Management Ethics, Chapter 5
ROCRASTINATION
LAGIERISM
&
Plagiarism
Today’s Economic Challenges 2017
Today’s Economic Challenges
| Bitcoin | Minimum Wage |
| Capital Gains Tax | Offshore Banking |
| Corporate Tax | Online Sales Tax |
| Economic Stimulus | Overtime Pay |
| Equal Pay | Paid Sick Leave |
| Estate Tax | Pension Reform |
| Farm Subsidies | Property Taxes |
| Federal Reserve | Puerto Rico Bailout |
| Government Pensions | Wall Street Accountability |
| Government Spending | Welfare |
| Labor Unions | Welfare Drug Testing |
Oh, the morality: why ethics matters in economics is because “Economic Challenges” are ethical Issues
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The U.S. trade deficit: America today imports almost twice as much merchandise as it exports.
Our relentlessly growing trade deficit is now over $700 billion annually, translates to almost 300,000 lost American jobs.
With this deficit the country’s reliance on foreign borrowing has increased, and foreign creditors now provide two-thirds of America’s net domestic investment.
Today we owe the rest of the world about $4 trillion—over twice what we owed in 2000.
Today’s Economic Challenges
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Changing attitudes toward work: Americans now work 20 percent more than in 1970.
But the American work ethic is disappearing:
Only one in three persons believes that hard work pays off in the end.
People are less interested in work than in looking out for themselves.
With increased education, we are rearranging our ideas about what we want from life.
People want meaningful and challenging work that offers us autonomy and self-development.
Today’s Economic Challenges
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Chapter Five: Corporations
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The Corporation
A corporation is a three-part organization made up of:
Stockholders, who provide the capital, own the corporation, and enjoy liability limited to the amount of their investments
Managers, who run the business operations
Employees, who produce the goods and services
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The Corporation
A corporation is an independent legal entity, separate from the people who own, control, and manage it. In other words, corporation and tax laws view the corporation as a legal "person" that can enter into contracts, incur debts, and pay taxes apart from its owners.
A corporation does not dissolve when its owners (shareholders) change or die, and the owners of a corporation have limited liability -- that is, they are not personally responsible for the corporation's debts.
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The Limited Liability Company
The concept of limited liability: Members of a corporation are financially responsible for the debts of the organization only up to the extent of their investments.
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Kinds of corporations: For-profit, nonprofit; privately owned or owned wholly or in part by the government; privately or publicly held.
Evolution of the corporation:
The corporate form developed during the Middle Ages.
The first corporations were towns, universities and religious orders, chartered by government and regulated by public statute.
The Limited Liability Company
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The birth of the corporation: These enterprises began in 1600, when Queen Elizabeth I granted a group of merchants the right to be “one body corporate” and hold a trading monopoly to the East Indies.
The pooling of capital: Members of the earliest corporations financed voyages and absorbed the losses individually if vessels sank – since ships became larger and more expensive, buyers had to pool capital and share the losses.
The Limited Liability Company
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Corporate Moral Agency
Corporations as legal persons: In the eyes of the law, corporations are legal persons.
This means they enjoy rights and protections that any ordinary individuals do.
These include the right to free speech, due process, against unreasonable searches and seizures, jury trial, and freedom from double jeopardy.
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Can corporations make moral decisions? Many argue that only the individuals within the structure can act morally or immorally, and can be consequently held morally responsible for their actions.
Others disagree as to whether the structure as a whole can be liable for criminal offenses and punishable by the law.
Not every form of punishment can be applied to corporations.
Corporate Moral Agency
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Reflection
Questions ?
This week
Management Ethics
Reflection Questions
1. Are corporations moral agents? Do they have moral responsibilities? Or, in your view, do only human beings have moral agency and moral obligations?
Chap 5 – Corporations
Vanishing individual responsibility: One response to the tendency of vanishing individual responsibility is to attribute moral agency to the corporation itself.
Another response is to refuse to let individuals duck their personal responsibility.
