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THE PHILOSOPHY OF ACTION AND AUTHORITY IN THE ENTREPRENEURIAL ETHIC Prof. Richard M. Robinson, PhDSUNY FredoniaAbstractThe ancient philosophical principles that define and justify notions of public action, political freedom, and the exercise of public authority, especially as explored by Arendt, are shown to extend to an American frontier-cultural foundation for the entrepreneurial ethos. It is argued here that the initiation of, and development of business organizations should be properly viewed as a category of action that is a modern substitute for the ancient civic activity (involvement in the polis). Of course entrepreneurial activity can be motivated by a desire to achieve social separation through wealth. As a result, one of the two classic motivations for ethical behavior, namely the fear of social ostracism (the other being living with the inner dialogue of conscience), is shown to be weakened by an entrepreneurial culture that is motivated to achieve a sort of “lordship” to use the description of Joseph Schumpeter. Recent relevant psychological experimental studies are also reviewed. These are shown to reinforce this notion of ethical “weakening” resulting from social separation by wealth. Introduction: Philosophical FoundationsThe philosophical foundations for public action, political freedom, and the exercise of public authority, are all relevant for explaining the proper role of the entrepreneur in Western society. Indeed, it is argued below that entrepreneurship is a key component of modern public action. These political concepts are well explored in philosophy, and these explorations are reviewed here. In particular, the 20th century philosopher Hanna Arendt especially explored these political concepts in The Human Condition (1958), Labor, Work, Action (1964), and Between Past and Future (1960). Although Arendt’s exploration does not explore these problems within the context of the modern firm, it is shown here that her explorations do provide insights into modern entrepreneurial motivation. To initiate this examination, we should first briefly explore the basic notions of power and authority as reviewed by Weber (1947). Authority can be either rational (legal via office as in a board-of-directors where shareholders vote on board members), traditional (generally seen as following some hallowed tradition as we often have for corporate board elections), or charismatic (conferred as a right to lead through informal group recognition of exceptional motivational leadership). The latter is particularly relevant for entrepreneurship. Power means the ability to affect outcomes; it is necessary for the exercise of effective authority. But to achieve a popular consensus that this authority-power combination is socially acceptable, it must be legitimized by a philosophical foundation that justifies its source, and then be established by properly established rules that meet with popular approval. The point is that without a popular acceptance of this philosophical foundation, this authority becomes socially unstable, and eventually fails.For example, consider the source of authority and power of police officers. They clearly have a philosophical foundation justified by the rules necessary for the maintenance of a civilized society, and also by the necessity for having law enforcement officers to enforce these rules. As a result, police officers also have the power with the associated rules constraining it. All of this provides a simple example of authority and power, but in an examination of entrepreneurship, we must penetrate to a deeper and more complex philosophical foundation. We pursue this examination in some detail in sections presented below where it is argued that entrepreneurship is a modern version of an ancient social activity that once had strong philosophical foundation.It is also necessary that we examine the broad philosophical concept of freedom as we might apply it to the entrepreneur’s motivation. We must do so because we recognize that a tension always exists within the business organization concerning the conflict between freedom and automatism. In “What is freedom?” Arendt (1960) uses the ancient notion of freedom, defined as the ability to act, i.e., to begin something anew, or to consciously decide to continue something traditional. This is in contradiction with the action of an automaton. This is not the “free will” notion of freedom, nor the “I think therefore I am!” notion, but it is a notion based on action, not just thought. Certainly entrepreneurs’ primary motivation would be the pursuit of this action-related freedom to initiate something new. Perhaps others, as a form of their own free action, resist this tide so as to preserve what they perceive as tradition. What is essential is to recognize that the acts of the entrepreneur are expressions of personal freedom, of a refusal to accept the role of an automaton, and to do so in the context of starting something new.Within the domain of free actions, whether through new creation, or even resistance to the new in order to preserve tradition, there can be either a bias towards creative destruction, or a bias against reform. The mere renewal of previous action, even if it is combined with a rethinking of the rationale for this action, is not typically as attractive as what might be perceived as the more heroic action to create anew as with entrepreneurship. Power can always shift to the charismatic social leader within the organization (perhaps the entrepreneurial leader), who by strength of persuasion can overcome any bias against action. Charisma can also lead away from what is perceived as traditional expertise. At such times, even those who stand for the latter, those who Arendt (1963, 2003) claims exhibit the noble nature of speaking out in a social setting against any charismatic destructive leadership, may be perceived as illegitimate. Still, there is a special position, that is a special heroic category for the entrepreneur who is capable of combining expertise with charisma and