BS3916 Thinking about Management

9:Ethics in Management Thought

BS3916 Thinking about Management9:Ethics in Management Thought

Classical ‘stakeholder theory’ of the firm

BS3916 Thinking about Management9:Ethics in Management Thought

In the classical ‘stakeholder theory’ of the firm, Managers ‘hold the ring’ between contending forces:

• shareholders/workers

• customers/suppliers

• senior management/ junior management

• government/ ‘society at large’

BS3916 Thinking about Management 9:Ethics in Management Thought

Criticisms of this approach include:

• It fails to explain how each stakeholder can be treated in an equitable fashion (e.g. who should suffer in a recession

• the shareholders through dividends

• The workers through a factory closure )

• in the last analysis, it depends on the relative power of the stakeholders who are anything but equal

BS3916 Thinking about Management 9:Ethics in Management Thought

Applying ‘stakeholder’ theory to the government:

• Governments role is to ensure a ‘level playing field’ in which competition may occur (e.g. through legislation)

• Governments reserve the right to intervene on behalf of the social interest/society at large but in practice may be reluctant to do so

• Government itself becomes ‘just another stakeholder’ e.g. regulation of the tobacco industry

BS3916 Thinking about Management 9:Ethics in Management Thought

‘New Labour’ and stakeholder theory…

The Blair government was concerned that the de-industrialisation of the 1980’s had produced a ‘dual economy’

• some in secure, well paid jobs

• weakened unions and a ‘flexible’ labour force had created many part-time and temporary jobs without worker protections

BS3916 Thinking about Management 9:Ethics in Management Thought

• Ethics can be considered as a set of moral principles or values that act as an aid to conduct

• One major ethic (across all of the major world religions) is to treat others as you would wish to be treated

• But what might be ethical for one purpose might not be for another

BS3916 Thinking about Management 9:Ethics in Management Thought

The power of business

• 500 corporations, employing 0.05% of population control 25% of the world’s output

• Top 300 multinationals own 25% of world’s assets

• Asset of 50 largest commercial banks = 60% of world’s stock of productive capital

BS3916 Thinking about Management 9:Ethics in Management Thought

Responsibilities

• Economic power over the lives of individuals and communities should be matched by corresponding responsibilities

• Can we say that 19th C. capitalism was exploitative whilst 20th C is socially responsible or the reverse ?

BS3916 Thinking about Management 9:Ethics in Management Thought

No responsibilities

• The duty of the manager is to the owners (shareholders) alone

• Therefore it is not ethical to let other considerations come into play

• A free market has to play by ‘free market’ rules

BS3916 Thinking about Management 9:Ethics in Management Thought

But is ‘ownership’ a valid concept ?

• Split of ownership from control a feature of the modern corporation

• Modern managers are likely to be significant owners of shares

• Workers themselves (and communities) have few legal rights (and hence governments intervene in the case of major closures)

BS3916 Thinking about Management 9:Ethics in Management Thought

Modern agendas

• Conservation of non-renewable resources

• ‘Social agendas’ of gender;ethnicity; age; disabilities

• Health, safety and welfare are examples of ‘representative’ bureaucracy

• Part of the spirit of professionalism and responsiveness to pressure groups

BS3916 Thinking about Management 9:Ethics in Management Thought

Long-term interest

• ‘Social responsibility’ can be seen as good business

• But in the short term can lead to lack of viability

• to ensure viability will an organisation always be tempted to act ‘unethically’

• Responsiveness to local/national community pressures the ‘key’ to concerted action