What can business history tell us about regulation and business responsibility?
The Purpose Of Business
Looking at business history gives an interesting perspective. The idea that businesses are only there for the benefit of shareholders (see here) is not the only view that exists by a long way. One set of people who had a different view were the Quaker business people of the 19th century. The Quakers are a modestly sized Christian group. Richard Nixon was of Quaker heritage but he isn’t necessarily the perfect poster child.
The Quakers were major players in the English business scene. They also had notable strength in nineteenth-century US business. The list of names of businesses associated with the Quakers are impressive. The Quakers built a great brand for their business dealings. Integrity was central to the idea of a Quaker business. Quaker Oats illustrates how strong the brand was. Interestingly, the founders of this business were not Quakers. Still, the owners thought taking the name would associate the brand with the Quaker’s positive qualities.
Probably the most famous Quaker business person was George Cadbury — of chocolate fame. (The Quakers are massively over-represented in UK confectionery). He seems to have developed an early form of CSR (Corporate Social Responsibility). Indeed, he might have thought it odd to seek solely to increase funds for the owners.
Cadbury’s approach seems to see how far the business could sustain the improvements in the lot of stakeholders — illustrated in the donation of the Bournville to the village trust.
Fincham, 2019, page 54
Cynicism
There has been pushback on the idea of business for good. If you compare working conditions against modern laws then all nineteenth-century conditions left a lot to be desired. That said, I would worry less about that comparison. The explicit intention was the elevate the conditions of the workers. At the time working conditions were pretty awful and the Quaker plans represented progress (not an end state we should aspire to). It seems reasonable to conclude that many of the business owners were genuine in their desire to improve the world and would probably celebrate that we have made further progress since. They seem to have felt that business could be a force for good.
Regulation
History also shows us why we need to regulate business. Regulation and business responsibility aren’t competitors but go hand in hand. While in an ideal world firms might do the right thing all the time this seems too much to hope. Human beings, and their organizations, aren’t always perfect.
Furthermore, the idea that consumers will punish firms doing the wrong thing has at least three limitations.
Firstly, the consumers need to know about the problem. This isn’t always the case. Consumers buy a lot of different things. Who really expects consumers to know everything about their purchases even if they do genuinely care?
Secondly, consumers need to care. Consumers buying a product might not be impacted by bad business practices. In which case sometimes they won’t be sufficiently concerned to pressure for change that is vital for the other people who are impacted.
The third problem is neatly illustrated by the story of the “Bradford Sweets Poisoning of 1858, in which 21 died after eating humbugs in which arsenic have been mistakenly used as a sugar substitute” (Fincham, 2019, page 49). There is a problem if the consequences are so dramatic that the consumers can’t just say, ‘well we won’t buy from you again’, when a firm acts badly.
Regulation And Business Responsibility
There is much to learn from history including why we need regulation. One of the reasons we don’t have arsenic in our sweets is because we learned from previous disasters. The past also illustrates many problems. The Quaker business approach to women — dismissing them upon marriage — was hardly great. The same volume that the author, Fincham, was writing in notes a lack of enthusiasm from some Quaker businesspeople in fighting child labor. Furthermore, some of the Quaker businesspeople opposed slavery but failed to follow through on their convictions when they were lauding Thomas Jefferson. These are glaring errors.
Yet, we can also celebrate the positives. Some people have seen business as a potential force for good in the world. Let’s have more of that.
For more on business and social issues see here.
Read: Andrew Fincham (2019) Cadbury’s Ethics and the Spirit of Corporate Social Responsibility, Pages 14-58 in Quakers, Business and Corporate Responsibility: Lessons and Cases for Responsible Management, Springer, Editors Nicholas Burton and Richard Turnbull