Essay Business Ethics

1686 Words 7 Pages
The stockholder and stakeholder theories are two popular frameworks used to examine the purpose of business and its ethical obligations. With reference to the quote above, both theories seem rational and enjoy strong support. However, a common failing of both is typically how humans interpret and implement the theories in contemporary business environments. For instance, Enron was so focused on the raising the price of their stock that they “cooked the books to produce fake profits”1. This paper will provide a description of each theory and, analyze ethical justifications and major objections to each theory. The ethical justifications will be based on pertinent examples - policies and actions, of businesses such as Wal-Mart. Based on this …show more content…
The stock chart below illustrates how Wal-Mart, one of the companies seen as being stockholder focused, has benefited its stockholders immensely over the last three decades.
Ethical theories provide adequate support for the stockholder theory as detailed below.
Entitlement theory maintains that if someone acquires resources by just means they are entitled to those resources. Stockholders who acquire ownership of a business by investing in it are therefore the owners of the business and entitled to its profits. The entitlement theory also states that benefiting other stakeholders at the expense of stockholder dividends is akin to stealing. Year after year, it has been quoted that “Wal-Mart pays low wages and appears to aggressively seek to keep wages down”2. In this respect, Wal-Mart’s policy on employee wages seems to indicate that they respect the stockholder rights over those of their employees.
Utilitarianism theory holds the view that profit maximization directly or indirectly maximizes benefits for the greatest number of people. Wal-Mart uses its retail clout to bring the lowest possible prices to its customers and “the giant retailer is at least partly responsible for the low rate of U.S. inflation”3. Wal-Mart’s legendary toughness in dealing with suppliers forces them to improve every aspect of their operations and this can help profit growth with other customers as well.
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