Week 4

Question 1

Corporation

Answer 1

This is a legal entity, that can endure beyond the natural lives of its members, with legal rights and responsibilities similar but not identical to those enjoyed by individuals.

Question 2

Corporations are made of 3 parts:

Answer 2

1. Shareholders- they own the corporation and provide it capital
2. Managers- they are usually responsible for running business operations and overseeing employees.
3. Employees- they produce the goods and services

Question 3

Milton Friedman’s main belief

Answer 3

“The social responsibility of business is to increase profits” (1970)
Argued “the Narrow View”- Profit Maximization

Question 4

People with the “Narrow View” believe:

Answer 4

Believed unrestricted markets yield the best for society

Question 5

Friedman’s 3 main arguments:

Answer 5

1. Moral responsibility
2. Shareholder’s interest
3. Roles of corporations and state

Question 6

Friedman’s view on Moral responsibility

Answer 6

Corporations do not have a moral responsibility.
Only human beings do.

Question 7

Friedman’s view between managers and Shareholders’ interests (2)

Answer 7

• It is managers’ responsibility to only act in the interest of the shareholders.
• If managers seek the interest of shareholders, their activities will yield the greatest good for society.

Question 8

Friedman’s view on Roles of corporations and state

Answer 8

• Facing social issues, these problems require expertise
• As a result, this should be assigned to the state
  Because they would have adequate time and resources to tackle these problems.

Question 9

Corporate Social Responsibility

Answer 9

• The extent to which a business considers the obligations and concerns of its wider stakeholders.
  Almost all businesses engage in some form of CSR- it is more than what is minimally required.

Question 10

The broad view

Answer 10

Utilizing business ethics to focus on CSR and how to justify it.

Question 11

Moral reasons for CSR (3)

Answer 11

1. Corporations will cause societal problems
   - These activities can and most likely will have externalities
2. Corporations have a social impact due to the amount of power they maintain.
3. Corporations rely on the contributions of many stakeholders in society, not just shareholders.

Question 12

Externalities

Answer 12

The side affects produced from corporations causing societal problems.

Question 13

Economic/Business reasons for CSR

Answer 13

1. They may receive extra, more satisfied customers.
   a. By implementing responsible practices, businesses may receive more customers deciding to buy from that corporation as they notice the effort the corporations have made (revise later)
2. Employees may become more committed to the company
   a. Jobless individuals may be more
   attracted
3. More investment opportunities

Question 14

Describe Carrol’s model (framework) in order

Answer 14

1. Economic - Responsibility to be profitable
2. Legal- Responsibility to obey laws and regulation (competition, health)
3. Ethical- Responsibility to act morally and ethically (e.g. treatment of employees)
4. Philanthropic- Responsibilities to give back to society (e.g. donations [money/time])

Question 15

Freeman’s stakeholders concept/theory

Answer 15

For a business to be successful it must create value for all of its stakeholders. You can not look at or focus on one in isolation, their interests must all go together in the same direction

Question 16

Stakeholder definition

Answer 16

A stakeholder is any individual or group who is affected by, or can affect the organization’s actions and objectives

Question 17

What does the Stakeholder theory do? (3)

Answer 17

1. Considers the interests of multiple stakeholders
2. Balances the needs and concerns of stakeholders
3. Emphasizes long-term sustainability and relationships

Question 18

Shareholder-centric (3)

Answer 18

Prioritizes the interests of shareholders
Focuses on maximizing shareholder wealth
May prioritize short-term financial gains over long-term sustainability.

Question 19

The Narrow view on CSR(3)

Answer 19

1. Company’s primary responsibility is to maximize profits and shareholder value
2. Actions or expenditures related to social or environmental issues should only be pursued if they contribute directly to enhancing shareholder wealth
3. CSR activities are often seen as optional and discretionary.