Rights, Duties and Obligations

• We saw that managing for stakeholders can do what is best for the company and society.

• However sometimes we can violate important rights and be morally wrong for example underage labor.

• Management have a duty to do what is right which can conflict with what is perceived as morally good.

• We will try to identify rights and obligations.

• Neoclassic Account• Stakeholder management Account• Conflict of rights and other obligations• Rights held by stakeholders and corresponding managerial

duties and obligations.

Outline

• If managers spend time and money on their own social objec-tives then they are violating shareholders constitutional, pro-prietary and fiduciary rights

• Constitutional rights – they have a kind of taxation without representation.

• However increasing costs without shareholder approval is an accepted managerial function.

Neoclassic

• Designed to prevent opportunistic exploitation of trust. • Managers should maintain transparency, have truthful report-

ing and try the best to follow their job description.• For example they should not take monetary gain at the com-

panies expense. • However as long as managers are genuinely trying to drive

company success there is no issue here.

Fiduciary Obligations

• Shareholders are different that people who posses their own personal property.

• They do not have direct control over company assets so have an indirect influence on the company.

• So this is seen as Friedman's weakest argument.

Proprietary rights

• Can close off consideration of basic rights of employees, sup-pliers, consumers and communities. E.g. Ford Pinto.

• So the stakeholder orientated approach is more inclusive and helpful.

• The diversity of potential obligations makes managerial deci-sion making more complicated.

Only stock price view

• Right = An entitlement to act in a certain way or be treated in a certain manner.

• E.g. If you owe someone money they have the right to be paid back.

• So the other person has a duty or obligation – to pay back the money.

Rights based terms

• Securities regulations• Occupational health and safety regulations• Product Liability laws• Advertising laws• Anti-trust laws.• Codes of ethical conduct.

Laws, regulations and codes

1. Legal and political rights – based on existing laws, minimal obligations. E.g. Civil rights. UN declaration on Human rights, International corporate law e.g. product safety.

2. Professional rights – View of experts in the field about how professionals should act. Organizations own view. Usually codified. Breaking the code can lead to internal sanctions. E.g. Anelka

Types of rights

3. Moral rights – Usually not codified and no accepted general agree-ment. Different moral systems.

• Duty based ethics –Immanuel Kant , People have rational and auton-omous thoughts. So rights are necessary for protecting and fostering the inherent worth and dignity of human beings, so obligations not to deceive or steal from others them and the duty to develop rationality and autonomy.

• Other philosophers- Without moral rights and duties social practices can cause mistrust, a lack of co-operation and solidarity and promote deceptive or violent behavior. E.g. Financial crisis.

Types of rights

Have highest priority and ought always be respected.

1. Protect something that is vitally important. A. Necessary for promoting individual respect (Human rights)

B. Protect private property, liberty, fair competition and ensure shareholder rights (Contracts)

2. Subject to significant and recurring threats

3. Fairly distribute the economic distribution of duties they im-pose. - If a company cannot respect fundamental rights it is fair to impose economic sanctions.

Fundamental rights and duties

• Non- discrimination• Physical security• Freedom of speech• Political participation• Subsistence

Fundamental rights and obligations

• “Depend for their importance on an instrumental contribution toward achieving some other good”

• Not legally or practically essential for indivual integrity and may be infringed upon if in conflict with other rights.

• Privacy e.g. Doctor- Patient, it can be justifiably infringed upon if there is a strong cause e.g. preventing a crime.

• Search “Warrant”• An employees privacy might be infringed upon if the private

information is relevant to their job performance.

Derivative rights and duties

• What are a managers fiduciary obligations to Shareholders?• Give an example of how managers only thinking about in-

creasing the stock price might infringe on someone's funda-mental rights?

• What is the difference between legal rights and professional rights?

• What is the difference between fundamental and derivative rights?

Questions

• Some forms of respecting rights involve action others inaction.• Negative duties – inaction, e.g. not censoring a movie – re-

specting freedom of speech.• Positive duties – action to support someone who’s rights are

being violated. E.g. security forces help those whose right to free speech is being violated.

Negative and positive duties

• Relationships with stakeholders lead to both negative and positive fundamental and derivative rights and duties.

• Fundamental right to non-discriminatory treatment – Positive obligation – companies should ensure that they have poli-

cies and procedures to protect against discrimination.

• Derivative right to privacy- Positive obligation – HR department should use security enhanced information technologies to protect employee information.

.

Negative and positive duties in business

• Derivative obligation to protect the environment

- Positive obligation – Companies should engage in sustain-able business practices.

Negative and positive duties in business

• Arise when there is a high degree of vulnerability and depen-dence. E.g Child and Parent, Client and Lawyer.

• The needier party can be open for opportunistic exploitation.• So the benefactors take on special obligations to protect the

well being of their subordinate.

Special obligations

• Manager-Shareholder - Shareholders rely on managers for reports and information. So managers could opportunistically exploit their trust. Managers have a fiduciary responsibility to promote company success, even if it means they cannot make a comprehensive environmentally sustainable business plan.

• Vulnerability of desperate employees.• Vulnerability of trusting consumers.

Special obligations in business

• Stakeholder rights can conflict.• Use the rights-based terminology to help managers prioritize

claims.• Provide more moral clarity and a helpful framework.

Stakeholder Rights and Obligations

• First, identify fundamental stakeholder rights and correspond-ing negative and positive duties. Stakeholders have funda-mental rights even if they don’t express them. Identify special obligations - relationships with a high degree of vulnerability.

• Second identify and prioritize derivative stakeholder claims and corresponding negative and positive rights and duties. Derivative rights can be overridden but that should be justified e.g. privacy rights. Figure 2.1.

Stakeholder Rights and Obligations

• Right – Fair competition• Duties – Always keep laws relating to anti-trust, anti-corrup-

tion. Make a formal ethics and legal compliance system.

Competitors

• Right – Fair return on investment• Duties – Fiduciary responsibility e.g. put company success

ahead of other interests (except fundamental rights), don’t take too much salary, honest reporting, try to make more democratic governance structures.

Shareholders

• Rights -Fundamental rights and right to privacy and meaning-ful work.

• Duties – Protect fundamental rights, promote meaningful work, ensure that decisions about promotion and demotion are related to job performance. Ensure that private informa-tion is related to job performance.

Employees

• Rights – Safe, non-defective products, honest advertising.• Duties – Disclose all safety risks, don’t deceive the consumer,

make a quality management system, be extra careful with children's products.

Consumers

• Rights – Respect contractual terms. • Duties – Respect contractual terms, negotiate fairly, promote

healthy and safe working conditions down the supply chain.

Suppliers

• Rights – Legal compliance, fundamental rights, right to healthy and safe environments.

• Duties – Follow the law, pay reparations if violate fundamental rights, try to engage in CSR initiatives.

Government and communities

• Give an example of a negative obligation, a positive obligation and a special obligation.

• What obligations do managers have when dealing with em-ployees?

Questions: