Group Group Members

Group Leader :
 A.Omaid Shour
 M.Ishtiaq
Mursal Alemi  Mujtaba
 Owais Ahmed
 Haidar Ali
(Group Members )

 A. Omaid Shour  Owais Ahmed

 M. Ishtiaq  Haidar Ali
 Mujtaba

 Ch # 5

Moral Issue In Business

Corporations
 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 Types
For-profit and non-profit
of 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 public

However, 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

3. Invisible hand argument

4. The hand of Govt. argument

5. The inept custodian argument

6. 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, Truth about corporate culture:-

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.
Looking
for
question