creative leadership to establish a successful organization. This charismatic demonstration of entrepreneurial and creative action manifests the modern version of the ancient notions of the heroic; it can be akin to the actions of Homeric legend. This action is examined below in the public and heroic leadership context. The important point here is that for this action to be effective, it must be backed by a legitimate philosophically-acceptable authority, and this needs to be backed by appropriate philosophically justified power. This philosophical basis for entrepreneurial action, and the ethical implications that follow from this basis, is the subject of this composition. The Philosophical Basis for Authority within the FirmIn “What is authority?” Arendt (1959) points out that authority stands in contradiction to coercion or persuasion. She argues that the linkage of religion-tradition-authority was the basis for ancient Roman authority. This linkage lasted until the dawn of the modern age, and it defined authority as “more than advice, and less than command, an advice which one may not safely ignore.” “Religion” is used in a broad sense here, as a “binding back” with a traditional philosophy. Therefore this notion of religion need not strictly conform to our Western notions of Judeo-Christian theological religion, but it does conform to notions of a philosophical foundation. The philosophical foundation that provides authority to entrepreneurship also needs this “binding back” to strong cultural roots.The seeds of the ultimate demise of this Roman linkage were actually sown by Plato in his follow-up to the “allegory of the cave.” Plato used the concept of “hell” as necessary to control or coerce the common masses who can only respond to the “enlightened” (those who leave the dark cave in search of the light, and who come back within the cave to try to bring others to the light), with a hostile resistance (a hostile anti-intellectualism). (See The Republic, 615a.) The concept of “hell in the afterlife” forced these common masses to behave in a civilized fashion as defined by “authority.” But once the absurdity of the concept of “hell” was understood at the start of the enlightenment age, and therefore the Roman-Greek linkage was broken, then the philosophical foundation for authority was destroyed. Since this philosophical-traditional basis for authority was never reestablished, arguments about the decline of the West eventually emerged. (Oswald Spengler’s Decline of the West, 1918, being one manifestation.) Note that the Kantian notion of the categorical imperative manifests this break in the linkage. Rather than relying upon religious based moral prohibitions, it seeks to develop practical moral maxims that are consistent with the commonly accepted categorical imperative and are developed through democratic discourse. The second formula for the categorical imperative seeks to clearly prohibit the coercion of individuals into serving one’s ends while preventing them from pursuing their own ends. Such prohibitions against manipulation of the common masses originated during the enlightenment age, that is at the start of the modern age. These democratically established “prohibitions” manifest a reaction against this Roman religious-based authority. They manifest an attempt to reestablish a new democratic philosophy built upon individual reason and public discourse.The Roman religion-tradition-authority linkage had a promise of permanence that engaged individuals in cultural institutions such as churches, civic organizations of government, military organizations, and craft guilds, all of which are designed to last beyond the individual lifespan. The modern business organization can be viewed as the continuation of these ancient institutions. Hence the potential capacity for building, preserving, and continuing our efforts beyond our lives so as to benefit those who come after continues with the modern business firm, i.e. a replacement for among other institutions, the traditionally organized religious church. Note that although the modern business continues the philosophy-based social authority, it does not do this in the tyrannical sense associated with the ancient cultural institutions, at least tyrannical for the common masses. The social authority manifested by modern institutions assures that certain freedoms are maintained.Arendt (1959, p. 501-502) suggests, however, that there must be something different with the American foundation of authority versus the European foundation. In fact, Arendt argues that confusion about the very nature of authority, and its foundation, has existed since the fall of the Roman foundation:“…. The one political experience which brought authority as word, concept, and reality into our history – the Roman experience of foundation – seems to have been entirely lost and forgotten. And this to such an extent that the moment we begin to talk and think about authority, after all one of the central concepts of political thought, it is as though we were caught in a maze of abstractions, metaphors, and figures of speech in which everything can be taken and mistaken for something else, because we have no reality, either in history or in everyday experience, to which we can unanimously appeal.” (Arendt, 1959, p. 498.)In an attempt to relieve this “confusion,” and to follow up on Arendt’s hypothesis, I suggest that there is an American foundation of authority which is built upon the following strong and generally recognized cultural principles:The individual is hero of his/her own story.This principle has obvious Greek roots, but is was also expanded by our notions of the exploration and development of the American frontier, and also by other heroic American images such as Steinbeck’s “Tom Joad” of Grapes of Wrath, i.e. the 1930s presentation of the common man who crusades heroically for the rights of all common men. All have the right to participate in governance.This is the notion that, “We need not fear the rabble.” It harkens back to the Jeffersonian age, the Age of Jackson, and the political movements