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Economic Responsibilities

Categories: Economics

Carroll proposes that the managers of business organizations have four responsibilities: economic, legal, ethical, and discretionary. 1. Economic responsibilities of a business organization’s management are to produce goods and services of value to society so that the firm may repay its creditors and shareholders. 2. Legal responsibilities are defined by governments in laws that management is expected to obey. For example, U. S. business firms are required to hire and promote people based on their credentials rather than to discriminate on non-job-related characteristics such as race, gender, or religion.


Ethical responsibilities of an organization’s management are to follow the generally held beliefs about behavior in a society. For example, society generally expects firms to work with the employees and the community in planning for layoffs, even though no law may require this. The affected people can get very upset if an organization’s management fails to act according to generally prevailing ethical values. 4. Discretionary responsibilities are the purely voluntary obligations a corporation assumes.

Examples are philanthropic contributions, training the hard-core unemployed, and providing day-care centers.

The difference between ethical and discretionary responsibilities is that few people expect an organization to fulfill discretionary responsibilities, whereas many expect an organization to fulfill ethical ones. 5 Social responsibility A corporation’s task environment includes a large number of groups with interest in a business organization’s activities. These groups are referred to as stakeholders because they affect or are affected by the achievement of the firm’s objectives. Ethics Stakeholder analysis is the identification and evaluation of corporate stakeholders.

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This can be done in a three-step process. The first step in stakeholder analysis is to identify primary stakeholders, those who have a direct connection with the corporation and who have sufficient bargaining power to directly affect corporate activities. The second step in stakeholder analysis is to identify the secondary stakeholders—those who have only an indirect stake in the corporation but who are also affected by corporate activities. These usually include nongovernmental organizations (NGOs, such as Greenpeace), activists, local communities, trade associations, competitors, and governments.

The third step in stakeholder analysis is to estimate the effect on each stakeholder group from any particular strategic decision. Another possible reason for what is often perceived to be unethical behavior lies in differences in values between business people and key stakeholders. Some businesspeople may believe profit maximization is the key goal of their firm, whereas concerned interest groups may have other priorities, such as the hiring of minorities and women or the safety of their neighborhoods.

Of the six values measured by the Allport-Vernon-Lindzey Study of Values test (aesthetic, economic, political, religious, social, and theoretical), Enron’s accounting moved from creative to aggressive, to fraudulent, like the pot of water moving from cool to lukewarm to boiling; those involved with the creative transactions soon found themselves working on the aggressive transactions and were finally in the uncomfortable situation of working on fraudulent deals. moral relativism claims that

morality is relative to some personal, social, or cultural standard and that there is no method for deciding whether one decision is better than another. At one time or another, most managers have probably used one of the four types of moral relativism—naive, role, social group, or cultural—to justify questionable behavior. Naive relativism: Based on the belief that all moral decisions are deeply personal and that individuals have the right to run their own lives, adherents of moral relativism argue that each person should be allowed to interpret situations and act on his or her own moral values.

This is not so much a belief as it is an excuse for not having a belief or is a common excuse for not taking action when observing others lying or cheating. Role relativism: Based on the belief that social roles carry with them certain obligations to that role, adherents of role relativism argue that a manager in charge of a work unit must put aside his or her personal beliefs and do instead what the role requires, that is, act in the best interests of the unit.

Blindly following orders was a common excuse provided by Nazi war criminals after World War II. Social group relativism: Based on a belief that morality is simply a matter of following the norms of an individual’s peer group, social group relativism argues that a decision is considered legitimate if it is common practice, regardless of other considerations (“everyone’s doing it”). A real danger in embracing this view is that the person may incorrectly believe that a certain action is commonly accepted practice in an industry when it is not.

Cultural relativism: Based on the belief that morality is relative to a particular culture, society, or community, adherents of cultural relativism argue that people should understand the practices of other societies, but not judge them. This view not only suggests that one should not criticize another culture’s norms and customs, but also that it is acceptable to personally follow these norms and customs (“When in Rome, do as the Romans do. ”). ISBN 1-256-05098-9 Concepts in A code of ethics specifies how an organization expects its employees to behave while on the job.

Developing codes of ethics can be a useful way to promote ethical behavior, Enhanced internal reporting and communications—33% _ Ethics hotlines—17% _ Improved compliance procedures—12% _ Greater oversight by the board of directors—10%56 Guidelines for Ethical Behavior Ethics is defined as the consensually accepted standards of behavior for an occupation, a trade, or a profession. A starting point for such a code of ethics is to consider the three basic approaches to ethical behavior:6 Utilitarian approach: The utilitarian approach proposes that actions and plans should be judged by their consequences.

Individual rights approach: The individual rights approach proposes that human beings have certain fundamental rights that should be respected in all decisions. Justice approach: The justice approach proposes that decision makers be equitable, fair, and impartial in the distribution of costs and benefits to individuals and groups.

Question that can be asked when developing a code of ethics

1. Utility: Does it optimize the satisfactions of all stakeholders?

2. Rights: Does it respect the rights of the individuals involved?

3. Justice: Is it consistent with the canons of justice? For example, is padding an expense account ethical? Using the.

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Economic Responsibilities. (2016, Nov 06). Retrieved from

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