Business and Its Publics: Cycle 1 Essay

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Imagine you own a fishing company in a small lakeside town. Your company has been profitable for five years and your family lives a prosperous lifestyle. All of a sudden, everything dramatically changes. A new factory moves to the lakeside and begins to pollute PCB's into the lake, causing many of the fish to die. Years of hard work, motivation, and dedication have now gone to waste. Your business has been forced to close because of reasons out of your control. Much like the fishery, the livelihood of many businesses is threatened by negative externalities- unintended consequences brought upon a third party through regular business operations. Solving externalities is not as easy as it seems; every interest has a different opinion.…show more content…
In many cases, “value” is a simply a social construct; it has no precise analytical definition. But in the context of the corporation, value is used to quantify importance and impact on the bottom line. Freeman believes all corporate assets must work together to create value, as the whole is always greater than the sum of the parts. As long as every corporate relationship is managed with the same goals and ethics in mind, firms can generate profit and prevent the repercussions of negative externalities. In his idealistic analysis, Freeman assumes corporate managers are inherently evil, acting in self-interest. According to his "separation fallacy", corporate executives try to create as much value for themselves as possible, neglecting business ethics and the rest of the supply chain. (Freeman 28). Corporations such as Enron, WorldCom, and Tyco, all of which had managers manipulate their accounting and exploit the corporate structure for illegal self-gain, have given more credibility to Freeman’s fallacy. Although shareholder value has its benefits, corporations must always abide by the law; neglecting to do so can result in jail time or bankruptcy. Many efficient-market supporters, such as N. Christian Brown, agree with Freeman and are leery of created shareholder value. In his essay Scaling Down Corporate Persons, Brown argues in favor of forcing firms to assume all external costs of
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