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ethics chapter 5 Coporations

Corporation
a thing that can endure beyond the natural lives of its members and that has incorporators who may sue and be sued as a unit and who are able to consign part of their property to the corporation for ventures of limited liability.pg224
Limited Liability
The members of a corporation, unlike the members of a partnership or the proprietors of a business, are financially liable for the debts of the organization only up to the extent of their investments.pg.224
Privately Held Company
A small group of investors who may own all of the outstanding shares of a privately owned, profit-making corporation.pg.224
Publicly Held Company
Stock that may be traded among the general public.pg.224
Corporate Internal Decision (CID) Structures
Established procedures for accomplishing specific goals.pg.227
Corporate Moral Agency
There is no reason why a corporation cannot show rationality and respect for persons that individual human beings can. It makes just as much sense to speak of corporate moral responsibility as it does to speak of individual moral responsibility. A corporation can be a moral agent if moral reasons enter into its decision making and if its decision-making process controls not only the company’s actions but also its structure of policies and rules.pg.228
Corporate Rate Punishment
Whether or not corporations are moral actors, the law can fine them, monitor and regulate their activities, and require the people who run them to do one thing or another.pg.228
Diffusion of Responsibility
Means that no particular person or persons are held morally responsible.pg.229
Narrow View Of Corporate Responsibility
Business has no social responsibilities other than to maximize profits (Friedman). If the market is allowed to operate with only the minimal restrictions necessary to prevent fraud and force, society will maximize its overall economy(Levitt). Friedman also thought that managers are put in place by executives to help further succeed the company and if there are moral obligations that are in place that they must sometimes go against the executives will and or profit of the company– The doctrine that corporations have social responsibilities beyond profit making thus transforms executives into civil servants and business corporations into government agencies, thereby diverting business from its proper function in the social system.pg.231
Broader View of Corporate Responsibility
Business has obligations in addition to pursuing profits. This view maintains that a corporation has obligations not only to its stockholders but also to all the other constituencies that affect or are affected by its behavior, that is, to all parties that have a stake in what the corporation does or deosn’t do. Corporations have responsibilities beyond simply enhancing their profits because, as a matter of fact, they wield such great social and economic power in our society and with that power must come social responsibility. Professor of administration Keith Davis says that business is not some self-enclosed world; business activities have profound ramifications throughout society, and their influence on our lives is hard to escape. Melvin Ashen believed that society always structures guidelines within which business is permitted to operate in order to derive certain benefits from business activity.pg.232
Social Entity Model or Stakeholder Model
Corporations have responsibilities to consumers, to employees, to suppliers and contractors, to the surrounding community, and to society at large.pg.232
Externalities
The unintended negative (or in some cases positive) consequences that an economic transaction between two parties can have on some third party (biggest example is Industrial pollution).pg.233
Stockholders
STOCKHOLDERS OWN THE COMPANY. They intrust management with their funds, and in return management undertakes the job to make as much money for them as it can. As a result, according to proponents of the narrow view, management has a fudiciary duty to maximize shareholder wealth, a duty that is inconsistent with any social responsibility other than the relentless pursuit of profit.–Stockholders should have a more social roles and responsibilites because if not, their focus’ would be on the greater good of themselves.pg.234
Fiduciary Responsibility
Managers have a fiduciary responsibility to look after the interests of shareholders but it doesn’t trump all of the company’s other responsibilites.pg.234
Invisible-Hand Arguments
Adam Smith claimed that when each of us acts in a free-market environment to promote our own economic interests we are led by an invisible hand to promote the general good. If businesses are permitted to seek self-interest, their activities will inevitably yield the greatest yield the greatest good for society as a whole. To invite corporations to base their policies and activites on anything other than profit making is to politicize business’s unique economic function and to hamper its ability to satisfy our material needs. Corporations should not be held morally responsible for non-economic matters; to do so would distort the economic mission of business in society and undermine the foundations of the free-enterprise system.pg.236
Let-Government-Do-It Argument
Proponents believe that the strong hand of govenment, through a system of laws and incentives, can and should bring corporations to heel. Teddy Roosevelt proclaimed “I believe in corporations. They are indispensable instruments of our modern civilization; but i believe that they should be so supervised and so regulated that they shall act for the interests of the community as a whole.” Robert Reich sayed “If we want corporations to take more responsibility for the economic well-being of Americans, then government will have to provide the proper incentives.” Reich and Galbraith both believed, however, that it is misguiding to expect or demand that business firms do anything other than pursue profit.– When its all said and done if we really think relying on the government to decide whats right and whats wrong is going to make corporations safer for us then we’re mistaken. The government is run by normal human beings just like corporations. Whos to say that they wouldn’t decide whats best for them or the biggest corporate buyer?pg.238
Business-Can’t-Handle-It Argument
Corporations are the wrong group to be entrusted with broad responsibility for promoting the well-being of society for 2 reason: 1) They lack the necassary expertise. Walter Goodman viewed that corporate leaders lack the moral insight or social know-how that a broader view of corporate responsibility would seem to require of them. –This argument, that corporations aren’t up to addressing social issues because they lack the necessary expertise runs up against the fact that, often, it is only business that has the know-how, talent, experience, and organizational resources to tackle certain problems. If society wants help with, AIDs research, cancer research, 3rd world country support, food resources to starving children, and many other similar things than they must rely on the assistance of corporations. 2) In addressing non-economic matters, they inevitably impose their own materialistic values on the rest of society. People who believe this reason fear that if permitted to stray from strictly economic matters, corporate officials will impose their materialistic values on all of society. Broadening corporate responsibility will thus “materialize” society instead of “moralizing” corporate activity.–The point here is that business already promotes consumerism and materialistic values. It doesn’t hesitate to use its resources to express its views and influence our political system on issues that affect its economic interests. If corporations take a broader view of their responsibilites, are they really likely to have a more materialistic effect on society, as Levitt suggests, than they do now?pg. 239-240
Corporate Moral Code
Should set reasonable goals and subgoals, with an eye on blunting unethical pressures on subordinates. In formulating the code, the top-level eithics committee should solicit the views of corporate members at all levels regarding goals and subgoals, so that the final product articulates “a fine-grained eithical code that addresses ethical issues likely to arise at the level of subgoals.” The committee will also be in charge of further decisions in the futur such as communicating the code to all corporate members, clarify and interpret the code when needed, facilitates the codes use, investigate violations, discipline violaters and reward compliance, and review, update, and upgrade the code when necessary.pg.244
Corporate Culture
As best put by W. Brooke Tunstall, an assistant VP for AT&T, “Corporatoin culture is a general constellation of beliefs, mores, custons, value systems and behavioral norms, and ways of doing business that are unique to each corporation, that set a pattern for corporate activities and actions, and that describe the implicit and emergent patterns of behavior and emotions characterizing life in the organization.” The formal culture of corporation should also be distinguished from the informal culture that shapes beliefs, values, and behavior. Also, there may be overlapping cultures within and organization because employees have differnet backgrounds, work in different divisions of the organization, and may be subject to different systems of rewards and sanctions. Organizational theorist emphasize the importance of monitoring and managing corporate culture–beginning with an attempt to understand each corporation’s distinctive culture–to prevent dysfunctional behavior and processes. If management does not make explicit the values and behavior it desires, the culture will typically develop its own norms, usually based on the types of behavior that lead to success within the organization. Thus, desired values must be communicated throughout the oraganization. Conduct in accordance with them must be rewarded and inconsistent with them sanctioned.pg.245

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