Optimists rejoin that business and ethics are inseparable for the long term good of society. But as things stand presently, neither are especially well served. In this Note I address some of the reasons that reciprocity for stakeholders and reciprocal good are both at risk in their current conceptions.
Through better addressing the issues that presently surround the stakeholder idea, it is my hope that as a society we can better manage the power of business for good. A little over 30 years ago, another ethics scholar, Ed Freeman, defined a stakeholder as any group or individual who can affect or is affected by an organization. Fundamentally, the stakeholder idea is one of inclusion: essentially that anyone who can affect or is affected by an organization should be treated fairly, and should treat others fairly, in that relationship.
Unfortunately, business relationships often lack such reciprocity. Most issues with the stakeholder idea, in fact, come back to this point. For example, ethicist Donna Wood [3] notes reciprocity-related conflicts with the assumptions of economics.
She argues that these simplifying assumptions not only fail to reflect the real world, but also damage human well-being because they allow and often justify non-reciprocity in stakeholder relationships. Other issues arise due to non-reciprocal expectations in stakeholder relationships. Philosopher Tom Donaldson suggests that a normative revolution, presently underway requires: 1 a normative justification for economic systems, and 2 that managers consider stakeholders reciprocally—as having intrinsic worth beyond their instrumental usefulness in conducting business.
But, since there are about million businesses in the world, much more such work remains to be done. Still other issues surround the time-honored role of shareholders as the possessors of rights to the residual retained earnings of the corporation. He recently has argued that those—beyond shareholders—who contribute to the creation of the residual of a corporation should have reciprocity: distribution rights to the residual, as well. So as conceived presently, the stakeholder idea—while socially appealing—is plagued by norms of non-reciprocal stakeholder engagement.
These norms constitute barriers to its ethical use in corporations. Thus in society at large, the stakeholder idea continues to be at risk of remaining somewhat marginalized: a lip-service mantra, but little more.
Conduct toward stakeholders will continue to lack business-ethics legitimacy as long as it lacks built-in reciprocity. How, then, does one assess the goodness of business? He identified four distinct sources of good Figure 1. Self-specific good can only be brought about by the individual, such as learning through diligent study; whereas cooperation-specific good requires cooperative effort involving the individual and at least one other, such as a successful team rescue effort. The foregoing two types of good are distinct from independently existing good, such as sunshine, which cannot be brought about by individual or collective effort.
A further distinction may be made with other-specific good, which only can be brought about for an individual by another or others , such as the care of severely disabled persons. Where does business fall in this typology? Providing your customers with good quality at a fair price is both an ethically and financially responsible path.
Whatever product or service you produce, you should give your customers what you promise. Be honest, be fair. And your customers will reward you with purchases and brand loyalty. But even if your business has no shareholders, you may have a board of director or an advisory board. Your ethical responsibilities are clear. Be honest about how the business is doing. When will you be able to pay back the note and what can your investor expect in the way of a return on his investment?
Your responsibilities to the community at large may be more nuanced, but that community remains a relevant and important stakeholder. Suppliers expect loyalty. Companies may choose cheaper products or parts from suppliers that may not be the same quality, but will be lower cost.
Customers do not want inferior products, but they are price sensitive and want savings passed on to them. Employees expect raises and bonuses when the company is profitable. Outsourcing labor to other countries affects both employees and society negatively, especially if the other country encourages child labor or poor wages.
Outsourcing also causes distrust, decreased movation and low morale in employees. Corporations must analyze any areas of ethical conflict and build a compromise by listening to each group express its concerns and ideas. Companies should strive to consistently improve communication between themselves and their individual stakeholder groups.
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