Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
Instructor Manual
Chapter 3: Corporate Governance and Stakeholder Relationships
CHAPTER 3 LEARNING OBJECTIVES AND END OF CHAPTER QUESTIONS
After reading this chapter, you will be able to
3.1 Describe the role of ethical values for the six traditional shareholder-oriented
governance systems.
End of Chapter Question 1: What are the roles of ethical values for the six traditional
3.2 Identify two primary ways boards of directors determine what is in the best
interest of the company.
End of Chapter Question 2: What are the two primary ways board of directors
3.3 Explain three innovative stakeholder-oriented governance systems.
3.4 Propose best practices for corporate governance.
3.5 Identify common governance problems and issues.
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
End of Chapter Question 5: What are several common governance problems and
issues?
CHAPTER 3 OVERVIEW
The best managed companies are governed by clearly articulated roles and responsibilities that
treat all stakeholders with respect. A company’s governance system evolves as the organization
grows. As companies grow, owners become more distant from day-to-day operations.
CHAPTER 3 LECTURE OUTLINE
Suggested Time: 2 to 3 hours of class time is recommended to present this chapter.
I. Chapter Question 1: What are the roles of ethical values for the six traditional
shareholder-oriented governance systems?
Type
Description
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
Sole Proprietorship
One owner; all income earned is reported on the owner’s individual
federal income tax form.
S-Corporation
100 or fewer shareholders who elect a board of directors; business
profits are distributed to shareholders and taxed on the shareholder’s
individual federal income tax form.
C-Corporation
stocks are sold on public exchanges or over-the-counter markets;
pay personal income tax on dividend distributions.
Unlimited shareholders who elect a board of directors; business
income is taxed at the corporate level and shareholders only pay
II. Chapter Question 2: What are the two primary ways board of directors
determine the shareholders’ best interests?
Narrow Conception of Social Responsibility
Broad Conception of Social Responsibility
Partnership
profits and losses; all income earned is reported on the partners’
individual federal income tax form.
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
III. Chapter Question 3: How can companies implement three innovative
stakeholder-oriented governance systems?
Type
Description
Benefit Corporation
Any for-profit company whose governing documents state that it
operates for a public benefit; the board of directors has legal
Employee Stock
Ownership Plan
(ESOP)
All full-time employees over the age of 21 have an equity stake in the
company; shares must be sold back to the company within one year
after departure.
V. Chapter Question 5: What are some of the best practices for good corporate
governance?
1) A board should be put in place to work cooperatively with management for the long-term
success of the business.
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
4) The process of electing members to the board is formally defined, transparent, and
addresses the need for new appointments to maintain fresh perspectives and approaches.
6) There is a clear and transparent procedure for determining remuneration of board
directors and executives. No sitting executive/director has involvement in their own
remuneration.
9) The board oversees the risk management plans and internal controls of the business as
maintained by management.
10) An Audit Committee of the board is in place.
11) The business communicates performance with its shareholders and allows shareholders to
VI. Chapter Question 6: What are several common governance problems and
issues?
Negligence
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
Undue Influence by CEO and Other Managers
Board Member Interests and Insider Trading
CHAPTER 3 SUPPORTING MATERIALS
Textbook Inserts
Ethical Dilemma Analysis
• What Would You Do: Work Hard, Play Hard
Tables and Figures
• Table 3.1 Traditional Shareholder-Oriented Governance Forms
Self-Assessment (in Vantage only)
• Self-Assessment 3.1: Altruism
Thematic Boxes
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
• Up for Debate: The Social Responsibilities of Business
CHAPTER QUESTION 1: WHAT ARE THE ROLES OF ETHICAL VALUE FOR THE
SIX TRADITIONAL SHAREHOLDER-ORIENTED GOVERNANCE SYSTEMS?
Type
Description
Sole Proprietorship
One owner; all income earned is reported on the owner’s individual
federal income tax form.
S-Corporation
100 or fewer shareholders who elect a board of directors; business
profits are distributed to shareholders and taxed on the shareholder’s
individual federal income tax form.
C-Corporation
Unlimited shareholders who elect a board of directors; business
income is taxed at the corporate level and shareholders only pay
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
CHAPTER QUESTION 2: WHAT ARE THE TWO PRIMARY WAYS BOARD OF
DIRECTORS DETERMINE THE SHAREHOLDERS’ BEST INTERESTS?
NARROW CONCEPTION OF SOCIAL RESPONSIBILITY AND OBJECTIONS
• The Nobel Prize-winning economist Milton Friedman famously articulated the viewpoint
that the only social responsibility for business is to maximize profits within the guidelines
of the law.
• Managers have a fiduciary duty to always act in the best interests of shareholders. Stay
focused on your organization’s mission, Friedman instructs managers, and don’t be
BROAD CONCEPTION OF SOCIAL RESPONSIBIITY
• Professor Archie Carroll differentiates four different components of social responsibility:
o Economic responsibilities
o Legal responsibilities
• According to Carroll’s conceptualization, a socially responsible business is profitable,
law abiding, ethical, and a good corporate citizen.
• November 2010, ISO 26000 launched to provide common conceptualization of CSR.
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
▪ Labor practices, environment
▪ Fair operating practices
▪ Consumer issues
▪ Community involvement and development
DISCUSSION ACTIVITY
Milton Friedman argues that the only social responsibility for business is to maximize profits
within the guideline of the law. Archie Carroll argues that businesses have two additional
CHAPTER QUESTION 3: HOW CAN COMPANIES IMPLEMENT THREE
INNOVATIVE STAKEHOLDER-ORIENTED GOVERNANCE SYSTEMS?
BENEFIT CORPORATION AND CERTIFIED B CORPS
In 2010, B Lab, a nonprofit organization, initiated a third-party Benefit Corporation (B
Corporation) certification process for branding a business as being ethical, sustainable, and
socially responsible.
• The multi-stakeholder obligations of a B Corporation contrasts with the typical C
Corporation designation, where managers have a primary obligation to act in ways that
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
• Delaware passed B corporation legislation; Public Benefit Corporation.
• 36 states have passed B Corp legislation.
DISCUSSION ACTIVITY
Ask students: Should the federal government provide a special lower tax rate for companies that
meet B Corporation criteria for implementing best practices in business social performance?
Why?
EMPLOYEE STOCK OWNERSHIP PLANS (ESOPS)
• a benefit option in which all full-time employees over the age of 21 have an equity stake
in the company
COOPERATIVES
• a voluntary association of people that meets their common economic, social, or cultural
needs or aspirations through a jointly owned and democratically controlled business.
• Types:
– A producer cooperative is owned by producers of commodities or crafts who pool
their capital and resources for their mutual benefit, such as joint buying or
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
• There are 3 million worldwide
CHAPTER QUESTION 4: WHAT ARE SOME OF THE BEST PRACTICES FOR GOOD
CORPORATE GOVERNANCE?
1) A board should be put in place to work cooperatively with management for the long-term
success of the business.
4) The process of electing members to the board is formally defined, transparent, and
addresses the need for new appointments to maintain fresh perspectives and approaches.
5) The board will undergo an annual review of its performance, as well as the performance
of its members.
8) The policies and procedures, as well as levels of remuneration, are communicated with
transparency.
9) The board oversees the risk management plans and internal controls of the business as