Corporations Case Essay Sample
- Word count: 749
- Category: capitalism
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Corporations Case Essay Sample
• To whom do corporations have responsibility? Discuss, with examples, how these responsibilities inevitably lead to ethical disagreements.
A corporation is a business entity whose underlying objective is to increase the shareholder’s wealth and optimize profits. Keeping in view this fundamentally accepted principle, the primary responsibility of a corporation is to the shareholders, the ones who put in their money in to the company, share the ownership, and expect a return on their contribution whenever the company makes profit. However, the company is also responsible to its other stakeholders that include the customers, employees, suppliers, distributors and in a broader setup, community, as well as, the society. (Davis, 2000) Finally, the society expects them to work to promote various activities for societal betterment at all levels possible, be it health, education, environment, or sports.
The unfortunate part begins when fulfillment of responsibilities towards one hinders others. For instance, giving incentives to suppliers may reflect in cost of the products, not satisfying customers with a reasonable price. Providing good quality can please customers even with a higher price, but this quality assurance also comes with a cost. Use of technology and availability of safe working environment may deduce employees’ benefits. (Davis, 2000) Even products providing both good quality and price may lack in proper means of disposing industry waste, eventually harming the environment.
• Discuss Friedman’s arguments against Corporate Social Responsibility. What Limitations on business conduct does he allow? On what grounds?
According to Milton Friedman, the only social responsibility of a corporation is to channelize effectively the shareholder’s money in the business prospects, because they put forth their contributions in a company on the affirmation for the business operation’s purpose only. Utilizing that money on other projects results in reducing their expected returns and may also have their stakeholders pay for it with increased pricing or decreased pay.
However, he draws a thin-line, allowing business to go for those activities that are not only in-line with company’s profit-maximizing objective but also indirectly help create positive social impacts. Reason being these not only safeguards investors’ money and stakeholders interests, but rather give boost to company’s profit by projecting goodwill and giving them an edge over others in the market. (Milton, 1962-1970) For example, contributions to charitable organizations help deduce taxes ultimately beneficial to all stakeholders.
• What is a justified wage? Are less developed countries justified in paying workers significantly less than their working counterparts in better-developed countries? Why, or why not?
A justified wage is one that may fulfill basic needs and requirements of an employee that includes food, shelter, health, and education as well. In addition, it is very much dependent on the cost of living in respective countries. Less-developed countries cannot justify lower wages by blaming their economies; however, since such countries also have low cost of living, providing lesser than their counterparts may seem reasonable. Yet according to WTO social compliance, the Social Accountability International (SAI) articulates that a company should ensure that wages are at least the minimum legal requirement or of the industry standard. (Davis, 2000)
• Discuss the difficulties culture differences raise for multinationals with regard to bribery.
Most economies, if not all, are not corruption-free and every company has to face this in most of their dealings. However, it is likely to have more of it in some cultures rather than in others and therefore, managers operating internationally must know what perception they hold of the ethically relative term “bribery.” In less developed countries, bribery takes the shape of side income whereas in cultures of developed regions, it may take a sophisticated shape, lesser yet existing. (Moran, 2007) In some cultures, cronyism; giving favors and authoritative positions to friends is acceptable, whereas, it is prohibited in merit-based societies. A western multinational, belonging to a rule-of-law based culture, working in china face difficulty because China is a state where giving favors is important for strong business and trade relationships, and it will not regarded as bribery. Briefly, all these variances hinder their pursuance of operations through ethical means and require certain flexibility at both ends to still say in their ethical regions and prosper.
Davis, John P. (2000). Corporations. Beard Books.
Friedman, Milton. (1962). Capitalism and Freedom. Chicago: University of Chicago Press.
Friedman, Milton. (1970). “The Social Responsibility of Business Is To Increase Its Profits.” The New York Times Magazine. Sept. 13, 1970, No. 33, pp. 122-26.
Moran, Robert T. (2007). Managing Cultural Differences. Bupa International.