L3: Business ethics Flashcards
what do businesses provide
profit, but also employment (directly and indirectly), improvements to customers lives and regeneration of local areas.
theories of corporate social responsibility (3)
shareholder theory, stakeholder theory and corporate citizenship theory
what is shareholder theory and who developed it
Milton Friedman, 1970. Ethically, corporations should be run for benefit of shareholders. Assuming shareholders want profits and high dividends, managers should seek to maximise profits. Any CSR activity that reduced profits is unethical
what are justifications of shareholder theory
utilitarianism justification: markets where businesses focus on maximising profit are best at satisying customer demand. But. if all parties focussed on profit max. can lead to worse outcomes for all, like market failure. Property rights justification: if shareholders want profit maximisation and CSR doesn’t do this, theft of shareholder property and violation of fiduciary duty. Equally, just because you own something it doesn’t mean you can do whatever you want with it.
what is corporate citizenship theory
businesses exist as private citizens. they have rights and freedoms, also responsibilities. should seek to be good corporate citizens. difficult to define responsibilities.
what is stakeholder theory
all versions have rejection of shareholder theory, where corporations have ethical responsibilities to stakeholders that go beyond the law. normative stakeholder theory comprises of multi-fiduciary stakeholders theory and Goodpasters stakeholder theory
what is the normative stakeholder theory
seeks to explain why companies have ethical responsibilities to stakeholders and what they are. multi-fiduciary and goodpasters
what is multi fiduciary stakeholder theory and who developed it
Freeman and Evans, 1993. companies should be run for the benefit of all stakeholders. Kantian theory, universal moral principles apply to everyone. corporations use stakeholders as a means to an end, this is acceptable as long as not mere means.
what are the key principles of multi fiduciary stakeholder theory (2)
stakeholder fiduciary principles and principle of corporate legitimacy
what are stakeholder fiduciary principles as part of multi-fiduciary stakeholder principles
management has fiduciary relationship to stakeholders and corporation, so must act in interests of stakeholders as agent, and corporation
what is the principle of corporate legitimacy, relating to multi fiduciary stakeholder theory.
corporations should be managed for benefit of stakeholders
arguments against multi fiduciary stakeholder theory
radical proposal as private corportations essentially converted into public institutions. but, stakeholders avoid being used as mere means. Shouldn’t the relationship with shareholders be special? impartiality almost a betrayal of trust. Could simply pay fairly and give job security to not use as mere means.
what is Goodpasters stakeholder theory
management have fiduciary duties to shareholders, but also non-fiduciary duties to stakeholders. ‘Nemo dat’. Shareholders cannot give management right to do something it wouldn’t be ethical to do themselbes. If clashes in interests, CSR takes prioirty. We can increase our duties for shareholders, but cannot decrease our duties to everyone else. Radical proposal.
objections to Goodpasters stakeholder theory
there will be clashes in CSR duties to stakeholders and fulfilling duties to shareholders. Impossible to juggle both.
‘ethics is universal, ethical in business is no different to ethical in any other sense’ respond
Issues/values may be universal, but some are more important in different areas. related to the purpose of the company.
