.
marks." Why? Because, I thought, the facts of busi-
"And one of these," said Mrs. Whitehead, "'Render
unto Caesar,' was evasive." ness life were not available. This seemed to be
"There were historical reasons for this lack, I grant to some extent a matter of communication and
you," he continued. "The Hebrews had no independent
state to govern, and a man cannot be blamed for fail- of semantics. The theologians were talkir.g in
ing to consider what there was in his period no occa- terms of a nomadic and simple agricultural
sion for considering. He said what an ahle thinker
might be expected to say. His historical situation did life--of sheep and lambs, of shepherds-in an
not elicit a code of ethics concerned with responsibility industrial age in which the maj ority had. no
for a social system; hut the absence of such responsi-
bility has been a characteristic of the Jews for cen-
experience of rural life. But the fault was not
turies. That is one reason for their unpopularity. You so much that of the theologians and the clergy.
may say that the way they have been treated in many The doctrine of the economists concerned with
of the countries of their sojourn has not permitted
such participation, and I quite agree. But that absence highly abstract aggregates of behavior, with
has involved Christianity in an almost perpetual self- its highly artificial assumptions of the maxi-
contradiction. It held that the externals of life are not
worth caring ahout and at the same time insisted on mizations of profits as the principle of eco-
types of moral conduct which cannot be observed- nomic behavior, was not merely misleading
without perishing-unless the externals of life are
sufli~i~ntly ~e1~ organized. A society run on strictly
but abortive; and they had neglected the study
Christian principles could not survive at all.:" of business as such, of the entrepreneurial
functions and its history. And the men of af-
The approach of war and then war duties
fairs, though some were highly loquacious,
prevented much reflection upon these matters,
were singularly inarticulate except in the tech-
though experience during this period seemed
nical language" of their heterogeneous shops.
to confirm my previous conclusions about the
There are reasons for this inarticulateness to
essentially moral character of behavior in for-
which I shall refer later. Suffice it to say that in
mal organizations.
my estimation empirical studies of behavior in
I began to get a little more insight into this
business and affairs, of organizations, and of
subject in 1944 when I attended a conference
the moralities they create, were needed, stated
of what was then called "A Commission on a
in language facilitating" communication with
Just and Durable Peace," an activity of the
those whose concern is with general problems
Federal Council of Churches of Christ in the
of ethics.
United States of America. It was held at Cleve-
However laborious the path by which I
land, Ohio, under the chairmanship of Mr.
reached this view, it was not new. For a num-
John Foster Dulles. About half the delegates
ber of years the Federal Council of Churches
were clergymen and most of the remainder
had maintained a Department of the Church
were church people. It was concerned primar-
and Economic Life which had shown concern
ily with international relations; but in the vari-
for the empirical facts, though its approach was
ous sectional meetings I observed that when-
primarily from the religious side; and it had
• Dialogues of Alfred North Whitehead. As Re-
corded by Lucien Price (Boston: Little, Brown & Co., little money for the expensive research reo
1954), pp. 261-262. quired. Mr. Paul G. Hoffman, one of my prede-
 4 CALIFORNIA MANAGEMENT REVIEW

cessors on this platform, then Chairman of the immediate consequences of a decision to do or

Committee for Economic Development, was not to do specific things under particular condi-
much interested in these efforts which I sup- tions. To some extent questions of right or
pose were somewhat analogous to those of his wrong in business are strictly personal-hon-
committee. He offered to attempt to raise esty, abstinence from violation of the rights of
money for the research requirements if I would others, conformance to rules of decency,
do likewise; but my suggestion was that at least Golden Rule in regard to the interests of others,
initially funds should be sought from the most charity-the questions with which traditional
neutral sources, that is, the foundations, since religious or philosophical ethics are concerned.
many controversial questions would be in- Most modern concrete business behavior, how-
volved, the treatment of which should not be ever, is not of direct personal interest. Rather,
biased by the source of funds, whether from business morality relates to "good of the or-
private individuals, corporations, or labor ganization," "interests of society," prescrip-
unions. Subsequently the Federal Council made tions of law. The fact that personal interests are
application to the Rockefeller Foundation for not involved leads many to fail to recognize
support. More than $200,000 in two appropria- that adherence to organizational interest, to
tions was made available, resulting in the pro- correct procedure, as in the courts-for ex-
duction of a series of books published by Har- ample, in application of the first ten amend-
per & Brothers. In them there is not much ments-becomes not technical, but moral in the
reflection of empirical research, but an illumi- sense just stated. I shall set forth some of these
nating presentation of the approaches and con- moralities in the next section of this paper en-
siderations involved in understanding the titled "Varieties of Moralities."
