Shareholder vs Stakeholder vs Market Failure's Model
Business and ethics are often considered as opposite ends of a magnet, one in the means of seeking profit and other with the common assumption of refraining from profit maximization; so the question become is business ethics really an oxymoron? The usual perception of business ethics is very poor and pessimistic as many corporate executives say one thing yet do another. Although the maximization of self-interest and profit seeking is what drives the economy forward, but how should one’s actions be justified, is it ok to do as you wish as long as the law permits? Business managers along with other professionals have sets of ethical codes laid out and are to be followed. There is the bar set in place to monitor the practices of each individual lawyer; medical association for doctors as they perform medicine; and a ring to be worn to constantly remind the engineers of their professionalism and the potential consequences of their work (Heath). Managers on the other hand do not have an association to oversee the decisions they make, whether they are permissible by law or meet the moral obligations. However not having the standards on paper does not mean there aren’t any to be followed. In order to make justification for the type of behaviours business managers have and to outline the appropriate actions they should take, many ethical theories have been developed since. There are three that best represent the key perspectives in this matter; Friedman’s Shareholder theory, Freeman’s Stakeholder theory and Heath’s Market Failure Model of business ethics (Heath). Each of them is the pillars of which many other theories are based on but have very different and opposite views. The Shareholder theory suggests that manager has fiduciary duties to the shareholders only and must maximize profits as long as the law permits. The Stakeholder theory on the other hand suggests that managers have fiduciary duties to all stakeholders whom are positively or negatively affected by the
Bibliography: Heath, J. (n.d.). Business ethics without stakeholders. In F. Allhoff & A. Vaidya (Eds.), Business in Ethical Focus: An Anthology (pp. 110-126). Peterborough: Broadview. Friedman, M. F. (n.d.). The social responsibility of business is to increase its profits. In A. Allhoff & A. Vaidya (Eds.), Business in Ethical Focus: An Anthology(pp. 65-69). Peterborough: Broadview. Freeman, E. F. (n.d.). A stakeholder theory of the modern corporation. In A. Allhoff & A. Vaidya (Eds.),Business in Ethical Focus: An Anthology (pp. 69-78). Peterborough: Broadview.