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Topic05: Purpose and Stakeholders

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by

Marco Robles

on 12 April 2016

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Transcript of Topic05: Purpose and Stakeholders

PURPOSE AND STAKEHOLDERS
AIMS:

1-
discuss why the
purpose
of the firm
is relevant
to business ethics
2-
consider the concept of "
corporate mission
" and its difference from "
corporate vision
", as well as the notion of "
mission-driven management
".
3-
gain an understanding of conventional views of the business corporation and its
historical antecedents
.
4-
discuss
three different proposals
about the conception and purpose of the firm in society.
5-
the firm as a community of persons and the multi-ends of the firm. Three models for corporate governance.
relevance of
the
purpose
of
business
1. Relevance of the purpose of business
*
Determining
the
PURPOSE

of business in SOCIETY
is highly
relevant for business management ethics
.

*
Many
assume that business exist
for the purpose
of
MAKING MONEY
. But the
firms
as institutions within society
is more complex
than the subjective motivation to make money.

COMPLEXITY
: "A firm needs capital to build a business, customers with an interest in goods it offers, managers and employees to contribute with their work, suppliers of raw materials, loans and services. And in the end,
SOCIETY

providing infrastructure and supporting the businesses
".
"
Free enterprise
cannot be justified as
being good for business
, it can be justified only as
being good for the
common good
for society" (Drucker, 2000).

The
firm

performs functions
as
ENDs
, which we ought to consider their
contribution to the
common good
:

1. Creating added economic
value
with justice
and
distributing
it with
equity
->
profit motives
.
2. Supplying
useful goods
and services
efficiently
and
fairly
.
3. Providing
jobs
,
opportunities
in accordance with
human dignity
and human rights.
4.
Promoting
the necessary
relationships
among stakeholders,
fostering
reciprocity
and
collaboration
.
5.
Striving
for the continuity and
sustainability
of firms.
MAKE OTHER ENDS POSSIBLE
.
6.
Being a good
corporate citizen
. Beyond its core activities,
being an agent for good within society
.
Purpose and
stakeholders

Topic 05

3. MISSION-DRIVEN MANAGEMENT.
Etymologically, "
MISSION
" is from the Latin missum or "
sent
".
It announces what the
organization

intends to do
.

*
Some corporate mission
contain only
one objective
. Eg: IKEA's mission is to offer a wide range of home furnishing items of good design and function, excellent quality and durability, at prices so low that the majority of people can afford to buy them"

*
Others
focus on
several stakeholders
. Eg: Merck's mission is to provide society with superior products and services by developing innovations and solutions that improve the quality of life and satisfy customers' needs, and to provide employees with meaningful work and advancement opportunities, and investors with a superior rate of returns.

* Some corporate
includes submissions
. Eg: Ben & Jerry's, whose mission includes three interrelated missions: (1) product mission, (2) economic mission, and (3) social mission.

As we can see is not easy to find all the ends mentioned before on the mission of the best companies with the best practices
.
FOR WHOSE BENEFIT SHOULD A COMPANY BE MANAGED?
Definition of the purpose of business
* DEF: By the purpose of business, we mean
the
role
of business in society
and its
social
and ethical
justification
.

* To
understand

the purpose
of business, we need to
recognize
that business
benefits several groups
of people
, and that various factors must be present for a business to survive.

* The
purpose is important
for at least
two
reasons
:
1. It
determinates
whether an organization's
activities
are
appropriate
.
2. It gives us
criteria
with which
to evaluate

whether it is succeeding
.

*
Business ethics
is
concerned
with
both

the morality of the activities
and also with
criteria to evaluate

whether the firm is well designed
and
well managed
from a moral point of view.
2. Purpose and Common Good
These
MULTI-ENDs,
which
DEFINE the PURPOSE
of the firm,
should be included in the
corporate mission
, at least implicitly. It leads us to define the
purpose
of the firm
as
the
common good
,
as
the
legacy

through its multi-ends
.

Eg: PROCTER & GAMBLE presents some of the mentioned ends in its mission statement (called "Our Purpose"):

2. Purpose and Common Good
https://www.pg.com/en_US/company/purpose_people/pvp.shtml
4. HISTORICAL OVERVIEW OF FIRMS
1.
Early-1800's
: A corporation is an
artificial being
, invisible, intangible, and
existing only contemplation of law
. Being a mere
creature of law
it possesses only those properties which the charter of its creation confers upon it.

2.
Mid-1800's
: Emerged another view influenced by a strong ideological individualism that emphasized individual freedom and saw it as a
mere aggregate of individuals
with
agreements

between parties
.

3.
Late-1800's to late 1900's
: Emerged a large-scale of firms and huge bureaucracies, and a
collectivist view of the firm was fostered
. The firms were seen as
single entities
considering the compact and highly depersonalized structure
of the organizations. Individuals were regarded as subordinates of the firms
individuals

were treated as
cogs
in a machine
.
Many talents, skills and capabilities of people within the organizations also go to waste
. Only the whole was what mattered, and
it again reconciles the interest with other via "social contracts"

4.
Early 2000's
: The corporation as
analogous to a
living organism
or
community

inside another large community, with mind and will
. As with any organism or community, corporations have to be legitimated to operate, and
people
within it are its "
ORGANS
" with personal autonomy and real commitment with other.
AND EVERYTHING THEY DO HAS TO CORRESPOND TO HIS PURPOSE.
Shareholder
Stakeholder
As community
Arguments
1. Fiduciary duties



2. Legality




3. Property right




4. Wealth creation
1. Managers bear duties
only to shareholders
.



2. Corporates are
right
when they
seeks to maximize profits
and wrong when it does not.


3.
Owned
by
shareholder
, so they decide how to use their properties.



4. In a free market, individuals
pursue their own
self-interest
, this also tends to promote the good of their community as a whole.
1. Bear to
stakeholders.




2. The incurred investments are not directly related to short-term profits.
Law bestows rights upon employees and communities

3. Based on the principle of
distributive justice
.




4. Freeman: to maximize shareholder value over an uncertain time frame, managers ought
to pay attention to key stakeholder relationships
.
1. It is a duty
to act for the good of the

whole institution
, for which one has been authorized to act.

2.
Laws are not in themselves a moral justification
.
Ethics comes first
: "whatever the legality may be, a corporation is a member of the large community, which is inconceivable without it"

3.
A
corporation

is not merely
material property
, but rather a

human reality
.


4.
Wealth

is an integral part of the
common good
of the firm and society. The goal is maintaining and improving the firm in the long term contributing to societal well-being and people development.
IMPLICATION OF THE FIRM'S PURPOSE FOR
CORPORATE GOVERNANCE
SIMON SINEK
https://www.youtube.com/embed/vtIRal8jxcc?feature=player_detailpage
Full transcript