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Chapter 3

MGMT 3020 Chapter Notes - Chapter 3: Legal Personality

Course Code
MGMT 3020
Mark Juhasz

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Topic 1.2 Textbook Notes (Chandler) Chapter 3
Corporate Rights and Responsibilities
If the responsibilities expected of an organization do not infringe upon its rights and align with
its self interest, the chance of building a more sustainable economic model increases.
What are the social responsibilities of the firm? == How can the firm create the most value for
the broadest section of society?
It is the stakeholder that defines what the value creation looks like
a normative approach – one that starts out with a predetermined outcome and then works out
how to achieve it.
Ex: “Walmart must pay it’s employees a livable wage”
- livable wage is objective !
A Descriptive Approach – one that allows the outcome to emerge (depending on what
stakeholders value at a given time) instead of imposing a fixed view on what should or
shouldn’t happen
Corporate Rights
the most important organization in the world is the company: the basis of prosperity in the West
and the best hope for the future of the rest of the world
if we are going to argue that a company has responsibilities (more than just supplying jobs,
taxes, innovations etc) then we must also grant it rights to exits and do what it was designed to
do – make money
Citizens United
In this case corporations were granted the right to freedom of speech just like an individual
would have, this also allowed them to freely donate to political campaigns
The idea of personhood is that a a corporation should be treated as an individual and have the
same rights as any citizen
personhood is an important complement to the idea of limited liability which together have laid
the foundation for an explosion in growth among developed countries.
Corporate Responsibilities
as determined by by corporate law and corporate charters
The widespread acknowledgment after the “dodge vs Ford Motors” case was that a corporations
main responsibility is to return a profit to their shareholders
Benefit Corporations
The law in the US is that corporation must abide by the corporate laws which are managed by
the state not federal laws. This allows corporations to incorporate in the more beneficial state
based on what laws and regulations they would have to abide by
If the federal government were to take over this responsibility a good starting point would be
for them to enforce that a corporation must incorporate where they hold the highest presence,
where their actual, physical headquarters is.
This makes the corporation more directly accountable for their actions in the community that
they exist.
A Benefit Corporation is a new class of corporation that voluntarily meets different standards
of corporate purpose, accountability and transparency.
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