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Volkswagen and the Future of Honesty

In the wake of the Volkswagen emissions scandal, cynics might say that lofty talk of "business ethics" is intended only to camouflage the pursuit of profit. Yet the company’s behavior is odd, because, even – or especially – by the standard of profit maximization, its software ruse was an extraordinarily reckless gamble.

PRINCETON – If you used the term “business ethics” in the 1970s, when the field was just starting to develop, a common response was: “Isn’t that an oxymoron?” That quip would often be followed by a recitation of Milton Friedman’s famous dictum that corporate executives’ only social responsibility is to make as much money for shareholders as is legally possible.

Over the next 40 years, however, businesspeople stopped quoting Friedman and began to talk of their responsibilities to their companies’ stakeholders, a group that includes not only shareholders, but also customers, employees, and members of the communities in which they operate.

In 2009, an oath circulated among the first class of Harvard Business School to graduate after the global financial crisis. Those who took it – admittedly, a minority – swore to pursue their work “in an ethical manner” and to run their enterprises “in good faith, guarding against decisions and behavior that advance my own narrow ambitions but harm the enterprise and the societies it serves.”

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