Carson's Argument Essay
In his paper, Carson points out 4 main arguments that we can derive from the recent corporate scandals (e.g. Enron, WorldCom). The arguments pointed out revolve around the flaws and inadequacy in current business approaches such as the stakeholder theory, shareholder theory and incentives system in corporations currently. In my response paper, I will make use of ethical theories such as Kantian ethics, Utilitarianism, Rawl’s theory of justice etc. to analyse the arguments made in the paper and to evaluate if some of the corporate acts mentioned in the paper are ethical.
Weaknesses in Stakeholder Theory
Carson pointed out that one of the most evident flaws in the stakeholder theory is that it is not does not show that fraud and deception …show more content…
should be prohibited explicitly. What it focuses on, as stated by Edward Freeman, is ensuring the rights of the various stakeholders and the management acting in the interests of the corporation to safeguard the long-term stakes of stakeholders.
I feel that the point about prohibiting fraud and deception need not be explicitly stated out in the shareholder theory itself. In my opinion, the harms which will be brought caused by fraud to the corporation and society is so great that there have been various laws such as Misrepresentation which have been set up to explicitly prohibit any form of fraud and deception. Furthermore, most if not all the ethical theories will disapprove against the action of fraud and deception. Using Kant’s Principle of Universality, fraud and deception definitely cannot be applied universally to all settings as the person committing the fraud himself would not want to be deceived in the same way which will affect his autonomy to make a rational decision if he were the one as a victim of the fraud. Therefore, in this case the maxim of the person committing fraud which is he should be entitled to commit fraud to bring in more profits is not applicable to the whole universe. Thus, it fraud and deception fails the categorical imperative of Principle of Universality and would be considered non-ethical.
Therefore, I feel that the current laws and ethical theories are sufficient for all corporations to know that fraud and deception is unethical and will bring about undesirable effects to themselves and the society. Thus, it is in their knowledge that they should not commit fraud but the key is if they have strong enough morals to bar themselves from such unethical acts withstanding the possible benefits such as increased profits for the company.
A more controversial issue brought up in the flaws of stakeholder theory Holman’s Jenkin’s argument that the WorldCom chief’s act of cooking the books created thousands of jobs instead of “destroying thousands of life” and is therefore implying that it is complying to both the shareholder’s theory and may be ethical as the act brings about more good than harm. In my opinion, despite the possible job opportunities this act creates, it is still unethical and the Utilitarianism theory would be apt to explain why.
According to Mill’s Greatest Happiness Principle, the act needs to be evaluated based on the overall happiness versus pain of the whole community which in this case would be the various stakeholders of WorldCom. Indeed, cooking the books might bring about short-term pleasure for the shareholders and employees as they not only get to stay in their jobs, they enjoy higher pay also. However, these pleasures are only short-lived, sanctions and adverse effects may flow from deviations of the Greatest Happiness Principle. This means that the act will bring about far greater pains when they still eventually lose their jobs and pay in the long run. The total amount of pain is exemplified by the remorse and attacks on the conscience of Bernie Ebbers investors who are deceived into investing in WorldCom losing their investments, the auditors involved who might possibly lose their jobs for not spotting the errors and also the whole business community in general as people begin to lose confidence in credibility of companies which might cause a slowdown in the economy. Therefore, under the Greatest Happiness Principle, this act brings about far greater and prolonged pains than happiness thus should be deemed
unethical.
Carson also argues that since corporate executives cannot be relied upon to accurately discern and impartially promote of all stakeholders they should be given less power and discretion. I personally disagree with this point. Although I agree with the fact that there should be guidelines to help executives make ethical decisions, there must not be too much restrictions such that it removes their autonomy and freedom to act which goes against Kant’s principles. We must not undermine or assume that business executives do not possess Solomonic wisdom. I believe instead of relying on the law and putting restrictions on the autonomy the true solution to a more productive yet ethical business place is the emphasis on the 6 parameters that define virtues in Solomon’s business ethics. The only way to achieve this would be to give executives the trust and opportunity to make decisions and learn from their mistakes. This helps them move closer towards ingraining these parameters within themselves and eventually make better decisions for their corporations.
Shareholder Theory and Invisible Hand
The key issue brought up under this section of Carson’s argument is the mechanisms of the Invisible Hand Theory relies on the motives of greed and self interest but it was further argued that this theory will only work for the general welfare when appropriate laws are in place.
I agree with the above proposition and Mill’s Utilitarianism theory will be suitable to explain why it is ethical. Executives will not only consider bringing about as much profits for their companies as possible, the corporate laws present also ensure that these executives are aware of the possible pain which can accompany their unethical acts which go against the law. This ensures that the decision maker are well aware of both the possible pleasures and pains present in order to make a more evaluated and ethical decision which will bring about greater happiness than pain.
Another point brought up under this section is the sharp divorce between the ownership and management of the business. In today’s world where most decisions in the business world is made by the employees rather than the owner themselves, it is crucial that owners of business have in place strategies to ensure these employees make the best ethical decisions which are beneficial to the companies. This is especially true due to vicarious liability as companies have to bear the consequences of decisions made by the employees, no matter right or wrong.
I feel that instead of just using monetary incentives, the best way to ensure employees act in the best interest of the companies would be to follow Kant’s Principle of Humanity and always treat employees as ends instead of means. By doing so, not only will the firm make more ethical decisions when it comes to staff-related decisions such as hiring and promotion, employees themselves will also be more motivated since they now feel that the company gives them more autonomy and takes care of their development as a person. This ensures that employees have a sense of belonging to the corporation and will not solely work based on monetary motivation which is a catalyst for unethical decisions driven by greed.
