Historical Account

Emergence of Modern
Corporation

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 Emergence of Modern Corporation

Emergence of Modern Corporation in US (Perrow,

2002)

Earliest Forms of Corporation (1700s and 1800s)

Role of Court Decisions

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 Emergence of Modern Corporation

(Terret v. Taylor, 1815)

‘a private corporation created by the legislature may

lose its franchise by a misuser or nonuser of them.
This is the common law of the land, and is a tacit
condition annexed to the creation of every such
corporation’

In Massachusetts and New York, charters of turnpike corporations

were revoked for ‘not keeping their roads in repair’ (Derber, 1998: 124)

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 Emergence of Modern Corporation

(Dartmouth College v. Woodward, 1819)

‘a corporation is an artificial being, invisible, intangible. And

existing only in contemplation of law’ (Chief Justice John
Marshall, Dartmouth College v. Woodward, 1819).

And so the modern corporation was born, defined as a

‘fictitious legal person, an artificial legal entity’ distinct from

its owners and officers (Hessen, 1979: xiv)

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 Emergence of Modern Corporation

(Aftermath)

In the first 15 years of the adoption of the 14th

Amendment less than 0.5 percent of the cases involved
protection of the rights of African-American slaves while
more than 50 percent of the cases involved corporations
(Justice Hugo Black, Connecticut General Life Insurance
Company v. Johnson, 1938).

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Chapter One

Business Ethics, The

Changing Environment,
And Stakeholder
Management
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Western, a division of Thomson
Learning 6
 Chapter Topics
1. Business ethics and the changing
environment
2. What is business ethics? Why does it
matter?
3. Levels of business ethics
4. Five myths about business ethics
5. Why use ethical reasoning in business?
6. Can business ethics be taught and trained?
7. Plan of the book

Copyright © 2003 by South-Western, a division of Thomson

Learning 7
 Business Ethics and the
Changing Environment
 Businesses & governments operate in changing
technological, legal, economic, social & political
environments with competing stakeholders & power
claims.
 Stakeholders are individuals, companies, groups &
nations that cause and respond to external issues,
opportunities, and threats.
 The rate of change and uncertainty in which stake-
holders & society must make & manage business &
moral decisions have accelerated due to the impact of:
 Internet and information technologies
 Globalization
 Deregulation
 Mergers
 Wars
Copyright © 2003 by South-Western, a division of Thomson
Learning 8
 Stakeholder Management
Approach
 The stakeholder management approach is a way of
understanding the effects of environmental forces and
groups on specific issues that affect real-time
stakeholders and their welfare.
 This approach attempts to enable individuals and
groups to articulate collaborative win-win strategies:
based on:
 Identifying and prioritizing issues, threats, or opportunities
 Mapping who the stakeholders are
 Identifying their stakes, interests, and power sources
 Showing who the members of coalitions are or may become
 Showing what each stakeholder’s ethics are and should be
 Developing collaborative strategies and dialogue from a higher
ground perspective to move plans and interactions to the
desired closure for all parties

Copyright © 2003 by South-Western, a division of Thomson

Learning 9
 Stakeholder Management
Approach
 The stakeholder management approach is a way of
understanding the effects of environmental forces and
groups on specific issues that affect real-time
stakeholders and their welfare.
 This approach attempts to enable individuals and
groups to articulate collaborative win-win strategies:
based on:
 Identifying and prioritizing issues, threats, or opportunities
 Mapping who the stakeholders are
 Identifying their stakes, interests, and power sources
 Showing who the members of coalitions are or may become
 Showing what each stakeholder’s ethics are and should be
 Developing collaborative strategies and dialogue from a higher
ground perspective to move plans and interactions to the
desired closure for all parties

Copyright © 2003 by South-Western, a division of Thomson

Learning 11
What is Business Ethics?
 What is Business Ethics?
Why Does It Matter?
 Business ethicists ask, “What is right and wrong, good and
bad, harmful and beneficial regarding decisions and actions
in organizational transactions?”

 Laura Nash has defined business ethics as “the study of how

personal moral norms apply to the activities and goals of
commercial enterprise,” as dealing with three basic areas of
managerial decision making:
 Choices about what the laws should be and whether to
follow them
 Choices about economic and social issues outside the
domain of law
 Choices about the priority of self-interest over the
company’s interests

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Learning 13
What Are Unethical
Business Practices?
 What Are Unethical
Business Practices?
 Surveys have identified the following recurring
themes to prominent everyday ethical issues
facing businesses and their stakeholders:
 Managers lying to employees
 Office nepotism and favoritism
 Taking credit for other’s work
 Receiving/offering kickbacks
 Stealing from the company
 Firing an employee for whistle-blowing
 Padding expense accounts
 Divulging confidential information or trade secrets
 Terminating employment without sufficient notice
 Using company property/materials for personal use
Copyright © 2003 by South-Western, a division of Thomson
Learning 15
Why Does Ethics Matter In
Business?

