Business Ethics and Law

Business Ethics and Law

Question 1

Stakeholder’s theory refers to the group of individuals that can affect or is affected by the achievement of the organization’s objective. The concept of the theory is based on how the organization needs to be and how it needs to be conceptualized. An organization is viewed as a grouping of stakeholders, and it is the duty of the organization to manage the needs, interests and viewpoints of the stakeholders. (Freeman 34).  Managers are given the responsibility of ensuring that they take good care of the needs of the stakeholders by incorporating their views in their decision-making.  Various theorists have a different understanding of what stakeholder theory means.

Joseph Johnstone argument in his article, Natural law and the fiduciary duties of business managers is that. “Simply put stakeholder theory sounds good in social theory but will not work in practice”. The reasoning behind this statement was that it was not possible to incorporate all the views of the stakeholders in running an organization. The stakeholders have different needs that the management of the organization cannot be able to meet. Therefore, it is not practical for the manager to meet the needs of all the stakeholders. The essence here is that, the theory is suited to be a social theory because, it can allow the stakeholders of the organization to participate in the decision making of the organization but not all their needs and views can be factored in the organization.  The theory therefore was appropriate in enhancing the relationship among the various stakeholders but it could not work in practice as it was intended. The shareholders or stockholders of a company are the owners of the business and therefore these are the ones that are given the first priority. The managers therefore, would work to meet the needs and interests of these shareholders instead of other stakeholders.

I do disagree with Joseph argument because of various reasons. The organization does not operate in a vacuum even though it aspires to satisfy the needs of its shareholders.   Other stakeholders such as the government, employees, community, suppliers, and financial institutions among others play a fundamental role in the functioning of the organization. Their views and opinions are of important in ensuring that better decisions are reached by the managers. For instance, if the organization fails to remit its taxes, then it will face problems with the government and this may hinder it from achieving its objectives (Freeman 56). Therefore, the organization must work closely with stakeholders to ensure that they satisfy their needs to be able to meet the interests and needs of the owners. Therefore, I feel that, this theory is not a social theory but it is practical.

Question 2

Cost /benefit is a systematic process that is used by organizations and governments in the calculation and comparing the benefits and costs of implementing a decision.  It helps in the determination of whether the investment decision is feasible or justified. It also helps in providing a basis of comparing various projects to determine whether the benefits outweigh the costs or vice versa for the right decision.  I do agree with the Steven Kellman critique of the costs /benefit analysis that it might lead to flawed ethical result. The reason for support is that, it is important to consider other factors that related to the decision before opting to make a decision that seems to be beneficial and at the same time ethical. The use of probability in reaching a decisive decision is also questionable, as it does not factor in the question of ethics.  Furthermore, the accuracy of the method is questionable because it depends on an individual’s cost and benefit estimates. The inaccuracies arise on overreliance on past projects (Frank 913). The skills of people vary, also things change, and therefore, it is not appropriate to be relied on.  The assessment team may also use subjective impressions and there might be biasness among the project supporters leading to ethical flaws.

Value of corporate sustainability

Corporate sustainability describes the evolution of ethical corporate responsibility. The business has the responsibility of impacting positively to the environment, to impact positively on the customers as well as the corporation.  The value of corporate responsibility is that it fosters the unity and stability of an organization because of its efforts and contribution in enhancing the environment in which an organization does business. It also allows the success of the company and ensures proper employee development in the organization.

Corporate sustainability also increases revenue, reduces waste expense, reduces energy expenses, reduces material and water expense; reduces hiring and attrition expenses, strategic and operation risks and increases the level of employee productivity in an organization. The organization therefore is able to benefit from an increased level of productivity because of the reduction in its expenses and the higher level of their employees productivity (Epstein 12).

It also promotes transparency. The organization and community become open to each other and this improves the performance as well as the profits of the organization.  Employees’ involvement is improved as they become innovative and creative.


Works cited

Epstein, Marc. Making Sustainability Work. Sheffield, UK: Greenleaf Publishing Limited.             (2008).

Frank, Robert. “Why is Cost-Benefit Analysis so Controversial?” The Journal of Legal Studies      29.2 (2000): 913-30. Print.

Freeman Edward.  “A Stakeholder Theory of Modern Corporations”, Ethical

            Theory and Business, 7th edn. (2004).



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