07-07-2012, 01:25 PM
Crane & Matten - Business Ethics
Crane & Matten.ppt (Size: 119.5 KB / Downloads: 41)
Key features of a corporation
A corporation is essentially defined in terms of legal status and the ownership of assets
Corporations are typically regarded as ‘artificial persons’ in the eyes of the law
Corporations are notionally ‘owned’ by shareholders, but exist independently of them
Managers and directors have a ‘fiduciary’ responsibility to protect the investment of shareholders.
Can a corporation have social responsibilities?
Milton Friedman 1970 classic article “The social responsibility of business is to increase its profits”
Vigorously argued against the notion of social responsibilities for corporations based on three main arguments:
Only human beings have a moral responsibility for their actions
It is managers’ responsibility to act solely in the interests of shareholders
Social issues and problems are the proper province of the state rather than corporate managers
Can a corporation be morally responsible for its actions?
Long and complex debate but generally support from literature for some degree of responsibility accredited to corporations
Argument based on
Every organisation has a corporate internal decision structure which directs corporate decisions in line with predetermined goals (French 1979)
All organisations manifest a set of beliefs and values that lay out what is generally regarded as right or wrong in the corporation – organizational culture (Moore 1999)
Stakeholder theory of the firm
Theory developed by Edward Freeman (1984)
A stakeholder in an organization is…any group or individual who can affect, or is affected by, the achievement of the organization’s objectives (Freeman 1984:46)
Principle of corporate rights - the corporation has the obligation not to violate the rights of others
Principle of corporate effect – companies are responsible for the effects of their actions on others.
A new role for management
According to Freeman, this broader view of responsibility towards multiple stakeholders assigns a new role to management.
Rather than simply being agents of shareholders, management has to take into account the rights and interests of all legitimate stakeholders:
Stakeholder democracy
Corporate governance