Stakeholder Theory of the Modern Corporation R Edward

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Stakeholder Theory of the Modern Corporation R. Edward Freeman • Management has a fiduciary

Stakeholder Theory of the Modern Corporation R. Edward Freeman • Management has a fiduciary responsibility to stakeholders • Corporations a tool for immortality • Corporations status changed – “Privity of Contracts – Employment Law – Public Policy and Law

CORPORATE BEHAVIOR FORCING CHANGE • EXTERNALITIES – “Tragedy of the Commons” “Freerider” • MORAL

CORPORATE BEHAVIOR FORCING CHANGE • EXTERNALITIES – “Tragedy of the Commons” “Freerider” • MORAL HAZARD – Passing on the cost of pollution • MONOLOPLY – Strive to avoid competition

REASONABLE PLURALISM • MEASURE AFFECT ON STAKEHOLDERS BY – Doctrine of Fair Contracts –

REASONABLE PLURALISM • MEASURE AFFECT ON STAKEHOLDERS BY – Doctrine of Fair Contracts – Feminist Standpoint Theory – Ecological Principles • Ask Questions – Corporation ought to be governed by… – Managers ought to act. • WHERE DO WE FIND BACKGROUND DISCIPLINES: Business, Social Science, Religion

DOCTRINE OF FAIR CONTACTS • • • The Principle of Entry and Exit –

DOCTRINE OF FAIR CONTACTS • • • The Principle of Entry and Exit – Clearly defined entry, exit and renegotiations conditions The Principle of Governance – Rules of the game set by unanimous consent The Principle of Externalities – If effected person want can be renegotiated The Principle of Contracting Costs – Shared cost of contracting The Agency Principle – Must act in the interest of all stakeholders Principle of Limited Immortality – Continued existence of Corporation is in all stakeholders interests

CRITICAL QUESTION WHO IS A STAKEHOLDER? IS THERE RANKING OF STAKEHOLDER INTERESTS?

CRITICAL QUESTION WHO IS A STAKEHOLDER? IS THERE RANKING OF STAKEHOLDER INTERESTS?

Business Ethics and Stakeholder Analysis Kenneth Goodpaster • • Stakeholder Paradox – Fiduciary duty

Business Ethics and Stakeholder Analysis Kenneth Goodpaster • • Stakeholder Paradox – Fiduciary duty to stockholders – Make stakeholders quasistockholders in their own right Stakeholder Analysis – Fact Gathering – Analysis (Strategic Stakeholders) – Synthesis (Multi-fiduciary – Choice(Why Chosen) – Action

Challenges of Stakeholder Perspective • Ruder: Decide based on the decent thing to do

Challenges of Stakeholder Perspective • Ruder: Decide based on the decent thing to do and what ought to be done. • Public obligations takes away from private nature of the corporation • Agent-Principal relationship

CRITICAL QUESTION Can Morality Be Legislated?

CRITICAL QUESTION Can Morality Be Legislated?

The “New” U. S. Sentencing Commission Guidelines: A Wake-up Call for Corporate America Dalton,

The “New” U. S. Sentencing Commission Guidelines: A Wake-up Call for Corporate America Dalton, Metzer, and Hill • Formula used to determine justice. A multiplier used to establish penalty – Nature of the Crime • Amount of Loss • Amount of Planning – Culpability Score • Size of Organization • Level in Organization – (Officer/Janitor) • Past Crimes • Past History

MITIGATION • • Policy in Place Assigned Responsibility for Enforcement Control of Deviants Communicated

MITIGATION • • Policy in Place Assigned Responsibility for Enforcement Control of Deviants Communicated to Organization Control (Audits/Monitoring) Appropriate Discipline Respond Appropriately if Violation Occurs

…a society without any objective legal scale is a terrible on indeed. But a

…a society without any objective legal scale is a terrible on indeed. But a society with no other scale but the legal one is not quite worthy of man either. . Life organized legalistically has shown its inability to defend itself against the corrosion of evil. ” Alexander Solzhenitsyn

The Parable of the Sadhu Bowen H. Mc. Coy • Once in a lifetime

The Parable of the Sadhu Bowen H. Mc. Coy • Once in a lifetime trip to the Himalayas. Travel a well used trail • Found a half naked holy man in the snow • Do you take him back to a village? Do you care for him? Both option would cause you to loose the opportunity to make your once in a life time climb.

QUESTIONS RAISED? • Is no single person responsible when there is a group? •

QUESTIONS RAISED? • Is no single person responsible when there is a group? • Do we make decisions based on ethnic considerations? • Can a superordinate goal allow for moral slippage? • Is their an institutional or group ethic strong than an individual ethic? • How much effort is enough to satisfy your moral obligation?

AUTHOR’S OBSERVATIONS • Organizations without a history of mutually accepted shared values tend to

AUTHOR’S OBSERVATIONS • Organizations without a history of mutually accepted shared values tend to come apart during stress. • People in touch with core values can deal with change, ambiguity, stress, and tough times. • People tend avoid the ambiguous yet that is what tends to be the most rewarding • Individuals need organizational support to act morally.