Because nonprofit organizations mobilize vast reserves of goodwill, corporate investment in the community can have tremendous reach in building a better corporate profile and in strengthening public support of the private sector. (Kanaga, 1998)
The work of Nae and Grigore (nd) entitled: "An Overview of European Multinational Corporations" the social and political changes brought about by globalization have raised new questions as well as expectations about governance and social responsibilities. More and more companies of all sizes and sectors are recognizing the importance of their role in society and the real benefits of adopting a proactive approach to Corporate Social Responsibility (CSR)." (Nae and Grigore, nd)
V. FIDUCIARY DUTIES as a GUIDE to ETHICS
The work of Young (2007) entitled: "Fiduciary Duties as a Helpful Guide to Ethical Decision-Making in Business" states that the challenge for business ethics "is not so much enunciating the unyielding call of moral perfection but rather providing practical wisdom relevant to the needs of business decision-makers." (Young, 2007) Young states that while the applicable law "most closely associated with business ethics is fiduciary theory and practice...it is increasingly overlooked and slighted in legal studies and in business schools. In most contemporary law school curricula, agency is a marginal subject, passed over like cold toast on the breakfast tray in courses on corporate law and finance." (2007) Young states that tax planning "...in trust and estate courses...is given more emphasis than the fiduciary responsibilities of trustees." (2007) There is however, in every fiduciary relationship "a risk of abuse of power on the part of the fiduciary - from simple negligence or misunderstanding to intentional fraud theft. This risk is frequently noted as the cost associated with agency relationships." (Young, 2004) Agency relationships are those in which principals hire 'agents' for accomplishing tasks and this brings with it a risk. As well when partners engage other partners the business while enhanced by this joint enterprise creates a new level of ethical risk. The fiduciary is under requirements of the law to "act with self-restraint, with a view towards the advantage and interests of others."
The law refers to a duty of loyalty and a duty of care which demand selflessness, and the use of good sound judgment in making decisions, respectively. Young states that these duties as set out for the fiduciary are a good guide for measuring the level of ethical behavior of the individual or corporation.
Gormus states that there are four different stands a typical firm would take in incorporating ethics into the organization. The first is the decision in choosing or alternatively choosing not to incorporate ethics and then a time horizon is set for this incorporation of ethics. The following illustration shows the conception of Gormus of the four types of stands taken by typical firms in relation to organizational incorporation of ethics.
The Four Types of Stands Taken by Typical Firms in Relation
To Organizational Incorporation of Ethics
Source: Gormus (2004)
According to Gormus When any of the a, B, C, D options are chosen, the firm will face different profit curves. When option a is chosen, the firm will start at a higher profit level in the shortrun but profits will decline in the long-run as it has been suggested earlier in the paper. If option B. is chosen, the firm will start at a lower level of profits because of the opportunity costs of choosing to be ethical and socially responsible. Coming closer to long-run the profits will gradually increase but decline again in the long-run being parallel but at a lower marginal profit than a.
The reason for this is the fact that people will respond harshly to be let down and get the feeling of being fooled." (2004)
Ethical concerns are also global concerns and according to Phukan and Dhillon (2001) in the work entitled: "Ethical and Intellectual Property Concerns in a Multicultural Global Economy" When any of the a, B, C, D options are chosen, the firm will face different profit curves. When option a is chosen, the firm will start at a higher profit level in the shortrun but profits will decline in the long-run as it has been suggested earlier in the paper. If option B. is chosen, the firm will start at a lower level of profits because of the opportunity costs of choosing to be ethical and socially responsible. Coming closer to long-run the...
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