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    Corporate Social Responsibility: MGMT 621 Contemporary Ethical Issues in Management Jeffery D. Smith

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    Sagarika Sadi
    The document discusses two models of corporate social responsibility: Milton Friedman's stockholder model and the stakeholder model. Friedman's model argues that the only social responsibility of business is to maximize profits for shareholders within legal bounds. The stakeholder model argues that corporations should serve and balance the interests of all stakeholders, including customers, employees, suppliers, and communities, not just shareholders. It proposes principles like respecting humanity, responsibility for effects on others, legitimacy, and fiduciary duty to multiple stakeholder groups.

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    Corporate Social Responsibility: MGMT 621 Contemporary Ethical Issues in Management Jeffery D. Smith

    Uploaded by

    Sagarika Sadi
    78 views14 pages
    The document discusses two models of corporate social responsibility: Milton Friedman's stockholder model and the stakeholder model. Friedman's model argues that the only social responsibility of business is to maximize profits for shareholders within legal bounds. The stakeholder model argues that corporations should serve and balance the interests of all stakeholders, including customers, employees, suppliers, and communities, not just shareholders. It proposes principles like respecting humanity, responsibility for effects on others, legitimacy, and fiduciary duty to multiple stakeholder groups.

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    The document discusses two models of corporate social responsibility: Milton Friedman's stockholder model and the stakeholder model. Friedman's model argues that the only social responsibility of business is to maximize profits for shareholders within legal bounds. The stakeholder model argues that corporations should serve and balance the interests of all stakeholders, including customers, employees, suppliers, and communities, not just shareholders. It proposes principles like respecting humanity, responsibility for effects on others, legitimacy, and fiduciary duty to multiple stakeholder groups.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    78 views14 pages

    Corporate Social Responsibility: MGMT 621 Contemporary Ethical Issues in Management Jeffery D. Smith

    Uploaded by

    Sagarika Sadi
    The document discusses two models of corporate social responsibility: Milton Friedman's stockholder model and the stakeholder model. Friedman's model argues that the only social responsibility of business is to maximize profits for shareholders within legal bounds. The stakeholder model argues that corporations should serve and balance the interests of all stakeholders, including customers, employees, suppliers, and communities, not just shareholders. It proposes principles like respecting humanity, responsibility for effects on others, legitimacy, and fiduciary duty to multiple stakeholder groups.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 14

    Corporate Social Responsibility

    Mgmt 621 Contemporary Ethical Issues in Management Jeffery D. Smith

    A View of Corporate Social Responsibility (CSR)


    CSR Philanthropic Economic Environmental Ethical Legal

    Adapted from Archie Carroll (1991). The Pyramid of Corporate Social Responsibility. Business Horizons, 42: 39-48.

    Pacific Lumber Company


    Corporate Social Responsibility Initiatives Environmental Sustainability Community Sustainability Economic Sustainability http://www.palco.com

    Milton Friedmans Stockholder Model


    Nobel Prize in Economics (1976)

    Capitalism and Freedom (1962)


    The Social Responsibility of Business is to Maximize Profits (1971)

    Free to Choose (1980)

    Milton Friedmans Stockholder Model


    Some Preliminary Assumptions The corporation only has "artificial responsibilities", i.e., only individuals (proprietors, executives, and managers) have moral responsibilities Managers (operation executives and officers) are employees of stockholders (owners) Managers and stockholders are in a voluntary principalagent relationship Stockholders own the corporation and this gives them a primary ethical entitlement to the ownership of profits

    LAW

    OWNERS (Principals) MANAGERS (Agents) Employees Suppliers Customers

    Friedmans Stockholder Model, contd The only social responsibility of business is to maximize shareholder wealth, i.e., maximize profits, within the bounds of the law Managers have a fiduciary responsibility to carry out the directives and protect the interests of shareholders.

    Friedmans Stockholder Model, contd


    1. Stockholders have an ethical entitlement to their property (capital) and the profits that flow from its productive use by the firm. 2. Through an act of trust, managers agree to maximize the value of stockholders property (capital) by maximizing the profits of the firm. 3. From 1) and 2), managers have an ethical responsibility to maximize the profits of the firm. 4. Corporate social endeavors require managers to act in ways that do not maximize the profits owned by stockholders. 5. From 3) and 4), managers have an ethical responsibility not to pursue corporate social endeavors.

    The Stakeholder Model


    A stakeholder theory of the firm must redefine the purpose of the firm. The stockholder theory claims that the purpose of the firm is to maximize the welfare of the stockholdersThe purpose of the firm is quite different [for the stakeholder approach.] The very purpose isto serve as a vehicle for coordinating stakeholder interests. It is through the firm that each stakeholder group makes itself better off through voluntary exchanges. William Evan and R. Edward Freeman. (1993) The Stakeholder Theory of the Modern Corporation: Kantian Capitalism. In Norman Bowie and Tom Beauchamp (Eds.), Ethical Theory and Business (pp. 7584). Upper Saddle River: Prentice Hall.

    Owners Management FIRM Communities Customers Employees Suppliers

    R. Edward Freeman

    Stakeholder: an individual or group that is vital to the survival and success of the corporation

    Owners Management FIRM Communities Customers Employees Suppliers

    2. The Stakeholder Model, contd


    Kants Humanity Formula of the Categorical Imperative Corporate agents must always respect the humanity of each stakeholder group by never treating stakeholders as a means to corporate ends. Principle of Corporate Rights (PCR) The corporation and its managers may not violate the legitimate rights of others to determine their own future. health, safety, association, contractual entitlements, fair/equitable treatment Principle of Corporate Effects (PCE) The corporation and its managers are responsible for the effects of their actions on others.

    2. The Stakeholder Model, contd


    Principle of Corporate Legitimacy (PCL)
    The corporation should be managed for the benefit of its stakeholdersThe rights of these groups must be ensured and the groups must participate, in some sense, in decisions that substantially effect their welfare (Evan and Freeman, p. 82)

    Stakeholder Fiduciary Principle (SFP)


    Management bears a fiduciary relationship to stakeholders and to the corporation as an abstract entity. It must act in the interests of the stakeholders as their agent, and it must act in the interests of the corporation to ensure the survival of the firm, safeguarding the long-term stakes of each group. (p. 82)

    2. The Stakeholder Model, contd


    Some Problems and Concerns Institutionalizing/Implementing the PCL and SFP Conflicts Between Stakeholder Groups Efficiency Turns the Regulation of the Market Excessively Inward

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