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An Introduction to Business Ethics

Chapter 3 Corporate Social Responsibility

Classical Model of Corporate Social Responsibility • • Corporations don‟t have any responsibilities. What becomes clear ultimately is that the view does not deny that the agents of corporations have moral obligations. • . just that they are very specific (primarily fiduciary). Officers of corporations do. but they are narrowly defined according to perceived interests of the owners.

Bellotti). . • Knowledge and will. Don‟t have the capacities necessary for responsibilities. corporations are increasingly granted the rights of individual citizens (First National Bank of Boston v. • • What about the fact that corporations are frequently held criminally and civilly liable? Also.Corporations Don‟t Have Responsibilities? • • Corporation‟s are legal fictions.

.If There is Responsibility it Must be That of the Officers • • • Only people with the appropriate capacities. What is the nature of that responsibility? • To satisfy the will of the owners. But to whom are they responsible? The owners.

Utilitarian Defense of Classical Model • • • The market guarantees maximization of good (usually characterized as „satisfaction‟). Managers have a responsibility to conform closely with market expectations (maximize satisfaction). . Evidence is expressed preferences of consumers and owners.

. water. fisheries)-no pricing mechanism.Criticisms of the Utilitarian Defense Part I • There are a range of instances in which the pursuit of profits does not maximize satisfaction. • Prisoner‟s Dilemma (cooperation more optimal than competition). • Market Failures • Externalities (Polution. • Complexity of markets and the contexts in which they function make it unlikely that a single-minded focus on profit will guarantee good outcomes. resource depletion). • Public Goods (Air.

. Satisfaction does not equal happiness. there may be mechanisms that could be developed to meet the sort of objections just noted. It‟s not always good to get what you want. not proactive. • However. there are more difficult conceptual problems.Criticisms of the Utilitarian Defense Part II • Of course. • Property values an economic measure of air quality preferences. • • First-Generation Problem: markets are reactive.

Officers of corporations are responsible to the desires of the owners. The primary desire of the owners of the corporation is profit maximization. .Private Property Defense of Classical Model • • • Corporations are the property of their owners.

They have no direct rights of access/control. zoning. • Constrained by: rights of others. • • Stockholder of a corporation have limited liability for actions of their corporations.Criticisms of the Private Property Defense • Right to property is not absolute. • Corporate Property Rights are different from personal property. . eminent domain.

• The pursuit of profit is understood to be constrained by these standards. in addition to the law. • Which standards is up for debate.The Moral Minimum Model of Corporate Social Responsibility • • A modified version of the Classical Model. . Supplements the Classical Model by adding reference to fundamental moral standards. but reference to the Harm Principle (Do no Harm) is common.

whatever additional moral standards are invoked can also be sources of controversy. .Criticisms of the Moral Minimum Model • • The Moral Minimum Model is open to criticisms similar to those leveled against the Classical Model. In addition.

• Expanding on this notion. . people have suggested that the moral responsibility of businesses are similarly rooted in a “contract” between them and society.Social Contract Theory • The Social Contract Theory account of corporate social responsibility has its roots in a broader political theory. • Responsibilities and rights of individuals grounded in a hypothetical contract between members of society.

Resource depletion. . political corruption. • The potential costs are also obvious. concentration of wealth. • • A “contract” is the best way to understand the tradeoffs between these benefits and risks • Takes the form of specific principles which guide behavior of all parties to the contract. distribution of risk. • Accumulation of capital. jobs.Justifications of Social Contract Theory • The benefits of business (especially corporations) to society are well recognized. threats to democracy.

• Practical • . Theoretical • Specifying the terms of any contract requires identification of initial conditions. how do we specify the actual prescriptions that it underwrites? Social Contract theory is insufficiently action-guiding. Granting the idea of a contract.Criticisms of Social Contract Theory • • There are both theoretical and practical criticisms of this account of corporate social responsibility. but there is considerable disagreement about how these conditions should be understood.

and thus that corporate officers have a responsibility to treat them as ends rather than as means to ends. .Stakeholder Theory • • The current focus of much of the thinking about corporate social responsibility is Stakeholder Theory. Adherents of the theory argue that all stakeholders in a corporation have a fundamental right to respect.

Any individual or group whose interests can affect or are affected by the corporation.Who is a Stakeholder? • Narrow Definition • Any individual or group vital to the survival and success of the corporation. • Wide Definition • • Examples? .

• Differences between stockholders and employees? .Defense of Stakeholder Theory • • Most defenses of Stakeholder Theory begin with the recognition that Stakeholders are conceptually related to stockholders. Justification then focuses on the reach and number of relevant normative concerns.

• Stakeholder theory inadequately addresses stockholder rights and property rights. • Another criticism focusses on practical issues.Criticisms of Stakeholder Theory • A common criticism of Stakeholder theory emerges from the classical model. • Who are the stakeholders? How do they count? How should managers take them into account in their decisions? .