Commerce Ever Ethical? The Issue Term Paper

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While some firms are content to subscribe to the bare minimum of ethical doctrines, others have pursued a broader stakeholder perspective. The stakeholder perspective posits that ethics derives from outcomes, which places it squarely in the consequentialist perspective, and that those outcomes be considered from the perspective of all stakeholders (Phillips, 2003). This represents an advancement on Friedman's theory, since he considered only the perspective of the firm's shareholders. Friedman's theory was built on the idea that the shareholders have put up their money to invest in the firm and allow management to build it, therefore management is an agent of the shareholder. The stakeholder perspective recognizes the contribution of all stakeholders. Employees also make an investment in the firm, and that investment may go beyond for which they are compensated. Customers, suppliers and other groups as well are invested to different degrees. The environment and society at large are also stakeholders who can be both harmed and helped by the company's actions. While Friedman argued that employees, customers and suppliers are all engaged in economic, mutually beneficial transactions with the company, social and the environment are not. Outcomes for those stakeholders are externalities of the firm's behavior. These externalities have a cost but that cost is not typically transferred to the company directly. Therefore, the company must consider these costs in order to be ethical, certainly by utilitarian standards.

The stakeholder perspective contrasts with the perspective that allows the law to dictate ethics, which is akin to a Kantian perspective whereby the law defines the categorical imperative.

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That these two views exist concurrently today is evidence that the business community is split as to which ethical perspective is more reasonable, perhaps evidencing a fundamental split on the role of government as well. If the firm believes that it should pursue profit to the extent that the law allows, then it will do so. BP is a good example of this, knowing that its liability in the event of a catastrophic oil spill is capped in the United States. If the firm believes, however, that government should not be the sole creator of ethics is society -- that the people and their businesses should determine the ethics of business and society rather than the government -- those companies will take the more responsible stakeholder approach to corporate ethics.

Works Cited:

FDA (2009). The story of the laws behind the labels. FDA.gov. Retrieved May 18, 2010 from http://www.fda.gov/AboutFDA/WhatWeDo/History/Overviews/ucm056044.htm

Friedman, M. (1971). The social responsibility of business is to increase its profits. New York Times Magazine. Retrieved May 18, 2010 from http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html

Phillips, R. (2003). Stakeholder theory and organizational ethics. Berrett-Koehler Publishers. Retrieved May 18, 2010 from http://www.bkconnection.com/static/stakeholdertheoryPR.pdf

Verschoor, C. (2004). Will Sarbanes-Oxley improve ethics? Strategic Finance. Retrieved May 18, 2010 from http://www.allbusiness.com/management/172153-1.html

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