Chapter 2, Beauchamp and Bowie
In addition to Chapter 2, read http://www.bsr.org/CSRResources/ResourcesDocs/BSR_200508_Allen-White_Fade-Transform.pdf What is the purpose of a Corporation?
Profits v. social responsibility
Stockholders v. Stakeholders
Who are stakeholders?
According to Friedman, can a business do anything in the quest for profits? •
No, it must not be deceptive or fraudulent
Who is Theodore Levitt?
Former professor of marketing at Harvard B-School, Ph.D. in economics, prolific writer, editor of Harvard Business Review, coined the term "globalization" has been referred to as the father of modern marketing What is meant by a "nonconsequentialist perspective?" (page 49 in textbook) •
Check out definition of consequentialism here
Can there every be agreement between Friedman and advocates of "social responsibility?" •
Yes, if the socially responsible act leads to higher profits. The Social Responsibility of Business is to Increase Its Profits by Milton Friedman •
Is business social responsibility the same as socialism? (page 50) o
Yes, Friedman argues, since political mechanisms, not economic mechanisms, determine the allocation of resources - that is, the corporate CEO decides who should get what, rather than the market •
Corporate executives are agents of the owners, i.e., the stockholders - they should not be spending someone else's money to advance a particular agenda o
to do so is equivalent to taxing and the CEO becomes a civil servant of sorts, a public employee •
Only people have responsibilities, corporations do not have responsibilities •
In fact, this kind of thinking can lead to the downfall of capitalism A Stakeholder Theory of the Modern Corporation by R. Edward Freeman •
Managers do not have a duty to stockholders but they have a fiduciary relationship with stakeholders. o
stakeholders have an interest in, and must participate in "determining the future direction of the firm in which they have a stake." (page 56) •
What kinds of laws and regulations support this view?
consumer laws, product liability
caveat emptor (let the buyer beware) has been replace with caveat venditor (let the seller beware) o
laws related to employee relations, labor law, laws against discrimination in hiring o
laws protecting the community - environmental protection, local restrictions on plant closings •
Problems with free markets
There is a narrow and wide view of stakeholders - the narrow view includes only those who are "vital to the survival and success of the corporation." •
The role of management is to balance the claims of the other stakeholders. •
What is a "normative core?"
a set of questions??
What are the ground rule principles for the Doctrine of Fair Contracts? o
these are listed and explained in the textbook
What three principles does he advocate for reforming the law of corporations? o
these are listed and discussed briefly in the textbook
Two Normative Theories of Business: A Critique by John Hasna •
Stockholder vs. Stakeholder
Which theory of distributive justice (or ethical theory) is used to justify the stockholder theory? Two can be used: o
Utilitarian - based on the idea that the invisible hand of the market leads to the best outcome for society - promotes the general interest •
utilitarian can also be called consequentialist - outcome matters •
The problem here is that we are very far from a free market in the U.S. •
Another problem is that free markets can have other problems - REMEMBER THESE?? o
Deontological or non-consequential
moral laws or duties - think Kantian
Rawls is also a deontologist to the extent that he thinks outcome is not the issue IF people's basic rights (liberties) are violated •
We can also include Libertarians in this deontological/non-consequential category •
supports stockholder theory because...
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