Week Two Instructor Guidance
Welcome to Week Two
This week our reading in chapters 2 – 3 will explore concepts of Capitalism and Corporations in an ethical framework. There are several articles required for review and analysis this week located in the required resources tab. In addition, there are several articles listed in the recommended resources tab. Please watch the required videos before formulating your analysis and responses to peers in the discussion threads.
Capitalism is an economic system based on private ownership and the use of capital. Growth of towns and cities and the expansion of trade in the late Middle Ages sparked this economic development. Capital belongs to individuals who are free to do what they wish with it. For this reason, capitalism is also called the “free-enterprise” system. Based on the economic laws of supply and demand, when enough people want something, producers make it because they want a profit. In a market economy monetary values can be placed on everything in the marketplace: land, goods, time, and labor. Buyers and sellers are free to exchange goods and services at prices determined by supply and demand. Modern capitalism is not about immoral pursuit of gain, but upon disciplined obligation of work as duty.
A corporation is a legal entity, distinct and separate from the individuals who create and operate it. As a legal entity, a corporation may acquire, own, and dispose of property in its own name. The three types of corporations are corporations for profit, corporations not for profit, and government owned corporations. The stockholders or shareholders who own the stock own the corporation. Corporations whose shares of stock are traded in public markets are called public corporations. Corporations are distinct legal entities which exist separate from shareholders (Shareholders have limited liability). Corporations whose shares are not traded publicly are usually owned by a small group of investors and are called nonpublic or private corporations. The stockholders of this form of corporation have limited liability. The stockholders control a corporation by electing a board of directors. The board meets periodically to establish corporate policy. It also selects the chief executive officer (CEO) and other major officers. Corporations can sue and be sued. Corporations can own property. Corporations may and usually have a perpetual life. Corporations are created by compliance with state corporation statutes which usually require, a. filing Articles of Incorporation with the secretary of state, and paying a fee Corporate existence begins when the articles of incorporation are filed, unless a delayed effective date is specified in the articles.
Corporate Social Responsibly:
Corporate social responsibility looks at ethical issues on the organization level. Social responsibility means that organizations are a part of a larger society and are accountable to that society for their actions. Any group within or outside the organization that has a stake in the organization’s performance. Any group within or outside the organization that has a stake in the organization’s performance. It’s the beliefs that guide socially responsible business practices. Staff do their best with a balance of work and family life. Corporations perform best in healthy communities. Corporations gain by respecting the natural environment. Corporations must be managed and led for long-term success.
Corporations must protect their reputations. Economic responsibilities are producing goods and services that society wants at a price that perpetuates the business and satisfies its obligations to investors. Legal responsibilities are obeying local, state, federal, and relevant international laws. Ethical responsibilities are meeting other social expectations, not written as law. Philanthropic responsibilities are additional behaviors and activities that society finds desirable and that the values of the business support. Perspectives on corporate social responsibility: Classical view— Management’s only responsibility is to maximize profits. Socioeconomic view— Management must be concerned for the broader social welfare, not just profits.
Additional Sources for review
Title: The Ethics of Capitalism
Journal of Markets & Morality 2, no. 2 (Fall 1999), 150-163
Copyright © 1999 Center for Economic Personalism
Jesús Huerta de Soto
Titular Professor of Political Economy
Universidad Complutense de Madrid
Traditional studies on natural law and justice have been eclipsed by the development of a concept of economic science that has tried to apply a methodology originally formed for the natural sciences to the social sciences. According to this line of thought, the defining content of economic theory consists of the systematic application of a narrow criterion of “rationality,” so that both individual human action and economic policy are determined by calculations of costs and benefits based on a maximization criterion that makes it
possible to “optimize” the attainment of the ends pursued on the basis of given means. According to this approach, it seemed obvious that considerations relative to ethical principles as guides for human behavior lost relevance and significance. In fact, it seemed that a universal guide for human behavior had been found that could be put into practice by applying a simple criterion of maximizing the beneficial consequences derived from each action without the need, therefore, to adapt the behavior of human beings to predefined ethical rules. Science had apparently thus managed to eliminate considerations related to
justice by rendering them obsolete
Title: Sustainable Capitalism: A matter of Ethics and Morality
University of Missouri, USA, Professor Emeritus of Agricultural Economics;
5121 S. Brock Rodgers Rd, Columbia, Missouri, USA; e-mail: JEIkerd@centurytel.net
With the fall of communism, capitalism became the dominant global economic system. However, widespread
environmental and social problems are raising fundamental questions regarding the sustainability of today’s capitalist economies. In fact, the most basic laws of science indicate that unrestrained capitalism is not sustainable. All economic value is inherently individualistic in nature, thus there is no economic incentive to do anything for the sole benefit of anyone else and certainly not to ensure the sustainability of future generations. Attempts to ensure sustainability by assigning economic values to ecological and social costs and benefits inevitably result in undervaluation and misallocation of social and ecological resources. Economic sustainability requires a fundamentally different economic model based on a paradigm of living systems. Living systems are capable of productivity as well as regeneration, and thus sustainability, because they rely on solar energy. Sustainable agriculture provides a useful metaphor for sustainable economic development. However, a capitalist economy can function sustainably only within the context of an ethical and just society. Lacking ethical and moral restraints, capitalists inevitably degrade and deplete the natural and societal resources from which all economic value is derived. Most nations already have in place the institutional structures needed to restrain unsustainable economic extraction and exploitation. All that is lacking is a moral and social commitment to an ethic of stewardship, a commitment to rightness and goodness in our relationships with each other and with the earth.