of the 1930s. Note that Kant’s “average intelligence” requirement for democratic participation has strong implications for this principle. All have freedom of geographic movement, employment, property ownership, and even entrepreneurship, so that social mobility is possible.This implies a certain freedom in markets in the progressive sense of a lack of any monopoly domination of markets. Free and generally competitive markets are viewed as essentially democratic with the price mechanism being the voting method used for society’s allocation of resources.Religion is not the basis of law, but fair democratic debate is.Religion may, however, be the motivation for the various intuitions brought to the democratic interaction that establishes law, but only the filter of democratic discourse can decide which intuitions are worthy of popular endorsement. The decrees of religious institutions cannot have the weight of law. Buell (2006, “Introduction”) points out that the American Transcendentalists of the mid-nineteenth century, such as Emerson, especially emphasized resistance to religious authority particularly of established churches. They, of course, developed the Unitarian religion which particularly emphasized the authority of the inspiration of the individual rather than of revealed scripture as interpreted by a clerical elite. Does our American view of business (free and competitive markets) stem from our Western-heritage roots, or has it evolved from something newer? Economic history indicates that the American view must be from newer roots. Free markets, free geographic movement, and capitalism in general, are all relatively new concepts born roughly with the American republic. I suspect that the image of the common man as hero, fighting for fair rules of the game, forms the very philosophical foundation for the American view of authority, and that freedom to conduct business is at the very foundation of American freedom, especially in this current age of non-industrial repetitive work. Americans do not wish to see themselves as mere draft animals, but prefer to perceive themselves as heroes struggling for something idealistic in their business roles. This is the mythic model of pioneers penetrating and developing the frontier. This is the archetype of heroic individual action, the roots of which we can trace back to Homeric legend. This archetype forms the very philosophical foundation of American notions of authority within the business realm. It is natural for us to use the hierarchy of Plato’s Republic with its philosopher king-ruler of the common masses as an ancient model for the authoritative-hierarchical firm. But this is not the mythic model of the American pioneer frontier-hero. In commerce, from the ancient age through the enlightenment, markets were certainly not free even in myth. Governments and guilds regulated trade and commerce up through the age of mercantilism, i.e. up to the 19th century. Hofstadter (1961) explored the role of the American frontier religions, with their decentralized structure, and informally educated clergy, as a cause of the rise of the non-elitist authority on the American frontier. These breaks from the European authoritarian structure allowed the development of the four pillars of a new American authority: (1) the individual American frontiersman as hero of business development, (2) local governance, and even national governance such as during the Age of Jackson, as dominated by the non-elitist common man, (3) the freedom of geographic movement, especially to obtain and develop property, and (4) a non-religious institutional basis for authority. The frontier also provided an additional brick to the building of the free-market myth, i.e. on the frontier, by necessity trade was largely unregulated. The markets for agricultural goods, and of the services of craftsman, were unregulated. Even the infrastructure for this trade was seen as largely created by the frontiersmen or individual entrepreneurs. This private profit-making infrastructure included the commercial railroad and canal networks that essentially opened the American Midwest and West to development, while shipping its goods back to Eastern seaboard ports to facilitate exports to Europe. All of this rugged frontier development strengthened the foundational myths. This model of rugged individualism has, however, a corresponding reaction in American politics. The progressive age, with its emphasis on a populist politic that proposed government regulation of business, along with the development of union activity, does not fit with the foundational principles of American authority as reviewed above.9 The resistance to this movement, i.e. a counter reaction of the Taft-McKinley-Coolidge era, actually originated in the gilded age of big business and its associated increased income and wealth inequality, but it is also rooted in the mythic foundational principles. The current myths surrounding the benefits of free-market capitalism are also founded in the four principles reviewed above.Greek Philosophical Notions of Labor, Work and Action In “Labor, Work, Action,” (1964), Arendt carefully differentiated the concepts essential for our analysis. She states,“I shall assume that the age-old distinction between two ways of life, between a vita contemplativa and a vita activa, which we encounter in our tradition of philosophical and religious thought up to the threshold of the modern age, is valid, and that when we speak of contemplation and action we speak not only of certain human faculties but of two distinct ways of life.” (1964, p. 167)Surely this distinction is of relevance for the modern firm. The vita contemplativa, is hardly a prized lifestyle within the American cultural myth. The motivation for the active life, particularly as specified in its ancient Greek origins, is of substantial relevance within entrepreneurial motivation. It plays a central role within the American myth. Arendt points out (1964, p. 167) that to the ancient Greek, “labor” means the mundane, repetitive physical effort necessary for life’s maintenance. “Work,” in