ETHICS AND CORPORATIONS 1. THEORIES OF CORPORATE SOCIAL RESPONSIBILITY (CSR) HELP IN UNDERSTANDING PROPER BALANCE AMONG DIFFERENT RESPONSIBILITIES. A.

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Presentation transcript:

ETHICS AND CORPORATIONS 1. THEORIES OF CORPORATE SOCIAL RESPONSIBILITY (CSR) HELP IN UNDERSTANDING PROPER BALANCE AMONG DIFFERENT RESPONSIBILITIES. A. UNDERSTANDING THE NATURE OF CORPORATIONS AND THEIR OBJECTIVES SOCIAL RESP. OF CORPORATIONS B. FUNDAMENTAL QUESTION OF CORPORATE GOVERNANCE IS WHOSE INTEREST OUGHT CORPORATIONS SERVE? 2. DEBATE OF CSR A. MILTON FRIEDMAN B. NOT POLITICAL LEADERS C. TRADE-OFFS

3. DEFINITION: CSR IS THE SELECTION OF CORPORATE GOALS AND EVALUATION OF OUTCOMES NOT SOLELY BY THE CRITERIA OF PROFITABILITY AND ORGANIZATIONAL WELL- BEING BUT BY ETHICAL STANDARDS OR JUDGMENTS OF SOCIAL DESIRABILITY. (FORGOING A CERTAIN MEASURE OF PROFIT IN ORDER TO ACHIEVE NON-ECONOMIC ENDS). CSR IS BRINGING CORPORATE BEHAVIOR UP TO A LEVEL WHERE IT IS CONGRUENT WITH THE PREVAILING SOCIAL NORMS, VALUES, AND EXPECTATIONS OF PERFORMANCE. A. A FOUR STAGE CONTINUING, OR THREE CONCENTRIC CIRCLES B. PROCESS => CORPORATE SOCIAL RESPONSIVENESS => INTEGRATED INTO STRATEGICPLANNING PROCESS. C. CORPORATE SOCIAL PERFORMANCE => PRINCIPLE, PROCESS AND OUTCOME. E.G. ENVIRONMENTAL CONCERNS ABOUT PACKAGING

4. CLASSICAL VIEW OF THE ROLE OF THE CORPORATION A. ECONOMIC BEHAVIOR AND BUSINESS ORGANIZATION ARE DISTINCT B. CRITERIA FOR BUSINESS PERFORMANCE ARE ECONOMIC EFFICIENCY AND GROWTH C. GOAL AND MOTIVATING FORCE IS PROFIT 5. ARGUMENTS FOR CSR A. THE MORAL MINIMUM OF THE MARKET "RULES OF THE GAME" B. BY OPERATING ABOVE THE MORAL MINIMUM, "INTERNALIZING" THE EXPECTATIONS OF SOCIETY, CORPORATIONS RETAIN CONTROL OVER DECISION MAKING AND AVOID THE COSTS ASSOCIATED WITH GOVERNMENT REGULATION

C. POWER AND RESPONSIBILITY – SOCIAL RESPONSIBILITY ARISES FROM SOCIAL POWER D. GIVING A HELPING HAND TO GOVERNMENT: URGENCY, PROXIMITY, CAPABILITY, AND NEED 6. FRIEDMAN' S ARGUMENT AGAINST CSR - CORP. EXECS ARE NOT CIVIL SERVANTS WITH POWER TO TAX THE CLASSICAL THEORY DOES NOT PERMIT CORPORATIONS TO ACT IN A SOCIALLY IRRESPONSIBLE MANNER; IT ONLY RELIEVES THEN OF THE NEED TO THINK ABOUT MATTERS OF SOCIAL RESPONSIBILITY. IN A WELL-ORDERED SOCIETY, CORPORATIONS ATTEND TO BUSINESS WHILE GOVERNMENT AND OTHER INSTITUTIONS FULFILL THEIR PROPER ROLES.

