Business Ethics.docx - Business Ethics MGT781 I...

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Business Ethics MGT781 I. Introduction
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Unethical conduct in corporate behavior have become so frequent to the extent that news of scandals of, and limited to, sales malpractice, accounting fraud, financial reporting, safeguarding the environment, marketing irregularities, improper political influence of public officials and product safety are posted on the local and global media resources documenting by evidences the status of the extensive fraud in business. Famous examples of such scandals are Enron, Waste Management and Qwest. The Examples shown in Table 1 suggest the common theme of fraudulently overstating income in order to increase stock prices and executive compensation, and to obtain equity funding for strategic initiatives (McGeorge Law Review / Vol.39). II. Literature Review Stakeholder Theory Although the term “stakeholder” appears to have been invented in the early 60s as a deliberate play on the word “stockholder” to signify that there are other parties having a “stake” in the decision-making of the modern, publicly-held corporation in addition to those holding equity positions; A Stakeholder is defined as “any group or individual who can affect or is affected by the achievement of the organization’s objectives.” (R. Edward Freeman. Strategic Management: A Stakeholder approach) General categories of Stakeholders include stockholders, employees, customers, the government, and the community.
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A.A. Berle stated that all of the powers that are given to a corporation are to be used to create benefits in the interest of the shareholders and Argued that managers should consider themselves trustees and guardians of investments made by the shareholders. E. Merrick Dodd Argued that corporations are allowed to become legal entities because they serve a purpose to the community instead of just providing opportunities for financial gain by its owners. Friedman stated “the Social Responsibility of Business is to increase its profits” and Argued that social responsibility is a fundamentally subversive ideal and that the only social responsibility a manger has is to enhance the level of profitability of the firm. Stakeholders have been classified based on the amount of power they could potentially have, the legitimacy of their entitlement, and the urgency of their need in the situation. Table 2 uses these dimensions to develop a classification scheme for stakeholders. Not only have the past 10 to 15 years witnessed a marked growth in the literature on stakeholder theory, but more tellingly, there has been an increase in the rate of growth of stakeholder scholarship in recent years. Furthermore, the stakeholder idea has spread from the realm of scholarly literature to the arena of popular discussion. Furthermore, the stakeholder idea is implicit in the operations of many highly successful companies throughout the world.
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Corporate Culture and Stakeholder Relations Corporate culture refers to the beliefs and behaviors that determine how a company's employees
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