Abstract
This paper analyses the arguments for two competing ethical models of business. On the one hand there are theorists like Milton Friedman who claim that the sole social responsibility of business leaders is to maximise stockholder profits. On the other, there are those who argue that a business has ethical responsibilities to many stakeholders: employees, stockholders, retailers, customers, and so on.
I argue that a business has ethical responsibility over those functions and purposes over which it has the most autonomous control. The production and selling of products and services for customers is the primary purpose of a business. The generation of profit is a contingent purpose dependent on the exchange between the business and the customer. I define excellent functioning businesses as those that synergise the purposes of stakeholders to provide products and services with ethical outcomes. When ethical considerations and business interests between stakeholders conflict, the responsibility of a business to its customers has primacy over those related to business input stakeholders such as employees, stockholders and suppliers.
Similar content being viewed by others
Bibliography
Birch, Charles, and David Paul. Life and Work: Challenging Economic Man. Sydney: UNSW Press, 2003.
Collins, James C., and Jerry I. Porras. Built to Last: Successful Habits of Visionary Companies. London: Century Business, 1998.
Danley, John R. The Role of the Modern Corporation in a Free Society. Notre Dame: University of Notre Dame Press, 1994.
De George, Richard T. Business Ethics. 5th ed. Upper Saddle River, N.J.: Prentice Hall, 1999.
Delbridge, Arthur. The Macquarie Dictionary. Rev. 3rd ed. North Ryde, N.S.W.: Macquarie Library, 2001.
Delbridge, Arthur. The Macquarie Dictionary. 2nd [i.e. 4th] ed. [McMahons Point, N.S.W.]: Macquarie Library, 2003.
Donaldson, Thomas. The Ethics of International Business. New York: Oxford University Press, 1989.
Drucker, Peter F. The Concept of the Corporation. New York, N.Y.: New American Library, 1964.
Drucker, Peter F. Managing in Turbulent Times. Oxford: Butterworth Heinemann, 1993.
Friedman, Milton. ‘The Social Responsibility of Business Is to Increase Its Profits’ In Ethical Theory and Business, edited by Tom L. Beauchamp and Norman E. Bowie. Englewood Cliffs, N.J.: Prentice Hall, 1970.
Grace, Damian, and Stephen Cohen. Business Ethics: Australian Problems and Cases. 2nd ed. Melbourne, Australia; New York: Oxford University Press, 1998.
Graves, Samuel B., and Sandra A. Waddock. ‘Beyond Built to Last...Stakeholder Relations in ‘Built-to-Last’ Companies’ Business and Society Review 105, no. 4 (2000): 393–418.
Hayek, Friedrich A. von. New Studies in Philosophy, Politics, Economics, and the History of Ideas. London: Routledge and K. Paul, 1978.
Heald, Morrell. The Social Responsibilities of Business, Company, and Community, 1900–1960. Cleveland,: Press of Case Western Reserve University, 1970.
Hegel, Georg Wilhelm Friedrich. Hegel’s Philosophy of Right. Translated by T. M. Knox. London; New York: Oxford University Press, 1967.
Jensen, Michael C., and William H. Meckling. ‘Theory of the Firm: Managerial Behaviour, Agency Costs and Ownership Structure’ In Corporate Governance, edited by R. I. Tricker. Vermont: Ashgate, 2000.
Ryle, Gilbert. The Concept of Mind. London: Hutchinson’s University Library, 1949.
Wright, John. The Ethics of Economic Rationalism. Sydney: University of New South Wales, 2003.
Rights and permissions
About this article
Cite this article
Dawson, L. Stockholders Versus Stakeholders: Implications for Business Ethics. Philos. of Manag. 7, 3–12 (2009). https://doi.org/10.5840/pom20097318
Published:
Issue Date:
DOI: https://doi.org/10.5840/pom20097318