business ethics/corporate social responsibility overview

Business Ethics/Corporate Business Ethics/Corporate Social Responsibility Social Responsibility

OverviewOverview

Business Ethics &Business Ethics &Corporate Social ResponsibilityCorporate Social Responsibility

The corporation as a legal entityThe corporation as a legal entity The corporation as an economic entityThe corporation as an economic entity The corporation as a social entityThe corporation as a social entity The corporation as a moral entityThe corporation as a moral entity The corporation as a religious entityThe corporation as a religious entity

Business Ethics &Business Ethics &Corporate Social Responsibility: The Legal Corporate Social Responsibility: The Legal

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What are the What are the advantagesadvantages of the of the corporate form of organization, corporate form of organization, vis-a-vis-a-visvis the alternative structures of sole the alternative structures of sole proprietorships or partnerships? proprietorships or partnerships?


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What What isis a corporation? a corporation?


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Trusteeship ModelTrusteeship Model TrustorTrustor TrusteeTrustee BeneficiaryBeneficiary


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D. Fraher on Corporate TrusteeshipD. Fraher on Corporate Trusteeship


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Funds received by the Church would be Funds received by the Church would be used for charitable purposes, for the used for charitable purposes, for the appropriate level of support of the appropriate level of support of the clergy, or for the aggrandizement of the clergy, or for the aggrandizement of the Church and its interests, but the cleric in Church and its interests, but the cleric in charge could not legally appropriate the charge could not legally appropriate the goods of his church for his own support goods of his church for his own support or enjoyment beyond a reasonable or enjoyment beyond a reasonable living...living...


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……ecclesiastical property-holding gave ecclesiastical property-holding gave birth to corporation theory. In trying birth to corporation theory. In trying to explain the roles of bishops, lower to explain the roles of bishops, lower clergy, and laity, medieval lawyers clergy, and laity, medieval lawyers ultimately decided that each church ultimately decided that each church was an entity distinct from the was an entity distinct from the persons who made up the church...persons who made up the church...


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……the fictional person, the corporate the fictional person, the corporate entity, theoretically lived forever, and entity, theoretically lived forever, and theoretically this fictional person had theoretically this fictional person had property rights and interests of its property rights and interests of its own...own...


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……vis-à-vis the corporate church, the vis-à-vis the corporate church, the clergy were agents or representatives, clergy were agents or representatives, subject to fiduciary duties.subject to fiduciary duties.


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What is the corporation?What is the corporation? A corporation is an artificial being, invisible, A corporation is an artificial being, invisible,

intangible, and existing only in intangible, and existing only in contemplation of law. Being the mere contemplation of law. Being the mere creature of law, it possesses only those creature of law, it possesses only those properties which the charter of creation properties which the charter of creation confers upon it, either expressly, or as confers upon it, either expressly, or as incidental to its very existence.incidental to its very existence. Chief Justice Marshall, Dartmouth vs Woodward Chief Justice Marshall, Dartmouth vs Woodward

(1819)(1819)


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By what By what mechanismmechanism are corporations are corporations formed? formed?

Business Ethics &Business Ethics &Corporate Social Responsibility: The Moral Corporate Social Responsibility: The Moral

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What are the differences between What are the differences between legallegal, , socialsocial, and , and ethicalethical responsibility? responsibility?


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What What logiclogic can be used to support the can be used to support the notion that corporations have notion that corporations have legallegal responsibilities? That they have responsibilities? That they have socialsocial responsibilities? That they have responsibilities? That they have ethicalethical responsibilities? responsibilities?

Business Ethics &Business Ethics &Corporate Social Responsibility: The Moral Corporate Social Responsibility: The Moral

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Ethics is concerned with the following:Ethics is concerned with the following: Good vs BadGood vs Bad Right vs WrongRight vs Wrong Fair vs UnfairFair vs Unfair Praise vs BlamePraise vs Blame

Social Contract TheorySocial Contract Theory

Morality consists in the set of rules,Morality consists in the set of rules,

governing how people are to treat one governing how people are to treat one another,another,

that rational people will agree to accept,that rational people will agree to accept,

for their mutual benefit,for their mutual benefit,

on the condition that others follow those on the condition that others follow those rules as well.rules as well.


