Unit 6: Chapter 5 Social Responsibility

corporation

legal entities, with legal rights and responsibilities similar but not identical to those enjoyed by individuals.

investments

Business corporations are limited-liability companies - their owners or stockholders are liable for corporate debts only up to the extent of their _________.

responsibilities

The question of corporate moral agency is whether corporations are the kind of entity that can have moral __________.

blameworthy

If corporations can make rational and moral decisions, then they can be held morally _________ or praise worthy for their actions.

assigning

This problem is compounded by the difficulty of ________ moral responsibility to individuals inside corporations.

useful

Despite these controversies, the courts and the general public find the notion of corporate responsibility ________ and intelligible.

expression

For Friedman, the market represents free choices persons make and profit is the _________ of those choices; accordingly maximum profit means maximum good in a society.

good

Friedman: maximum profit means maximum ________ in a society.

contrary

For business to involve itself in "doing good" would be _________ to its purposes and would interfere with the structure of the free market (and why that business was there in the first place).

Narrow

_______ view of CR: Corporate responsibility covers only profit maximization.

broader

________ view of CR: Corporate responsibility includes refraining from from socially undesirable behavior and contributing actively and directly to the public good.

Milton Friedman

narrow view: ________ contends that diverting corporations from the pursuit of profit makes our economic system less effective.

rules

narrow view: The only social responsibility of business is to make money within the ______ of the game.

public

narrow view: Private enterprise should not be forced to undertake ______ responsibilities that properly belong to government

power

broader view: corporations have additional responsibilities because of their great social and economic _________.

social contract

broader view: Business is governed by an implicit __________ which requires it to operate in ways that benefit society.

unintended

broader view: corporations must take responsibility for the _______ side effects of their business transactions (externalities) and weigh the full social costs of their activities.

relationship

Managers bear a fiduciary _______ to stakeholders - those groups who have a stake in or claim on the firm.

vital

"Narrow definition" of stakeholder: Those groups who are _____ to the survival and success of the corporation.

affect

"Wide definition" of stakeholder: Any group or individual who can ______, or is affected by the corporation

participate

broader: Each stakeholder group has a right not to be treated as a means to some end, and therefore must _______ in determining the future direction of the firm in which they have a stake.

alone

Advocates of the narrow view stress that management has a promissory relation with the owners (stockholders) of a corporation, which obligates it to focus on profit maximization _________.

priority

Stone points out that this is not a very compelling argument because it offers no reason why management's promises to stockholders should take ________ over their promises to other parties.

promissory argument

corporations have made promises to their share holders to maximize their profits

criticism: 1. no actual promise made 2. even if actual promise made, no opportunity to refuse terms 3. sometimes morally permissible to break promises 4. still does not mean "maximize profits by any means necessary"

agency argument

management is an agent of the shareholders

criticism: 1. not true, shareholders don't select directors 2. companies fight shareholders requests to be more socially responsible 3. the so called agents don't demonstrate an interest in learning how their shareholders want them to behave.

role argument

certain responsibilities that are attached to ones role. may or may not have actually promised shareholders or directly made shareholders agent, but this is implied in the role- management has responsibility not to waste company assets.

Criticism: 1. advocates of corporate responsibility are not suggesting that corporations must waste assets. 2. pay more than required amount, but not so much that they violate fiduciary duties 3. only prima facie force 4. if dissatisfied the shareholder can leave/sell.

polestar argument

it is best for society as a whole if the managers of a corporation act only to maximize profit. (AKA "business-can't-handle-it"/ "let-government-do-it" arguments.)

regulations

Economist Kenneth J. Arrow responds specifically to Friedman's piece and explains why there must be certain _______ in place for the free market foundation of Friedman's argument to work

maximum

a wholly unregulated free market will not produce the __________ good effects from maximum profits that is at the heart of Friedman's argument

professional

Arrow argues that business could increase its efficiency and thus benefit from a ___________ moral code, much as doctors and lawyers have professionally benefited from their (strenuously taught and strictly enforced) moral codes.