problems of business morality. The propensity toward ideal behavior stated
My purpose in this introduction has been to without regard to ethical foundations in reli-
indicate the nature of the problem of business gious doctrine or to philosophical precepts is
morality, the confusion that exists about it, its so deceptively simple that it raises the possibil-
importance, and something of what has been ity that to emphasize the moral character of so
attempted recently to secure enlightenment in large a part of modern business behavior is to
a field that is obscure. What I wish to do in the paint the lily of what after all may be only
following discussion is to sketch some of the "practical" behavior. Why, to the layman, does
elementary conditions of behavior in business business practice so often seem either immoral
relevant to moral questions. or amoral? In part the remainder of this lec-
ture is concerned with this question; but it may
DEFINITION OF MORALITY be useful to give here some brief general com-
The ideas that there may be numerous sys- ments suggesting why moral business behavior
tems or codes or attitudes of morality and that is not always recognized as being moral.
cooperation in formal organizations creates First, a perfectionist standard is not a valid
such systems or codes or attitudes are not com- criterion of moral behavior. Moral ideals, when
mon. And much behavior that is determined by expressed in general terms rather than in ac-
moral attitudes is not recognized as such. I tion in concrete situations, are necessarily ab-
therefore should attempt some approximate stract, and attainment may fall far short of the
definition of morals, morality, and associated abstract ideal. This does 110t mean that failure
concepts. I mean by moral behavior that which is evidence of immorality, but that moral
is governed by beliefs or feelings of what is achievement is in part dependent on concrete
right or wrong regardless of self-interest or conditions which vary widely. This is perhaps
 ELEMENTARY CONDITIONS OF BUSINESS MOHALS 5
only to say that the degree of "temptation" to in any large organization and only somewhat
deviance must be taken into account. The test less easily recognized in other organizations,
is not whether moral error is committed, but even though small. I am not attempting here to
whether when committed it is so recognized be comprehensive or to present a selection
with accompanying apology, regret, or reo based on a thoroughgoing taxonomic study of
morse. However, the situation is one where the the moralities of business. Indeed, I think that
professor of a moral standard is vulnerable to would be impossible at the present time. Much
criticism, extremely difficult to meet where observation and analysis will be required be-
technical considerations are involved. It ex- fore this can he done. There is little explicit
plains why so often I have heard men say that knowledge of this subject. Such understanding
they were operating frankly on the basis of of it as there is, is a matter of intuitive famil-
self-interest or for economic or even legal rea- iarity with specific organizations, specific op-
sons when I knew this was not the case. erations, and specific conditions. Thus the
Second, the more moral organized behavior moral climate in different organizations varies
becomes the more frequently will conflicts greatly, so that a thoroughly competent execu-
arise, not only between moral principles, but tive, administrator, or employee transferring
between such principles and those of technical from one to another will require as much time
(accounting, financial, legal, organizational) "to learn the ropes" of the moral climate as of
and technological character. This will be fur- the technical situation-and may never "learn
ther discussed later. Suffice it to say here that the ropes;" that is, the loyalties and responsi-
the situation is one easily interpreted as one of bilities of a transportation organization, of a
incessant conflict to defeat moral principles, publicly regulated electric power organization,
and to obscure their constructive influence. of one manufaeturing shoes and one manufae-
Finally, and perhaps more important, is the turing dangerous chemicals, ofa distributor of
fact that explicitly moral terms are not much automobiles and a distributor of nylon stock-
admitted in business or public affairs. The ings, are radically different.
terms most used are "loyalty," "responsibil- In the discussion that follows I have ar-
ity," "duties," and "obligations." Though such ranged the topics roughly from the general and
terms are ambiguous (e.g., "responsibility" is simple to the more specific and complex. First
often used to mean "legal liability" where no I shall discuss personal responsibility, then
moral question may be involved) they are in representative responsibility, then personnel
fa.ct loaded with moral implications. These be- responsibility, then corporate responsibility,
ing the terms currently used, I shall from here then organizational responsibility, followed in
on largely use them instead of "moral" or "mo- order by economic, technical and technologi-
rality" as being more convenient and as lend- cal, and legal responsibility.