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What What examplesexamples of social contracts can of social contracts can you provide from our own country's you provide from our own country's history? history?


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By what By what processprocess do you think social do you think social contracts ought to be established? contracts ought to be established? More specifically, More specifically, whowho should be should be involved in 'writing' the social involved in 'writing' the social contract?contract?


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If you were designing an organization, If you were designing an organization, what what rulesrules would you propose be part would you propose be part of the organization's social contract of the organization's social contract with its with its shareholdersshareholders? Its ? Its customerscustomers? ? Its Its employeesemployees? The ? The public at largepublic at large? ?


Basic facts about the conditions of human Basic facts about the conditions of human life:life:

equality of needequality of need

scarcityscarcity

the essential equality of human the essential equality of human powerpower

limited altruismlimited altruism


Suppose that in living together with Suppose that in living together with other people, you can adopt either of other people, you can adopt either of two strategies:two strategies:

“ “acting egoistically”acting egoistically”

“ “acting benevolently”acting benevolently”


In a world populated by those who In a world populated by those who behave egoistically and those who behave egoistically and those who behave benevolently, what is the behave benevolently, what is the best situation you can hope for?best situation you can hope for?


In a world populated by those who In a world populated by those who behave egoistically and those who behave egoistically and those who behave benevolently, what is the behave benevolently, what is the next best situation you can hope next best situation you can hope for?for?


In a world populated by those who In a world populated by those who behave egoistically and those who behave egoistically and those who behave benevolently, what is the behave benevolently, what is the worst situation you can hope for?worst situation you can hope for?


Based on these assessments, you Based on these assessments, you should conclude that you should should conclude that you should notnot adopt the policy of respecting adopt the policy of respecting other people’s interests:other people’s interests:


Either other people will respect your interests Either other people will respect your interests or they won’t.or they won’t.

If they do respect your interests, you will be If they do respect your interests, you will be better off not respecting theirs whenever it is better off not respecting theirs whenever it is to your advantage not to do so. This will be to your advantage not to do so. This will be the optimum situation.the optimum situation.

If they do not respect your interests, then it If they do not respect your interests, then it would be foolish for you to respect theirs--that would be foolish for you to respect theirs--that would land you in the worst possible situation.would land you in the worst possible situation.

Therefore, regardless of what other people do, Therefore, regardless of what other people do, you are better off adopting the policy of not you are better off adopting the policy of not respecting their interests.respecting their interests.


And now we come to the catch:And now we come to the catch:

other people, of course, can other people, of course, can reason in the same way, and the reason in the same way, and the result will be that we end up back result will be that we end up back in Hobbes’s state of nature.in Hobbes’s state of nature.

And in this situation each of us And in this situation each of us is obviously worse off than we is obviously worse off than we would be if we cooperated.would be if we cooperated.


1) You would be best off in a situation in 1) You would be best off in a situation in which you were an egoist while other which you were an egoist while other people were benevolent.people were benevolent.

2) The next best situation for you would be 2) The next best situation for you would be one in which everyone was benevolent.one in which everyone was benevolent.

3) A bad situation, but not the worst, would 3) A bad situation, but not the worst, would be one in which everyone was egoistic.be one in which everyone was egoistic.

4) And finally, you would be 4) And finally, you would be worstworst off in a off in a situation in which you respect other situation in which you respect other people’s interests but they ignore yours.people’s interests but they ignore yours.


Only an enforceable agreement Only an enforceable agreement could provide a way out of the could provide a way out of the dilemma, for either of dilemma, for either of you...what Garret Hardin refers you...what Garret Hardin refers to as mutual coercion, to as mutual coercion, consistently applied.consistently applied.


Clearly, what is needed to escape Clearly, what is needed to escape the state of nature is some way for the state of nature is some way for people to cooperate with one people to cooperate with one another.another.

By cooperating, and dividing the By cooperating, and dividing the labor, the amount of essential labor, the amount of essential goods could be increased and goods could be increased and distributed to all who need them.distributed to all who need them.


