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Paper Abstract: Examines government regulations of businesses. Conflicts that arise when various types of regulations (environmental, human resources, financial) are imposed on business entities, creating difficulties in maximizing shareholder wealth. Basic conflict between social responsibility and profit/wealth maximization. Impact on ethical business behavior. Corporate responsibility. Factors influencing ethics. Paper Introduction: Corporate Finance: Regulations, Ethical Behavior and Shareholder Value The purpose of this essay is to examine the conflicts that can arise when various types of governmental regulations (e.g., environmental, human resources, and financial) are imposed on business entities, creating difficulties in maximizing shareholder wealth. Different perspectives on the conflict between “social responsibility” and profit/wealth maximization will be considered, as will issues relevant to the necessity of responding affirmatively to governmental requirements that can reduce shareholder value while achieving other socially and economically desirable outcomes. The question of how realistic it is for business to focus primarily on maximization of shareholder value or we Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. External factors -ranging from shareholder expectations and government regulations - alsoimpact upon these decisions and can lead to conflicts. Wheelen and Hunger (2 ) noted that most companies in the Westernworld are being asked to demonstrate increasingly high levels of corporatesocial responsibility. Marketing. A. In discussing ethical behavior on the international level, Miller andJentz (2 ) state that leaders and executives often have a fiduciary dutyto their firm and their shareholders to ensure that the company is not inviolation of universal ethical standards. (1986). In the United States and many other nations,government has acted on behalf of workers to ensure that this will occur.Regulatory agencies - including the Occupational Safety and Health Agency(OSHA), the Equal Employment Opportunity Commission (EEOC), theEnvironmental Protection Agency (EPA), the Securities and ExchangeCommission (SEC), the Financial Accounting Standards Board (FASB), to namebut a few - have been empowered to investigate companies that are suspectedor charged with ethical failures and to punish wrongdoers with fines,imprisonment, and other often very harsh sanctions (Miller & Jentz, 2 ).Similarly, professional organizations also publish and promote ethicalconduct codes that impact upon members, while government has passednumerous laws that directly speak to ethical issues such as discriminationagainst special groups, advancement of minorities, and protection forwhistleblowers. None of these imperatives seemto be incompatible with the notion that the business of business isbusiness and, therefore profit maximization within the legal and ethicalframework described by Milton Friedman. First,individual or personal factors such as values, knowledge, attitudes, andintentions are believed to be extremely influential in shaping ethicaldecision-making. Dorfman, P. (1985). Similarly, the companythat helps a local community to educate its workforce benefits from anemployee population that can help the company expand its own productivity.These and other examples of how corporate social responsibility is bothethical and sensible are presented by Schwartz (1999), who argues that acorporate prospers to the degree that its consumers or clients as well asits shareholders perceive it to be making desirable contributions tosociety. Second, opportunity resulting from the absence ofprofessional codes of ethics, corporate polices regarding ethics, orpunishment may encourage unethical decision-making. Dorfman, Powell, Hibino, Lee, Tate, and Bautista (2 ) pointed outthat ethical behavior in a globalized economic and business system leads tothe development of a culture-universal position in which it is possible toidentify certain values or responsibilities that a company and its leadersmust emulate. They also reduce shareholder value bydevaluing their firm and its profit potential. A firm that deliberatelyengages in a process of deforestation to generate dividends for itsshareholders will, left unchecked, ultimately log itself out of business.In order to continue making money, a degree of resource conservation inthis field (used as a single example) is needed. L., & Jentz, G. Different perspectives onthe conflict between "social responsibility" and profit/wealth maximizationwill be considered, as will issues relevant to the necessity of respondingaffirmatively to governmental requirements that can reduce shareholdervalue while achieving other socially and economically desirable outcomes.The question of how realistic it is for business to focus primarily onmaximization of shareholder value or wealth will be addressed. When Good Companies Do Bad Things.New York: John Wiley & Sons. These analysts propose a duty-based ethical system that moves beyond the