ing themselves perhaps to more easily intel-
ligible discussion. Personal Responsibility
A necessary, but by no means a sufficient,
VARIETIES OF MORALITIES foundation of business morals is the character
IN BUSINESS
of individuals as such. The basis of character
To give more meaning and substance to gen. may be the inculcation of the ethics arising
eral remarks already made and to suggest what from religious or philosophical doctrines and
is meant by "elementary conditions" of busi- the mores of the society in which the individual
ness morality, I shall now present several develops. The requisite character includes:
classes of responsibility readily distinguishable avoidance of criminal acts, gross and public
6 CALIFORNIA MANAGEMENT REVIEW

immoralities and in particular stealing and spect to a few kinds of action. Morally and Ie·
lying; a willingness to recognize the interests gaIly it is not permissible for one to kill another
of others to the extent of ordinary courtesy; (except in self-defense) yet the policeman, the
and, finally, a willingness to discharge com- soldier, and the executioner may and some-
mitments, that is, to perform duties accepted, times must kill in the discharge of duties, usu-
to honor promises. ally without any implication of immorality.
Indeed, failure or refusal to do so would often
Representative or Official Responsibility be regarded as immoral. On the other hand, so
One of the important, if not the dominant far as I know, no one may legally steal on or-
characteristic of modern Western society, as ders, except perhaps in foraging for military
contrasted with ancient, or with Western so- purposes. Yet there are circumstances where it
cieties of one hundred or two hundred years would be immoral, from the standpoint of re-
ago, is the extent to which concrete behavior sponsible representative behavior, not to do
of individuals has become representative rather things immoral and even illegal from a per·
than personal. By "representative" is here sonal point of view.
meant "on behalf of other," that is, not by the The representative character of organized
actor personally, but "in accordance with the behavior is the basic condition of the numerous
aims or goals or by the methods determined special moralities. It affects not only such be-
by others." From the point of view of this lee- havior directly, but also strictly personal be-
ture the most significant aspect of this radical havior. For example, the housewife purchasing
change of conditions is the wide gap between from a chain store is a:ffected by the impersonal
the ethics of personal behavior and those of morality of the store, and often there is a con-
representative behavior. This seems to be well flict not so much of interest as of moralities
recognized only with respect to the decisions of involved.
trustees and of directors of corporations, and
of other agents either of individuals or of firms Personnel Loyalties
or of corporations. In these technical functions Representative behavior is the ethical ground
it is well understood that a trustee may not do upon which is erected a sometimes elaborate
things which an individual may do, and must structure of moralities in organized coopera-
do things which an individual is not required tion. Perhaps the most pervasive and important
to do. These are matters governed by deeds of of these moral structures is that of personnel
trust, wills, statutes and court law, and the law loyalties. Superficially these appear as personal
of agency. The limits so fixed usually leave loyalties, but they are not, and it is this fact
wide latitude for the exercise of judgment, but which gives them their special moral character.
even so that judgment is to be divorced from In formally organized activities the principal
personal interest entirely. personnel relationships are those between suo
The field of representation or official be- periors and subordinates and between those of
havior covered by legal prescriptions is only a coordinate status (fellow workmen). This rela-
small part of the total of the behavior on behalf tionship involves loyalties to individuals acting
of others. Every act of a trustee, director, offi- in their official capacities. Loyalty in this con-
cer, or employee is officially representative ac- text means recognition of the responsibilities
tion, not personal, and the ethics of personal of others and the desire to support others in the
behavior are not identical, except coincidently, discharge of those responsibilities, often by
with the ethics of representative behavior. This means thought to be erroneous and contrary to
seems to be recognized generally only with reo self-interest. Spontaneously constructive efforts
 ELEMENTARY CONDITIONS OF BUSINESS MORALS 7
largely grow out of such loyalties, and they poses, is, in my view, more important than any
constitute a very large part of the cohesiveness single scientific or technological discovery in
of organizations. making possible either utilization of discover-
The highly moral character of these relation- ies or especially mass production or mass dis-
ships will not be understood unless it is recog- tribution. It is also an important factor in
nized that subordination is not a criterion of economic and social stability. Yet the corpora-
personnel loyalty. Mere acceptance of orders, tion, as something having the attributes of a
the making of prescribed reports, the effective personality, is a legally authorized fiction, The
performance of specified functions are all con- concrete physical activities underlying it are
sistent with essential disloyalty, and, indeed, those of individuals or organized groups. But
can be a method of sabotage. a myth or fiction accepted widely as a basis for
Nor should personnel loyalty be confused individual behavior becomes a social reality.
