Corporation Responsibility and Ethics

Topics: Social responsibility, Economics, Business ethics Pages: 7 (2264 words) Published: January 10, 2014
Corporation can be explained as an association of individuals, created by law or under authority of law, having a continuous existence independent of the existences of its members, and powers and liabilities distinct form those of its members. The corporation may exist for the purpose of profit or non profit oriented. By the early 18 century, corporations are owned and control by government authorities. At the late 18 century, the old economic policies and theories are eliminated with the work of Adam Smith and other economists. And the corporations are transformed from being government affiliated entities to public and private economic entities. The main two ideas behind this transformation was that a business corporation should not be directly tied to any public policies, and the corporation is a by-product of the people’s right of association, not a gift from the state. However, with the given freedoms, they still exist within the legal system and considered as legal person, who has morally responsible for their actions. These morale responsibilities are classified as narrow and broader view. Narrow view primarily concerns for the interest of shareholders, obligation to other stakeholders are evaluated within the range of satisfied demand implied by shareholders. Whereas, broader view mainly concern for the stakeholders with all those affected by the corporation’s action, shareholders represent only one set of multiple responsibilities that are weighed in decisions. Though, the specified statements in a question “corporation’s obligation to their stakeholders comes before its obligations to the rest of society” were construed narrowly to cover only the shareholders interest. . The main economist who supports the narrow view of corporative responsibilities was Milton Friedman. The Milton Friedman (1970) in an influential article argued that when corporate manager are consideration was given for social responsibilities to influence their decisions, they are violating the obligations to the corporation’s owners. He believes that only employees of the corporations have a responsibility to meet desired requirements of its owners. The desired requirements are in most case to maximizing the wealth of the organization. He argues by saying “if we wish we can refer to some of these responsibilities as ‘social responsibilities.’ But in these respects he is acting as a principal not an agent; he is spending his own money or time or energy, not the money of his employers or the time and energy he has contracted to devote to their purposes. If these are ‘social responsibilities,’ they are the social responsibilities of the individual, not the business.” Further Friedman’s added “the situation of the individual proprietor is somewhat different. If he acts to reduce the returns of his enterprise in order to exercise his ‘social responsibility,’ he is spending his own money, not someone else’s. If he wishes to spend his money on such purposes that is his right and I cannot see that there is any objection for doing so.” Friedman’s interpretation towards corporative responsibilities are seems too narrow to accept and adopt in today’s business environment. Business Corporation’s who stick with those narrow view become a challenge to sustain in a competitive market economy. In today’s business environment, public expectations towards the business organizations are high and it becomes a basic requirement for the organization to fulfill those expectations to building positive corporative images and sustainable relation to achieving economic results. To justify my argument I have used narrow and broader view of corporative responsibility theories and some success stories. 2. THE NARROW VIEW OF CORPORATIVE RESPONSIBILITY

The narrow view theorist believes that honoring commitments to shareholders is more valuable than responding to the demands of other stakeholders. Such theories includes; pure marketplace ethics,...
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