Notes

Pg. 23-27

Business Ethics & Corporate Social Responsibility:
CSR --> "Corporate social responsibility" is often confused for Business ethics.
--> "a corporation's responsiblities or obligations toward society." book definition
**What are a corporation's responsiblities?
?? Do companies have a responsibility to donate to charities??
?? Do companies have thee obligation of giving their employees higher wages ??
?? Are they obligated to maximize profits for their shareholders or stockholders??

Miltion Friedman --> an extremist in a free enterprise system answers by saying that companies are obligated to fall under the command of their owner who is are shareholders/stockholders and by doing this it is their job as an employee of these individuals to maximize their profits. Which generally takes the concept of the basic rules of society both by law and natural ethical custom. Basically the companies only real responsibility is to "make as much money as possible." Therefore, Freidman also believes that a company has no business to give away money to social causes when the money belongs to shareholder's. If giving employees higher wages will make the employees work harder and better; If providing better customer products and sercives will increase profits; or even if giving money to local community groups will lead to tax deductions, then they may do so.
Brightside --> when the profits of shareholders are maximized, competitions forces wages, pricing, and products to better for the society as a whole.
Disagreements --> some have stated that the executives of the company understand what is good for the company in order to run and operate to its full potential in serving its customers and obeying laws while shareholders do not know any of this and would have no idea how they would preffer the company to be run. Some have argued that they these companies only look to increase their pockets when they state they are benefiting the society because while they claim to be helping they are harming society wilth pollutent and local damages.

Stakeholder --> any identifiable group or individual who can affect the achievement of an organization's objectives or who is affected by the achievement of an organization's objectives. basically a stakeholder is anyone the corporation can harm, benefit, or influence and vise-versa to the corporation "Stake"
--> **General Motors Impact**
"Safety" built into its cars
"Salaries" are set for its employees
"Community" is affected when it decides to shut down a plant
"Stockholders" dividens are increased
--> **Government Impact on GM**
"laws & regualtions" are passed
"Creditors" raise their interest rates and call back loans
"Suppliers" raise their prices or lowering quality for car parts
--> Stakeholders include customers, employees, local communities, media, stockholders, government, creditors, and suppliers
Stakeholder theory --> a manager should take all stakeholder interests into account hen making decisions. (balance) Not about how to maximize profits its about who should get the profit. Meaning investing in better working conditions, reducing pollution for the ocal comomunity, and even reducing shares for stockholders.
Agreements --> Instrumental argument says that if the company takes into account the favorable interest of the stakeholders, the stakeholders will do their part to give the company whatever resources it needs to continue and thereby maximize profits. However the cost of these actions require a reduction in shareholder dividens.
Normative argument leans towards being more moral and taking a principle based on Robert Phillips called the "principle of fairness" which expresses that everyone should do their part in order to reach a common goal knowing that every is scarificing something in order for the everyone to benefit. Or a company taking advantages of the benefits given by a stakeholder while it costs the company something in order to take that offer.

??Which is better stakeholder theory or shareholder theory??
Majority of business take into consideration the stakeholders theory

What is the purpose of business?
Shareholder theory -> to keep the interest of shareholders in mind and it will be shown through competitive markets that will casue the soceity to be positiviely effected.
Stakeholder theory -> to keep the interest of stakeholders in mind and even if competitive markets fail the loyality will secure them.

Business's OWE it to society to be ethical as a part of thier social responsiblities