the ancient Greek, denotes a distinct difference with “labor” in that it means a more creative craftsman-like approach to the fabrication of things beyond the merest necessities, but still a fabrication of things that add to life’s maintenance. “Work” of this sort can go hand-in-hand with “action,” which the ancient Greeks use to describe the organization of people so that living peacefully together is possible, and the conditions for the quiet of contemplation are assured. “Action” combines both “words and deeds” so as to achieve the organizational conditions necessary for the vita contemplativa. The active life in the polis was not the highest aspiration, but rather the life of the philosopher, the contemplative life of pursuing truth was the highest aspiration. Hofstadter (1963) documents and explains the American reversal of the rankings of these aspirations. American entrepreneurship certainly manifests the combination of these notions of fabrication work and public activity, but not particularly for the purpose of achieving the contemplative life, but rather for the development of considerable wealth.Arendt (1964, p.169) argues that the prestige associated with work and action reversed in the modern age, i.e. post Smith, Locke and Marx. Productive craftsman-type labor, the work of fabrication such as that envisioned as performed by Jefferson’s yeoman farmer, became the ideal. American anti-intellectualism especially favored the non-elite uneducated yeomen-masses of the frontier, while the menial repetitive work of the industrial factory held the lowest prestige. The entrepreneurial action in this modern age is most easily viewed as a combination of work (fabrication) and action (a social organizational activity), and it stands in contradiction to the repetitive-industrial work of lowest bined with these notions of the prestige-rankings of human activities is the notion of eudaimonia, the pursuit of the good or flourishing life. Greek philosophy links this pursuit to the social interaction with the family and polis. Through both words and deeds, the individual interacts with his social group, and only through this interaction could the flourishing life be established. Wrong doing that would separate the individual from this society would destroy this life, as explored in the Socratic Dialogue Gorgias (1961). Therefore, in order to be prestigious, actions and fabrications, must be within these ethical constraints. Entrepreneurial activity can reach the philosophical height of this social interaction when the entrepreneur is motivated by joining with the social group that is the firm, recognizing it as necessary for eudaimonia. Entrepreneurial activity can also be motivated, however, by seeking to achieve a separation from the entrepreneur’s social group, even within the firm, a separation that can be achieved by substantial wealth creation. Joseph Schumpeter (1911, p. 93) described three entrepreneurial motives:“First of all, there is the dream and will to found a private kingdom, usually, though not necessarily, also a dynasty. The modern world really does not know any such positions, but what may be attained by industrial and commercial success is still the nearest approach to medieval lordship possible to modern man …. (Italics added.)Then there is the will to conquer; the impulse to fight, to prove oneself superior to others, to succeed for the sake, not for the fruits of success, but of success itself. From this aspect, economic action becomes akin to sport ….Finally, there is the joy of creating, of getting things done, or simply exercising one’s energy and ingenuity.”How do we analyze the ethical implications of these three Schumpeterian motives? Also, which of the three is paramount? If it is the pursuit of eudaimonia through the “joy of creating,” especially in the social sense, then this provides a natural motive for avoiding any moral wrongdoing that might result from playing the leadership role among those organized. If, however, the paramount motive is to achieve a social separation that is akin to a “lordship,” then the motive for avoiding wrongdoing is so much weakened. A “lordship” does not fear the disapproval of his subjects. By “lordship” I mean a separation due to extreme wealth differences. Of course, the Schumpeterian motive of “creating,” and/or proving “oneself superior,” need not lead to the desire for this wealth separation.The Nature of this Social ActionIt is argued in this section that entrepreneurial activity is a paramount version of social action. Because of the complexity of human relations and inherent conflicts, all social action has difficulty achieving its purpose. The resulting chaos, Arendt (1964, p. 180) argues, intentionally or unintentionally produces stories “as naturally as fabrication produces tangible things.” These stories are designed to make sense of the chaos of civilization, to offer a logical-causation that connects events for the purpose of explaining actions. These stories are woven into various documents and materials; they express the words and deeds (actions) of some heroes. In the classical ancient age, Homeric Achilles is the archetype of “the speaker of great words, and the doer of great deeds.” The story of the Illiad expresses the polis’ ideal responsibility of both speaking at public meetings, and following up these words with heroic deeds.The essential parts of these story-documents are the promises made to overcome chaos. The communication that is an essential social duty of all, that establishes a way-of-life within the social community, is comprised of promises and stories. The modern firm is an expression of this communication in that it is essentially a nexus of implicit and explicit contracts (promises) and imperfect duties where people are driven together apparently by economic need, but also possibly by social interactive need. In this context, the arrangement we call “the firm” expresses a freedom to contract and promise, and it can be a complete expression of modern social action, i.e. a modern version of the ancient Greek action in the