Perverse Incentives
The third argument presented by Carson is employment terms and compensation schemes can become drivers for unethical acts if not handled appropriately.
Weaknesses in Stakeholder Theory
Carson pointed out that one of the most evident flaws in the stakeholder theory is that it is not does not show that fraud and deception …show more content…
should be prohibited explicitly. What it focuses on, as stated by Edward Freeman, is ensuring the rights of the various stakeholders and the management acting in the interests of the corporation to safeguard the long-term stakes of stakeholders.
I feel that the point about prohibiting fraud and deception need not be explicitly stated out in the shareholder theory itself. In my opinion, the harms which will be brought caused by fraud to the corporation and society is so great that there have been various laws such as Misrepresentation which have been set up to explicitly prohibit any form of fraud and deception. Furthermore, most if not all the ethical theories will disapprove against the action of fraud and deception. Using Kant’s Principle of Universality, fraud and deception definitely cannot be applied universally to all settings as the person committing the fraud himself would not want to be deceived in the same way which will affect his autonomy to make a rational decision if he were the one as a victim of the fraud. Therefore, in this case the maxim of the person committing fraud which is he should be entitled to commit fraud to bring in more profits is not applicable to the whole universe. Thus, it fraud and deception fails the categorical imperative of Principle of Universality and would be considered non-ethical.
Therefore, I feel that the current laws and ethical theories are sufficient for all corporations to know that fraud and deception is unethical and will bring about undesirable effects to themselves and the society. Thus, it is in their knowledge that they should not commit fraud but the key is if they have strong enough morals to bar themselves from such unethical acts withstanding the possible benefits such as increased profits for the company.
A more controversial issue brought up in the flaws of stakeholder theory Holman’s Jenkin’s argument that the WorldCom chief’s act of cooking the books created thousands of jobs instead of “destroying thousands of life” and is therefore implying that it is complying to both the shareholder’s theory and may be ethical as the act brings about more good than harm. In my opinion, despite the possible job opportunities this act creates, it is still unethical and the Utilitarianism theory would be apt to explain why.
According to Mill’s Greatest Happiness Principle, the act needs to be evaluated based on the overall happiness versus pain of the whole community which in this case would be the various stakeholders of WorldCom. Indeed, cooking the books might bring about short-term pleasure for the shareholders and employees as they not only get to stay in their jobs, they enjoy higher pay also. However, these pleasures are only short-lived, sanctions and adverse effects may flow from deviations of the Greatest Happiness Principle. This means that the act will bring about far greater pains when they still eventually lose their jobs and pay in the long run. The total amount of pain is exemplified by the remorse and attacks on the conscience of Bernie Ebbers investors who are deceived into investing in WorldCom losing their investments, the auditors involved who might possibly lose their jobs for not spotting the errors and also the whole business community in general as people begin to lose confidence in credibility of companies which might cause a slowdown in the economy. Therefore, under the Greatest Happiness Principle, this act brings about far greater and prolonged pains than happiness thus should be deemed
unethical.
Carson also argues that since corporate executives cannot be relied upon to accurately discern and impartially promote of all stakeholders they should be given less power and discretion. I personally disagree with this point. Although I agree with the fact that there should be guidelines to help executives make ethical decisions, there must not be too much restrictions such that it removes their autonomy and freedom to act which goes against Kant’s principles. We must not undermine or assume that business executives do not possess Solomonic wisdom. I believe instead of relying on the law and putting restrictions on the autonomy the true solution to a more productive yet ethical business place is the emphasis on the 6 parameters that define virtues in Solomon’s business ethics. The only way to achieve this would be to give executives the trust and opportunity to make decisions and learn from their mistakes. This helps them move closer towards ingraining these parameters within themselves and eventually make better decisions for their corporations.
Shareholder Theory and Invisible Hand
The key issue brought up under this section of Carson’s argument is the mechanisms of the Invisible Hand Theory relies on the motives of greed and self interest but it was further argued that this theory will only work for the general welfare when appropriate laws are in place.
I agree with the above proposition and Mill’s Utilitarianism theory will be suitable to explain why it is ethical. Executives will not only consider bringing about as much profits for their companies as possible, the corporate laws present also ensure that these executives are aware of the possible pain which can accompany their unethical acts which go against the law. This ensures that the decision maker are well aware of both the possible pleasures and pains present in order to make a more evaluated and ethical decision which will bring about greater happiness than pain.
Another point brought up under this section is the sharp divorce between the ownership and management of the business. In today’s world where most decisions in the business world is made by the employees rather than the owner themselves, it is crucial that owners of business have in place strategies to ensure these employees make the best ethical decisions which are beneficial to the companies. This is especially true due to vicarious liability as companies have to bear the consequences of decisions made by the employees, no matter right or wrong.
I feel that instead of just using monetary incentives, the best way to ensure employees act in the best interest of the companies would be to follow Kant’s Principle of Humanity and always treat employees as ends instead of means. By doing so, not only will the firm make more ethical decisions when it comes to staff-related decisions such as hiring and promotion, employees themselves will also be more motivated since they now feel that the company gives them more autonomy and takes care of their development as a person. This ensures that employees have a sense of belonging to the corporation and will not solely work based on monetary motivation which is a catalyst for unethical decisions driven by greed.
Perverse Incentives
The third argument presented by Carson is employment terms and compensation schemes can become drivers for unethical acts if not handled appropriately.