Essay About Social Responsibility Theories And Fiduciary Duty

Social Responsibility Theories
Essay Preview: Social Responsibility Theories
Report this essay
In the paper titled, “Social Responsibility”, the author discusses fiduciary duty and its
various implications as described by the Stockholder, the Stakeholder, Social Contract
and Social Responsibility theories. In doing so, the author thereby attempts to define
the broad problems associated with “how” a fiduciary duty is viewed from the
perspective of these four theories, and goes further by highlighting a number of the “de
facto” issues associated with the sometimes tedious relationship between the “corporate
entity” and its employees, customers, and the environment. The basic case put forward
by the author is that the corporate fiduciary duty is to maximize profits, or as the author
puts it, “(t)o make money for its shareholders”, and in so doing it can then “(d)isregard
all of the other people it affects”. However, a closer look at the evidence provided by
the author does not necessarily support this view, and the logic used to make this case
is, at times, rather inconsistent.
The Stockholder theory is compared, initially, to the Stakeholder and Social Contract
theories by the author, with limited success. Mentioned only in passing, these two
theories are seen by the author as “hybrid” theories, which although they espouse a
broadened view of the “nature” of what fiduciary duty “ought” to be, nonetheless, for the
author – the Stakeholder and Social Contract theories do not go far enough in re-
orienting the corporate focus away from “profit” as a motive, or for the Shareholder
theory – making a profit is the “only” motive.
The first issue tackled is the relationship between the corporation and its employees.
The author takes a strict view of fiduciary duty (Shareholder theory/perspective), when it
is inferred that the profit motive encourages corporations to lower wages or as stated,
“(a)llows the wages of employees to decrease”. The author goes on to state that this
will lead to “(a)n unhappy workplace” and a “(l)oss of sales through bad guest service
transactions”. Although I DO understand what the author is trying get at, I do not
necessarily agree that (A), leads to (B), which then leads to (C). The author takes some
big leaps here when a corporation makes profit a “priority”, automatically leads to
decreased wages and poor customer service.
The issue of “customers” is up next – and the corporate “duty” is fulfilled by “raising
prices” with any profit being passed on to the stockholders. The author does not agree
with this process and warns the corporate entity that raising prices could cause a loss of
business (i.e. loss of customers), which could then lead to a reduction in profits. This
particular issue, the “customer”, does not seem fully developed and, in my opinion,
needs some further clarification. This could be done with a little background from some
basic economics theory or some specific examples.
The author then turns to investigating the relationship between the corporation and
the “environment”. This is where the author loses me. Statements like, “(n)o