with personal loyalty as involved in the ordi- Corporations can sue and be sued; can have
nary social relations of individuals. One kind title to property; are responsible to public
of loyalty does not involve the other. In fact authority, for example, in the matter of taxes;
they are usually incompatible. This is readily can be given privileges, for example, the right
seen where there is a change of official status of eminent domain. Although there call be
or relationship, for example, in cases of retire- nothing to a corporation except its organiza-
ment, termination of employment, promotion. tion, there is imputed to it not only legally but
It is probably very much the exception when popularly a special responsibility as if it were
two persons bound hy mutual official loyalties a person; hence there can be attributed to it
remain close personal friends after the termina- moral or immoral action.
tion of official relationship-for example, when The imputation of moral responsibility-
one retires. One reason for this is the restricted not merely legal liability and privilege-can be
extent to which any individual can maintain realized only in the concrete action of trustees,
close personal contact with others. Another is officers, and employees. The moral decisions
that close official relationships paradoxically they must make, however, are not of the order
are largely private and confidential. Thus of personal morality, nor of official organiza-
where A and B are mutually loyal in an official tional morality, but of a fictitious entity where
relationship, and by the turn of events C re- responsibility and obligations are in many re-
places B, then A's loyalty to C requires sever- spects outside the possibility of relevance either
ance of his loyalty to B. He cannot communi- to individual or to organizational morality.
cate to B what has become confidential with The responsibilities of corporations, aside
respect to C, and there is no longer the degree from the obligation to conform to their charters
of common interest permitting intimate com- and the law, are of two kinds: (1) those which
munications. Thus it would usually be regarded may be called internal, relating to the equitable
as very bad taste at best for A to discuss C's interests of stockholders, creditors, directors,
performance with B. Many a workman pro- officers, and employees; and (2) those relating
moted to foreman has found, to his dismay, to the interests of competitors, communities,
that his loyalty to a fellow workman is of a government, and society in general.
radically changed character.
Organizational Loyalties
Corporate Responsibility Corporate entities, including not only formal
The social invention of the limited liability corporations, and enterprises of partnership
corporation, whether for business or other pur- and of individual proprietors but also govern-
 8 CALIFORNIA MANAGEMENT REVIEW

ment departments, and educational institutions, Economic Responsibility

have no reality except as they relate to coor- We are so accustomed to think of economic
dinate activities (whether directed, spontane- behavior in terms of calculation, supply and
ous, or autonomous) which as a whole we call demand, efficiency, maximation of profits, that
organizations. The ethical problems of organi- we leave out of account economic morality. It
zations, that is, their duties and obligations, are has many forms from the simple conviction
most conveniently considered as like those of that one should discharge obligations with re-
formal corporations already discussed, al- spect to debts to a moral horror of waste or of
though in some peripheral areas one must inefficiency. When I was a boy, repeatedly
recognize that there is sometimes a moral situa- dinged into my ears was the aphorism "Willful
tion of an organization distinct from that of waste makes woeful want," which I seldom
the corporate entity. On the other hand there is hear nowadays. Waste was not merely econom-
a moral situation with respect to individuals ically inept, it was sinful. With this embedded
and also to groups or communities related to in my moral sense, no economic or political
organizations as entities with which we are now argument can convince me that the destruction
concerned. Many individuals feel an obligation of food stocks to maintain prices is morally
to what they conceive to be an entity-an or- defensible. A trivial example is my perpetual
ganization-that transcends personal interest annoyance at the appalling waste of electric
or advantage. In extreme cases this loyalty has current for lighting, manifest in every or-
involved great personal sacrifices "for the good ganization with which I have or have had any
of the organization" that become matters of connection. I do not doubt that such waste
public knowledge; but for the most part this is going on right now on this campus at Berke-
kind of loyalty is not publicly recognizable. It ley. In one organization for which I had re-
is sufficiently recognized so that elaboration of sponsibility I found that the annual electric bill
the idea is not necessary here; but it is not suffi- was about $5,000. I estimated that at least half
ciently recognized to make superfluous some was wasted, but I decided that to correct the
comments about it. Naive critics and cynics fail situation involved a nagging pressure to change
to recognize the high moral character of or- habits that would cost more than it was worth.
ganization loyalties, their importance, and the I should have to suffer in silence. But I could
ethical problems involved. This is probably due not resist from time to time visiting empty
principally to the following circumstances: offices and switching off the blazing and useless
lights.