Morality consists in the set of rules,Morality consists in the set of rules,

governing how people are to treat one governing how people are to treat one another,another,

that rational people will agree to accept,that rational people will agree to accept,

for their mutual benefit,for their mutual benefit,

on the condition that others follow those on the condition that others follow those rules as well.rules as well.


To escape the state of nature, then, To escape the state of nature, then, people must agree to the people must agree to the establishment of rules to govern establishment of rules to govern their relations with one another, their relations with one another, and they must agree to the and they must agree to the establishment of an agency--the establishment of an agency--the state--with the power necessary to state--with the power necessary to enforce those rules...enforce those rules...


...for it is the government, with its ...for it is the government, with its systems of laws, police, and systems of laws, police, and courts, that courts, that ensuresensures that people that people can live with a minimum fear of can live with a minimum fear of attack and that people will have to attack and that people will have to keep their bargains with one keep their bargains with one another.another.


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What 'What 'problemproblem' is social contract ' is social contract theory meant to resolve?theory meant to resolve?


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How How formalformal should social contracts should social contracts be? be? WhyWhy? ?


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What are the What are the legal dutieslegal duties of those who of those who managemanage corporations? What are the corporations? What are the socialsocial duties of these same duties of these same individuals? The individuals? The ethicalethical duties? duties?


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It has oftentimes been claimed that It has oftentimes been claimed that the only objective of managers is to the only objective of managers is to maximizemaximize shareholder wealth. What shareholder wealth. What justificationjustification can be provided for this can be provided for this point of view? point of view?


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What is implied by shareholder wealth What is implied by shareholder wealth maximizationmaximization? Specifically, what does ? Specifically, what does this perspective 'mean' for the this perspective 'mean' for the interests of other interests of other stakeholdersstakeholders? ?


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What is a 'What is a 'stakeholderstakeholder,' and why ,' and why should stakeholder interests be taken should stakeholder interests be taken seriously? seriously?


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How would you go about How would you go about prioritizingprioritizing the interests of stakeholders? With the interests of stakeholders? With what what justificationjustification would you establish would you establish these priorities? these priorities?

Business Ethics &Business Ethics &Corporate Social Responsibility: The Social Corporate Social Responsibility: The Social

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For whose benefit ought the For whose benefit ought the corporation act?corporation act?


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Stakeholder: Any group which either...Stakeholder: Any group which either... ...can affect the ability of the corporation ...can affect the ability of the corporation

to achieve its mission, to achieve its mission, oror

...which is affected by the corporation’s ...which is affected by the corporation’s activitiesactivities


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The Bluebird Smelter CaseThe Bluebird Smelter Case

Bluebird Smelter CaseBluebird Smelter Case

Payroll (100 X $20,000)Payroll (100 X $20,000) 2,000,002,000,0000

Benefits (100 x $1,000)Benefits (100 x $1,000) 100,000100,000

Community incomeCommunity income 4,600,0004,600,000

Local taxes/feesLocal taxes/fees 125,000125,000

Social services/charitySocial services/charity 20,00020,000

Total Social BenefitsTotal Social Benefits $ $ 6,845,0006,845,000

Total Social Benefits:


Excess deaths (5 X Excess deaths (5 X $1,000,000)$1,000,000)

5,000,005,000,0000

Health/illness Health/illness 450,000450,000

Crop/property damageCrop/property damage 1,000,0001,000,000

Aesthetic value reductionAesthetic value reduction 100,000100,000

Lost tourismLost tourism 100,000100,000

Total Social CostsTotal Social Costs $ $ 7,450,0007,450,000

Total Social Costs:


Total Social BenefitsTotal Social Benefits $ 6,845,000$ 6,845,000

Total Social CostsTotal Social Costs $ 7,450,000$ 7,450,000

Net Social LossNet Social Loss $ 605,000$ 605,000


Excess deaths (5 X Excess deaths (5 X $1,000,000$1,000,000))

5,000,005,000,0000






Total Social Costs:


Break-even Cost of a Human LifeBreak-even Cost of a Human Life



Total Social Costs Total Social Costs (w/o excess deaths)(w/o excess deaths) $ 2,450,000$ 2,450,000

Net Social Profit Net Social Profit (w/o excess deaths)(w/o excess deaths) $ 4,395,000$ 4,395,000



Net Social Profit Net Social Profit (w/o excess deaths)(w/o excess deaths) $ 4,395,000$ 4,395,000

Divided by number Divided by number of deathsof deaths 55

Break-even cost of a Break-even cost of a human lifehuman life $ 879,000$ 879,000



Excess deaths (5 X Excess deaths (5 X $ $ 879,000879,000))

4,395,004,395,0000






Total Social Costs:



Total Social CostsTotal Social Costs $ 6,845,000$ 6,845,000

Net Social LossNet Social Loss $ 0$ 0

Discussion Questions...Discussion Questions...

• Is a human life worth Is a human life worth moremore or or lessless than $879,000?than $879,000?

• What factors ought we to consider What factors ought we to consider when placing a value on human life?when placing a value on human life?


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De George on Corporate Social De George on Corporate Social ResponsibilityResponsibility


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Corporations are not human beings. The Corporations are not human beings. The differences between human individuals differences between human individuals and corporations, other formal and corporations, other formal organizations, and nations are organizations, and nations are significant from a moral point of view significant from a moral point of view and from the point of view of moral and from the point of view of moral responsibility.responsibility.


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A corporation as such has no conscience, A corporation as such has no conscience, no feelings, no consciousness of its no feelings, no consciousness of its own. It has a conscience only to the own. It has a conscience only to the extent that those who make it up act extent that those who make it up act for it in such a way as to evince for it in such a way as to evince something comparable to conscience.something comparable to conscience.


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Because a corporation only acts through Because a corporation only acts through those who act for it, it is the latter who those who act for it, it is the latter who must assume responsibility for the must assume responsibility for the corporation.corporation.


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Vehicle met all NTSB standardsVehicle met all NTSB standards Vehicle was as safe as other Vehicle was as safe as other

automobiles in its classautomobiles in its class Social costs of modification exceeded Social costs of modification exceeded

social benefitssocial benefits 11,000,000 vehicles @ $11/ 11,000,000 vehicles @ $11/

$121,000,000$121,000,000 180 persons @ $200,000/ 180 persons @ $200,000/

$36,000,000$36,000,000


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Who is responsible for the decision to Who is responsible for the decision to introduce the Ford Pinto without introduce the Ford Pinto without modification?modification?

Business Ethics &Business Ethics &Corporate Social Responsibility: The Corporate Social Responsibility: The

Pseudo-Religious ViewPseudo-Religious View

Business Ethics &Business Ethics &Corporate Social Responsibility: The Corporate Social Responsibility: The

Pseudo-Religious ViewPseudo-Religious View

The metaphor of the veilThe metaphor of the veil The metaphor of sanctuaryThe metaphor of sanctuary

Business Ethics/Corporate Social Business Ethics/Corporate Social Responsibility OverviewResponsibility Overview

The exclusively economic The exclusively economic definition of the purpose of definition of the purpose of the corporation is a deadly the corporation is a deadly oversimplification, allowing oversimplification, allowing overemphasis on self-overemphasis on self-interest at the expense of interest at the expense of consideration of others.consideration of others.

--Kenneth --Kenneth AndrewsAndrews

Business Ethics/Corporate Social Business Ethics/Corporate Social Responsibility OverviewResponsibility Overview

Man…ought to regard himself, not Man…ought to regard himself, not as something separated and as something separated and detached, but as a citizen of the detached, but as a citizen of the world, a member of the vast world, a member of the vast commonwealth of nature…to the commonwealth of nature…to the interest of this great community, interest of this great community, he ought at all times to be willing he ought at all times to be willing that his own little interest should that his own little interest should be sacrificed.be sacrificed. --Adam --Adam

SmithSmith

Business Ethics/Corporate Business Ethics/Corporate Social Responsibility Social Responsibility

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