Ethics in Management Essay

Excerpt from Essay :

Ethics in Management

The Moral rights of stockholders and shareholders

Whilst considering the moral rights of stockholders and stakeholders, it is worthwhile to point out the views of Karl Marx. He classified the economic world into 2 classes, those who owned and hired and those who got hired and sold their time and services. In the capitalist free market economy, the former class gets richer and reduces in number while the later gets poorer and expands in number. In the free market economy, the owners are the investors; people who invest their money and allow inflow of capital in the organization. With regards to a corporate entity, the owners are the stockholders; similarly, with regards to a small business, the owner is classified as proprietor; and where more than one business owner exist, the owners are classified as partners (Narveson, 1998).

He emphasized the role of the community as being the owner of business, i.e. stockholder, as well as the stakeholder, i.e., customer, consumer and employee. This business model has failed o produce the desired results and governments around the world are privatizing or denationalizing their assets. For instance, the rising economies have instigated their determined strategies to denationalization of their state owned enterprises (SOEs) in past several years. Denationalization in rising economies has augmented from $8 billion (in 1990) to around $65 billion (in 1997) (Dharwadkar, George, & Brandes, 2000). Denationalization shifts the possession from government to the fresh possessor, both civic and personal, which might comprise administration, staff, people in locality, organizations as well as financiers from overseas, whilst the government having a share as well following denationalization. The corporate governance has become a significant matter with the appearance of branched out possessed structure after denationalization in rising economies of the world (Rajagopalan and Zhang, 2008).

Furthermore, it is fairly easy to designate between the people working within an organization, however that is not the case for the owners of the company, hence even though Marx simplifies it, his simplification is not good enough as the actual situation is far more complicated. As stated above, usually the owners of the company are those individuals who have invested money or other capital in the business; stockholders are the owners in case of a corporation of a multinational; a proprietor is the owner when we talk about a smaller business or partners own the business when we talk about a business owned by multiple individuals. Keeping in mind about the statement made by Marx, it is safe to say that the proprietors fit the overall structure but they rarely make up the wealthier sector of the business community and make up individuals like cultivators, farmers, small business owners like home delivery or video shops, etc. (Narveson, 1998).

So in order to define what the rights of owners are, it is first important to define the kind of ownership we are talking about. But to define generally, ownership is when an entity, whether an individual or a group, have the right to make the final decisions of what happens to a particular topic or line of action. This board definition applies to all the owners aforementioned as well as the specific ownerships we are talking about in this paper i.e. shareholders and stockholders. It is important to note here that this definition does not include the legal demographics as legally by the above definition there are very few things that are owned and furthermore fewer actions or decisions that can be made when an individual or an entity is responsible 'owning' them (Narveson, 1998).

A simple way to explain this is that a shareholder might own the machines that are being used in the company but he does not own them in a way that he can just head up to the factory and take one of the machines merely on his ownership rights. On the other hand, the only control he really has is how and for what purpose these machines are used. This is because the division of what a stockholder own within the company is divided based upon the stocks or shares that he owns, as opposed to every item that is being used in the company. Hence, taking a machine from the factory because you own say 3 out of the 100,000 shares in the company is not logical or legal (Narveson, 1998).

Keeping in mind the above example and what Marx had said, the above situation could stand to be very true for a sole proprietor as he has a 100% investment in everything that is being used in the business. That is not saying that sole proprietors should do that or are known to have done that, it is merely stating the fact that they can if they wanted to. Normally, when we are talking about the rights of shareholders, it is important to note that they will have many agreements and contracts with quite a few of the administrative staff, managers and workforce. These agreements and contracts are typically designed to limit the overall control or monopoly of any one section in a business. This stands true in all circumstances which is why there needs to always be a majority or a consensus when making a corporate decision as there is very little that the 'owners' can truly dictate. It is important to note here that these contracts can very easily be altered and renegotiated on the willingness of the parties involved. One way to do this is to perhaps buy out other shareholders in the company and then buy all the contracts that those shareholders initially agreed on and renegotiate the terms. However, this rarely ever happens in corporations and the rights thereof for the shareholders are no more lenient or advantageous than those that are enjoyed by the employees or the managers (Narveson, 1998).

The rights of the stockholders

There are of course certain aspects and rights that the stockholders and shareholders enjoy under the brand ownership. For instance, any and all dividend payments are rightfully the stockholders if there were any made on the stock that he owns. The corporation cannot randomly or on a whim choose to reimburse all the female stockholders with the dividends in one quarter or give extra dividend percentage to a certain caste. Furthermore, the stockholders have the complete right to decide when they want to sell the shares they own, to whom and at whatever price that they can come to a decision on. Of course, care has to be taken that none of the brokerage ethics are violated when the stockholders sell their shares through the exchange or a sole broker (Narveson, 1998).

The right of shareholders

The rights of the employee

Every individual brings a unique set of resources to the table, whether as an employee, manager or shareholder. Hence, each individual 'owns' these resources and can decide to use them however he wants and wherever he wants, offering them to one who makes the most suitable (usually the highest) negotiation. Furthermore, negotiations are two-way roads where neither party is obligated to participate if they don't want to i.e. there is not obligation for an individual to take a particular job and the managers are not obligated to hire a certain individual over others. This is a fact that no negotiation will be one that makes both parties completely happy and it is usually the manager who has the upper hand in employment negotiations. A good example to explain this from the shareholders point-of-view is that there will be situations when shareholders will have to buy stocks that they don't really want. Again, since there is no obligation to buy the stocks, the shareholders can always decide not to buy any stock at all (Narveson, 1998).

Furthermore, every company brings to the table employee benefit plan for higher employee retention rates. Throughout their work life, companies constantly encourage the employees to take on more challenges and they are provided with the environment that can encourage them to go above and beyond their usual list of tasks and responsibilities. This organizational attitude inculcates confidence and courage their employees, making them risk takers and teaching them valuable insights about decision making. Also, an employee working at a certain department in the company may also ask a certain level of freedom to try on various other departments by proving his experimental abilities and by making decisions confidently. However, these perks and privileges are there only until he works for the company; post retirement, these privileges may not be there for the employee. The benefit plan of the employees are designed with the objective of fostering the financial security by means of providing insurance against unforeseen circumstances and to increase the standards of living by offering the emphasized services (Fronstin, 2008).

The rights of the buyer

The buyer, i.e., consumer and customers, also enjoy certain rights and privileges. These rights are founded on the idea of freedom and liberty; meaning that the seller cannot force the buyer…

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