1. With some exceptions, particularly in the
The moral horror of waste and patent in-
fields of religion, education, philanthropy, and
efficiency is, of course, often reenforced by
politics, individuals become attached to organi-
economic sanctions such as the danger of losses
zations for reasons of nonmoral incentives. It
or bankruptcy, a fact that leads many to as-
is not easily recognized that loyalty develops
sume that conservative and efficient manage-
afterward.
ment is merely a matter of effective calcula-
2. At any given time the members of an or- tion. This is too limited a view. Calculation is
ganization include many who have no loyalty not a sufficient basis.
to an organization.
3. Concrete expressions of organization loy- Technical and Technological
alties relate chiefly to action in small groups Responsibility
(subsidiary organizations) that are overlooked Another type of morality is that to which I
or discounted. give the title "Technical and Technological Re-
 ELEMENTARY CONDITIONS OF BUSINESS MORALS 9
sponsibility." It is commonly assumed that this In the converse case, where an attempt might
kind of responsibility is involved in the work be made to change from a low quality product
of the creative artist, the first-class artistic per- to a higher one, the moral resista.nce to the
former, the experimental scientist, an artisan change would be evident-it would often seem
such as a first-class toolmaker. It is not so wasteful and even silly to those affected.
widely appreciated that the adherence to high
standards of performance is a common charac- Legal Responsibility
teristic of many kinds of technical and techno- The last type of morality I wish to present I
logical work, including the management of have called "Legal Responsibility." By this I
human relations in cooperative enterprises. mean much more than a propensity to conform
This failure to recognize one of the most im- to statutes, court decisions, regulatory rules. I
portant factors in business operations is due include also the rules of internal and private
perhaps to the difficulty of making explicit the character that are important aspects of the
standards of performance in much technical operations of formal organizations. No doubt
work. The reality of the moral factor in much much conformity is a reflection of interest in
work commonly regarded as merely technical avoiding sanctions or liabilities, but the moral-
is manifest when, as a matter of deliberate ity I am speaking of transcends this interest.
policy, the attempt is made to reduce standards, Its basis is the deep belief that the kind and
say, for economic reasons. The accountant, degree of order involved is not only indis-
the engineer, the manager, all resist such efforts pensable to effective cooperation and the
not as a matter of insubordination, conscious proper distribution of specific responsibilities,
unwillingness to conform to prescriptions, but but also is essential to equity and justice, and
as moral reaction to doing thing wrongly. that the flouting of legal prescriptions is de-
The significance of this reaction may be structive of integrity and morale in an organi-
illustrated by the following case. A manufac- zation. Therefore, immediate or even ultimate
turer was engaged in producing a certain type advantage or disadvantage of any specific: re-
of vehicle of very high quality, using the best quirement is irrelevant.
materials and a high grade of precision work- I hope that this incomplete description of
manship so that each unit was to a considerable some of the kinds of morality involved in busi-
extent equivalent to a custom job. It was de- ness organization is sufficient to convince you
cided. to produce the same type of vehicle by that the moral factors are of predominant im-
mass production methods, using materials of portance. Clearly they are complex, some being
lower quality and less precision in mechanical quite independent of others, some closely con-
work. The manufacturer attempted to do this nected and interdependent, and most of them
in the same plant, merely lowering standards imponderable. But little reflection is needed to
and using some new machines, but with the see that they involve many inconsistencies and
same organization. The attempt was a failure. contradictions, so that the conflict of responsi-
The old organization simply could not produce bilities is a characteristic condition of coopera-
effectively with lower standards, so that finally tive efforts. To. this important subject I turn
a new plant in a distant city with a new organi- next.