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Why Does Ethics Matter In
Business?
 “Doing the right thing” matters to employers,
employees, stakeholders, and the public.
 For companies, it means saving billions of dollars each
year in lawsuits, settlements, and theft
 Tobacco industry
 Dow Corning
 Costs to businesses include:
 Deterioration of relationships
 Damage to reputation
 Declining employee productivity,creativity, and
loyalty
 Ineffective information flow throughout the
organization
 Absenteeism

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Levels of Business Ethics

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 Levels of Business Ethics
 Because ethical problems are not only an
individual or personal matter, it is helpful to
see the different levels at which issues
originate and how they move to other levels.

 Five levels are:

 Individual
 Organizational
 Association
 Societal
 International

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Learning 19
Appropriate Approach in
Decision Making
 Asking Key Questions
 The following questions can be asked when a
problematic decision or action is experienced or
perceived before it becomes an ethical dilemma:
 What are my core values and beliefs?
 What are the core values and beliefs of my
organization?
 Whose values, beliefs, and interests may be at risk
in this decision? Why?
 Who will be harmed or helped by my decision or by
the decision of my organization?
 How will my own and my organization’s core values
and beliefs be affected or changed by this decision?
 How will I and my organization be affected by the
decision?
Copyright © 2003 by South-Western, a division of Thomson
Learning 23
 Stakeholder Management Approach
 Identifying and prioritizing issues, threats, or opportunities
 Mapping who the stakeholders are Identifying their stakes,
interests, and power sources
 Showing who the members of coalitions are or may
become
 Showing what each stakeholder’s ethics are (and should
be)
 Developing collaborative strategies and dialogue from a
“higher ground” perspective to move plans and interactions
to the desired closure for all parties

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 Evaluate the Following:
Ethics is a personal, individual affair, not a public or
debatable matter

Business and ethics do not mix

Ethics in business is relative

Good business means good ethics

Information and computing are amoral

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Five Myths about
Business Ethics

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Five Myths About Business
Ethics
 A myth is “a belief given uncritical
acceptance by the members of a group,
especially in support of existing or
traditional practices and institutions.”
 Myth 1: Ethics is a personal, individual
affair, not a public or debatable matter
 Myth 2: Business and ethics do not mix
 Myth 3: Ethics in business is relative
 Myth 4: Good business means good ethics
 Myth 5: Information and computing are
amoral
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Learning 27
Why Use Ethical Reasoning
In Business?

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 Why Use Ethical
Reasoning In Business?
 Ethical reasoning is required in business for
at least three reasons:
 Many times laws are insufficient and do not cover
all aspects or gray areas of a problem
 Free-market and regulated-market mechanisms do
not effectively inform owners and managers about
how to respond to complex issues and crises that
have far-reaching ethical consequences
 Complex moral problems require an intuitive or
learned understanding and concern for fairness,
justice, and due process to people, groups, and
communities

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Learning 30
Can Business Ethics be
Taught and Trained?

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 Can Business Ethics Be
Taught And Trained?
 Ethic courses should not:
 Advocate a set of rules from a single
perspective
 Not offer only one best solution to
specific ethical problems
 Not promise superior or absolute ways
of thinking and behaving in situations

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Learning 32
 Can Business Ethics Be
Taught And Trained?
 Ethic courses and training can do the
following:
 Provide people with rationales, ideas, and vocabulary
 Help people make sense of their environments
 Provide intellectual weapons
 Enable employees to act as alarm systems for company
practices
 Enhance conscientiousness and sensitivity
 Enhance moral reflectiveness and strengthen moral
courage
 Increase people's ability to become morally autonomous
ethical dissenters
 Improve the firm’s moral climate
Copyright © 2003 by South-Western, a division of Thomson
Learning 33
 Can Business Ethics Be
Taught And Trained?
 Other scholars argue that ethical
training can add value to the moral
environment of a firm and to
relationships in the workplace by:
 Finding a match between employer’s
and employee’s values
 Managing the push-back point
 Handling an unethical directive
 Coping with a performance system that
encourages unethical means
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Learning 34
Stages of Moral
Development
(Kohlberg)

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 Stages Of Moral
Development
 Kohlberg’s 3 levels of moral development:
Level 1: Preconventional level (self-
orientation)
 Stage 1: Punishment
 Stage 2: Reward seeking
 Level 2: Conventional level (others orientation)
 Stage 3: Good person
 Stage 4: Law and order
 Level 3: Postconventional level (universal,
humankind orientation)
 Stage 5: Social contact
 Stage 6: Universal ethical principles

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Learning 36