Today, a case can be made that business firms are beginning to emerge as the most powerful institutions in the world.
Stakeholder Theory and Organizational Ethics
Scholasticism preceded the giants of secular moral and political philosophy. Now, as power is transferred to business institutions and other private organizations, so must our theories recognize this transition in power and begin to look more closely, explicitly, and reflectively at the morality of economic interactions and the organizations where these transactions take place. Business organizations are even taking on larger, more complicated roles in society.
As they enter new arenas such as health care and education, where tough choices and trade-offs among multiple goods are commonplace, friction between economic objectives and other worthy aims is likely to increase. Elements of business and organizational ethics are interwoven within bioethics--the latter perhaps also a contender for the title of most important area of applied ethics. If ethics is to become an integral part of business conduct, it must be knit into organizational life.
Our theories must thus begin with a consideration of organizations. Just as scholars have previously attempted to philosophically analyze and justify the power wielded by the state and its agents, it is essential that at least a portion of our attention be turned to a philosophical analysis of the power wielded by managers in organizations. Political and moral theory seeks a comprehensive explanation of ethical duties between moral agents. This level of abstraction is typically comprehensive and universal; that is, the classics of moral and political philosophy generally refer to all persons in all times and places.
This book attempts to provide a general explanation of the creation and existence of moral obligations within organizations and among stakeholders. Furthermore, organizations are dependent upon these constituency groups for their success. This much is uncontroversial. Refer to these constituencies as stakeholders, however, and the disagreements appear ceaseless.
Who are these stakeholders?
Stakeholder Theory and Organizational Ethics by Robert Phillips
How should they be managed? Is there a legal duty to attend to stakeholders or is such a duty instead legally prohibited due to the shareholder wealth maximization imperative? Should the law require stakeholders on boards of directors? For whose benefit ought the organization be managed?
Should stakeholder principles be extended to the entire world in pursuit of a stakeholder society? The debate only becomes more intense when the questions are couched in moral terms. What does the organization owe its stakeholders? Is there a moral obligation between the organization and its stakeholders? What is the source and justification of this obligation?
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If the organization in question is a business organization, are there moral duties of any sort or is business either immoral or amoral in nature? The generally beneficial fact that everyone is an ethicist of a sort--having opinions and considered judgments about moral topics--only fuels the considerable fire when stakeholder theory is discussed as a theory of organizational ethics.
This book is an attempt to add some light to this heat. Just as everyone is a sort of ethicist, so too is all activity in organizations, particularly business firms, shot through with fodder for moral reasoning more on this metaphor momentarily. Edward Freeman has identified and described a "separation thesis" at work in discussions of business. Academics and practitioners alike seem to operate with an underlying assumption that business is business and ethics is ethics, but the two have little if anything to do with one another.
Professor Freeman argues that this is the greatest obstacle to moral decision making in organizations today. That is, they are neither moral nor immoral, but are instead not the sort of concepts to which application of moral ideas is appropriate. These fields of study and practice are merely tools for making decisions and are no more moral or immoral than a pen.
Recent events have proven, however, clearly moral connotations to the use of these tools, just as with the use of pens. Anyone making the argument that the use of the tools of accounting and finance are amoral today would likely meet with stunned incredulity in light of recent events. A still deeper variation of this argument, however, is even more dangerous. The assertion that the purpose of business activity is to maximize the wealth of the business''s owners--shareholders in the case of corporations--has near religious status.
It is the dogma of business and is taken for granted like the air we breathe. I examine this claim at some length in later chapters. For now, it is sufficient to point out that the prescription to maximize shareholder wealth is itself a moral claim rendered using the language of moral reasoning.
The utilitarian variation says that individuals working toward their own self-interest will actually benefit society as a whole. Even when extended from individuals to organizations, the rationale for maximizing owner wealth lies in the benefits that accrue to society: In addition to the utilitarian argument is the property rights argument, which says that because the shareholders own the firm, managers bear an obligation to act consistently with shareholders'' wishes, assumed to be wealth maximization.
Again, talk of property rights is moral reasoning. Recent corporate scandals have brought attention to business ethics, yet there are few books available that cover an important aspect of this topic. In this timely study of organizational ethics and stakeholder theory - which holds that business is beholden not only to shareholders but also to customers, employees, suppliers, management, and the community - Robert Phillips Recent corporate scandals have brought attention to business ethics, yet there are few books available that cover an important aspect of this topic.
In this timely study of organizational ethics and stakeholder theory - which holds that business is beholden not only to shareholders but also to customers, employees, suppliers, management, and the community - Robert Phillips challenges the idea that the theory has no "moral underpinnings" and suggests useful ways to define which groups are or are not legitimate stakeholders.
This study is based on the work of John Rawls, the most widely cited moral and political philosopher of the 20th century. Hardcover , pages. To see what your friends thought of this book, please sign up. To ask other readers questions about Stakeholder Theory and Organizational Ethics , please sign up. Be the first to ask a question about Stakeholder Theory and Organizational Ethics.
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