BUSINESS ETHICS

Business Ethics

Business Ethics

Task 1

Dear Brother,

I hope that you will be fine. After a telephonic conversation regarding to start a new business, I would like to give you some recommendations about the different types of business organizations and how the structure and purpose of each type may differ. The three major legal forms of businesses are the sole proprietorship, which is a business owned by a single individual; the partnership, which is a contract that defines ownership percentage for two or more individuals; and the corporation, which has a more formal structure, where ownership can be traded between two unaffiliated parties, generally via stock markets. The corporation has the advantage of allowing ownership to shift over time, which means there is no inherent life expectancy or temporal limitation. In addition, corporations tend to have limited liability, related to the potential loss of direct investment, and not personal loss of property or liberty except in cases of gross or criminal negligence. A corporation's life is limited by the decreasing demand from its consumers. This flexible structure has allowed for corporations to become relatively large, in some cases employing upwards of one million employees, having thousands of owners, and supplying goods and services to millions of customers. Corporations that take full advantage of the span of transportation and communications system networks can operate in many locations and thus become global or multi-national (Engle, 2001, pp: 51).

A corporation is formed by a multi-step process of idea generation, acquisition of investors and capital, the entrepreneur's stock ownership of the newly formed corporation, hiring of organizational and technical managers to develop the good or service, identification of vendors, hiring of employees, marketing to identify and secure customers, and securing a customer service and accounting process (Goodpaster, 1991, pp: 55).

A key task is to analyze the business organization and its environment to determine who constitutes its stakeholders. The stakeholder is any person who has an interest in the activity of an organization, although it is normally considered to be a person who is actually affected by that activity. So owners, investors, employees, customers, and suppliers are all stakeholders—but so too would be citizens living around the location of the organization's operations and the government at national and local levels. Bodies such as trades unions, consumer associations, and civic societies would also be considered to be stakeholders because the norm is to consider stakeholders as groups rather than as individuals. From this understanding of stakeholders then, stakeholder theory has been developed as a way of managing an organization. Within this theory, attempts have been made to provide frameworks by which the relevant stakeholders of an organization can be identified on the basis that stakeholders are relevant if they have invested something in the organization and are therefore subject to some risk from that organization's activities. A useful approach is to separate stakeholders into two groups: voluntary stakeholders, who choose to deal with an organization, and involuntary stakeholders, who do not choose to enter into—nor can they ...