zation was set up to produce the cheaper prod-
uct. Note that this is not a case where new skills CONFLICTS OF RESPONSIBILITY
had to be learned. In general, less skill and less Experience, or even contemplation and imag-
time: were required. The acceptance of lower ination, suggests that if there are simulta-
standards was morally repugnant. neously in effect different sets of moralities,
10 CALIFORNIA MANAGEMENT REVIEW

then there is likely to be ethical conflict or held, and the contradiction simply not realized,
dilemmas of loyalties and responsibilities. This for in the concrete situation not to try to effect
situation is certainly a characteristic of deci- consolidation would seem to be a dereliction in
sions in the world of affairs; but its nature is one's duty to stockholders, or to heirs, or to the
concealed by the labels by which it is described, organization, or to the discharge of other
such as "personality conflicts," "conflicts of obligations.
interests" (economic, political, or prestige). It This kind of objective conflict is commonly
is also concealed by the privacy with which the observed in many other circumstances includ-
struggles for the discharge of conflicting re- ing the conduct of individuals of high moral or
sponsibilities are veiled. Men seem unwilling or religious convictions. What is involved is not
unable to reveal moral struggles, and often insincerity or hypocrisy. This kind of conflict
seem forced to concoct rationalizations of their can lead to personal recrimination and law-
decisions instead of "the real reasons." suits, but not to personal frustrations and
In what follows I shall attempt to state briefly anxieties.
the nature of a few types of moral conflicts to The most crucial testing of behavior from
suggest the kinds of conflicts which we should the standpoint of morals in business comes
look for in a study of the ethics of practical from conflicts of responsibility. Almost every
affairs. But first a few general remarks are moral issue in matters both large and small
desirable to avoid confusion. arises from such conflicts, although in business
The first is that most of the moral systems in they are most frequently not recognized, or at
effect, unlike the Ten Commandments or the least not expressed as such. I should like to
Sermon on the Mount, are not explicitly for- explain the nature of such conflicts by three
mulated or coded. They are "feelings" or "atti- illustrations. Those I have chosen relate to
tudes" made evident by overt action (or reo large and complex problems having a certain
straint) or overt (i.e., verbally expressed) de- dramatic character, which make them serve
cisions. This is an important fact suggesting better as illustrations, but it should be remem-
the great difficulty of understanding the moral bered that the nature of these conflicts could be
situation. It is due not merely to the limited exemplified in the thousands of moral dilem-
ability of most people for self-analysis and to mas, hidden from public view or discussion,
their inarticulateness, but also to the fact that that are the main burdens of the administrators
morals are in many respects felt to be private, of affairs.
not appropriate or seemly for public expres- A friend who was employed in the American
sion. military government of Sicily dropped in to see
The second general remark is that it is im- me after his return to his usual academic func-
portant to distinguish two classes of moral con- tions. I asked him what he had been doing in
flicts. The first I shall call "objective conflicts Sicily, and he said he had been engaged in
or contradictions;" the second, "subjective making public opinion polls for the American
conflicts or dilemmas." In the first class incon- military government among the Italian citizens
sistency of behavior is not recognized or ad- of Palermo. It developed that when the Ameri-
mitted by those "guilty" of it, but it is apparent can forces had taken over, practically all the
to observers. One of the interesting instances inmates of the prisons were released on the mis-
of it is the propensity of businessmen to effect taken assumption that they were political pris-
purchases or consolidations of competing en- oners regarded as enemies of the Fascist re-
terprises, although persistently extolling com- gime. Consequently, there were released not
petition. These opposing views are sincerely merely political prisoners, but also thieves,
 ELEMENTARY CONDITIONS OF BUSINESS MORALS 11
burglars, rapists, and murderers who then pro- great question of practicability is involved,
ceeded in their usual practices to the terror of there is no great problem. It is merely one of
the civilian population. The attempt to bring efficiency in engineering. But where the cost
this situation under control by arbitrary meth- of factors of safety is such as to make the eco-
ods, such as arrest and incarceration on sus- nomic feasibility of an engineering enterprise
picion without trial, was opposed by the legal doubtful, the problem is different, for the de-
authorities of the army as un-American and in cision must then be whether to deprive the
violation of the Bill of Rights. I suppose there community of a service or the entrepreneur of
is no one in my audience who, like myself, does an opportunity, or to take the risks of failure.
