Group Leader :

Mursal Alemi

Group Group Members

A.Omaid Shour M.Ishtiaq Mujtaba Owais Ahmed

Haidar Ali

(Group Members )

A. Omaid Shour

M. Ishtiaq

Mujtaba

Owais Ahmed

Haidar Ali

Corporations

Ch # 5

Moral Issue In Business

Definition

A legal entity that exists independently of the person or persons who have been granted the charter creating it and that is invested with many of the rights given to individuals: a corporation may enter into contracts, buy and sell property, etc.A group of people, as the mayor and aldermen of an incorporated town, legally authorized to act as an individual.

A body that is granted a charter recognizing it as a separate legal entity having its own rights, privileges, and liabilities distinct from those of its members.

Such a body created for purposes of government. Also called Body Corporate.

Corporation TypesFor-profit and non-profitof corporate governance commonly appear in a wide variety of business and non-profit activities. Though the laws governing these creatures of statute often differ, the courts often interpret provisions of the law that apply to profit-making enterprises in the same manner (or in a similar manner) when applying principles to non-profit organizations.

Closely held and publicHowever, the majority of corporations are said to be closely held,

privately held or close corporations, meaning that no ready market exists for the trading of shares. Many such corporations are owned and managed by a small group of business people or companies, although the size of such a corporation can be as vast as the largest public corporations.

The Limited Liability Company

• A Limited Liability Company (LLC) is a relatively new business structure allowed by state statute.

• LLCs are popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation.

Continued

• Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit “single member” LLCs, those having only one owner.

• A few types of businesses generally cannot be LLCs, such as banks and insurance companies. Check your state’s requirements and the federal tax regulations for further information. There are special rules for foreign LLCs.

Member & Membership Interest:

• Member: All LLCs must have at least one member. LLC members are the owners of the LLC much as shareholders are the owners of a corporation or the partners of a partnership. Like shareholders, a member's liability to repay the LLC's obligations is limited to his or her capital contribution. Members may be natural persons, corporations, partnerships, or other LLCs.

• Membership Interest: A member's ownership interest in the LLC is called a membership interest. Membership interests are often divided into standardized units which, in turn, are often called shares.

Corporate Moral Agency• Given that moral agency entails responsibility, in that

autonomous rational agents are in principle capable of responding to moral reasons, accountability is a necessary feature of morality.

• Moral agents have negative responsibilities at least, and can be held to account for violating these.

• A thicker sense of accountability derives from the roles we occupy. Responsibilities attach to roles,

• for example professional responsibilities, and roles sometimes are defined in terms of responsibilities. I can be held to account for my fulfillment of my role-given responsibilities.

Meaning of “Moral Responsibility”

• Refers to people being morally accountable for some past action;

• refers to a person’s accountability for the care, welfare or treatment of others according to social conventions;

• Refers to a person’s own capacity to make moral and rational decisions.

Can Corporations Make Moral Decisions?

• Yes, corporate internal decision structure establishes

lines of authority and corporate procedures and

objectives. In addition, corporate decision-making

structure acts intentionally and with a purpose.

Therefore, corporation makes informed and rational

moral decisions, and carries out actions in order to

realize its intentions.

Corporate Responsibility

• Corporate responsibility covers a

wide range of issues, including

the effects that an organization's

business has on the environment,

human rights and third world

poverty.

Narrow View; Profit maximization• According to Milton Friedman, a business has no social

responsibilities other than to maximize profits.

• Corporate officials have a sole responsibility to serve the interests of their shareholders within the rules of the game: open and free competition without deception and fraud.

• Corporate managers must obey civility and to seek material gain.

• To have other social responsibilities means that managers must subordinate owners’ interests to some social objectives, such as controlling pollution or fighting sexual discrimination.

The Broader View of Corporate Social Responsibility

• A business has other obligations in addition to pursuing profits.

• Because of their great social and economic power, corporations must carry social responsibility.

• Businesses cannot make decisions that are solely economic decisions, because they are interrelated with the whole social system – business activities have profound implications for society.

• As a result, society expects business to pursue other responsibilities as well.

Should corporate responsibility be broadened

Four important arguments against broadening

corporate responsibility

1. Invisible hand argument

2. The hand of Govt. argument

3. The inept custodian argument

4. Materialization of society argument

The invisible hand argument• Adam Smith claimed that when individuals act in self-

interested manner in a free-market environment, the general good is promoted.

• If businesses are permitted to seek self-interest (maximization of profit), their activities will inevitably yield the greatest good for society as a whole through the invisible hand of the market.

The Hand of Govt. Argument

• Radical economists argue that corporations should not be considered as moral agents, and reject the assumption that Smith’s ‘invisible hand’ will have moralizing effects on corporate activities.

• Corporations will enrich themselves while impoverishing society.

• Only the strong hand of government, through a system of laws and incentives, can and should bring corporate under control.

The inept Custodian Argument

• Corporate executives lack the moral and social expertise,

and can only make economic decisions.

• To ask executives to take charge of non-economic

responsibilities is to put social welfare in the hands of inept

custodians.

The materialization of society argument• Broadening corporate responsibility will materialize society

rather than moralize corporate activity.

• Corporate managers will impose their materialistic ideas, using cost-benefit analysis, on many non-economic activities.

• Yet, businesses already use their privilege position to promote their view of humanity and the good life through corporate advertising and marketing.

• Corporations are unlikely to have a more materialistic effect than they do now.

Institutionalizing Ethics within corporations

• The list of corporate responsibilities goes beyond such

negative injunctions as ‘Don’t pollute’, and ‘Don’t

misrepresent products’.

• Included also are affirmative duties like ‘Improve

working conditions’, and ‘Contribute to arts and

education’.

Corporations require at least four actions to institutionalize ethical behavior

• acknowledge the importance of moral business conduct;

• encourage employees to take moral responsibilities seriously;

• encourage public discussion and criticism;

• Recognize the pluralistic nature of the social system.

There are limits on what government and laws can achieve

• Many laws are passed only after damage has already been done;

• Formulating and designing laws are difficult and haphazard;

• Enforcing laws is cumbersome, expensive and protracted.

Ethical Codes and Economic Efficiency

• Ethical codes need not damage economic efficiency as

trust and confidence are vital for economic exchange.

• Professional or business moral codes instill confidence.

Corporate Moral Codes This development seems possible only if the

standards of expected behavior are institutionalized.

To institutionalize ethics within corporations, professor Milton suggests that top management should:

1. Articulate the firm's values and goals.2. Adopt an ethical code applicable to

all members of the company.3. Setup a high ranking ethics

committee to oversee, develop, and enforce the code, and

4. In corporate ethics training into all employee development programs.

Corporate Culture Corporate culture refers to the shared values,

attitudes, standards, and beliefs that characterize members of an organization and define its nature.

Corporate culture is rooted in an organization's goals, strategies, structure, and approaches to labor.

As such, it is an essential component in any business's ultimate success or failure.

It is the underlying soul and guiding force within an organization that creates attitude alliance, or employee loyalty.

A winning corporate culture is the environmental keystone for maintaining the highest levels of employee satisfaction, customer loyalty, and profitability.

Employment• The collection of beliefs, expectations,

and values shared by an organization's members and transmitted from one generation of employees to another. The culture sets norms (rules of conduct) that define acceptable behavior of employees of the organization. It's important for job-seekers to understand the culture of an organization before accepting a job.

Truth about corporate culture:-

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