law and draws upon moral orphilosophical values in such a way as to ensure that justice and equity arean integral part of a company's behavior. However, all of these regulations and mandates are valueless when acompany itself - in the form of structure and managerial action - does notinsist on ethical behavior across the entire organization. Journal of Marketing,Summer 87-96. Friedman is said to havefailed to defined which "ethical customs" were to be regarded by businessas shaping their responsibility to society. New York: Universe Books. Miller and Jentz (2 ) maintain that thedesire to gain competitive advantage either with respect to a corporaterival or an external competitor often leads an individual to behaveunethically. G. Upper Saddle River, N.J.: Prentice-Hall. Business ethics will be understood as "a consensus of whatconstitutes right or wrong behavior in the world of business and theapplication of moral principles to situations that arise in a businesssetting" (Miller & Jentz, 2 , p. Wealth or profit maximizationmay thus become secondary to other concerns - concerns that also speak tothe desire of shareholders to gain value from their investment. Human Resource Management. Miller, R. M. It may ultimatelybe unreasonable to assume that a company can logically or legitimatelydedicate itself to the uninhibited pursuit of profit. E. Boston: Irwin McGraw Hill. Miller and Jentz(2 ) state that most companies have learned that it pays to be ethical;corporations that value goodwill and reputation have come to therealization that this is the case. Boston:Houghton Mifflin. C. An article in Success (Justice: The leader's job, 1993) emphasizedthat leaders must recognize their responsibility with respect to being arole model for ethical conduct and socially responsible behavior. Fiedler, F. Boston: IrwinMcGraw Hill. Ostas (2 1) stated thatFriedman did believe that once such laws and customs were followed, amanager should follow the dictates of the market to maximize return onshareholder investment. (2 ). (2 ). J., & Hunger, J. W. Strategic Management andBusiness Policy. (2 ). Business Law Today. Indeed, Schwartz (1999) suggests that achieving profit maximization isbest approached through responsible behaviors. The argument against such notions of social responsibility is oftenframed within the context of shareholder expectations and market dominance. Pierce, J. The adoption of an ethical business posture begins with the top-levelmanagement of a company; executives, owners, and managers set the stage forall types of behavior (ethical and unethical, legal and illegal) that occuramong workers in the firm (Miller & Jentz, 2 ). W., Howell, J. Conversely, others including Keith Davis or John Hood (1996) take theposition that while profit maximization and return on investment is theprimary business responsibility of any organization, other responsibilitiesto the society (and its members) that make business possible also exist andmust be met. Leaders & the LeadershipProcess. (1993). Byacting ethically and responsibly, leaders and their companies can maximizeshareholder value and meet other obligations as well. Two disparate normative entitiesimpact upon ethical business behavior - duty and consequences, with thelatter referring to specific obligations under law and custom to behave ina certain manner and the latter encompassing a recognition of the potentialill effects of a failure to act in such a manner (Miller & Jentz, 2 ). New York:West. Milton Friedman: A Guide to HisEconomic Thought. W. Similarly, in the international business arena,maintaining high ethical standards may be made more complex because ofcultural variations that differentiate between what is acceptable in oneculture or society and unacceptable in another. Deconstructing corporate socialresponsibility. Peter Schwartz (1999), for example, believes thatcorporations have certain responsibilities toward society including: 1)promotion of sustainable development; 2) promotion of human rights anddemocratic institutions when and where practical; 3) collaboration withthose in the community who are working to promote health and education; and4) functioning as a good corporate citizen. Schwartz, P. Success, March, 45+. Other barriers to ethical conduct by leaders include locallaws or regulations that allow a company to violate accepted ethical canonsor company policies that facilitate individual unethical behavior. (2 ). Social responsibility is increasinglyseen as good business sense and not in any way as an undue burden placed ona firm or a leader. Implicit in this notion is the belief thatcorporations, which thrive because of consumer action and acceptance,should be accountable to society for their actions and not merelyresponsive to shareholder demands for profit and wealth maximization(Wheelen & Hunger, 2 ). A Theory of Leadership Effectiveness. However, as Ostas (2 1) also notes, managers who are guidedsolely or even primarily by the conceptions of law and markets is unlikelyto have a fully objective understanding of either normative element. (1998). Justice: