anything that year they would be ashamed to read about in their local newspaper. “You can lose a reputation that took 37 years to build in 37 seconds. And it might take more than 37 years to build it back.”
Reputation • “The purest treasure mortal times can afford is a spotless reputation” - William Shakespeare
Virtue • Virtue :The quality of doing what is right and avoiding what is wrong. – "Virtue develops from a habitual commitment to pursue the good.” - Ronald F. Thiemann, a professor of religion and society at Harvard Divinity School – Wisdom is know what to do next; virtue is doing it. - David Starr Jordan (1851 - 1931), American naturalist
3 Theories of Social Responsibility • Classical Theory • Stakeholder Theory • Corporate Social Responsibility Theory (CSR)
Classical Theory • Definition: The role of business is to maximize profits within the law (see Milton Friedman, "The Social Responsibility of Business Is to Increase Its Profits.", New York Times Magazine , 1970)
Classical Theory • Put another way, by Harvard Professor Theodore Levitt, “In the end business has only two responsibilities - to obey the elementary canons of face-to-face civility (honesty, good faith, and so on) and to seek material gain.” - “The Dangers of Social Responsibility”, Harvard Business Review 36 (Sept.-Oct., 1958)
Classical Theory • Serve the interests of the shareholders • Social obligations limited to “ordinary moral expectations”. • Views obligations to non-shareholders as a constraint • Trusts in Adam Smith’s “Invisible Hand” (The Wealth of Nations) - The assumption that society benefits most when individuals are allowed to define and pursue their own self-interests, with minimal interference from governments or other authorities.
Classical Theory - Contra • Problems with: Market Failures (e.g. Pacific Lumber a successful, balanced enterprise ruined by a corporate takeover)
Classical Theory - Contra • When the 1990’s Tech Stock Bubble “burst” it sent layoffs soaring, 401(k) assets tanking. According to the Center on Budget and Policy Priorities, between 1997 and 1999 the bottom 20% of earners saw their income decline, while the richest 1% saw their income more than double. The invisible hand is a bit partial in the way it dispenses favors. (Marjorie Kelly, The Divine Right of Capital)
Classical Theory -Contra • “In fact, the purpose of a business firm is not simply to make a profit, but is to be found in its very existence as a community of persons who in various ways are endeavoring to satisfy their basic needs, and who form a particular group at the service of the whole of society. Profit is a regulator of the life of a business, but it is not the only one; other human and moral factors must also be considered which, in the long term, are at least equally important for the life of a business.” - Pope John Paul, Centesimus annus, May 1, 1991
Stakeholder Theory • Definition : The primary consideration in business decision- making is preserving/promoting the rights of stakeholders • Takes into consideration the moral principle of mutual respect.
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- DWI MARTANI
- Business, Ethics, moral principles, Responsibility Theory