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Upcoming SlideShare. Like this presentation? Why not share! Ch 5 social responsibility and mana Embed Size px. Securing the Society: Often ethics succeeds law in safeguarding the society. The law machinery is often found acting as a mute spectator, unable to save the society and the environment.
Technology, for example is growing at such a fast pace that the by the time law comes up with a regulation we have a newer technology with new threats replacing the older one. Lawyers and public interest litigations may not help a great deal but ethics can.
Ethics tries to create a sense of right and wrong in the organizations and often when the law fails, it is the ethics that may stop organizations from harming the society or environment. View All Articles. To Know more, click on About Us. The use of this material is free for learning and education purpose.
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Shareholder primacy is the dominant view about the ends of corporate governance among financial professionals and in business schools. A few writers argue for shareholder primacy on deontological grounds. On this argument, shareholders own the firm, and hire managers to run it for them on the condition that the firm is managed in their interests. Shareholder primacy is thus based on a promise that managers make to shareholders Friedman ; Hasnas In response, some argue that shareholders do not own the firm.
They own stock, a type of corporate security Bainbridge ; Stout ; the firm itself may be unowned Strudler Others argue that managers do not make, explicitly or implicitly, any promises to shareholders to manage the firm in a certain way Boatright More writers argue for shareholder primacy on consequentialist grounds. In support of this, some argue that, if managers are not given a single objective that is clear and measurable—viz. Consequentialist arguments for shareholder primacy run into problems that afflict many versions of consequentialism: in requiring all firms to be managed in a certain way, it does not allow sufficient scope for personal choice Hussain Most think that people should be able to pursue projects, including economic projects, that matter to them, even if those projects do not maximize welfare.
The second main view about the proper ends of corporate governance is given by stakeholder theory. To its critics, stakeholder theory has seemed both insufficiently articulated and weakly defended.
Marshall Schminke (ed.), Managerial Ethics: Managing the Psychology of Morality - PhilPapers
The groups most commonly identified are shareholders, employees, the community, suppliers, and customers. But other groups have stakes in the firm, including creditors, the government, and competitors. It makes a great deal of difference where the line is drawn, but stakeholder theorists have not provided a clear rationale for drawing a line in one place rather than another. With respect to defense, critics have wondered what the rationale for managing firms in the interests of all stakeholders is.
This is precisely what defenders of shareholder primacy say about that view. It is important to realize that a resolution of the debate between shareholder and stakeholder theorists however we conceive of the latter will not resolve all or even most of the ethical questions in business. This is because this is a debate about the ends of corporate governance; it cannot answer all of the questions about the moral constraints that must be observed in pursuit of those ends Goodpaster ; Norman Rather, these views should be interpreted as views that managers should do whatever is morally permissible to achieve these ends.
A large part of business ethics is trying to determine what morality permits in this domain. Answers to questions about the means of corporate governance often mirror answers to question about the ends of corporate governance. Often the best way to ensure that a firm is managed in the interests of a certain party P is to give P control over it.
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We might see control rights for shareholders as following analytically from the concept of ownership. To own a thing is to have a bundle of rights with respect to that thing. As noted, in recent years the idea that the firm is something that can be owned has been challenged Bainbridge ; Strudler But contractarian arguments for shareholder control of firms have been constructed which do not rely on the assumption of firm ownership.
All that is assumed in these arguments is that some people own capital, and others own labor. It just so happens that, in most cases, capital hires labor. Many writers find this result troubling. Even if the governance structure in most firms is in some sense agreed to, they say that it is unjust in other ways. Anderson characterizes standard corporate governance regimes as oppressive and unaccountable private dictatorships. Arguments for these governance structures take various forms.
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According to it, if states should be governed democratically, then so should firms, because firms are like states in the relevant respects Dahl ; Walzer A fourth argument for worker participation in firm decision-making sees it as valuable or even necessary training for participation in political processes in the broader society Cohen Space considerations prevent a detailed examination of these arguments. But criticisms generally fall into two categories. The first insists on the normative priority of agreements, of the sort described above.
There are few legal restrictions on the types of governance structures that firms can have. And some firms are in fact controlled by workers Dow ; Hansmann To insist that other firms should be governed this way is to say, according to this argument, that people should not be allowed to arrange their economic lives as they see fit.
Another criticism of worker participation appeals to efficiency. Allowing workers to participate in managerial decision-making may decrease the pace of decision-making, since it requires giving many workers a chance to make their voices heard Hansmann It may also raise the cost of capital for firms, as investors may demand more favorable terms if they are not given control of the enterprise in return McMahon Both sources of inefficiency may put the firm at a significant disadvantage in a competitive market.
And it may not be just a matter of competitive disadvantage. If it were, the problem could be solved by making all firms worker-controlled. The problem may be one of diminished productivity more generally. Business ethicists seek to understand the ethical contours of, and devise principles of right action for, business activity.
One way of advancing this project is by choosing a normative framework and teasing out its implications for a range of issues in business. One influential approach to business ethics draws on virtue ethics see, e. For MacIntyre, there are certain goods internal to practices, and certain virtues are necessary to achieve those goods. Building on MacIntyre, Moore develops the idea that business is a practice, and thus has certain goods internal to it, the attainment of which requires the cultivation of business virtues.
Scholars have also been inspired by the Aristotelian idea that the good life is achieved in a community. They have considered how business communities must be structured to help their members flourish Hartman ; Solomon Another important approach to the study of business ethics comes from Kantian moral theory D.
In a competitive market, people may be tempted to deceive, cheat, or manipulate others to gain an edge. Ethical theory, including virtue theory and Kantian deontology, is useful for thinking about how individuals should relate to each other in the context of business cf. Rorty But business ethics also comprehends the laws and regulations that structure markets and organizations. And here political theory seems more relevant see and cf. This is not an easy task, since while Rawls makes some suggestive remarks about markets and organizations, he does not articulate specific conclusions or develop detailed arguments for them.