polis.The hero of the story of the modern firm is the organizer-entrepreneur who persuades others to join their fabrication efforts with his or her own to start, or continue, a social organization. This persuasion consists of both words and deeds, and appears to be an heroic attempt to make logical sense of the chaotic world for an ultimate economic purpose. The Western-American culture contains many of these heroic stories of entrepreneurship. They correspond to Homeric or other classical tales of overcoming chaos through actions posed as every bit as courageous as Achilles, Odysseus, or Jason.Coincident with this heroic freedom of action, or combination of heroic words and deeds, are the natural demands for conformity in society. Arendt (1964) argues that this conformity results from a replacement of heroic actions by repetitive behavior as the foremost mode of human interaction. This is a conforming behavior that does not reflect distinguishment, nor individuality, nor courage. The daily greetings, acquiescence to norms, repetition of mundane participation in consumption, all represent much of this conformity. This occurs because both the polis and entrepreneurial social group, with its focus on the words and deeds of action that earn individual prestige, can only survive through certain restrictions on this very freedom of action. Not everybody can play this leadership role. Excesses would destroy the heroic nature of the action. For example, the firm can only have a limited number of leading organizers, and the market can only accommodate a limited number of firms. As a result, repetitive behavior and conformity must be a resulting characteristic of much of firm activity, i.e. a certain degree of authoritarianism must characterize the modern firm. In addition, this forced conformity results in “an almost irresistible inclination towards despotism” (1964, p. 194) which is less tolerant of nonconformity. This tendency towards despotism, I argue, is so much the stronger when the motive of the entrepreneur is to separate from the social group he/she leads, rather than fully joining in this modern corporate version of the polis. It stems from the lack of communication that inevitably results from this separation in that without two-way communication, it is easier to rule by decree, even when the rules are suboptimal for efficiency. Optimal rules could only follow from a full communication between management and other firm participants. Consider again that a motive for the entrepreneur may be the creation of a substantial personal wealth, which in turn may naturally lead to a social separation, a sort of unapproachable “lordship.” This appears to be a prime motive within the modern firm. It is similar to, and perhaps a reflection of, the American frontiersman’s motive to separate from society. The American society, formed for the upraising of the common masses, has ingrained in it a strong motive for separation from these very masses, a desire to journey to an upper-stratified social elite. Perhaps this best describes the industrial and post industrial American society.In describing modernism, Arendt points out,“Neither education nor ingenuity nor talent can replace the constituent elements of the public realm, which make it the proper place for human excellence.” (1964, p.199)By “human excellence,” she might have substituted “heroism.” We then ask, “What does provide this modern location for expression of great words and deeds, that is the action of the social sphere of the ancient Greeks?” Of course the answer substantially lies in the action of the business world, the entrepreneurial creation of the new firm, or the extension of the existing firm. Hofstadter (1963) documents and argues that the anti-intellectualism of the American culture eliminates certain types of intellectual expression, such as academic achievement, as being particularly prestigious. For the common person, the modern impulse to create in the business world possesses all of the ancient prestige of action in the public realm, a prestige that is not present in other intellectual excellence, or even accomplishment in the fine arts.Cultural Principles of Entrepreneurial Authority and ActionThe four principles at the philosophical foundation of American authority (reviewed above) also form the philosophical foundation for the most important social action in American culture, i.e. the actions associated with business formation, retrenchment and extension. It was argued above that managerial action in business is, or at least could be, a modern version of involvement in the ancient polis. The words and deeds that formed the paramount action in the polis in ancient Greece can now be interpreted as having a modern common-man’s corresponding action that results from the economic impetus to form organizations for the fabrication of goods and services. Management and skilled labor compose both the leaders and the fabricators who act through explicit and implicit contractual agreements to benefit both those organized and the general public.This modern version of words and deeds provides the motive force, i.e. the logos, for firm activity. The neoclassical economic-seeking of profits, and the neoclassical marginalist solution that determines the extent of, or the design of the firm, is the result of this fundamental social interaction that we describe as firm activity. The neoclassical model may be accepted as a description of either the result or the path (profit seeking path) business firms take, but not necessarily the most fundamental urge for social interaction that expresses itself in entrepreneurial activity. The entrepreneurial motive to form a business, a motive that usually requires exhaustive managerial hours and emotional commitment, often generates a low financial return. This model of entrepreneurial action within the social group, with its cultural principles as reviewed above, provides a viable explanation for this considerable investment, i.e. the benefits of apparent social interaction that extends beyond monetary profit. These benefits may be