The leader's job. Ivancevich, J. A contingency framework forunderstanding ethical decision-making in marketing. Ferrell and Gresham (1985) speculated that three general sets offactors influence the ethics of an individual's decisions. (1997). According to this view, to preserve their ethical and sociallyresponsible behaviors while they pursue and accomplish their goals, leadersand their companies must monitor changes and trends in society's values.Leaders and top-level managers must assume responsibility for the ethicalconduct of employees by establishing and enforcing policies that supportethical behavior. (1985). Establishing an in-house ethical code,training workers and managers in expected behaviors, and actively rootingout those who behave improperly are all part of corporate social andethical responsibility, as these entities are now understood. (2 1). C., & Gresham, L. Ostas, D. Top management is now increasingly charged with developing, promoting,monitoring, and implementing a corporate "code of ethics" in which theorganization informs its members of the values that it holds and the stepsthat must be taken to operationalize those values (Wheelen & Hunger, 2 ).Companies tend to behave ethically only to the degree that their topexecutives mandate ethical behavior; duties to shareholders and otherstakeholders (including the employees, the general or consuming public, andsociety as a whole) coalesce to create a framework for such behavior andvalues. Whenleaders cut corners, ignore their social responsibilities, and act in sucha manner as to damage the company and its reputation, they inhibitprofitability and productivity. Ferrell, O. (1999). Third, the values,attitudes, and behavior of significant others such as peers, supervisors,and clients affect the ethics of a leader's decisions. The notion of "corporatesocial responsibility" has become of enormous significance of late,addressing not only such "basic" ethical constructs as obeying the law butincluding the obligation of businesses to behave in a pro-social manner(Miller & Jentz, 2 ). NewYork: McGraw Hill. L., & Newstrom, J. The effective leader is therefore a leader for whomethical conduct and corporate social responsibility are priorities. Structurethat is open, accountable, flexible, and participative is associated with amore aggressively ethical orientation than other forms of organizationalstructure and is more conducive to accountability and transparency in alloperations (Wheelen & Hunger, 2 ). American Business Law Journal, 38 (2),261 - 288. In J. 21 ). For example, environmental social responsibility is both anethical requirement and good business sense regardless of where one'sbusiness is located. Newstrom (Eds.). The myriad benefits of ethical behavior identified by Miller and Jentz(2 ) include encouraging justice and diversity in the workplace,facilitating the personal growth of employees, providing support for apositive corporate or brand image, and gaining customers by meetingcustomers' ethical expectations. Another example of ethical behavior speaks toensuring that conditions for workers are safe, regardless of what local ornational regulations impact on this aspect of facility maintenance. Wheelen, T. M., & Ferrell, O. Pride, W. F. D. Leadership in Western and Asian countries. References Butler, E. Pierce and Newstrom (2 ) made note of the fact that effectiveleaders base their decisions on a clear set of values that do not deny thenecessity of gaining competitive advantage, but which also recognize thenecessity of doing so in a manner that does not break the law or leadothers to do so. L.Pierce and J. Two widely divergent theories regarding the social responsibilitiesof business have been advanced by organizational theorists as well aseconomists. Corporate Finance: Regulations, Ethical Behavior and Shareholder Value The purpose of this essay is to examine the conflicts that can arisewhen various types of governmental regulations (e.g., environmental, humanresources, and financial) are imposed on business entities, creatingdifficulties in maximizing shareholder wealth. P., Hibino, S., Lee, J. There are, however, many barriers to ethical behavior that confrontleaders at almost every turn. K., Tate, U., &Bautista, A. Pride and Ferrell (1997) pointed out that some firms are recognizingthat ethical issues and social responsibilities find their expression inthe daily decisions made by executives and leaders rather than in abstractideas. Milton Friedman (Butler, 1985), for example, has arguedfrequently that the sole responsibility of any business enterprise was tomake as much money as possible while conforming to the basic rules ofsociety as embodied in law and ethical custom. Leadership & the Leadership Process.Boston: Irwin McGraw Hill, 179-188. Ostas (2 1) states that from this perspective, particularly as advancedby Friedman, is the implicit notion that the market is self-protecting andself-regulating and will not act in a manner that will cause damage to itsmembers. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.