Rights, Duties and Obligations
• We saw that managing for stakeholders can do what is
best for the company and society.
• However sometimes we can violate important rights and be
morally wrong for example underage labor.
• Management have a duty to do what is right which can
conflict with what is perceived as morally good.
• We will try to identify rights and obligations.
Outline
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Neoclassic Account
Stakeholder management Account
Conflict of rights and other obligations
Rights held by stakeholders and corresponding managerial
duties and obligations.
Neoclassic
• If managers spend time and money on their own social
objectives then they are violating shareholders
constitutional, proprietary and fiduciary rights
• Constitutional rights – they have a kind of taxation without
representation.
• However increasing costs without shareholder approval is
an accepted managerial function.
Fiduciary Obligations
• Designed to prevent opportunistic exploitation of trust.
• Managers should maintain transparency, have truthful
reporting and try the best to follow their job description.
• For example they should not take monetary gain at the
companies expense.
• However as long as managers are genuinely trying to drive
company success there is no issue here.
Proprietary rights
• Shareholders are different that people who posses their
own personal property.
• They do not have direct control over company assets so
have an indirect influence on the company.
• So this is seen as Friedman's weakest argument.
Only stock price view
• Can close off consideration of basic rights of employees,
suppliers, consumers and communities. E.g. Ford Pinto.
• So the stakeholder orientated approach is more inclusive
and helpful.
• The diversity of potential obligations makes managerial
decision making more complicated.
Rights based terms
• Right = An entitlement to act in a certain way or be treated
in a certain manner.
• E.g. If you owe someone money they have the right to be
paid back.
• So the other person has a duty or obligation – to pay back
the money.
Laws, regulations and codes
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Securities regulations
Occupational health and safety regulations
Product Liability laws
Advertising laws
Anti-trust laws.
Codes of ethical conduct.
Types of rights
1. Legal and political rights – based on existing laws,
minimal obligations. E.g. Civil rights. UN declaration on
Human rights, International corporate law e.g. product
safety.
2. Professional rights – View of experts in the field about
how professionals should act. Organizations own view.
Usually codified. Breaking the code can lead to internal
sanctions. E.g. Anelka
Types of rights
3. Moral rights – Usually not codified and no accepted general
agreement. Different moral systems.
• Duty based ethics –Immanuel Kant , People have rational and
autonomous thoughts. So rights are necessary for protecting and
fostering the inherent worth and dignity of human beings, so
obligations not to deceive or steal from others them and the duty to
develop rationality and autonomy.
• Other philosophers- Without moral rights and duties social
practices can cause mistrust, a lack of co-operation and solidarity
and promote deceptive or violent behavior. E.g. Financial crisis.
Fundamental rights and duties
Have highest priority and ought always be respected.
1. Protect something that is vitally important.
A. Necessary for promoting individual respect (Human rights)
B. Protect private property, liberty, fair competition and ensure shareholder
rights (Contracts)
2. Subject to significant and recurring threats
3. Fairly distribute the economic distribution of duties they
impose. - If a company cannot respect fundamental rights
it is fair to impose economic sanctions.
Fundamental rights and obligations
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Non- discrimination
Physical security
Freedom of speech
Political participation
Subsistence
Derivative rights and duties
• “Depend for their importance on an instrumental
contribution toward achieving some other good”
• Not legally or practically essential for indivual integrity and
may be infringed upon if in conflict with other rights.
• Privacy e.g. Doctor- Patient, it can be justifiably infringed
upon if there is a strong cause e.g. preventing a crime.
• Search “Warrant”
• An employees privacy might be infringed upon if the private
information is relevant to their job performance.
Questions
• What are a managers fiduciary obligations to Shareholders?
• Give an example of how managers only thinking about
increasing the stock price might infringe on someone's
fundamental rights?
• What is the difference between legal rights and
professional rights?
• What is the difference between fundamental and derivative
rights?
Negative and positive duties
• Some forms of respecting rights involve action others
inaction.
• Negative duties – inaction, e.g. not censoring a movie –
respecting freedom of speech.
• Positive duties – action to support someone who’s rights
are being violated. E.g. security forces help those whose
right to free speech is being violated.
Negative and positive duties in business
• Relationships with stakeholders lead to both negative and
positive fundamental and derivative rights and duties.
• Fundamental right to non-discriminatory treatment
– Positive obligation – companies should ensure that they have
policies and procedures to protect against discrimination.
• Derivative right to privacy
- Positive obligation – HR department should use security
enhanced information technologies to protect employee
information.
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Negative and positive duties in business
• Derivative obligation to protect the environment
- Positive obligation – Companies should engage in sustainable
business practices.
Special obligations
• Arise when there is a high degree of vulnerability and
dependence. E.g Child and Parent, Client and Lawyer.
• The needier party can be open for opportunistic
exploitation.
• So the benefactors take on special obligations to protect
the well being of their subordinate.
Special obligations in business
• Manager-Shareholder - Shareholders rely on managers for
reports and information. So managers could
opportunistically exploit their trust. Managers have a
fiduciary responsibility to promote company success, even
if it means they cannot make a comprehensive
environmentally sustainable business plan.
• Vulnerability of desperate employees.
• Vulnerability of trusting consumers.
Stakeholder Rights and Obligations
• Stakeholder rights can conflict.
• Use the rights-based terminology to help managers
prioritize claims.
• Provide more moral clarity and a helpful framework.
Stakeholder Rights and Obligations
• First, identify fundamental stakeholder rights and
corresponding negative and positive duties. Stakeholders
have fundamental rights even if they don’t express them.
Identify special obligations - relationships with a high
degree of vulnerability.
• Second identify and prioritize derivative stakeholder claims
and corresponding negative and positive rights and duties.
Derivative rights can be overridden but that should be
justified e.g. privacy rights. Figure 2.1.
Competitors
• Right – Fair competition
• Duties – Always keep laws relating to anti-trust, anticorruption. Make a formal ethics and legal compliance
system.
Shareholders
• Right – Fair return on investment
• Duties – Fiduciary responsibility e.g. put company success
ahead of other interests (except fundamental rights), don’t
take too much salary, honest reporting, try to make more
democratic governance structures.
Employees
• Rights -Fundamental rights and right to privacy and
meaningful work.
• Duties – Protect fundamental rights, promote meaningful
work, ensure that decisions about promotion and demotion
are related to job performance. Ensure that private
information is related to job performance.
Consumers
• Rights – Safe, non-defective products, honest advertising.
• Duties – Disclose all safety risks, don’t deceive the
consumer, make a quality management system, be extra
careful with children's products.
Suppliers
• Rights – Respect contractual terms.
• Duties – Respect contractual terms, negotiate fairly,
promote healthy and safe working conditions down the
supply chain.
Government and communities
• Rights – Legal compliance, fundamental rights, right to
healthy and safe environments.
• Duties – Follow the law, pay reparations if violate
fundamental rights, try to engage in CSR initiatives.
Questions:
• Give an example of a negative obligation, a positive
obligation and a special obligation.
• What obligations do managers have when dealing with
employees?