personally valued as stemming from the individual’s demonstration of heroism, or charisma, or simply social contact. In any case they also capture the essence of freedom of activity. The 19th century’s American Transcendentalists emphasized these benefits. As stated by Emerson (2006, p.33.), “There are new lands, new men, new thoughts. Let us demand our own works, laws and worship. To create, - to create,- is the prize of divine presence.”All of this supports the application of the four American-cultural principles reviewed above is therefore relevant for entrepreneurial motivation:The entrepreneurship motive can clearly be explained by the desire of individuals to be heroes of their own story.The widespread desire for involvement in business management and entrepreneurship is an expression of the American individuals’ desire for involvement in community governance.Entrepreneurship expresses the desire for freedom to own property, social mobility, and geographic movement.The rules established for the firm, as constrained by society’s laws and sense of ethics, are largely determined by the entrepreneurial engagement, and do not directly result from any scriptural or external oligarchic decree. This also manifests a certain freedom of intellectual involvement and expression. These four points describe the appeal of entrepreneurial involvement within American culture. They all particularly appeal to the American original immigrant-pilgrim desire for new beginnings, and for forming new subcultures. We certainly observe many entrepreneurial firms, such as Microsoft and Apple, as very much the expressions of new business subcultures. They developed the new campus-type business location facilities, with unrestricted hours, dress, and interactions that better reflect academia than was manifested in previous business models.Unethical Action and AuthorityThe four principles reviewed above have obvious implications for ethical motivation in entrepreneurship. In Western philosophy, there are two ancient-Greek foundational reasons for why agents avoid the unethical:There is the Socratic motivation (the Gorgias dialogue of Plato, 1961) that “to do wrong is misery; to suffer wrongdoing is nothing in comparison.” This is the Socratic argument that nobody will do wrong willingly, but only out of ignorance because the conscience will be guilty.There is the “separation from the polis” in that wrongdoing results in separation from the very society that enables the flourishing life (eudaimonia) possible.Arendt (1971) also argues that the Socratic motivation to avoid wrongdoing essentially stems from the “inner dialogue” we have with ourselves, what is often called conscience. To violate our self-recognized moral rules would “contradict our conscience,” and make living with oneself intolerable.The separation from society argument stems from the Socratic Dialogue The Apology (Plato, 1961) in which Socrates suffers death rather than be exiled from Athens, his society. It is further rooted in “the great words, and great deeds” of other ancient Greeks who defended their society rather than be separated from it. Consider Hamilton’s review of Iphigenia’s refusal to kill Orestes:“It is not love of his friend alone that constrains him but also fear of what people would say, and he knows it and speaks it straight: “Men will whisper how I left my friend to die. Nay – I love you and I dread men’s scorn.” (Hamilton, 1993, p.82)Also consider that when Oedipus appears for the last time before his exile, he speaks his misery, and expresses his wish that he had died in infancy. His friend answers, “I also would have had it thus.” Such was the misery of being separated from society, either through scorn or exile. Besides the “inner dialogue,” the fear of community separation also formed the ethical motive for the ancient Greeks. In the context of the social-separation motive against wrongdoing, we can now apply the four foundational principles of authority in American business culture:An entrepreneur cannot be the hero of his/her own story when wrongdoing is involved. Why is this so? It is so because the story must be accepted by those organized into the firm, and they will reject a wrongdoer as their hero.The entrepreneurial desire for involvement in the business community is destroyed by wrongdoing. The implicit trust that is necessary for the business community to thrive is irredeemably destroyed by wrongdoing.Wrongdoing in the business community usually involves violating the property rights of others, which further generates community hostility for the wrongdoer.Entrepreneurial managers who have the opportunity to form the rules of the business community commit especially egregious violations, as viewed by the firm’s internal constituents, when and if they violate these rules.The first of these principle motives, the desire to be the hero of the entrepreneur’s personal story, does not strictly stem from the fear of social ostracism, but it is associated with it. The tag of being the firm’s heroic leader is jeopardized if society views the entrepreneur as a wrongdoer. The second and third motives, however, are directly community based, where fear of ostracism due to violation of some foundational principle of American culture provides the ethical motive. Furthermore, this fear of ostracism as motive is strengthened by the fourth principle since a morally wrongdoing entrepreneur who established the very code that is violated would be viewed as placing herself/himself above the rules, as insisting that others must conform, but not the manager, and this solely because of her or his special position. What other action could be perceived as so violating the very democratic foundation of American culture? This would be a declaration that the manager envisions herself/himself as elite.An associated question that is essential in business ethics concerns the issue of collective responsibility. This is a natural question since business organizations are, of course, social groups capable of collective wrongdoing. For a member of a group to be guilty not by action but only