Volkswagen and the Future of Honesty

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.”

Since then, the idea has spread, with students from 250 business schools taking a similar oath. This year, all Dutch bankers, 90,000 of them, are swearing that they will act with integrity, put the interests of customers ahead of others (including shareholders), and behave openly, transparently, and in accordance with their responsibilities to society. Australia has a voluntary Banking and Finance Oath, which obliges those taking it (more than 300 people have so far) to, among other things, speak out against wrongdoing and encourage others to do the same.