.

Session-5
The Nature of Corporation and
Corporate Responsibility Debate
1. The Nature of Corporation
2. The Classical Theory of CSR
3. Challenges to the Classical Theory of CSR
4. The Modified Classical Theory of CSR
5. The Stakeholder Theory of CSR
6. Challenges to the Stakeholder Theory of CSR
7. Corporate Citizenship
1
The Nature of Corporation (1)
.

2
 The Nature of Corporation (2)
: “corporation is a formal
. organization; its structure directs
Please those inside to pursue a single
summarize goal”.
those
five
positions
…

3
 The Nature of Corporation (3)
viewed as an “atomistic” entity
viewed in a mechanistic sense as a means of coordinating individual actions.
: sum of (reducible to) individual inputs & actions.
: external pressures thru laws and regulations.

Goodpaster French

Ladd Danley & Keeley

: viewed as a member of community.

: viewed in a compact entity that is more than the sum of the individuals within.
: more than sum of (irreducible to) individual inputs & actions.
: internal moral pressure from within (culture).

4
 The Nature of Corporation (4)
No, that is not all. I should say also that each of those arguments
Is that is not free from some defects. Nevertheless, it is much more
all what reasonable to insist
than to reject it,
you .
want to
By nature, however, the moral agency and responsibility of
say? corporation is different from personal moral agency and
responsibility. It is of .

In order to see how special the moral agency and responsibility of

corporation is, we need to investigate the characteristics and
purposes of corporation.

5
 The Nature of Corporation (5)

(1) Corporation is , chartered and protected

What are the under the state’s laws with some rights similar to persons.
characteristics (2) Corporation is
and purposes working for the achievement of a common purpose.
of corporation (3) Corporation is with regard to the accountability of
the owners for the amount of money invested in it.
? (4) Corporation in its modern form is
or independent from its founders and owners.

(1) Corporation is operated to or to

create economic values that are ultimately beneficial for the
.
(2) Corporation is in its origin legally established by the owners
for the purpose of increasing their values, including
(economic value).

6
The Classical Theory of CSR (1)
.

7
The Classical Theory of CSR (2)
.

8
.

9
 .

Rain again…
What man
wants, really?
I miss you!

10
The Modified Classical Theory of CSR
.

11
 The Modified Classical Theory of CSR
.

Hi you!
Stop watching me!
Think…
cogito ergo sum…

12
.

13
 :
What is the
development
of the The legal system has undergone many changes that constrain the
modern pursuit of stockholder interests. Following the refined legal
corporation system means that the claims of the affected parties (e.g.
that makes the consumers, employees, local communities) have to be taken into
stakeholder consideration in every corporate decision-making.
theory
relevant?
Externalities, moral hazards and monopoly power, which emerge
from the failure of the internal “invisible hand” of the market,
have led the government and other parties to exercise more
external control on the managerial operation of the corporation.
From this latest developments, the article develops two foundations:
 .
How do
those two
principles
provide
foundation
for the
concept of
stakeholder?
Thus,
each of those
stakeholders
has a right to
make claims or
a right to
demand certain
actions by
management.
 Right. Two principles are to follow:

Based on the
purpose of
the firm,
principles of
stakeholder
management
must follow,
right?
I am curious
how the
theory is to be
implemented

19
Challenges to the Stakeholder Theory of CSR (1)
.

20
 Challenges to the Stakeholder Theory of CSR (2)
What matters further is ( ), i.e.
So? a pattern or channel by which to move from stakeholder identification
to a practical response or resolution. There are two competing
positions of stakeholder synthesis:

Stakeholders outside the stockholder group are viewed

instrumentally as factors (just like “weather”) potentially affecting
the overarching goal of optimizing stockholder interests (profit
maximization). : it is non-moral (though not immoral)
and insufficient consideration, because the motive is for the sake
of stockholder’s interest (or anyone’s interest other than theirs).

All stakeholders (including the stockholder group) are viewed

impartially as having fiduciary relationships with the managers.
: It is simply incompatible with widely-held moral
convictions about the special fiduciary obligations owed by
management to stockholders.
Challenges to the Stakeholder Theory of CSR (3)
.

22
Challenges to the Stakeholder Theory of CSR (4)

23
 Challenges to the Stakeholder Theory of CSR (5)
But Prof. Freeman insists that no paradox should hold if the multi-
Goodpaster’s
fiduciary view is correctly interpreted and justified.
argument of
For Prof. Freeman, Goodpaster’s paradox is a result of confronting
the stakeholder
(strategic stakeholder synthesis) with
paradox
(multi-fiduciary stakeholder synthesis).
Thus, the paradox emerges from an implicit principle (prevalent in
most business ethics thinking) called “ ”:

As long as “moral” and “business” is separated, there will be room for

people to connect them and do criticism on either side.

24
Corporate Citizenship (1)
.

25
 Corporate Citizenship (2)
I agree with you.
But the
(have led to)
development
of CSR is
unfortunately
a mere (which has resulted in)
response to
the criticism
of business?

26
Corporate Citizenship (3)

27
 Corporate Citizenship (4)
There are 3 perspectives of the relationship among Corporate Social
Performance (CSP), Corporate Financial Performance (CFP) and
I am wondering Corporate Reputation (CR).
how Good
Social Perspective-1: CSP Drives the Relationship
Performance (a
good corporate
citizen) and
Financial
Performance is Perspective-2: CFP Drives the Relationship
related.

Perspective-3: Interactive Relationships among CSP, CFP, and CR

 Corporate Citizenship (6)
Yes, but all those
diagrams seem to
point to the
strategic
stakeholder Owner stakeholders’ bottom line
approach.
What happens
consumer stakeholders’ bottom line
when we apply
multi-fiduciary
stakeholder Employee stakeholders’ bottom line
approach?

Community stakeholders’ bottom line

Other stakeholders’ bottom line

We may use “balance score card” to measure CSP.