by association, he or she must have been capable of dissolving this membership, have prior knowledge of the wrongdoing, and still have not dissolved their relation with the firm. This prior knowledge requirement, combined with the requirement that the individual can dissolve membership, also requires that the individual not be powerless in preventing this wrongdoing. Arendt (2003) argues that this “powerlessness” essentially presupposes that the individual be isolated from decision making or influence. The four principles derived above therefore form a foundational basis not only for individual guilt in wrongdoing, but also for collective responsibility for prevention. Entrepreneurs may organize others, but those organized may suffer any of the four results presented above through associated moral violations. Knowing this, those moved by the entrepreneurs to join the organization must persistently examine the firm’s actions to consider dissolving their association. This poses a particular sort of extra cost associated with entrepreneurial organization that might not be perceived as present in established firms that appear to exhibit well-established rules, and with a track record of apparent ethical conduct. The argument here is that when the entrepreneurial manager is part of the social group organized into the firm, this very social group has the ability to pressure managers to avoid wrongdoing. This fear of social disapproval or ostracism is an ethical motive force but it requires that the entrepreneur not be separated into a sort of “lordship.” The Frontier Ethos and Social SeparationThe essence of the American frontiersman myth is that by strength of heroic individual character, the individual farmer and rancher pushed back the wilderness to bring goods to market. By their nature and locale, these markets were small and free. The local townships were geographically dispersed with low population density. In this society, fear of social ostracism might have been a weak motive for avoiding wrongdoing. This is in contradiction with the social motive of the Greek polis. Separation from this frontier society that might result from perceived wrongdoing would likely form only a slight motive for ethical behavior. On the frontier, the good conscience, and living with oneself, would likely form the only strong motive for moral conduct. The historical and mythical roots of struggle on the frontier, without the advent of unions, but with emphasis on the individual work ethic and cleverness, remain with us as the model of individual business character. The emphasis is not on the group, the organization that corresponds to the Greek polis with its activities of heroic words and deeds, but rather on the individual and lonely accomplishment. A de-emphasis on heroic words would appear natural on the frontier, especially the words that might organize others. Of course, a de-emphasis on words in current business organizations is hardly optimal. Hence there is an inherent conflict between the American cultural myth and the ancient philosophical model of ethical motivation. In the American-frontier mythology, the gilded age is typically used as an example of an era of individual accomplishment rather than a time of original business formation. Unfortunately it has been used as a model for misbehaving robber barons who separate themselves from their social-cultural group. In fact, the wealthy of this age formed their own sub-culture in Eastern financial centers.19 Actions against this wealthy class, not against the common humanity, would have provided these entrepreneurs with the model of behavior that might have prevented unethical conduct. For the robber barons, separation from the common masses was the goal, not the fear. These models of heroic American action were formed around the stories of clever creations of great wealth, and not formed around the failures in the cultural polis of the day. The great wealth creation of that era, and also of today, provides an a priori separation from the contemporary cultural polis. Ostracism from the employees of the modern firm for wrongdoing has hardly been feared. Today, it is not unethical action that separates management from the common masses, rather it is the rewards of successful entrepreneurship because these rewards move the entrepreneur to a higher social stratification. (See the Appendix for a contrary example, i.e. a brief biography of a very successful entrepreneur who exemplified the opposite of being motivated by the achievement of social separation.)De Tocqueville also addresses this problem of an emerging wealthy class due to the industrialism of the early nineteenth-century. He observed that the wealthy industrialists of his era (1830s) did not share a common spirit and set of goals with their workers; that these workers were brutalized by their employment, and they had no social bond with the industrialists. (See De Tocqueville, 2003, Volume 2, p.645.)The relevant question therefore concerns whether the current entrepreneurial motive for generating great wealth so as to reach an extremly stratified upper-class, conflicts with traditional Western culture. Does the fear of social ostracism still provide any motive for ethical business behavior? This question may well be answered in the negative. Empirical Studies of the Social-Class-Separation EffectPiff, et al (2012) examines the comparative relations between social classes and unethical behavior. One theory, presented and explored by Gino and Pierce (2009), Adler, et al (2000), and Kraus, et al (2011), is that lower-class individuals live in environments defined by fewer resources, greater threat, and greater uncertainty. As a result, lower-class individuals might be more inclined to commit unethical behavior to compensate and garner more resources. An alternative theory, argued by Piff, et al (2012), is that the greater resources enjoyed by the wealthy upper-class furnishes greater independence and freedom that results in a self-focused social tendency. This class is less cognizant of others, and less able to recognize the