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 698000 Pepsi Co’s 486000

When a person performs or fails to perform a morally significantaction, we sometimes think that he or she deserves aparticular kind of response. Praise and blame are perhaps themost common forms this reaction takes.

For example: One who encounters a car accident may be worthy of praise for havingsaved a child from inside the burning car, or alternatively, onemay be worthy of blame for not having at least used one’s cellphone to call for help.

Moral Responsibilities

Moral ResponsibilitiesExamples. 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 Expectati

on

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

Ethical ResponsibilitiesEthical ResponsibilitiesBe ethical.

Legal ResponsibilitiesLegal ResponsibilitiesObey the law.

Economic ResponsibilitiesEconomic ResponsibilitiesBe profitable.

Corporate social Responsibility We have two views about corporate social

responsibility.

1:Narrow View.

2:Broader View.

Narrow v/s Broader view1. 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.

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

Examples of corporate moral responsibilities

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Consumer2/3 of spending in the world economy ($30 trillion$30 trillion) is by

consumers. Yet they have no voice!Yet they have no voice!

New Economic PolicyNew Economic Policy floods market with products—Ye Dil Maange MoreYe Dil Maange More——too little information for consumer

to make choice.

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.

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.

Product Safety