Corporate Moral Agency
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Rival Views of Corporate Responsibility
Rival views of corporate responsibility: The debate over corporate responsibility involves several elements:
Whether it should be construed narrowly to cover only profit maximization
Whether it should be considered more broadly to include acting morally, refraining from socially undesirable behavior, and contributing actively and directly to the public good
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The narrow view: profit maximization: In his book Capitalism and Freedom, economist Milton Friedman (1912–2006) argues that diverting corporations from the pursuit of profit makes our economic system less efficient.
Business’s only social responsibility is to make money within the rules of the game.
Private enterprise should not be forced to undertake public responsibilities that properly belong to government.
Rival Views of Corporate Responsibility
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Milton Friedman (7/31/1912-11/16/06) American Economist
Broader view – corporate social responsibility:
Says that a corporation has obligations not only to its stockholders, but to all other constituencies that affect, or are affected by, its behavior
This includes all parties that have a stake in what the corporation does or doesn’t do – employees, customers, and the public at large
It is sometimes called the social entity model or the stakeholder model
Rival Views of Corporate Responsibility
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Broader view – corporate social responsibility:
The relationship between business and society is seen as an implicit social contract that requires business to operate in socially beneficial ways.
Corporations must take responsibility for the unintended side effects of their business transactions (externalities) and weigh the full social costs of their activities.
Rival Views of Corporate Responsibility
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…………..“However, the workers assembling iPhones, iPads and other devices often labor in harsh conditions, according to employees inside those plants, worker advocates and documents published by companies themselves. Problems are as varied as onerous work environments and serious — sometimes deadly — safety problems.”
“Employees work excessive overtime, in some cases seven days a week, and live in crowded dorms. Some say they stand so long that their legs swell until they can hardly walk. Under-age workers have helped build Apple’s products, and the company’s suppliers have improperly disposed of hazardous waste and falsified records, according to company reports and advocacy groups that, within China, are often considered reliable, independent monitors.”…………………..
In China, Human Costs Are Built Into an iPad
By CHARLES DUHIGG and DAVID BARBOZA
Published: January 25, 2012
Apple – made in China 2012 New York Times
Proponents of the narrow view argue that management’s fiduciary responsibility to maximize shareholder wealth outweighs any other obligations.
Proponents of the broader view argue that management has responsibilities to other constituencies as well (to employees, bondholders, and consumers).
Rival Views of Corporate Responsibility
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Debating Corporate Responsibility
The let-government-do-it argument: The corporation has a natural and insatiable appetite for profit and should be controlled through a government imposed system of laws and incentives.
Objection: Government can’t anticipate all moral corporate moral challenges but manifests many of the same structural characteristics that test moral behavior inside the corporation.
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The business-can’t-handle-it argument:
Corporations lack the expertise: Corporate executives lack the moral and social expertise to make other-than-economic decisions.
Corporations will impose their values on us: Broadening corporate responsibility will “materialize’’ society rather than “moralize’’ corporate activity.
Debating Corporate Responsibility
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This week
Management Ethics
Reflection Questions
2. Which view of corporate social responsibility—the narrow or the broad—do you favor, and why?
Chap 5 – Corporations
Institutionalizing Ethics Within Corporations
To make ethics a priority, corporations should:
Acknowledge the importance of conducting business morally
Make a real effort to encourage their members to take moral responsibilities seriously
End their defensiveness in the face of criticism, and invite public discussion and review
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Corporate moral codes: Several steps companies should take to institutionalize ethics:
Articulate the firm’s values and goals
Adopt a moral code applicable to all members of the company
Set up a high-ranking ethics committee to oversee, develop, and enforce the code
Incorporate ethics training into all employee-development programs
Institutionalizing Ethics Within Corporations
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Corporate culture: The set of explicit and implicit values, beliefs, and behaviors that shape the experiences of the members of a corporation.
Organizational theorists stress monitoring and managing corporate culture (and understanding each corporation’s distinctive culture) to prevent dysfunctional behavior and processes.
Management must pay attention to the values and behavior reinforced by its corporate culture.
Institutionalizing Ethics Within Corporations
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Reflection
Questions ?
This week
Management Ethics
Reflection Questions
3. What do you think companies should do to make themselves more moral organizations? How can they promote a healthy moral climate inside the company?
Chap 5 – Corporations