January 10th, 2018
Ethical Dilemmas of Modern Corporations
Modern corporations face a challenge of balancing contrasting interests of various stakeholders. Shareholders (investors) for instance require the entity to offer them higher returns on their investments through increased profitability that betters the market value of their shares. Customers, on the other hand, require high quality products, which may require the organization to incur additional costs thus lowering its profitability. Similarly, the entity’s employees demand better remuneration and working conditions, which increases an entity’s costs thus lowering its profits. Compounded by adverse economic environment, which impedes organizations’ initiatives to generate additional revenues, the entities face a dilemma as to establishing an effective equilibrium among the contrasting stakeholder interests. Establishing such a balance could lie in the political-economic ideology from which the entity derives its organizational approach.
One such political-economic ideology is capitalism, which is based on an endeavor to achieve maximum profits, annihilate the competition and advance private property (Shaw 2010; Rendtorff 2009). Traditional capitalist corporations thus strive to achieve maximum profits even when such achievement may deter the enhancement of society in which they operate. They seek to operate in a monopolistic environment (Rendtorff 2009). Ethical practices do not form a core concern for such corporations, with their ethical considerations coming only when the failure to initiate ethical programs, threatens the achievement of their core purpose of profit maximization (Heineman 2007). Accordingly, in such corporations, the interest of the shareholder takes precedence over all other interests, with a potential outcome being the increase in inequality in society (Shaw 2010).
An alternative to capitalistic organization is cooperative organization. Cooperative entities derive their approach from a catholic social doctrine that opposes the concepts of laissez faire capitalism (propagated by Adam Smith) and those of revolution and state collectivism (propagated by Karl Marx) (Cited in Flessati 1982). The social doctrine emphasizes the importance of principles such as open membership, democratic control (one man one vote principle), payment of limited interest on capital and distribution of surplus in accordance with the trade conducted (Flessati 1982). In accordance with such a doctrine, employees of the entity serve as its shareholders thus reducing the conflicting interests that would arise were they not part of the shareholders (Flessati 1982). However, one form of cooperative entities, the producer cooperatives, could fail to achieve long-term growth due to difficulties presented by the inability of its employees to raise adequate capital to support the entity’s optimal operations (Flessati 1982). Accordingly, even such cooperatives could eventually attract capitalists to ensure their survival.
The choice between a capitalistic and a cooperative mode of organization thus appears to present a unique challenge in itself – the generation of adequate capital to support the organization’s operations. With regard to capitalist entities, the challenge is in finding an incentive to attract investors who agreeable to an equivalent concern for the interests of other stakeholders in the organization. That is, will investors commit their funds in an entity that does not guarantee them a superior consideration in formulating its initiatives? With respect to cooperative entities, the challenge lies in getting adequate capital to ensure the entity’s survival, without seeking additional financing that renders them vulnerable to a capitalistic transformation. Accordingly, the next section compares and contrasts a capitalist entity (Microsoft) and a cooperative entity (MCC) to identify the ethical outcomes of stakeholder treatment in both entities. Go to part three here.