suffering of others. This is confirmed by Kraus, Cote and Keltner (2009), and also Kraus and Keltner, (2009a). Also Kraus and Keltner (2009b) indicates that the upper-class are more disengaged during social interactions.Behavioral economic studies show that upper-class wealthy individuals are less generous and altruistic. These behavioral studies and analyses of nationwide survey data are reviewed by Piff, et al, (2010). They show that upper-class households donate a smaller portion of their incomes to charity than do lower-class households, As a result of these studies, Piff, et al. (2012), theorize that “increased resources and independence from others cause people to prioritize their self-interest over the welfare of others, and perceive greed as positive and beneficial, which in turn gives rise to unethical behavior.” (p. 1) To explore this theory, they conducted seven empirical studies of observations in natural settings, and also in controlled laboratory experiments. Those who identify themselves as upper-class, or in some experimental observations those who meet certain objective criteria, such as riding a more expensive automobile, demonstrate more unethical decisions and behavior than those of the lower class.All this empirical and experimental evidence indicates that the upper-class adopts more unethical behavior than the lower class because of the following:The upper-class has greater independence and hence privacy from others. It therefore has reduced concern for the evaluations of others with respect to judgments of unethical behavior.The upper-class demonstrates lower risk aversion with respect to the consequences of unethical behavior because this class has more resources to deal with the potential consequential “downstream costs.”The upper-class has feelings of entitlements that are fulfilled by unethical behavior.The upper-class focues on greed.In studying the lower-wealth class, however, the experiments of Piff, et al (2010) showed that the lower class acts in a more pro-social fashion because of a greater commitment to egalitarian values and feelings of compassion. Because the lower-class must rely upon greater cross-sectional dependence (on each other), individuals in this class are more likely to conform to its ethical norms. This adds the missing piece in the class-related ethical story. Motivation to leave the lower class in order to reach the upper-class is essential to achieve the independence that furnishes lower social pressure towards ethical behavior.In general, the empirical psychological studies reinforce the philosophical argument that the wealth separation of social classes enables unethical behavior by the upper class. The primary motive for ethical behavior provided by social pressure is weakened by this wealth separation desire.ConclusionThe four principles that form the justification for entrepreneurial authority and action in American culture, have been shown to actually stem from Western philosophical foundations. They include: The entrepreneurship motive generally stems from the desire of individuals to be heroes of their own story.Entrepreneurship expresses the American desire for involvement in community governance.Entrepreneurship expresses the desire for freedom to own property, social mobility, and geographic movement.The rules established for the firm, as constrained by society’s laws and sense of ethics, are largely determined by the entrepreneurial engagement. This manifests a certain freedom of intellectual involvement and expression.The Shumpeterian motive to build a sort of “medieval lordship” through developing a business empire to achieve an upper-class wealth-stratification, however, eliminates (or at least severely modifies) one of the two classic reasons for ethical behavior, namely the fear of social ostracism that occurs as a result of wrongdoing. This leaves the inner dialog of conscience as the only motive for ethical behavior. Empirical studies from psychological experimentation support this wealth-stratification effect on ethical motivation. Furthermore, this wealth stratification is well engrained in the American entrepreneurial ethic, a phenomenon that leads to a modern crisis in business ethics. AppendixAs an example of one of many successful entrepreneurs who created business empires, but who was strictly motivated by action within their business and community, and not social separation from it, I offer Fred Meyer, the inventor of the modern hypermarket. Having immigrated from Brooklyn to Portland Oregon in 1909, Fred Myer began with a small coffee and tea business. He expanded to invent the hypermarket in 1922, and eventually expanded his empire to 63 stores in the Pacific Northwest by 1975. His annual total sales exceeded $1 billion. Throughout his career, Fred Meyer demonstrated two particular characteristics:He maintained the same living standard (same apartment dwelling, and the same personal shopping habits even in his own store where he walked the isles almost daily, and paid full price), and he continually and personally interacted with his employees and customers, treating them as friends who offered valuable advice. He reinvested almost all of his wealth into expanding his hypermarket empire because, having successfully lived through the great depression of the 1930s, his primary stated concern was expanding and maintaining employment. He also was extremely charitable during his life, and at the end, he left his wealth to charities of various sorts in the Portland area. (See the Oregonian, September 3, 1978 and Wikipedia under Fred G. Meyer.)Fred Meyer was so involved with the employees of his firm, as well as with members of his original social community, that the idea of social ostracism would have been a considerable motivation to avoid wrongdoing. In life, he was never publicly accused of any wrongdoing, and in death, he was considerably praised and eulogized by the significant leaders of his community, including Oregon Governor Robert Straub.ReferencesAdler, N.E., E.S. Epel, G. Castellazzo,J.R. 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