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Business - Corporate Responsibility.docx

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Philosophy 2074F/G
Michael Herbert

CORPORATE RESPONSIBILITY STAKEHOLDER MANAGEMENT  Stockholders are the owners of the corporation and hence corporate profits belong to stockholders  Managers have no right to donate corporate profits to charity  Stockholders are entitled to their profits as a result of a contract among the corporate stakeholders  Funds remaining after these payments have been made represent profit, and by agreement the profit belongs to the stockholders  The existence of capitalist markets limits the number of politically based decisions and thereby increases freedom. Even democratic decisions coerce the opposing minority  There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profit so long as it stays within the rules of the game  If wages can be cut to generate profit, they should be cut  In 1953 the legal system acknowledged the connection between corporate philanthropy and goodwill  An act that supports the public welfare can also be in the best interest of the corporation itself  Although managers may not be obligated to maximize profits, they certainly do have an obligation to avoid conflicts of interest where it appears that they benefit at the expense of the stockholders  Managers have an ethical duty to manage the organization for all stakeholders  Many theoretical problems remain. Stakeholder theory is still in its early developmental stage WHICH VIEW IS BETTER  Boatright concedes that the purpose of the firm is to benefit every stakeholder group. However he argues that management decision making is an inefficient means of protecting the interests of non-shareholder stakeholders and that a system of corporate governance marked by shareholder primacy better serves the interests of all stakeholders  Since stakeholder theory does not take into account the variety of difference relationships companies have with different individuals, it is too vague to be useful  One way that manager’s can help create and maintain ethically praiseworthy business practices is by cultivating and ethical culture within their organizations. Most medium and large sized businesses have values or mission statements that serve to clarify the core beliefs of the organization  That organizational cultures can be strong or weak, ethical or unethical, depending upon a range of formal and informal organizational systems SOCIAL RESPONSIBILITY OF BUSINESS TO INCREASE ITS PROFITS - FREIDMAN  The businessmen believe that they are defending free enterprise when they declaim that business is not concerned merely with profit but aso with promoting desirable social ends  The discussions of social responsibility of business are notable for their analytical looseness and lack of rigor  Presumably, the individuals who are to be responsible are businessmen which means individual proprietors or corporate executives  Eleemosynary purpose – for example, a hospital or a school. The manager of such a corporation will not have money profit as his objective but the rendering of certain services  The stockholders or the customers or the employees could separately spend their own money on the particular action if they wished to do so  The executive is an agent serving the interests of his principle  This facet of social responsibility doctrine is brought into sharp relief when the doctrine is used to justify wage restraint by trade unions  The difficulty of exercising social responsibility illustrates of course, the great virtue of private competitive enterprise  In a free society, it is hard for evil people to do evil, especially since one man’s good is another’s evil  Of course, in practice, the doctrine of social responsibility is frequently a cloak for actions that are justified on other grounds rather than a reason for those actions  It would be inconsistent of me to call on corporate executives to refrain from this hypocritical window-dressing because it harms the foundations of a free society  The political principle that underlies the market mechanism is unanimity. In an ideal free market resting on private property, no individual can coerce any other, all cooperation is voluntary, all parties to such cooperation benefit or they need not participate  Unanimity is not always feasible, there are some respects in which conformity appears unavoidable  Social responsibility taken seriously would extend the scope of political mechanism to every human activity MANAGING FOR STAKEHOLDERS – FREEMAN  The purpose of this essay is to outline an emerging view of business that we shall call managing for stakeholders  Simple ideas create complex questions  The primary responsibility of the executive is to create as much value for stakeholders as possible and that no stakeholder interest is viable in isolation of the other stakeholders
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