Download CORPORATIONS

CORPORATIONS
The limited liability company
The members of corporations are financially liable for
corporate loss and profit(dividend) up to the extent
of their investment.
Examples…
Corporations
Number of employees
General electric company
276000
General Motors
Pepsi Co’s
698000
486000
Moral Responsibilities
When a person performs or fails to perform a morally significant
action, we sometimes think that he or she deserves a
particular kind of response. Praise and blame are perhaps the
most common forms this reaction takes.
For example:
One who encounters a car accident may be worthy of praise for having
saved a child from inside the burning car, or alternatively, one
may be worthy of blame for not having at least used one’s cell
phone to call for help.
Moral Responsibilities
Examples.

If you leap into the river and rescue a drowning child, you
are responsible for the child being saved and deserve to be
praised.
 If you are playing with your car radio and accident occurs
so you are responsible for that accident and you deserve to
be blamed
 If accident resulted from your having suffered from heart
attack then you would not be seen as morally responsible
Corporate Social Responsibility (CSR)
CSR in Equation Form Is the Sum
of:
Economic Responsibilities (Make a profit)
Legal Responsibilities (Obey the law)
Ethical Responsibilities (Be ethical)
Corporate Social Responsibility (CSR)
Responsibility
Societal
Expectation
Examples
Economic
Required
Be profitable. Maximize sales,
minimize costs, etc.
Legal
Required
Obey laws and regulations.
Ethical
Expected
Do what is right, fair and just.
Pyramid of CSR
Corporate social Responsibility
We have two views about corporate social
responsibility.
1:Narrow View.
2:Broader View.
Narrow v/s Broader view
1. Narrow view:
 According to this view the only responsibility of a corporation is to
maximize its profit without any deception and fraud. Corporations can
participate in social activities only if it is in the best interest of that
corporation…
2. Broader view
 Corporations have other responsibilities also rather than maximization
of profit like…

Caring for consumers..

Caring for employees..

Caring for environment………
Outcome of the two Views
Corporations are the integrated part of a society….
It is not something separate,
So it must care for the society.
Example..
If any company producing chemicals and discharge
its waste in a river, damaging the commercial and
recreational fishing area,
Should be held responsible for this action?
Should corporate responsibility be
broadened
We have few arguments In this regard….
A: The invisible hand argument.
B: The hand of government
argument.
C: The inept custodian argument.
A:The invisible hand argument
Adam smith claimed that when each of us acts to promote our own
economic interest we are led by an ….invisible hand…. “To promote the
general good”.
If business are permitted to seek self interest, they will satisfy our material
needs to great extent.
According to this argument corporations should be held morally
responsible for their economic role(producing goods and services)…
for this they can be blamed or praised.
But corporations should not be held responsible for non-economic role
like….
Racial injustice, poverty or pollution……..
B:The Hand of Gov’t Argument
Supporters of this argument says that if we leave the corporations to their
own self interest(profit).
They will pollute the environment ,allow racial and gender inequalities
and deceive customers.
They will do anything (legal or illegal) which can bring profit for them
How can we broadened the corporate moral responsibility?...
Through the strong hand of government by systems of laws and
regulations…
“The gov’t will provide moral direction to the corporations”.
C:The inept custodian argument
Corporate executives lack social and moral expertise
to make other than economic decision(profit)…

So to charge corporate executives with non-economic
responsibilities would be to put social welfare in the hands of
inept custodian.
 These executives are limited In their activities than profit
maximization….
Summary
• Invisible –Hand-Argument – Corporations are
Free-Market
• The-Hand-Of-Government – Corporations
cannot be trusted, government must control
• The Inept-Custodian Argument – Corporate
executives are not qualified on social issues
Institutionalizing Ethics within the Corporation
How can we institutionalize ethics in the corporation?
1:Corporation should acknowledge the importance, even necessity of
conducting business morally. They must be committed to ethical
behaviors.
2:Corporations should make a real effort to encourage their members to
take moral responsibilities seriously .
3: Appointment of ethical committees, dealing ethical issues facing
organizational members in their work place.
Examples of corporate moral
responsibilities
1:Don’t pollute
2:Don’t misrepresent the product
3:Don’t bribe
4:Improve the skills of your employees
5:Seek to hire the disables
6:Contribute to the education
7:Locate plants in economically depressed areas
Consumer
2/3 of spending in the world
economy ($30 trillion) is by
consumers.
Yet they have no voice!
New Economic Policy floods market
with products—Ye Dil Maange
More—too little information for
consumer to make choice.
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Corporate responsibility towards
consumers
Consumer the most important stakeholder of a corporation. if
consumer do not buy, commercial business cease to exist.
Consumer’s interest should be foremost when business are
designing and delivering the product..
Examples.
1: The duty to inform consumer truthfully about the product contents,
purpose and uses.
2: The duty not to misrepresent or conceal information's about a product.
3: The duty to take “due care” to prevent any foreseeable injuries..
Consumer Rights
Related rights the consumers have in their
social contract with corporations are.
1:The right of safety…to be protected from harmful products.
2: The right to know about the product…..full information
3: The right to be heard…..complaints.
4: The right to be compensated…if any harm is done to
consumer.
Corporate responsibility in advertising

Advertising is to inform consumers about product
and motivate them to purchase. Advertising is big
business and it is significantly effecting the consumer.

Corporate ethical responsibility in advertising is not
to deceive or conceal the truth about the product….
Like…
 Inserting harmful chemicals into products without
informing the buyer is deceptive advertising.
 Giving false statements in ADS is also deception.
Arguments about Advertising
Arguments that justify advertisement……
1: without advertisement consumers would be uninformed about the
product.
2: Firms across globe use ads as competitive weapon.
3: Ads increase consumption and spending.
4: Ads boost a country exports.
Arguments against advertising……..
1: Advertisement are false statements
2: conceal facts
3: Deceive consumers with profit goal in mind but not consumer welfare.
Deception and Unfairness in ADS
Deceptive techniques in advertisement are….
1: Ambiguity
2: Conceal facts
3: Exaggeration
1: Ambiguity(uncertain)
When ads are ambiguous, they can be
deceiving…..
For example..
The (continental baking company) was
charged with such ambiguity in its ad…
Eating the (profile bread) would lead to
weight loss.
The fact was that the bread contained the same calories
2: Conceal Facts
When advertisers conceal facts, they neglect to
mention or distract consumers away from
information, Knowledge of which would probably
make their product less desirable.
For example…
SHELL used to advertised that its gasoline had no ”platform
ate” but neglected to mention that all other brands did .
3:Exagerrations
Advertisers can mislead through exaggeration
that is by making claims unsupported by
evidence .
For example…
A claim that pain reliever is 50% stronger than
aspirin.
Product Safety
 The degree of safety associated with using the product…
 Product is safe if the risk are known and judged to be acceptable or
reasonable by the buyer.
Corporate responsibility for product safety
1:Duty of disclosure…
If the product that the consumer is buying posses any defect
and can cause any harm. the consumer should be informed.
2: The duty not to misrepresent:
Selling a product in such a way to deceive the buyer
like….giving false information's about the product.
Product Safety
3: Business should give priority to the safety of the
product…
4: Business should abandon the misconception that
accidents occurs exclusively as a result of product
misuse.
5: Business must monitor the manufacturing
process itself regularly.
6: Companies should investigate consumers
complaints about the products.