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It is after dinner in the library of Lady Britomart Undershaft's house in January 1906. The high-tempered Lady Britomart sits at her writing table. Her son, Stephen, a grave young man who takes himself very seriously and is somewhat in awe of his mother, enters the stage. He asks his mother why she has called him. She asks him to wait and chastises him for beginning to read in the meantime and fiddling with his tie.
Britomart then aggressively announces that Stephen is now a grown man, well traveled and educated, and he must take charge of the family affairs. Though both his sisters are to be married, Britomart's income cannot sustain four households. Lomax, Sarah's fiancé, will not receive his trust fund until 35. Barbara, the most promising member of the household, has joined the Salvation Army and become involved with a tempestuous Greek scholar, Adolphus Cusins. Britomart cannot avoid the topic any longer—they must speak of Stephen's fabulously wealthy father, the great military industrialist Andrew Undershaft.
Stephen is all too aware of his father's wealth. He rarely opens a newspaper without reading of the latest weapon from the Undershaft and Lazarus firm. With his cannons and war loans, Andrew Undershaft has Europe under his thumb. He is above the law.
Britomart remarks that Undershaft has broken the law since birth, as his parents were unmarried. Like all the Undershafts before him, he was a foundling and, in the tradition of the armory, has disinherited Stephen to find a foundling as his own successor. Britomart divorced him as a result. She could not bear such an immoral man, a man who subscribed to a "sort of religion of wrongness."
Stephen is naïvely bewildered by his father's strange morality. Right should always be right, and wrong is wrong. He insists that they not ask for his father's assistance. Britomart resigns herself to asking Andrew. She has already invited him to visit this evening and meet the family and Stephen is outwitted and overwhelmed.
Britomart asks Morrison, the butler, to summon the family to the library. She warns Stephen against appearing nervous. It will only encourage his sister Barbara, a major with the Salvation Army, to try to get her way. Barbara and appear first and their respective fiancés follow.
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