Normative Theories of Business Ethics: Stakeholder Analysis Report

This report provides an analysis of normative theories in business ethics, emphasizing the stakeholder, stockholder, and social contract theories. It explores how these theories offer solutions to organizational and business problems, guiding management towards ethical practices. The stakeholder theory, which prioritizes maintaining stakeholders' rights, is contrasted with the stockholder theory, which focuses on maximizing stockholder value. The social contract theory, which considers society's needs, is also examined. The report uses the Dharavi development project as a case study, highlighting the suitability of the stakeholder theory in urban development, focusing on the needs of slum dwellers, land owners and shareholders to create a sustainable and inclusive project. The report emphasizes the importance of ethical practices in achieving long-term business success and stakeholder trust, drawing from examples like the Enron scandal.

Running head: NORMATIVE THEORIES OF BUSINESS ETHICS
Analysis of Normative theories of business ethics
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NORMATIVE THEORIES OF BUSINESS ETHICS
The normative theories of business ethics are getting much importance as important
management tool for business. The normative theories have been practiced since the ancient
times. The normative theories provide solutions for various organizational and business problems
(Crane & Matten, 2016). The analysis of normative theories in business practice helps to clarify
certain situation and assists with better understanding. The ethical aspect of the normative
theories guide the organizations and management to value human, which eventually leads to long
term profit.
The three normative theories for business ethics are the stakeholder theory, the stock
holder theory and the social contract theory. The stakeholder theory is based on the
management’s responsibility to maintain the stakeholders (Harrison, Freeman & de Abreu,
2015). The managers follow the organizational policies in order to protect every stakeholder’s
right. In stockholder theory the management is responsible to maximize the stockholder value by
any means. So here the ethical issues arise and the manager non-fraudulent actions and judgment
power over shareholder’s interest in the long run benefit the organization. In the social contract
theory, the organization considers society’s needs. The management must work on the conditions
that will allow the society to allow the project. As most business prefers maximum profit over
anything the stakeholder theory appear to be challenging. The stakeholder theory focuses on the
stakeholders’ interest. The scandal of Enron has brought forward the importance of ethical
practice and stakeholders’ trust in organizational business (Jennings, 2014). So it is proven that
the managers’ overemphasis on making profit in any way has resulted in business failure. Above
that the misinterpretations of stakeholder theory also affect the business. Often the theory is
criticized as some claim that it gives less importance to profitability. However in reality the main

NORMATIVE THEORIES OF BUSINESS ETHICS
principle of stakeholder theory is satisfying the needs of all stakeholders. Stakeholders also
includes the shareholders whose need is mainly profit based (Waldman & Balven, 2014).
In a project like Dharavi development, the stakeholder theory appears to be most suitable
(Chapman, 2015). The primary and most significant reason is the slum dwellers are the majority
of the stakeholders. The development plan must include the rehabilitation of all slum families
and business in Dharavi. The development has to be sustainable and capable of retaining all the
rehabilitated families. The integration program should be initiated in order to connect the slum
dwellers with other residents of Mumbai. The development must implement effective rail or bus
connectivity over the whole area. A bus route must connect all the sectors and links to the main
railway. From health, knowledge to income everything should be redesigned and implemented.
The stake holders will be provided with high quality housing, infrastructure and an improved life
style. They can get such great facilities as Hikes. The management must give them the guarantee
for maintain the lifts or water and electricity supply for more than 10 years. The land owning
stake holders would be given 70% of the received premium. The shareholders will also get
significant profit from the project. The successful execution of stakeholder theory in Dharavi
development project can materialize the project into an exemplary one.

NORMATIVE THEORIES OF BUSINESS ETHICS
Reference
Chapman, K. W. (2015). Urban Growth and the Slum: Analyzing Redevelopment Through Tri-
Sector Networks.
Crane, A., & Matten, D. (2016). Business ethics: Managing corporate citizenship and
sustainability in the age of globalization. Oxford University Press.
Harrison, J. S., Freeman, R. E., & de Abreu, M. C. S. (2015). Stakeholder theory as an ethical
approach to effective management: Applying the theory to multiple contexts. Revista
Brasileira de Gestão de Negócios, 17(55), 858.
Jennings, M. M. (2014). Business ethics: Case studies and selected readings. Cengage Learning.
Waldman, D. A., & Balven, R. M. (2014). Responsible leadership: Theoretical issues and
research directions. The Academy of Management Perspectives, 28(3), 224-234.