not regard the Bill of Rights as the most funda- The question just discussed leads easily not
mental legal basis for political and social se- only to that of accident control which com-
curity. When the citizens of Palermo were con- prises the question of safety factors in struc-
sulted, many suggested that arbitrary methods tures and electrical and chemical systems, but
of arrest and detention were the only way to also to matters of personnel and discipline.
get the situation under control. When it was Whenever there is a serious accident of catas-
suggested to them that with such methods seri- trophic character in which many are killed, the
ous injustice would inevitably be done to a public reaction frequently is that such accidents
number, if not to many individuals, to this the should be prevented at no matter what cost. It
pertinent reply was made that failure to estab- is easy to see, however, that in many situations
lish control of the lawless behavior of many the reduction of possibilities of inadvertent oc-
ex-prisoners inevitably resulted in a far greater currences can he obtained, if at all, only at very
injustice to the many victims of these crimi- great expense in the introduction of material
nals. This certainly could be true. The situa- factors of safety and by excessive inspection,
tion, therefore, presented a moral dilemma of testing, and policing. Many of the services we
the most crucial character. Under such con- now have would not be economically feasible
ditions, should procedures we usually regard if the "Safety First" slogan was excessively
as of fundamental importance to maintain be applied, especially in the early stages. Conse-
abandoned to prevent the great injustice per- quently, those who make decisions in such mat-
petrated by failure to maintain law and order? ters are confronted with moral issues. To what
The right of the President to suspend the writ extent is one morally justified in loading a
of habeas corpus under certain conditions in- productive undertaking with heavy charges in
volving a great moral responsibility, is recog- the attempt to protect against a remote pos-
nition of this type of dilemma, which is ex- sibility, or eveu one not so remote?
perienced every day in the conduct of affairs.
My second illustration relates to problems of METHODS OF RESOLVING
engineering where moral questions to the -un- CONFLICTS OF RESPONSIBILITIES
initiated would not seem to be prominent. That Reflection would suggest, and experience
this is not so can readily be appreciated by shows, that although conflicts of responsibili-
considering what are ultimately moral prob- ties are recognized as presenting moral issues,
lems, what are called "margins of safety." a condition of moral tension in a business, or
It costs money, frequently very substantial any other kind of organization, can become
amounts, to introduce factors of safety to offset unbearable and disruptive, leading to severe
uncertainties of future conditions, errors of political types of controversy and opposition.
calculation, and the like. When it can be as- It therefore becomes important to discover and
sumed that the economics are such that no develop methods of resolving such conflicts. No
12 CALIFORNIA MANAGEMENT REVIEW

comprehensive discussion of the techniques of ing placed in positions involving moral dilem-
such resolutions can be given here, but a few mas which they have insufficient ability to re-
words should be said about three of the main solve by invention and construction.
types of solution of this general problem.
The first may be called the judicial method. CONCLUSION: THE SIGNIFICANCE
This essentially is the process of narrowing and OF THE DISCUSSION
delimiting the areas of responsibilities, thus Rather than presenting a summary of the
restricting the incidence of conflict. discussion, I think it might be more useful if
The second method of resolving conflict is I made a few remarks regarding the signifi-
that of reconciliation, the process of demon- cance or the pertinence of this discussion to
strating that apparent or alleged conflicts of the problems of our times. This is partly be-
responsibility are pseudo-conflicts based on cause it seems to me that any summary at this
false assumptions or ignorance of the facts. time would lead to easy generalizations and
This is a process continually in use in organi- much oversimplification. I have barely touched
zations; it is frequently expressed as "chang- upon, have merely assembled some illustrations
ing the point of view." It also frequently in- of, an underlying situation and a set of prob-
volves redefinition of jurisdictions. lems which it seems to me no one adequately
The third method of resolving conflicts of comprehends.
responsibilities may be called that of the in- This at least partly results from the increased
vention of concrete solutions. Thus, where a importance and complexity of moral behavior.
