I have just two questions please answer them ASAP In One sitting ... 1- How does
ID: 432275 • Letter: I
Question
I have just two questions please answer them ASAP In One sitting...
1- How does the author of this article explain that the shareholder theory requires no ethical reasoning? is this criticism valid? if yes-- why? if No----why not?
2- why does use of the shareholder theory prevent effective resolution of the 13 common business practices listed in this article?
Reading are as below
The Social Responsibility.of Management: A Critique of the Shareholder Paradigm and Defense of Stakeholder Primacy [Response to The Social Responsibility of Management: A Critique of the Stakehalder Paradigm and Defense of Shareholder Primacy by Philip R.P. Coelho, James E. McClure, and John A. Spry] Frederick R. Post, University of Toledo "Shareholder Theory allows management to ignore the interests of the other constituencies while pursuing its own narrow self-interest under the guise (the ethical facade) ofpromoting the interests of the shareholder owners. The Shareholder Theory does not provide any relistic counterweight against management abuse. The Enron example strengthens the arguments for the use of Stakehoider theory and exposes the utter failure of the ShareholderExplanation / Answer
Answer:
Shareholders are those person who own a business or it's part through the shares. The author has effectively explained that the shareholder theory requires no ethical reasoning in the following ways.
I think the above criticism by the author is valid as the shareholder theory focuses on nothing but profit. They want to ahieve the same by any means and by any method, be it ethical or not. They want their employees to work only for maximizing their profits. They don't want to part with their profit money for any social cause or for any government initiative such as taxation or other welfare programs. Their one and only business moto is profit and they don't mind what unethical methods are required to achieve the same.
Answer to the second question:
As discussed above, the only moto of the shareholder theory is profit and to achieve it anyhow. We will discuss all the common business practices below, one-by-one and see, how the shareholder theory prevents the effective resolution of the same:
6. To reduce the operations cost, the company may relocate it's production facilities out of America where the resources and labor will be cheap and company can attain more profits.
7. The companies resort to place the pensions fund of the executives secretly in their trusts, as these funds will be exempted from any recovery process initiated through bankruptcy proceedings and they could utilize the same at later stages.
8. Much undetected amount is invested by the corporates in lobbying support for their favored political party to influence the political system in any country.
9. To retain some of it's key employees, the company may defer their retirement and allow them to work for certain further period after retirement also, by giving them usual salaries. After their retirement, the company has to pay hefty sum towards the retirement benefits of these employees.
10. The companies have developed methods to provide less pensions in lieu of their serivices, to the short-term employees.
11. For vested interests of few shareholders, the company provides exorbitant financed loans to selected few executives, and when the desired goal is achieved, the same is forgiven, stressing the same on other shareholders.
12. The company usually bribe the independent or outside directors of the board to make them decide in favor of the company in any policy matter.
13. The company uses the tactics of appointing powerful politicians who may not have any business experience but to gain the political support only for their business.