A. THE TAXATION ARGUMENT I. THE MORAL OBLIGATION OF MANAGERS TO BE SENSITIVE TO THE SOCIAL IMPACT OF THEIR ACTIONS IS MORE EXTENSIVE THAN THE MINIMAL RESTRAINTS LISTED BY FRIEDMAN (POLLUTION, PROD. SAFETY). II. THE MAIN AREA OF DISAGREEMENT BETWEEN PROPONENTS AND CRITICS OF SOCIAL RESPONSIBILITY IS HOW MUCH SOCIALLY RESPONSIBLE BEHAVIOR IS IN A CORPORATION'S LONG TERM SELF-INTEREST. III. SHAREHOLDERS' INTERESTS ARE NOT NARROWLY ECONOMIC

7. CORPORATE GOVERNANCE - WHOSE INTERESTS SHOULD THE CORPORATIONS SERVE? THE NATURE OF THE CORPORATION: A. PROPERTY RIGHTS THEORY - THE RIGHT TO INCORPORATE IS AN EXTENSION OF THE PROPERTY RIGHTS AND THE RIGHTS OF CONTACT THAT ALL HAVE B. SOCIAL INSTITUTION THEORY – HOLDS THAT THE RIGHT TO INCORPORATE IS A PRIVILEGE GRANTED BY THE STATE AND THAT CORPORATE PROPERTY HAS AN INHERENT PUBLIC ASPECT

C. CONTRACTUAL VIEW OF THE FIRM → FROM RESULTS FROM THE PROPERTY RIGHTS AND THE RIGHT OF CONTRACT OF EVERY CORPORATE CONSTITUENCY AND NOT FROM THOSE OF SHAREHOLDERS ALONE. (RESIDUAL RISK BEARERS) =>SHAREHOLDERS CONTROL CORP: THEORY OF THE FIRM => WHOSE INTEREST CORPORATIONS SERVE 8. NATURE OF CORPORATE PROPERTY →(1932 →BERLE AND MEANS) CHANGED WITH THE SEPARATION OF OWNERSHIP AND CONTROL

A FOR WHOM ARE CORPORATE MANAGERS TRUSTEES? CORPORATION AS A QUASI-PUBLIC INSTITUTION AN SENSE OF MANAGEMENT AS A PROFESSION WITH PUBLIC RESPONSIBILITY B. CONTRACTUAL THEORY → THE ULTIMATE OBJECTIVE OF THE FIRM IS THE MAXIMIZATION OF WEALTH FOR THE WHOLE OF SOCIETY (NOT JUST SHAREHOLDERS). WITH SHAREHOLDER CONTROL, CORP WILL CREATE MORE WEALTH IF DECISIONS ARE MADE WITH ONLY SHAREHOLDERS' INTERESTS IN MIND

9. STAKEHOLDER THEORY →CORP. OUGHT TO BE OPERATED FOR THE BENEFIT OF ALL THESE WHO HAVE A STAKE IN THE ENTERPRISE =>EMPLOYEES, CUSTOMERS, SUPPLIES, LOCAL COMMUNITY A. DEFINITION: ANY GROUP OR INDIVIDUAL WHO CAN AFFECT OR IS AFFECTED BY THE ACHIEVEMENTS OR THE ORGANIZATION'S OBJECTIVES B. DESCRIPTIVE, INSTRUMENTAL, AND NORMATIVE (THE INTERESTS OF ALL STAKEHOLDERS ARE OF INTRINSIC VALUE)

C. CRITICS CLAIM THE STAKEHOLDER VIEW CONFUSES THE RESPONSIBILITIES OF A CORP (WHICH INCLUDED THE OBLIGATIONS TO STAKEHOLDER GROUPS) WITH ITS OBJECTIVES (ONE OF WHICH IS TO MAKE A PROFIT FOR SHAREHOLDERS). ALSO NO GUIDANCE ON TRADE-OFFS IS GIVEN IN THIS MODEL. ALSO, WHAT WOULD A STAKEHOLDER CORPORATION MEAN FOR CORPORATE GOVERNANCE (GERMAN, JAPAN MODEL GIVES WORKERS A LARGER ROLE IN STRATEGIC DECISIONS.