proposal which seems desirable from one stand- Unlike many of the jeremiads of today, what
point appears to involve consequences that are impresses me the most in the present situation
seriously deleterious in some respects, the solu- is not the confusion, the frustration, and the
tion may be to discover or construct another irresponsibility to which so much attention is
proposal which will effectively accomplish the given, but rather the enormous increase in re-
ends initially desired without involving the sponsible behavior that has attended the growth
deleterious effects to be avoided. This may be of modern civilization and its technological ex-
illustrated by the analogy of certain drugs pression. Despite the wars of recent years and
which initially may be of great value in the the conflicts of many kinds of which we are
therapy of a particular disease, but which have almost pathologically conscious, the fact is that
side-effects that may be harmful or even fatal if a network of social behavior of enormous size
their use is long continued. This presents a and complexity is carried on daily and largely
dilemma for the physician and often for the autonomously with relatively few errors or
patient. It leads to efforts, often successful, to failures, although it is the errors and the fail-
discover derivative or analogous drugs having ures that occupy us almost entirely in the news
the desired therapeutic properties, but not hav- reports.
ing the undesirable side-effects. The develop- This increase in the magnitude and the com-
ment of Novocain as an alternative to cocaine plexity of moral behavior is first the result of
is one of many instances that could be adduced. increased specialization, especially in economic
The need for invention of alternative means is activities and in the machinery and materials
one of the chief reasons for the effort to secure which are employed for materialistic purposes.
people of great ability, for alternative solutions Attention is increasingly given to the technical
call for imagination, fine discrimination, and knowledge now required and to the technical
persistence. Many of the moral collapses of in- skills arising from specialized experience. The
dividuals in active affairs result from their be- moral factor involved in these activities seems
 ELEMENTJlRY CONDITIONS OF BUSINESS MORALS 13
to he almost entirely neglected. Yet the depend. cannot be secured except as responsibility is
ability with which the burden of specialized freely accepted. When so accepted the possibil-
activities is carried on, and the dependability ity of effective autonomous behavior is realized.
which we ascribe to those who do the carrying It should also he noted that it is the moral
on, is the most essential aspect of modern problem that leads to much frustration and
civilization. even to pathological behavior. This seems to
Thus in earlier periods morals were confined me to have been largely neglected by psychia-
to a relatively small range of alternatives which trists who have been concerned with other fac-
were conspicuous by the fact that they could tors in personal behavior. It has been wen and
be more or less rigidly adhered to and en- illuminatingly discussed by Eliot D. Chapple
forced. Needless to say this is so little appreci- in an article entitled "Contribution of Anthro-
ated with respect to specialized functions that pology to Institutional Psychiatry." This neg-
it is extremely difficult to convey the nature of lect is to some degree responsible for the neg-
the moral problems involved except to those lect of the moral factor by those in responsible
who have knowledge of the specific functional management positions, a neglect that perhaps
problems. Indeed, it seems to me that the most is reinforced by the relative ease with which
important of our problems is to convey an un- technical problems can be approached.
derstanding of the moral issues that are in- Another aspect of this subject which de-
volved, rather than the technical and scientific serves emphasis is that it indicates the impor-
questions to which so much of our educational tance of communication from within and to
and training processes are directed. without in a specialized organization. Again
This matter takes on increasing importance and again it has been made clear to me that
with respect to one of the crucial problems of public misunderstanding is due largely to lack
our times: how to secure the essential degree of of appreciation of the moral elements involved
coordination of a vast system of activities while in specialized activities and the extreme dif-
securing the degree of decentralization and au- ficulty of conveying to outsiders what these
tonomy essential to initiative and, indeed, to moral elements are.
responsible behavior. It is almost obvious that It must occur to anyone who considers this
those who are not capable of dependable be- subject that we are in a state of considerable
havior cannot be entrusted with the making of ignorance. It simply is not known to any wide
local decisions. Yet, if this cannot be done the degree what are the number and the character
of the moral problems that are faced by those
burden placed upon centralized authority for
who do the world's work. It is here, I think,
securing appropriate behavior over vast areas
that the universities in the future will have a
is in fact an impossible one. The span of con-
great opportunity, for I doubt if those within
trol is so limited that despite methods of spe-
our organizations can be sufficiently adept and
cialized training and the inculcation of the
objective to give appropriate study to the na-
appropriate points of view authority could not
ture of the moral problems which they face.••.
sufficiently operate if it were not for the devel-
Nevertheless I think a deep reflection upon the
opment, whether inculcated or spontaneous, of
nature of business activities will indicate that
the moral sense to which we broadly give the
this is inevitably the kind of investigation that
name "sense of responsibility." Responsibility is required.
cannot be arbitrarily delegated and, therefore,
• In Human Organization, XIII, 2, (Summer 1954)
a high degree of effective autonomous behavior 1~~ . ,