The business enterprises understood primarily as existing by and for it self. True, we have stressed the relationship to the outside – to customer and market, the labor union, to the social, economic and technological forces at work in our society. But these relations have been viewed somewhat lie the relationship between a ship and the sea which engulfs it and carries it, which threatens it with storm and shipwreck which has to be crossed but which is yet alien and distinct to the environment rather than the home of the ship.
Modern industry requires an organization of basic resources which is radically different from anything we have known before. In the first place, the time span of modern production and of business decisions is so long that it goes way beyond the life span of one man as an active factor in the economic process. Secondly, the resources have to be brought together into an organization – both resources to be brought together into an organization – both of material objects and of human beings which had to have a high degree of permanence to be productive at all. Next, resources human and material have to be concentrated in large aggregations though there is of course a question how large they have to be for best economic performance and how large they should be for best social performance. Thus in turn implies that the people who are entrusted with the direction of this permanent concentrations of resources – the managers – have power over people, that their decisions have great impact upon society, and that they have to take decisions that shape the economy the society themselves of individuals within it for a long time to come. In other words, modern industry requires the business enterprises, which is something quite different and quite new.
Historically, society has always reused to allow such permanent concentrations of power at least in private hands, and certainly for economic purposes. However, without concentration of power which is the modern enterprise, an industrial society cannot possible exist. Hence society has been forced to grant the enterprise what it has always been most reluctant, that is, first a charter of perpetuity, if not of theoretical immortality to the ‘legal person’ and second a degree of authority to the managers which corresponds to the needs of the enterprise.
This, however imposes upon the business and its managers a responsibility which not only goes far beyond any traditional responsibility of private property but is altogether different. It can no longer be based on the assumption that the self interests of the owner of property will lead to the public good can be kept apart and considered to have nothing to with each other. On the contrary, it requires of the manager that he assumes responsibility for the public good, that he subordinate his actions to an ethical standard of conduct and that he restrain his self-interest and his authority wherever their exercise would fringe upon the commonweal and upon the freedom of the individual.
And then there is the fact that the modern business enterprises for its survival needs the able to recruit the ablest, best educated and most dedicated of young men into its service To attract and to hold such men promise of a career of a living or of economic success is not enough. The enterprise must be able to give such men a vision and a sense of mission. It must be able to satisfy their desires for a meaningful contribution to their community and society. It must in other words embrace public responsibility of a high order to live up to the demands the manager of tomorrow must make on himself.
No discussion of the practice of management could therefore leave out those functions and responsibilities of management that arise out of the social character and the public existence of even the most private of enterprises. In addition the enterprise itself must demand that management think through its public responsibilities. For public policy and public law set the range for the actions and activities of the enterprises. They decide what forms of organization are open to it. They prescribe marketing pricing, patent and labor policies. They control the ability of the enterprise to obtain capital and its price. They decide altogether whether private enterprise is to remain private and autonomous and to be governed by management of its own choosing.
Responsibility of management in our society is decisive not only for the enterprise itself but for management’s public standing its success and status, for the very future of our economic and social system and the survival of the enterprise as an autonomous institution. The public responsibility of management must there underline all its behavior. Basically it furnishes the ethics of management.